Document of The World Bank Report No. 14656-TU STAFF APPRAISAL REPORT VOLUME 3 OF 3 REPUBLIC OF TURKEY PUBLIC FINANCIAL MANAGEMENT PROJECT ANNEX II: EXPENDITURE AND PERSONNEL ANNEX III: CUSTOMS MODERNIZATION AUGUST 29, 1995 Country Operations Division Country Department I Europe and Central Asia Regional Office CURRENCY EOUIVALENTS Currency Unit - Turkish Lira (TL) AVERAGE EXCHANGE RATES (Turkish Lira per US$) Currency Unit CY1990 CY1991 CY1992 CY1993 CY1994 CY1995 Jan-July US$1.00 = TL 2,609 4,172 6,872 10,985 29.609 42,447 WEIGHTS AND MEASURES FISCAL YEAR Metric System January I - December 31 ABBREVIATIONS AND ACRONYMS AB - National Agricultural Bank (Ziraat) CAS - Country Assistance Strategy CBT - Central Bank of Turkey CCC - Customs Cooperation Council CCT - Common Customs Tariff CET - Common External Tariff CIT - Corporate Income Tax Customs - Undersecretariat of Customs EBF - Extra Budgetary Funds EDI - Electronic Data Interchange EDP - Electronic Data Processing EU - European Union FAD - Fiscal Affairs Department FIB - Finance Inspectors Board FLS - Financial Ledger System GATT - General Agreement on Trade and Tariffs GDBFC - General Directorate of Budget & Fiscal Control GDC - General Directorate of Citizens' Affairs GDPA - General Directorate of Public Accounts GDR - General Directorate of Revenues GFMIS - Government Financial Management Information System GFS - Government Financial Statistics GIBOS - Customs Administration Integrated Automated System ICB - International Competitive Bidding IMF - International Monetary Fund IT - Information Technology LFA - Legal Framework Agreement MERNIS - Merkezi Nufus Idaresi Sistemi (Central Citizens Registry System) MOF - Ministry of Finance PFMP - Public Financial Management Project PIAL - Privatization Implementation & Social Safety Net Assistance Loan PIT - Personal Income Tax PMSS - Project Management Support Services PMU - Project Management Unit PSBR - Public Sector Borrowing Requirement PSAL - Public Sector Adjustment Loan RCs - Revenue ControHers SAR - Staff Appraisal Report SBA - Stand-By Arrangement SEE - State Economic Enterprises SOFIX - Systeme d'Ordinateurs de Fret International SPO - State Planning Organization TAB - Tax Accountants Board TCA - Turkish Court of Accounts TIN - Taxpayer Identification Number TIR - International Transport Register Treasury - Undersecretariat of Treasury TL - Turkish Lira UIN - Unique Identity Number VAT - Value Added Tax TABLE OF CONTENTS ANNEX 2: EXPENDIrURE AND PERSONNEL COMPONENT Annex 2a: Implementation Plan ................................... 1 Annex 2b: Terms of Reference ................................... 33 Annex 2c: Detailed Cost Table ................................... 57 Annex 2d: Implementation Schedules . ............................... 61 Annex 2e: Elements of the Government Financial Management Information System . . . 69 ANNEX 3: CUSTOMS MODERNIZATION COMPONENT Annex 3a: Implementation Plan . ................................. 79 Annex 3b: Terms of Reference ................................... 107 Annex 3c: Detailed Cost Table ................................... 135 Annex 3d: Implementation Schedules ............................... 141 Annex 3e: Simplified Customs Operational Procedures .................... 149 Annex 3f: Monitoring and Impact Indicators .......................... 161 Annex 2a PUBLIC FINANCIAL MANAGEMENT PROJECT Expenditure and Personnel Component Implementation Plan Annex 2a Expenditure and Personnel Component Implementation Plan Table of Contents I. THE EXPENDITURE AND PERSONNEL MANAGEMENT COMPONENT ... ..... 1 A. Scope and Objective . B. Project Description .2 Budgetary Procedures and Personnel Management. 2 Government Financial Management Information System. 7 C. Project Costs and Financing Plan .13 D. Accounting and Audit Plans. 15 11. IMPLEMENTATION ARRANGEMENTS ....... ...................... 17 A. Responsibilities of the Implementation Agencies ................... 17 B. Inter-Agency Coordination ......... ....................... 19 C. Role of World Bank Supervision ............................ 19 Ill. IMPLEMENTATION ACTIVITIES .............. .................. 21 A. Implementation Schedules ......... ........................ 21 B. Procurement Arrangements and Schedules ....................... 21 C. Disbursement Arrangements and Schedules ...................... 23 IV. BENEFITS AND RISKS ....................................... 27 A. Benefits ............................................ 27 B. Main Project Risks . ................................... 27 C. Other Factors Affecting Project's Success ....................... 28 V. MONITORING AND EVALUATION .............. ................. 29 A. Actions to Monitor Project Objectives .29 B. Indicators .29 C. Reporting Arrangements .31 Tables: 1. Costs Summary by Expenditure Accounts .14 2. Financing Plan. 15 3. Proposed Procurement Arrangements .23 4. Procurement Implementation Plan .24 5. Estimated Bank Disbursements .25 6 Impact Indicators .29 Figure: 1. Architecture of Financial Management Information Systems. 8 I. THE EXPENDITURE AND PERSONNEL MANAGEMENT COMPONENT A. ScopE AND OBJEcTIVE 1. The primary objective of the Expenditure and Personnel Management component is to improve the regulatory and technical framework for the central government budget--including: (a) preparation; (b) revision; (c) execution; (d) monitoring; and (e) accounting--and the information and payroll systems for management of personnel expenditure. Many of the problems in government expenditure management are only the corollary of the 1994 financial crisis and the practice of managing public expenditure from the financing, or cash, side rather than through a well-conceived above-the-line budgetary program consistent with a sound macroeconomic framework. However, independently of the spillover of the financial crisis, there are two major structural weaknesses of the public expenditure management process. First, the lax and erratic nature of budgetary policy in the 1980s led over time to a proliferation of special mechanisms and a fragmentation of expenditure decision-making processes. Second, while the bases and systems for budget preparation, monitoring and accounting remain workable, they date back to a much earlier time, and now require substantial modernization--in order to update, simplify, and streamline the budgetary and accounting framework. 2. Reforms of budgetary procedures are to be targeted to: (i) strengthen the role of the budget as an instrument of policy implementation; (ii) make the control more efficient and reinforce budget discipline; and (iii) improve the flexibility of the budget execution, as stronger budget discipline will permit greater delegation of budget execution responsibility to spending agencies. To support the process, a comprehensive information system will also be needed. 3. Computerization of financial transactions and the installation of computer systems in major accounting offices will take some time. However, some reform measures can be introduced early in the process and will generate immediate benefits. Moreover, the implementation of a fully integrated management information system needs important preliminary studies and development. Thus, a phased approach has been selected for the implementation of the reforms. 4. The first phase, financed under the present project, is intended to develop a sound foundation for planning the larger investments envisaged in the subsequent phase. Phase I, to be concluded in two and a half years, will encompass the following major activities: a. Modernization of budgetary procedures, which will aim at strengthening the budgetary control system and will update, simplify and streamline the budgetary and accounting framework c. Preparation of an integrated Government Financial Management Information System (GFMIS) and of a personnel and payroll management information system, which will include (i) the functional analysis of the intended system; (ii) applications development; and (iii) the computerization of pilot sites. The total cost of these activities is estimated at about US$11.1 million, including contingencies. - 2 - 5. The second phase of the program for modernization of Expenditure and Personnel Management will cover the replication, throughout the country, of the systems designed and tested under the first phase. About 1S0]accounting offices, which cover 90 percent of total government expenditures, will be computerized, according to an implementation schedule that will be defined in Phase I. Computer hardware and software will be located at the Ministry of Finance (MOF) in the center, the 76 provincial headquarters and about 80 other Accounting Offices. Non-automated Accounting Offices will forward documents to automated accounting offices documents for processing. The payroll system will be fully computerized at the provincial level. Thus, at the end of the second phase, processing and reporting of government expenditure and personnel data will be fully automated and the implementation of an integrated GFMIS will be completed. Phase II activities will include acquisition of needed hardware and system software equipment, training to end-users and site preparation. The authorities have requested Bank support for the Phase II activities through a follow-up investment loan. B. PRojEcT DEscRimoN 1. Budgetary Procedures and Personnel Management 6. Current Situation and Ma*or Weaknesses. As presently structured, the budget gives a fragmented and incomplete picture of government finances. The budget is divided into 'general' and 'annexed" budgets, while extra-budgetary funds (EBFs) and revolving funds include revenues and expenditures that are planned and managed in separate processes. An inadequate integration among budget components at the preparation stage, especially between investment and current expenditure, impedes efficient expenditure programming. The structure of budget coding is not conducive to economic analysis. There is no presentation on a functional basis (for expenditure) and limited breakdown on an economic basis. As a result, the budget is not the predictable and robust instrument of policy implementation that it should be. 7. The overall expenditure management system has a number of serious weaknesses from both a conceptual and organizational point of view: (i) the payment processing system is completely manual, involving the functions of account control and verification, transaction recording and payment; (ii) there exists a complex system of control/certification involving the MOF and the TCA, and which contains both duplication of controls and confusion concerning financial and accounting controls; and (iii) the system for data aggregation is largely manual, involving substantial "double handling' of data, and is primarily oriented to financial report production, rather than towards producing documents suitable for management information and decision-making. While it would be possible to continue with the existing labor-intensive manual accounting system for budget execution, demands by Government and institutions responsible for economic management are unlikely to be satisfactorily met in the future without substantial institutional modernization within the MOF. The cash management system is in effect a centralized cash rationing system, required largely by the weak budget preparation process and insufficient overall financing. While necessary in the current economic circumstances, this system is cumbersome and, although utilizing computers for detailed calculations, relies on manual intervention on a daily basis with little or no integration with the budget implementation process. S. The civil service is characterized by substantial over-staffing. In large measure, this is because the management and control system of personnel does not permit the identification and prevention of increased expenditures in a satisfactory way. Several weaknesses in this system may be identified including the following: a. The separation of personnel expenditures among different budgets and extrabudgetary entities, which makes comprehensive analysis and management difficult b. A management system of positions based on "cadres" that is ineffective for efficient management of human resources within the government sector--the system of position management has resulted in 20 percent more 'cadres' than occupied positions c. A payroll system that is partly manual and partly computerized which makes it difficult to manage and leads to redundant and cumbersome controls. 9. Planned reforms. To strengthen budgetary decision making: (a) a more appropriate budget code structure for economic and functional analysis will be prepared and the chart of accounts will be revised; and (b) the budget coverage will be improved. In order to submit all proposed expenditures to the same standards of comparative economic efficiency, the following actions will be carried out: a. Elimination of all EBFs, except a very few "strategic" ones b. Elimination of revolving funds which have no specific justification for continued existence c. Better integration of annexed budgets into a single consolidated budget. 10. The relationship between planning and budgeting processes will be tightened and the links between investment budget and current and transfer spending will be improved during the budget preparation process. Thus, it will be necessary to: a. Implement procedures to ensure that recurrent expenditure generated by investments projects is appropriately considered b. Formalize joint meetings between SPO and MOF during the preparation of the budget, to ensure that current and capital budget of spending agencies are scrutinized together. 11. Improving the budget processes requires a strict definition of the role of core agencies and spending agencies, to give more responsibility to spending agencies to allocate their expenditure within their approved budget while enhancing budget discipline. To make controls more efficient while avoiding cumbersome procedures, it will be necessary to: (a) correctly deflne controls needed at the different steps of the control/certification process, namely financial control before - 4 - commitment is made, accounting control before payment is made and audit after payment; and (b) review the responsibility of agencies in charge of budgetary control, to eliminate duplicate controls and center their activities on their essential functions. In general, ex ante controls will be reduced and ex post audit capabilities improved. Streamlined procedures to govern commitment authorizations, including forward commitments for investment, will be installed. The Accounting Offices network will be rationalized. Many of the current functions of Budget Offices will be reduced significantly or reassigned elsewhere (notably, in order to make spending agencies more accountable). The Budget Offices, as currently defined, will be restructured or phased out. 12. To improve cash management, banking arrangements must be reviewed with a view to: a. Centralizing all Government receipts in a single account at the Central Bank of Turkey b. Rationalizing the system of government accounts c. Improving arrangements for payment of interest and charges. 13. The ability to exercise effective control over civil service posts (positions) is fundamental for control over civil service employment and personnel expenditures. Some principles must be defined: a. The Budget must include the posts authorized b. Budget appropriations and authorized posts must be kept fully consistent during budget execution C. Ministries may retain actual implementation responsibilities for personnel management d. Procedures must be sufficiently flexible to allow the spending agencies to optimize the allocation of their human resources. 14. Implementation of the Reforms. Since February 1995, Working Groups, assisted by consultancies financed under the Japan Grant, have been conducting detailed studies to: (a) define a detailed reform strategy for improving budget coverage through the rationalization of non-budget entities; (b) introduce a new budget and accounting chart of accounts more suitable for economic and functional analysis, consistent with international classification structures and which can be implemented on the proposed Financial Ledger System (and utilized for both budget preparation and execution); (c) prepare an action program for rationalizing the current system of controls over government expenditures, as well as the organizations involved in these processes; (d) define new regulations and procedures for budgeting of positions in the public administration and develop a detailed program for computerization of personnel information and payroll; (e) deliver training to key staff in the Government Financial Statistics (GFS) methodology; and (f) review banking arrangements and government accounts, this task will be coordinated with the tdy of the potential role of banks in routine tax administration functions. These studies are expected to be completed by September 1995. They will design a streamlined procedural system and institutional arrangements that are needed for the implementation of a Government Financial Management Information System. However, some reforms will be introduced before the full computerization of government financial transactions and will generate immediate benefits. 15. Based on the recommendations of these studies, the following actions will be carried out: a. The new budget code structure will be completed by September 30, 1995--it will be used in parallel with the current code structure in 1996 and fully implemented for the preparation of the 1997 budget b. A new chart of accounts will be prepared by June 30, 1996 and implemented by January 1, 1997 c. All EBFs, except a very few of strategic funds, will be consolidated into the draft 1996 budget that will be submitted to Parliament, by November 1995, with a view to their progressive elimination d. New regulations and accounting methodology relating to the functioning of maintained EBFs and revolving funds will be included in the draft 1997 budget law e. Principles for streamlining budgetary processes will be defined by September 30, 1995 and a detailed action plan will be prepared by December 31, 1995 C. Position ceilings will be introduced in the 1997 budget law. 16. The program for streamlining budgetary processes will include: (i) a detailed design of new control and preparation procedures to be implemented; (ii) related organizational arrangements; (iii) identification of legal issues; and (iv) an implementation plan, including ansitional arrangements for measures, for which full implementation requires computerization. In the context of streamlining control processes and increasing responsibilities of spending agencies in budget preparation, the functions of budget offices will be reduced and reassigned elsewhere. Thus, the Budget Offices as an institution under revised arrangements must be restructured or eliminated. The action plan will include provision for restructuring of Budget Offices and reallocating their staff. The restructuring of Budget Offices will be achieved before Janury 1, 1997. The action plan will also include a restructuring program for Accounting Offices, which will be phased with other modernization measures (notably, implementation of the new budget code structure and computerization). 17. The actions for modernizing personnel management in this project will concern only the budgeffzation of positions and the preparation of personnel and payroll management information systems. However, the government intends to continue the actions carried out under the present project with a broader reform of the civil service. 18. It is important that the changes in organization structures, procedures and processes and computerization be supported by Government personnel. Detailed studies on reallocation and reassignment plans for affected civil servants need to be launched. Moreover, successful implementation will require the planning and completion of a set of actions to explain and disseminate the measures in order to gain active cooperation of the civil servants who will be operating in the new environment, or who will face a change in assignment or residence due to the restructuring of Budget Offices and accounting offices. In this respect, a particular emphasis will be put on communicating the changes to and through middle management. 19. Consultants external to MOF and a permanent advisor will assist in the implementation of these reforms (47 consultant-months, estimated base cost US$940,000). The In-House advisor (20 consultant-months) will * Provide technical guidance to staff in the conduct of the reforms, notably for the implementation of the Budget code structure, new control processes and related organizational changes and the finalization of the chart of accounts * Ensure the consistency between the outcomes of different studies, notably the functional analysis of the information system and the design of reforms * Prepare progress reports and detailed programs for working groups * Identify needed additional studies and prepare detailed terms of reference for these. Other short-term consultants (27 consultant-months) will help to: * Finalize the chart of accounts. * Implement modernized control processes and related organizational changes. * Design reorganization plans for departments that will be subject to change. * Improve methods of budget preparation related to personnel expenditure. * Strengthen payment processes and cash management. * Review procurement arrangements and systems to ensure consistency with the new control mechanisms.' The terms of reference for these consultancies are contained in Annex 2b. ' Any investment requirements stemming from the review of government procurement would be cosidered for inclusion in the second PFMP operation. - 7 - 2. Government Fmancial Management Information System 20. Current Situation and Major Weaknesses. Information systems currently in place in the MOF produce a variety of reports, but they are lacking in coverage, integration and flexibility. Information systems, where present, have been developed in response to specific organizational requirements and needs and not along functional lines. This leads to duplication of systems, inconsistencies in data, and a disparate set of segmented systems with no systematic data sharing arrangements. Data flows between the core financial agencies are predominantly manual and cross institutional access to data bases is very limited or non existent. This data is also not amenable to cross classification according to other schema as necessary for further analysis. In the absence of an automated accounting system, a cumbersome and often duplicate system of checks and controls has been built up, and a disproportionate amount of manual resources is expended on attempting to ensure that prescribed financial controls are applied to all transactions. Information systems organizations at the MOF are particularly weak and fragmented and lack adequate numbers of staff trained in current information systems technology and methodologies. A major part of the hardware and software installed at the MOF would now be considered out-dated and therefore, acquisitions of new technology are inevitable. However, no ministry-wide or organization-wide standards are present, resulting in heterogeneous acquisitions of hardware and software. This aggravates the data sharing problems and poses serious risks of investing in information systems which may not be compatible with each other. 21. Proposed Changes. A fully integrated new Government Fmancial Management Information System or GFMIS, capable of meeting the demands of Government, economic management agencies and line agencies is to be introduced in a timely and cost effective manner. Demands on such a system will range from the requirement to carry out functional and economic analysis of the implementation of government policy through the budget process, to the processing of a payment order against a particular budget line item appropriation. 22. The project will support the design and the development of information systems for budget preparation, execution and monitoring, cash management, government accounting and civil service position management, and the pilot implementation of these systems. A basic underlying principle is that the systems be structured along functional rather than organizational lines and provide support to all organizations involved in the expenditure management processes. This approach has the advantage that it enables the creation of integrated systems and data bases in which the primary responsibility for the timely provision of a particular sub-set of data resides with the agency responsible for that function. However, all data in the system data bases is accessible by all relevant central agencies (subject to appropriate security controls). Ihis eliminates duplicate data gathering and enables all agencies responsible for financial functions to work with the same set of data. Figure 1 shows the proposed information systems architecture for the overall government financial management system. 23. A financial ledger system (FLS) will be the core of the GFMIS and will be designed with the two basic objectives of: (a) controlling the state budget and the assets and liabilities of the government; and (b) providing comprehensive, reliable and timely information on the financial position of the Government of Turkey to facilitate its financial management. Function Central Treasury SPO MinistrydofFinance Line MOF Und.3ect. Paying/Recv. Courtdo Bank OD8FC GDPA Accountanchs Agencies ODR Customs; Banks Accounts Legend Arsso nfornlation reaws. Full lines irndicate Systemsi to b deveto under PEM oomponenyt Macro Econornk | Systems for Macro-Economic Forecasting Forecastitig | [S Systems to be deebped under the other AT ,Componenh of the PFM project Systems to be developed under the TDSP 2 | Macro-Economic Framewok Djata on v Lirne Agerncy TxCutm Budget Preparation previous d Preiminary Drre Summary sug | Sys s arjl_______ cunent ifSystems ol Jy} { JS Feed' beck ye4 r I Budget Guidelnes . . t.li~,................ .. ........................... . . .......... .. L.L. . fq actualsle i i Audit - Sy trW ~~~~~~~~~~~~~~~~~~~~~~~~to vahou ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~M . . ...... .........'..................... ............ ......... ....... ...,,,,,......!;..;. Basieledt II Inv nt |i Curre ----- -----------~Re' F mZt"+~~'- ---- -i-------t- ------^- -----i*-- ; ion Investment i . lwt l .............. ,ud B ..............uBU geedFie rm 0....... ..................... ............................ . Accountin an - Cashton RL'unii .- .~'-~~-''-'' _=g ieAec FbscaIReportin i an It,, ""dure|- t':':'Syste i . m; ,iar ailrf nti orrAaar Pav 4 t - I --- -- ........ ........Iing- - : rirP , , ,, ................ . .......... ,, _.. .......... 'i ; Dab on Pro,iecls l i i ~ ~~~~~~~~~~~~~~~ into Reevn xecutlan App~~~~~~~~~~~~~~~~~~~~~~~~~~~Bn ,~~~~~~~~~~. SyW s ; ma Eiti iSist ClBudgement E:. . =n FiAn"_n____ a i - 4 UI5fl I Uties, Inties. . ! Pers I> ' :'|konnel*4- t ~~~~~~~~~~~~~~~~~...... .......____. ......__..._i. . _.. ......... ....... ,,, Rwiti..... ........ ....._......... Accountinp an Audit co EsL 0 " np ..FW"InRut to udtmStassromVaiou Aea - 9- 24. The FLS will be used by: * The General Directorate of Public Accounts (including accounting offices) to perform the basic accounting functions * The General Directorate of Budget and Fiscal Control to perform the control functions associated with budget execution and monitoring * The Cash Management Department of Treasury to obtain information for cash management, and to implement funds allocations, as may be required * The SPO to obtain the status of actual expenditures on ongoing projects to update the major projects data base * Spending units to obtain financial information in their respective areas. 25. The system will be designed in accordance with generally accepted accounting principles and standards, a double entry accounting model and policies and procedures developed as part of the preceding consultancies. 26. The FLS will be a fully automated accounting system, with data captured only once as an accounting transaction progresses through the system. This system will be introduced along with a modern budget classification system and an appropriate chart of accounts, and would enable expenditures and revenues to be recorded at a detailed level and related to specific programs and projects. Data recorded at this level will then be directly available for use for program and project management. This data will also be easily amenable to cross classification for financial and economic analyses. The introduction of an automated accounting system would ensure completeness of data capture (that is, no transaction would be processed outside the system) and rigorous application of all relevant financial controls to all transactions processed by the system. The system will be structured in two levels, with a clear functional distinction between them: (i) Level 1 will process and keep consolidated data, (the central unit will be located at the MOF); and (ii) Level 2 will execute operational functions and keep detailed data (the units will be operated at accounting offices). The linkage between the central unit and units in accounting offices will be established through dedicated data transmission lines. 27. The FLS will be designed to produce the Financial and Management Reports required by the various users. This includes the monthly civil accounts, annual appropriation accounts and combined finance and revenue accounts as well as individual accounts for the respective agencies. The system will incorporate a reporting system to enable management to identify problems and bottlenecks in a timely manner. The reporting capability of the system will address all matters affecting the efficacy of the accounting function. In addition, the system will have facilities for easy retrieval and reporting on data in the system data bases in a variety of formats. The system will also enable user departments to download relevant data and perform required analysis and reporting. - 10- 28. At present there are about 1,700 accounting offices (including about 400 joint tax/ accounting offices) within Turkey. They cover 76 provinces and 840 towns. The total number of accounting offices in Turkey is expected to be reduced as a result of the financial reforms introduced under this component. However, setting up computer systems for all remaining accounting offices across the country, even with a substantial reduction in the number, would be quite expensive. An analysis of the distribution of the volume of transactions by expenditure and revenue indicates that about 90 percent of the expenditures are incurred through about 150 accounting offices. It is therefore appropriate to target these accounting offices for automation. 29. Budget Preration. A set of systems will support the processes of Budget preparation. These systems will receive from the various spending agencies the details of their programs and projects, consolidate them and produce from them the documents that form the basis of negotiations between the ministries and spending agencies and the central agencies. The system will facilitate an iterative process of budget submission, consolidation, review/negotiation, and documentation until the budget is finalized and approved. The systems will utilize the data base established within the Financial Ledger System (see below) to provide accurate historical data. This system would cover both the Investment and the Current Budgets integrated within a common chart of accounts. 30. The modules for preparation of the current budget will be managed by the GDBFC in the MOF and that for the Preparation of the Investment Budget by the SPO. Both systems will require extensive interaction with and regular data input from the various ministries and spending agencies in Government, as well as with the Treasury, whose macroeconomic policy formulation capability is being strengthened under the Treasury Data Systems Project, with World Bank fuiancing. The preparation and subsequent monitoring of the investment budget would require setting up a major projects data base in SPO. The Information Technology Working Group and the consultants in charge of the design of the GFMIS will investigate whether the systems recently developed by the SPO would be able to provide the functionality required in this area. If so, the existing SPO systems would be integrated with the other systems envisaged in this project. 31. Personne aMj ent. The ability to exercise effective post/position control is important to regain control over civil service employment. In addition, line agencies require systems to effectively manage personnel on their rolls. To help achieve these goals, it is proposed that the following systems be implemented: * A Position/Post Management System to maintain records of the authorized posts/positions for government agencies, of authorizations to fill vacant positions, and of appointments to permanent positions. * A Personnel Information System to maintain the personnel data for which civil servants and all personnel actions related to these civil servants; including retirements, resignations, removals, deaths and transfers. It would also maintain information to be able to produce manpower profiles including data on age, departmental distribution, skill categories, compensation and tenure etc. - 11 - * An automated Payroll System, at the major accounting offices to cover salary and related payments to civil servants. 32. This last group of systems is essential for the Government to regain control over civil service employment. Effective control will require a post management system that ensures that all fresh recruitment is against appropriated and budgeted positions. Personnel actions for civil servants on board will be recorded by the agency personnel systems and used to calculate the payroll. The agency record of budgeted positions will be used to ensure that no personnel are added to the payroll who do not have an authorized budgeted position. The payroll systems would be fully integrated with the FLS--the Government Budgeting and Accounting system described above. 33. Information Technolofy Activities. The information systems defined above will be introduced in a phased manner. Specifically, in Phase I: (a) the systems will be designed, specifications will be developed for the required hardware and software; (b) application software will be prepared; and (c) pilot systems will be implemented. Nationwide replication will occur in Phase 11. 34. Systems design and sDecifications for hardware and software. This task involves: a. Studying the functional processes, including administrative procedures, transaction documents, forms and information flows related to the budget preparation, budget execution, accounting and reporting and payroll and position management; recommendations for changes made by the preceding studies on budgetary reforms will be taken into account. b. Defining and developing information flows, procedures, transaction types and associated documents and forms, and related organization required to operate the proposed information system. c. Defining reporting capacities to make reports available in a variety of formats to end users and core agencies. d. Developing a full functional design and systems specifications for the computer systems required, including the specifications of the major data bases, output reports, input formats, processing and controls, interfaces and data flows between the nodes of the information flow network. e. Drawing up specifications of the hardware, system software and DBMS (Database Management Software) to be installed at various nodes and the mode of interconnection of this hardware and software. f. Investigation of alternatives for application software -- either packages will be purchased and customized, or specific applications will be developed. - 12 - 35. Pilot systems implementation. Implementation of the country wide network of information systems described above is a major long-term project. Under the present project, a pilot implementation of the Financial Ledger System and the post management/payroll systems will be carried out. This pilot implementation will be carried out at eight sites: the MOF, SPO, Treasury, Turkish Court of Accounts, Ministry of Health, State Highways, Ministry of Interior and a provincial center in the Eskisehir region. The pilot will test the links between the FLS and systems implemented at SPO and Treasury and access to the central data bank of the system from core agencies. Pilot systems implementation will involve site preparation, installation of hardware, system software and DBMS, installation and testing of the application system and training of local staff to enable them to operate and maintain the system and train end users. It is expected that pilot sites will be installed by July 1997, and testing and training will be carried out during the following six months (estimated base costs for site preparation, hardware, and application development or customization of software packages: US$6.02 million). 36. A consulting firm with extensive experience in the design and installation of such systems will assist the Government to prepare the implementation of the GFMIS. The task of this consultant will be the following: (i) preparation of the detailed design, systems specifications and related manuals and procedures for the specified systems; (ii) design of the technology architecture required to implement the information systems; (iii) investigation of alternatives for application software (evaluation of existing packages and/or needed developments); (iv) preparation of tender documents for acquisition (or) development of software and for acquisition of hardware and system software that will be installed at pilot sites; (v) assistance to the implementation of pilot sites (vi) training of users at pilot sites; and (vii) preparation of an implementation schedule for the second phase of the program of computerization (estimated base costs for advisory services, functional analysis and training: US$2.4 million). 37. To overcome the shortage of technical staff required for the implementation and support of systems: (i) a permanent local computer expert will assist the working group in charge of the design and the implementation of information systems; and (ii) a pool of about 10 Turkish computer experts external to MOF will be set up during the last year of component execution. These experts will work with expatriate experts to implement the pilot sites. Subsequently, they will assist the Government to replicate the system throughout the country in the second phase of the program. The establishment of a pool of local computer experts will be a cost effective means to ensure sustainability of the computerization effort (estimated base cost: permanent computer expert and pool of computer experts--one year: US$510,000). 38. The second phase of the program of modernization of expenditure and personnel management will follow the implementation of pilot sites and will involve the replication of information systems in other selected sites, according to an implementation plan to be defined during the first phase. About 150 accounting offices will be computerized, as mentioned above. Major cost items in Phase II will include: (i) hardware equipment and software defined in the first phase; (ii) site preparation; (iii) training of end users; and (iv) maintenance contracts for the hardware and software. At this stage, it is envisaged that the consulting firm responsible for the pilot will assist with the first ten replications, then the implementation of other sites will be carried out by the pool of local computer experts that will be set up in Phase I. Accurate design and estimates of costs for the Phase II activities will be drawn under the present project. - 13 - C. PRojEcT Com AND FINANCING PLAN 39. Project Costs. The total cost of the Expenditure and Personnel Management component of the PFMP is estimated at US$11.1 million equivalent, including contingencies, taxes and duties. Project costs include goods and equipment, advisory services, civil works, training services and materials, project management support services and a refund of that part of a US$2 million advance from the Bank's Project Preparation Facility allocated to this component. A breakdown of costs by expenditure category is shown in Table 1. A more detailed presentation is contained in Annex 2c. 40. The total baseline cost is estimated at about US$10.4 million. Physical contingencies are estimated at US$312,000, or 5 percent of the baseline costs of civil works and equipment. Price contingencies are estimated at US$377,000 equivalent or 4 percent of overall baseline costs over the two and a half years of component implementation. These are based on the assumptions of an average local inflation rate of 51 percent in 1995-96, and 15 percent thereafter; and price increases for foreign costs (estimated in US dollars) of 1.6 percent in 1995-96 and 2.6 percent for the remaining years of project execution. Cost calculations assume an average exchange rate of 62,000 Turkish Lira/US$1.00 for the project execution period. Foreign currency costs, including contingencies, are estimated at US$8.6 million or 78 percent of total cost. Taxes and duties are estimated at about US$1.2 million equivalent or 11 percent of total cost. 41. Financing Arrangements. The proposed IBRD loan will finance US$8.6 million (approximately 78 percent of the total cost of the component). It will cover 100 percent of the foreign costs of the component. The Government contribution of US$2.5 million will finance a variety of local costs, notably training and project support costs. The Government gave assurances during negotiations that adequate budgetary provisions will be made to meet counterpart funding requirements throughout the period of project execution. The financing plan is set out in Table 2. Table 1. Costs Summary Bv Expenditure Accounts (IL bilon) (US SN0) Of % Which % Foreig % Toal Of which % Tobl LoCal Foreign Toal Duties & Exchange Base Costs Duties & Foreig Bas Tax LAl1 Foreip TOtl Tax Excaa Costs Civil Worh 5 0 5 0 0 1 100 0 100 0 0 1 Equipment 55 230 285 56 81 57 1,146 4,773 5,919 1,162 S1 57 Training Local Training 19 10 29 0 33 6 400 200 600 0 33 6 International Taining 0 5 5 0 100 1 0 100 100 0 100 1 Subtotal 19 15 34 0 43 7 400 300 700 0 43 7 Technical Assitance Local Technicnal Aasitan 25 0 25 0 0 5 510 0 510 0 0 51 Intenatonal TechnicalAsistance 0 147 147 0 100 29 0 3,040 3,040 0 100 29 Subtotal 25 147 172 0 86 34 510 3,040 3,550 0 86 34 Piject Support 5 0 5 0 0 1 100 0 100 0 0 1 BASE COSTS 19 392 501 56 78 110 2,!i6 8,113 10,369 1,162 78 101 Pbysicl Contingeies 4 11 15 2 78 3 44 268 312 35 78 3 Price Continencies 175 438 613 69 77 123 151 226 377 42 76 4 TOTAL COSr 25R 76 1429 127 78 226 2,451 ,7 ii 1,239 78 107 - 15 - Table 2. Financing Plan (US$Million Equivalent) Local Foreign Total % of Total EBRD 0.0 8.6 8.6 77.5 Government 2.5 0.0 2.5 22.5 Total 2.5 8.6 11.1 100.0 42. Preparatory activities for the PFMP as a whole have benefitted from a Japanese PHRD grant in the amount of Yen 128 million (approximately US$1.3 million). The French Government has also provided a grant of about US$132,000 specifically for preparatory studies for the Expenditure and Personnel Management component. The Government has obtained an advance in the amount of US$2 million from the Bank's Project Preparation Facility. These monies have allowed the timely initiation of the most time-sensitive preparatory activities. D. ACCOUNTING AND AUDIT PLANS 43. A project account and special account will be established for each of the three implementing agencies. Each PMU would prepare quarterly statements of expenditures, consolidate component accounts, and prepare and submit disbursement withdrawal applications for project expenditures (beginning from the date of Loan Effectiveness). The project accounts and special accounts would jointly be audited annually by independent auditors acceptable to the Bank. The audit reports will contain a separate opinion on the use of Statements of Expenditure. During negotiations, it was agreed that an annual audit of all project and special accounts would be undertaken by an independent auditor in accordance with the Bank's Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank. (March 1982). Audit reports in English will be submitted to the Bank not later than six months after the end of each fiscal year (December 31). Details of the schedule for project reporting and annual reviews are presented in Table 4.7 of the Main Report. II. IMPIEMENTATION AMANGEMENTS A. REsrONS B es OF THE ImPEENTAToN AGENC1ES 44. The borrower is the Republic of Turkey which is represented by the Undersecretariat of Treasury. The Ministry of Finance will have overall responsibility for the Expenditure and Personnel Component. 45. The Undersecretary of Finance will have overall responsibility for supervision and management of this component which involves a number of agencies. A high-level, inter-agency Steering Committee has been appointed as an advisory body. The Steering Committee is chaired by a Deputy Undersecretary of Finance and includes appropriate high-level participants from the Ministry of Finance (General Directorate of Budget and Fiscal Control and General Directorate of Public Accounts), Treasury, State Planning Organization and Court of Accounts. Responsibility for day-to-day coordination, management and monitoring of the component rests with a Project Management Unit (PMU), led by a Head of Department from the General Directorate of Budget and Fiscal Control (GDBFC). The PMU includes the heads of four Working Groups that are responsible for implementation of specific tasks, as well as other MOF personnel with skills in accounting, procurement, contract monitoring and information processing. 46. The specific responsibilities of the PMU are the following: * Ensure the movement of official documents and contracts through their usual approval processes and undertake measures to expedite their release * Monitor the availability of Government funds * Monitor project expenditures and costs (local and foreign), process loan disbursement applications and track disbursements of the Bank loan and Government funds * Ensure compliance with the Bank Procurement Guidelines in the acquisition of equipment and software packages, administration of suppliers' and technical assistance contracts * Procure goods and services and works * Prepare and distribute periodic reports to the Undersecretary of Finance (monthly) and the Bank (quarterly), reflecting: (i) the status of implementation, progress, problems encountered and corrective actions needed; and (ii) current costs and estimates of completion * Ensure the timely preparation and submission to the relevant government institutions and the Bank of annual audit reports of project expenditure, including Statements of Expenditures (SOEs) and accounts * Liaise with the Bank and involved government agencies for project administration and supervision matters - 18 - * Ensure the placement and performance of staff receiving training and of consultant hired under the project * Prepare a Component Completion Report within six months after the completion of the component, which will be incorporated eventually into the overall Project Completion Report. 47. The specific responsibilities of the four working groups are: (a) Budget preparation and revision. This working group will: * Study issues related to budgetary coverage * Propose budget structure and coding * Develop a program for training in the methodology of Government Financial Statistics (GFS) * Study the integration of current and investment budget preparation procedures * Design a new budget presentation and related procedures * Coordinate with the working group in charge of information systems regarding the design of the budget preparation system. (b) Budgetary control processes. This working group will: * Study control process of Public Expenditures and role of TCA 3 Propose structure of Accounting Offices * Propose structure of Budget Offices * Propose cash management and banking arrangements * Coordinate with the working group in charge of information systems regarding the design of the FLS. (c) Personnel and payroll management. This working group will: * Study issues related to post and payroll management and develop proposals * Develop methodology for personnel expenditures forecasts * Coordinate with the working group in charge of information systems regarding the payroll and posts management systems. (d) Information systems. This working group will: * Design, develop and implement computer systems related to the expenditure and personnel component of the project in coordination with the three other working groups * Propose hardware/software standards for government financial management * Coordinate with the ongoing or new information systems projects in the government agencies, such as Tax Department, Treasury Undersecretariat, SPO, Customs to ensure systems integration. - 19 - B. IR-AGE mCY COORINATON 48. The successful implementation of actions carried out under the Public Expenditure and management component will depend on close coordination among several agencies in the government sector. Most of the reforms, and particularly the implementation of a new budget code structure and the strengthening of the Budget coverage will involve spending ministries. Their implementation will require close cooperation between core agencies and spending units. The modernization of personnel administration must be carried out in close cooperation between the MOF and the State Personnel Presidency. The design of new information systems must be coordinated with the ongoing or new information systems projects. The steering group must play an effective role in ensuring that there is coordination between the various agencies, while the participation of the most concerned agencies in the working group will contribute to ensure a good coordination at the technical level. C. ROLE OF WORLD BANK SUPERviSION 49. Bank supervision of project implementation will concentrate on the consistency of component activities with agreements reached during appraisal, performance of the implementing groups and assessment of emerging needs for adjustments to project parameters. The day-to-day implementation and monitoring will be carried out by the PMUs. The basis for Bank monitoring will be quarterly progress reports prepared by the PMUs. The reports will describe the status, deviation, if any, from the implementation plans, reasons for deviations as well as corrective actions being taken. The quarterly reports will be supplemented by substantive discussions with the Working Groups implementing the various subcomponents and discussions with higher echelon officials. Annual work and procurement programs will be required to be agreed with the Bank each year, and will include quarterly benchmarks for monitoring and evaluating progress in implementation. 50. Implementation of the proposed project, and the extent to which it is achieving its stated objectives, would be reviewed and evaluated annually and upon its completion. In addition, there will be three formal joint Bank-Government reviews. The first of these would be conducted early in 1996, about four months after Loan Effectiveness, to provide a basis for proceeding with preappraisal of the proposed follow-up investment operation, and for making any early adjustments as may be necessary in project parameters. The second (in FY1997) would cover the formal assessment of the pilot implementation of the new Customs system, and the third (FY1998) the assessment of the pilot GFMIS for the Expenditure and Personnel Management Component. The evaluation criteria for the latter are described in Part V of this annex. The proposed schedule of supervision and review missions is in Table 4.7 of the Main Report. III. IMLEMENTATION AMIfTIES A. ImrLz&iywAnoN59iwEuLFs 51. There are no substantial requirements for coordinating the three components of the PFMP at the implementation level and the three components would proceed according to separate Component Implementation Plans--see Annex la for Tax Administration and Annex 3a for Customs Modernization. However, overall responsibility for the supervision of the Tax Administration and Expenditure and Personnel Management components rests with the Undersecretary in the Ministry of Finance, who will ensure any necessary coordination within the MOF, and with other entities involved in the tax and expenditure components. Any necessary coordination between MOF and Customs will be effected at the ministry level by the Undersecretaries of Finance and of Customs, with the assistance of the Treasury. 52. Implementation of Expenditure and Personnel Management Component activities is to be carried out over a period of two and a half years. Due to the constraints of the budget cycle, the timeliness with which individual subcomponents are executed is critical, as delays in one subcomponent may delay overall implementation by one fiscal year. Successful implementation will depend on close coordination among several agencies in the government sector. Most of the reforms, particularly the introduction of a new budget code structure and the strengthening of budget coverage, will involve spending ministries. Thus, implementation will require close cooperation between core agencies and spending units. The modernization of personnel administration must be carried out in close cooperation between the MOF and the State Personnel Presidency. The design of new information systems must be coordinated with ongoing activities under a number of disparate information system projects. The Steering Committee must play an effective role in ensuring that there is the required coordination between the various agencies. Participation of most of the concerned agencies in the Working Groups is already contributing to good coordination at the technical level. 53. Studies to help for the preparation of reforms have been launched in February 1995. Detailed terms of reference for short term consultancies to assist in the implementation of these reforms will be prepared on the basis of the results of the initial studies. A rough indication of the likely short term assignments is included in the terms of reference for a long-term In-House advisor (see Annex 2b). Also included in Annex 2b are the terms of reference for an information technology expert and for the functional analysis of the intended information system. Annex 2d contains the schedule of implementation by activity. This schedule takes into account the work carried out during project preparation (preliminary studies for the preparation of reforms). B. P REmNT ARANGEN7s MD SCEEULES 54. The executing agencies' capabilities and purchasing regulations and procedures were reviewed during Appraisal. It was determined that the GDBFC and GDPA have staff with the appropriate background (including training in Bank procurement procedures) to manage the procurement activities of the Expenditure and Personnel Management Component. 55. All procurement of goods and material to be financed from the Bank loan proceeds would be carried out in accordance with the Bank's Guidelines: Procurement Under IBRD Loans and - 22 - IDA Credits (January 1995) and procurement of services, including the selection of consultants for technical assistance and training, would be in accordance with the Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (August 1981). Project procurement would be limited to the purchase of goods, material and services, including training. The former consists mainly of the hardware and software for the information technology subcomponents (including substations, personal computers and peripherals). 56. Contracts for goods and material with a value of more than US$300,000 equivalent per contract will be arranged in accordance with the Bank's procedures for international competitive bidding (ICB). In that event, goods manufactured in Turkey and procured through ICB may be granted a margin of preference of 15 percent in accordance with paras. 2.54 and 2.55 of the Bank's Guidelines and paras. 1-6 in Appendix 2 of the Bank's Guidelines. Direct contracting (single source) of proprietary software may be followed to ensure compatibility with development tools already in use in the MOF. Direct contracting will be permitted for contracts costing a total of up to US$330,000 equivalent in the aggregate. The Bank's Standard Bidding Documents will be used for all procurement under ICB. 57. Contracts for equipment and material estimated to cost US$300,000 equivalent or more and all direct procurement contracts would be subject to the Bank's prior review of procurement documentation and approval of contract award. This would result in prior review of 94 percent of Bank financed contracts. Other contracts would be subject to ex post review after contract award. 58. Procurement of services, including the selection of consultants, would be based mainly on a shortlisting of firms. The services of individual specialists not to exceed US$50,000 per contract may be contracted for diverse tasks of short duration (up to six months). Study tours will likely be sole sourced. The total value of consultant services to be procured from firms through shortlisting is estimated to be US$2.8 million, from individuals is US$580,000 and through sole sourcing is US$210,000. Prior review of consultant contracts would not apply to contracts estimated to cost less than US$100,000 equivalent per contract for firms and US$50,000 per contract for individuals. However, the terms of reference for all contracts will be pre-reviewed by the Bank. 59. Items to be procured will be grouped into major packages to encourage competitive bidding and permit bulk procurement. Major procurement categories include: about US$5.8 million equivalent to be procured through ICB; US$540,000 of proprietary software through direct procurement; and US$3.6 million equivalent through shortlisting of consultant firms, individual consultants and sole sourcing. Table 3 summarizes the procurement arrangements for the major categories of the component. Further details of the procurement packages and the relative timing of procurement actions are shown in Table 4. 60. The PMU will furnish the Bank quarterly procurement reports indicating: (a) changes in individual contracts' cost estimates, including best estimates for physical and price contingencies; (b) revised timing of procurement actions, including advertising, bidding, contract award and completion time of individual contracts; and (c) compliance with aggregate limits on specified methods of procurement. Further, the annual project operating plans would include any revisions - 23 - in the agreed implementation schedule regarding employment of consultants. Prior Bank review of procurement decisions will result in a coverage of 100 percent of Bank-financed project costs. Table 3. ProRosed Procuranent Anuiements (US$million equivalent) Item International Other N.B.F.w Total Competitive Cost Bidding Civil Works 0.10 0.10 I __________________________ _____________ ____________ (0-00) (0.00) Equipment/Goods 5.78 0.54 6.32 l ___________________________ (4.65) (0.43) (5.08) Training 0.32 0.43 0.75 l _______________________________ _______________ (0.32) (0.00) (0.32) Technical Assistance/Advisory 2.8S 0.55 3.43 Services (2.88) (0.00) (2.88) Project Management Support 0.11 0.11 Services (0.00) (0.00) PPP 0.35 0.35 (0.35) (0.35) Total 5.78 4.09 1.19 11.06 (4.65) (3.98) (0.00) (8.63) a/ Other includes shortlisting of consultant firms (USS2.77 million); individual consultants (US$0.58 million); sole sourcing (US$0.21 million); and direct procurement of proprietary software (USS0.54 million). bl Not Bank Financed Note: Numbers in parenthesis are the respective amounts financed by the Bank loan. Differences due to rounding. 61. The procedure of procurement for DBMS, development tools and financial management "off-the-shelf" packages will be reviewed with the Bank on the basis of the review and recommendations of the study for designing information systems. Direct procurement with property owners would be considered if compatibility with existing systems is needed for the purchase of DBMS and development tools. C. DISBURSEMENT ARRANGEMENTS AND SCHEDULES 62. The Loan would be disbursed separately for each component. Table 5 shows the disbursement forecast for the Expenditure and Personnel Management Component by semester. Disbursements for this component are expected to be completed by September 30, 1998, approximately 6 months after the end of component execution. Loan Closing will be June 30, 2000, allowing ample time for the processing of final withdrawal applications. - 24 - Table 4: Prournent Dln hmentation Plan (USS million) TOTAL Prepare (Including Procuremen Tender Bid Award CotrLct Contingencies) t Method Documents Invitation Contract Conlpetiom. 1 Hdand Syem Software 3.11 ICB 12/96 2/97 4/97 3/98 2. DBMS and Appllaioa Development Tools \b 0.54 DP 9/96 10/96 11/96 11/96 3. ApplicatIo Softwae 2.67 ICB 9/96 11/96 1/97 7/97 TOTAL Prepare Letter (ncluding Procuremnen Terns of of Award Contract Contingencies) t Reference Invitation Contract Completion Method I. Study Tours 0.21 SS TBD TBD TBD TBD 2. Information Technology (Procured with OFMJS) 0.11 SL 9/95 10/95 12/95 2/98 C. Tedl ce 1 .Budgetary Reforis a) In-House Advisor 0.43 SL 5/95 9/95 10/95 9/97 b) Sbort Termi Consulants 0.58 IC 5/95 9/95 10/95 3/97 2. Inonatioa Syatems GFMIS Developnent and Pilot i bnplemuaiiona 2.23 SL 9/95 10/95 12/95 2/98 j2MI 9.38 luhdte duties and taxes ealmted at US51.24 tolln, whicb are to be financed by the Government b Direct Procurement of propritory software nay be cesary to ensure compatability with development tools curmntly available in the MOF. 9CB - 1 1wntios. Competitive Bidding SL - Short Listing of Firms DP - Dirct Procurment of propitary software IC - bndividual Consultants 5S - Single Sourced TBD - To be Deterrined 63. In order to facilitate disbursements, the Bank's share of project expenditures for the Expenditure and Personnel Management Component would be disbursed through a Special Account which would be opened in the Central Bank, and managed by the PMU. The authorized allocation for the Special Account would be US$930,000, equivalent to an estimated four months of component expenditures under the Bank loan. However, initially this level of allocation would not be allowed until the project has disbursed an aggregate amount of US$900,000. Until such level of disbursements is reached, the Special Account deposit would be limited to US$470,000. - 25 - Table 5. Estimated Bank Disbursements (US$million Equivalent) IBRD Fiscal Year FY96 FY97 FY98 FY99 I II I II I | I II Annual 0.4 1.0 1.1 2. 2.0 2. 0 1 Cumulative 0.4 1.4 2.5 4. 6.5 8. 5 6 64. To ensure that critical initial project activities are not delayed, provision has also been made for retroactive financing of up to US$6.2 million for all eligible project expenditures (for the entire PFMP) between September 29, 1994 and the expected date of loan signing. Disbursements are expected to commence immediately at Loan Effectiveness with the initial deposits into the Special Accounts along with the refinancing of the PPF advance. All disbursements would be fully documented, except for expenditures on contracts for equipment and material of less than US$300,000 and contracts for services of less than US$100,000/50,000 with firms/individual consultants. In these cases, disbursements will be made against statements of expenditures, whose documentation will be retained by the PMU until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account or payment out of the Special Account is made. 65. During Loan negotiations the Government confirmed its agreement to the following specific conditions for the Expenditure and Personnel Management Component: Condition of Loan Effectiveness * The In-House Adviser for the Expenditure and Personnel Management Component shall have been appointed on the basis of terms of reference agreed with the Bank. Dated Covenants * By February 28, 1996, the new calendar and methodology for budget preparation shall have been adopted for implementation in the preparation of the fiscal 1997 budget. * The general budget submitted to Parliament for the 1997 fiscal year shall be prepared on the basis of the new code structure, which is to include functional and economic classification of expenditures according to international standards (GFS and COFOGE). - 26 - * The general budget submitted to Parliament for the 1997 fiscal year shall introduce the full implementation of new guidelines agreed with the Bank for budgetary posts management. * The new chart of accounts shall be put into effect by January 1, 1997 on the basis of guidelines agreed with the Bank. * By December 31, 1997, the Ministry of Finance shall furnish the Bank a satisfactory plan for the reorganization and rationalization of the budget offices and accounting offices prepared on the basis of the new procedures, regulations and automated systems. * By December 31, 1997, the Ministry of Finance shall have conducted successful pilot implementations of the Government Financial Management Information System and Personnel and Payroll Management Information System, with the success of implementation to be assessed on the basis of criteria agreed with the Bank. IV. BENEFITS AND RISKS A. BENEM 66. If the major weaknesses in budget preparation and execution are not addressed, computerization and technical assistance can do very little. Indeed, they could jeopardize the functioning of the present system without putting a better one into place. If instead these weaknesses are addressed--as the Turkish authorities have explicitly stated they are determined to do--modernization of Turkey's information systems on a uniform basis for all key agencies of government can produce the following benefits: * Improvement in the efficiency of the substantial resources expended by the central government--some US$25 billion equivalent at current rates * The concomitant regulatory and procedural improvements of the budget process should contribute substantially to the Government's capacity to pursue successfully its fiscal adjustment prograrn * By the time the fiscal and financial stabilization program has achieved its objectives, there would be modern and sound systems in place to prevent a reoccurrence of the budgetary fragmentation and loss of control that helped create the 1994 crisis * Modern processes and systems will improve the transparency of decision-making and increase the credibility of, and the confidence in, the government apparatus v The new systems would generate information necessary for economic analysis and further administrative reform--in particular, the rationalization of the civil service. B. MAN PRojEcT RISKS 67. Implementation of the proposed project must be undertaken on the basis of a comprehensive, integrated package. There is a risk that some components, such as computerization, will appear attractive, while other components involving hard decisions, such as restructuring the Accountancy Offices, will be set aside. There is a danger of unbalancing the proposed reforms and failing to realize their full benefits which should be recognized and addressed up-front in the reform process. Timely action in implementing individual sub- components will also be critical, as delays in a sub-component, such as budget coding, have the potential to delay overall implementation by one year, since implementation must be in line with the fiscal year. 68. Implementation of new Information Systems, always entails risks. To avoid these risks, the main requirements are: (a) Successfully setting up inter-agency group organizational arrangements to ensure systems integration, avoid duplication and implement systematic data sharing arrangements, and more importantly allay fears of domination by one agency; - 28 - (b) Ensuring that the systems fully take into account user needs and requirements; (c) Extensive user training so that users can make full use of the implemented systems for their day to day work and do not revert to manual methods; (d) Adequate numbers of trained technical staff available to implement and support the network of systems; and (e) Assurance that the existing system is protected and continues to function until it can be safely replaced by the new one. C. OTHER FACTORS AFECTING PROJECT'S SucCEss 69. The second phase of the project, which will concern the installation of information systems throughout the country, must be engaged as soon as technical requirements have been defined. Otherwise, studies on computerization that are carried out under this project may become outdated. V. MONITORING AND EVALUATION A. ACTON TO MomrroR PRojEcT OBECTIS 70. In addition to the milestones and actions identified as conditions of disbursement and dated covenants, the tracking of key monitoring indicators is necessary to measure the impact of the component and the implementation of reforms (see section B, below). The preparation of the Phase II program, which will involve the implementation of the GFMIS and the payroll system throughout the country, will be based on the review of these indicators. B. INDIcATORS 71. The major objectives of the Expenditures and Personnel component of the PFMP are reflected in the system of impact indicators shown in Table 6. Input indicators will track planned investments in terms of contracting assistance (consultant-months), enrollment and time in training programs (staff-months) and procurement of goods, software and system applications (disbursements). Output indicators will track items such as: (i) the number of reports completed by a given date during the project cycle; (ii) the number of staff trained; (iii) the software and applications that have been procured; (iv) the hardware systems that have been procured; and (v) the number of sites prepared for the pilot implementation of the information system. Table 6. hngac Indicators IMACT INDICATOR 1 ASUREMBNT imrovem_n of the Budget Covere Number of EBFs fully incoporaed into tle Budget. Completion of the Rcview of annexed budget and revolving fiuds. Number of revolving fuds coolidaed ito the Geeal Budget Stremliued Budget Code Structure New budgetay code sucur effcive for all governmn expeadiwre and reveeas. Number of staff traied in OFS methodology. plemnatio of a new chart of accounts. Availability of fuctional sd economic anaysis of the Budget. laovem i of Budget preparation Icree of responsibilities of Spending Agencies in tie budget prpration proces. Bettr coolini betwua_ the prepuation of the invesmet ad curt budgets (forml joint circular and meetn SPO-Budget, recurn costs of invetmen taken ino account). lmp _vemen of the effeicacy of the budgetary Redution of deays for appriation r_el Process Budgetization of personne positioos. Streamlining of Budget conrol: Introduction of effective controls on expenditure commt. Resructuring of Budget Offic and Accounting Offic 72. In addition to the above, the following specific criteria will be used to evaluate the functional and technical success of the pilot management information systems applications: - 30 - 1. Core Accunting Systems FunctionalA2ct: * New management processes for Budget execution (Cash allocation, Commitment, payment, receipts) in place and functioning with a sufficient number of end users (at least 5) trained in these processes at each of the eight pilot sites. * Necessary functional Manuals and procedures for the operation of the new processes and procedures completed. Technical As2pcts: * Hardware, Systems Software and application development tools successfully installed and tested at the Pilot Sites and necessary interconnections between sites successfully made and tested. * Inter agency coordination arrangements in place and functioning. In-house data processing organization in place and staffed (with contractors if necessary) to replicate the Pilot systems across other nodes of the network and for maintenance. * Application software for the Core Accounting applications installed and tested for the following minimum functions: - Maintaining Budget appropriation data - Maintaining and processing Cash allocation transactions - Maintaining and Processing Commitment Transactions - Maintaining and processing Payment transactions - Maintaining and processing receipt transactions - Producing Core financial reports required by the MOF and other agencies as required - System has a capability to enable sharing of data between relevant government agencies (MOF,Treasury, SPO etc.). - System has necessary security and selective authorization arrangements. - Full system functions tested and installed at Pilot sites. Full Technical and User Documentation complete and available. - Training arrangements for End Users formalized and in place. End users at Pilot sites trained and capable of using the system. 2. Post Management and PayroD Administration Technical Aspect: * Application software for Post and payroll management installed at Pilot sites and tested for the following minimum functions: - Maintaining a database of authorized positions for government agencies. - Producing the payroll for the selected sites - 31 - - Necessary Interfaces completed between the two systems to ensure that the payroll system checks on the availability of positions before authorizing payment. - Technical and user documentation complete - End Users trained in the operation of the new system - Technical staff in place to support the new system and for replication across other sites. C. REroRTING ARRANGEMENTS 73. The PMU will be responsible for: (i) tracking the above indicators; (ii) tracking inputs and outputs related to the project; and (iii) overseeing studies from consultants and working groups. The PMU will prepare a quarterly progress report which, upon clearance by the Undersecretary of Finance, will be submitted to the World Bank. The reporting schedule is described in Table 4.7 of the Main Report. Annex 2b PUBLIC FINANCIAL MANAGEMENT PROJECT Expenditure and Personnel Component Terms of Reference Annex 2b Expenditure and Personnel Component Terms of Reference Table of Contents Consultancy 1: In-House Advisor and Short Term Experts ...................... 37 Consultancy 2: Information Systems Expert ............................... 41 Consultancy 3: Functional Analysis and Pilot Management Information Systems .... ..... 43 TURKEY PUBLIC FINANCIAL MANAGEMENT PROJECT PUBLIC EXPENDITURE MANAGEMENT COMPONENT TERMS OF REFERENCE CONSULTANCY 1 Support for the Implementation of Reforms (Residential Advisor and Short-Term Consultancies) 1. BACKGROUND 1. The Public Expenditure Management component of the Public Financial Management Project aims at modernizing the expenditure management processes of the national government. New and revised concepts and practices of the expenditure management will be introduced, building where possible on the existing system. The legislative framework underpinning the new concepts and methodology are to be revised. In particular, the budget formulation process will be modernized, with the integration of the current and investment budget, and budget implementation and the related accounting framework will be streamlined and simplified, notably through the introduction of computerized systems for government financial operations. 2. The Undersecretary of Finance is responsible for overall management and supervision of this component. A Project Management Unit (PMU), led by a Department Head from the General Directorate of Budget and Fiscal Control (GDBFC), is responsible for day-to-day management. A Steering Group has also been set up to ensure inter-agency coordination and to act as an advisory body to the PMU. This Steering Group is chaired by a Deputy Undersecretary of Finance and includes high level participants from the Ministry of Finance, the State Planning Office (SPO), Treasury and Turkish Court of Accounts. Specific tasks are being carried out by four Working Groups, which include staff from the GDBFC and General Directorate of Public Accounts (GDPA) within the MOF, as well as from the Treasury, SPO and Turkish Court of Accounts. The heads of these Working Groups are members of the PMU. 3. Currently, Working Groups assisted by consultancies financed with grants from the Japanese and French Governments are carrying out studies to improve the budget preparation process and the budget coverage, define a new budget code structure and the framework of a new chart of accounts, and define modernized procedures for controlling expenditures and personnel management. 2. OBJECI1VE OF THE ASSISTANCE 4. Services from a residential advisor and short-term consultancies from specialized experts are required to assist the Project Management Unit in the implementation of reforms that have been defined by the working groups and studies financed under the Japanese and French grants and in the coordination of activities to be carried out under the component. - 38 - 3. TASKS a) Residential advisor 5. The residential advisor will assist the GDBFC and GDPA to: * Identify needed studies to complete the design of reforms, draft their detailed terms of reference and monitor them. * Supervise the implementation of reforms. * Prepare the overall program and detailed work plans for working groups in charge of specific tasks. * Prepare quarterly progress reports, identify needed adjustments and ensure their implementation. * Ensure the consistency between the outcome of studies, the design of reforms and the functional analysis of information systems. * Provide technical guidance to staff in the conduct of reforms and supervise the preparation of needed users' manuals. b) Short-term consultancies 6. Specialized experts will assist the MOF to complete the detailed design of the reforms and to implement them. The following assignments have already been identified: S Budget Preparation. The consultants will assist to the implementation of the new budget preparation process. They will notably help to improve methods of budget preparation related to personnel expenditure and to introduce commitment authorizations for investment expenditures into the Budget. They would assist to prepare the methodology and guidelines for structuring the budget of spending agencies by program and defining indicators to monitor them. They will contribute to define and implement a program of work for developping progressively an approach by program in the budget preparation and monitoring process. * Implementation of the budget code structure. The consultants will supervise the preparation of a version of the 1996 Budget under the new budget code structure, prepare a training program for budget users and assist to its implementation. * Chart of Accounts. The consultants will contribute to finalize the Chart of accounts and define accounting procedures for each category of expenditures. They will prepare a training program for accountants and assist to its implementation. They will assist to the implementation of the new Chart of Accounts. - 39 - * Review payment processes and cash management. The consultants will carry out a review of government banking arrangements with a view to developing recommendations for strengthening cash management, including through centralizing all Government receipts in a single account at the Central Bank of Turkey, rationalizing the system of government accounts and improving arrangements for payment of interest and charges. * Organization of the accounting offices network. The consultants will assist to prepare a detailed plan for restructuring the accounting offices, including eventually reallocation/reassigment plans for relevant civil servants. * Implementation of modernized control processes and relevant organizational arrangements. In the context of modernizing budget preparation and execution processes many of the current functions of the Budget Offices will be reduced significantly or be reassigned elsewhere. Moreover, the introduction of new controls on commitments for some categories of expenditures will need specific skills. Consultants will assist in the preparation of a detailed plan for restructuring the budget offices including reallocation/reassigment plans for relevant civil servants. They will assist in the implementation of this restructuring program. They will identify skills needed for operating budget execution procedures and will prepare a training program for officials in charge of budget execution. * Personnel Management. The consultants will assist with the implementation of a budgetary posts management system. * Procurement. The consultants will review procurement procedures and systems in order to ensure their consistency with revised control mechanisms. Any IT requirements will be identified for implementation in Phase II. 7. These short-term consultancies will be engaged at the request of the project director, on the basis of specific terms of reference to be agreed with the Bank. The residential advisor will assist in the preparation of the required detailed terms of reference and program of work for each consultancy. 4. TIMING OF ASSIGNMENT In-House Adviser: October 1995-September 1997. Short Term Experts: October 1995-March 1997. 5. REPORTING RESPONSIBILITY 8. The residential advisor and short term consultants will be functionally responsible to the deputy undersecretary of Finance, chairman of the Steering Group in charge of the supervision of the project. The residential advisor will be a member of the Project Management Unit. - 40 - 6. INPUTS Residential advisor: 20 man-months Short-term consultancies: 27 man-months 7. QUALIFICATIONS Minimum requirements for the experts: * Graduate degree in public finance or related field * Ten years experience in government budget management * A knowledge of information systems for public expenditure management is needed for the residential advisor. TURKEY PUBLIC FINANCIAL MANAGEMENT PROJECT PUBLIC EXPENDITURE MANAGEMENT COMPONENT TERMS OF REFERENCE CONSULTANCY 2 Information systems Expert 1. BACKGROUND 1. The Government of Turkey (GOT) is currently embarking upon a program to set up modern fiscal management systems to enable it to improve the management of the government sector. As part of the fiscal reform process the Government has decided to implement an integrated Government Financial Management Information System (GFMIS). The Expenditure and Personnel Management component of the Public Financial Management Project, financed by the World Bank, supports the design and pilot installation of the GFMIS. 2. OBJECTIVES OF THE ASSIGNMENT 2. The objective of the assignment is to assist the Ministry of Finance to design and implement a set of fully functioning computer based information systems for Budget Preparation, Budget Execution and Monitoring (for both the Current and Investment Budgets), Cash Management and Government Accounting (including Payroll Accounting) and Civil Service Post I Position Management for the Government of Turkey. 3. To achieve this objective the Government has set up an internal working group on information systems, will require services from consulting firms for the design and development of applications and appoint a permanent information systems expert. The permanent information systems expert will assist the project director for carrying out his tasks on issues related to information systems. 3. TASKS 4. The permanent information systems expert will assist: * The working Group in charge of information systems to: (i) contribute to the design and implementation of computer systems related to the Expenditure and Personnel component of the project in coordination with the three other working groups; (ii) propose hardware/software standards for government financial management; and (iii) coordinate with the ongoing or new information systems projects in the government agencies, such as Revenues Directorate, Treasury Undersecretariat, SPO and Customs to ensure systems integration. - 42 - * The project management unit and the project director to: (i) Follow up advisory services related to the implementation of information systems (ii) Prepare and launch tenders for hardware or software acquisitions (iii) Coordinate the implementation of information systems at pilot sites (iv) Prepare detailed progress reports. 5. A pool of about 10 computer experts external to MOF will be set up in February 1997. They will assist the government with the installation of pilot sites and replication of the system throughout the country. The permanent information systems expert will help the Ministry of Finance to set up the pool of computer experts and will coordinate activities of this pool. 4. TIMING OF ASSIGNMENT IT Adviser: November 1995-March 1998. Pool of IT Experts: February 1997-March 1998. 5. REPORTING RESPONSIBILITY 6. The permanent information system expert will be functionally responsible to the Head of the PMU. 6. QUALIFICATIONS Minimum requirements: * Graduate degree in information system technology. * Ten years experience in information systems management. * Detailed knowledge of information systems for public expenditure management would be desirable. * Proficiency in English and Turkish languages. TURKEY PUBLIC FINANCIAL MANAGEMENT PROJECT PUBLIC EXPENDITURE MANAGEMENT COMPONENT TERMS OF REFERENCE CONSULTANCY 3 Consultancy Services for the Design, Development, and Implementation of Budget Preparation Systems, Core Government Accounting Systems, Payroll and Civil Service Position Control Systems for the Government of Turkey I. INTRODUCTION 1. The Government of Turkey (GOT) is currently embarking upon a program to set up modem fiscal management systems to enable it to improve the management of the public sector. As part of the fiscal reform process the Government has decided to implement an integrated suite of modern computer based information systems to support the core expenditure management processes, namely those for Budget Preparation, Execution and Monitoring (for both the Current and Investment Budgets), Cash Management and Government Accounting (including Payroll Accounting) and Civil Service Post/Position Management (CSPM). It is expected that the implementation of these systems would materially improve the efficiency of public resource allocation and use, and assist economic policy formulation by: (i) Providing the core financial agencies namely the Ministry of Finance (MOF), the Treasury, and the State Planning Organization (SPO), with a comprehensive information base to better manage public resources and provide them the tools necessary to support day to day operational processes and for longer term planning. (ii) Enabling the integration of Budgeting and Accounting functions of the MOF and provide links with Cash and Debt management functions in Treasury. (iii) Providing the MOF senior management with the basic building blocks required for an executive Management Information System (MIS), accompanied by necessary reporting facilities. 2. The Government has applied for a loan from the World Bank to undertake the preparation of an integrated Government Financial Management Information System and a personnel and payroll management information system, which work will include (i) the functional analysis of the intended system; (ii) applications development; and (iii) the computerization of eight pilot sites. 3. These terms of reference provide a description of the technical assistance required by GOT to design and implement on a pilot basis the intended information systems. 4. The Government invites qualified agencies, with experience in the design and implementation of computer based Government Fiscal Management Systems to assist in this project. It is necessary that the agencies have extensive experience in the design and - 44 - implementation of similar systems for other government entities. It is considered that some of the services required under this project could be satisfactorily carried out by local firms. International agencies are accordingly encouraged to enter into partnerships with a local firm to deliver services for parts of the project for which local expertise is available. 5. The consultants will need to work closely with GOT officials in the various financial entities of the government which have responsibility for fiscal management processes, including, inter-alia, the various General Directorates of the Ministry of Finance and their subordinate offices, (in particular the General Directorates of Public Accounts (GDPA), the General Directorate of Budget and Fiscal Control (GDBFC), and the General Directorate of Revenue (GDR)), the Treasury, State Planning Organization, the Central Bank, the Under Secretariat of Customs, and spending agencies, etc. The consultants will report to the Undersecretary of Finance, through the Head of the PMU. 2. ASSIGNMENT OBJECTIVES 6. The objective of the assignment is to develop and implement a set of fully functioning computer based information systems for Budget Preparation, Budget Execution and Monitoring (for both the Current and Investment Budgets), Cash Management and Government Accounting (including Payroll Accounting) and Civil Service Post/Position Management for the Government of Turkey. To achieve this objective the consultants will be required to: (i) Prepare a detailed functional design and systems specifications for each module of the integrated Information System and develop related procedures and manuals (ii) Research possible alternatives for application software to set up these system modules. Emphasis will be placed on the use of off the shelf software packages to the maximum extent possible (iii) Develop Hardware and Software specifications for the technology platform required to set up the Systems, and assist the Government in its procurement (iv) In the event that off the shelf application software is not available for a particular application system, develop detailed system and program specifications and contract with an appropriate software supplier to custom develop the applications and manage this development (v) Implement the Systems at pilot sites and assist the Government to train trainers and end-users at selected pilot sites. 3. INFORMATION SYSTEMS REQUIRED BY THE GOVERNMENT 7. The suite of systems required to support the expenditure and personnel management processes and planned for implementation under this project are described below. - 45 - A. Budget Preparation 8. As the expenditure management reform progresses in Turkey and processes related to the preparation and monitoring of the Current and Investment budgets are better integrated, the Government will require information systems to support the preparation and monitoring of both the Investment and the Current Budgets. This set of systems will support the processes of Budget estimates preparation. 9. These systems will receive from the various spending agencies the details of their programs and projects, consolidate them and produce from them the documents that form the basis of the negotiations between the ministries and spending agencies and the central agencies. The system will facilitate an iterative process of budget submission, consolidation, review/negotiation, and documentation until the budget is finalized and approved. The system will thus provide a facility for tracking the budget preparation process from preliminary budget to the final draft stage and produce the master copy in a form suitable for presentation to parliament and ready for printing. After approval by parliament, the system will produce the approved budget estimates in a format suitable for budget implementation and accounting purposes. 10. In order to satisfy these requirements, the systems should be able to capture and maintain the budgetary proposals and revenue estimates of all government agencies and to capture any subsequent changes during the budget development and approval processes. The system should be able to assist in the evaluation of the budget proposals by enabling an analysis of the manpower costs, the maintenance and other operating expenses and capital outlays, by accessing baseline data from previous periods for comparison. Examination of the capital budget will require data on the status (physical and financial) of approved projects. The system should therefore be able to access and generate baseline data from the relevant past year data bases. The systems will utilize the data base established within the Financial Ledger System (see below) to provide accurate historical data. Training would need to be provided to the MOF staff in how to use the new models in the analysis of budget and expenditure policies. 11. The modules for preparation of the current budget will be managed by the GDBFC in the MOF and that for the Preparation of the Investment Budget by the SPO. Both systems will require extensive interaction with and regular data input from the various ministries and spending agencies in Government, as well as with the Treasury, whose macroeconomic policy formulation capability is being strengthened under the Treasury Data Systems Project, with World Bank financing. 12. This system would cover both the Investment and the Current Budgets integrated within a common chart of accounts. The preparation and subsequent monitoring of the investment budget, would require the setting up a major projects data base in SPO. As part of this project, the consultants would investigate whether the current systems recently developed by the SPO would be able to provide the functionality required in this area. If this is so, then the existing systems would be integrated with the other systems envisaged in this project. - 46 - B. A Financial Ledger System (FLS) 13. The Financial Ledger System should be designed with the two basic objectives of: a) controlling the state budget and the assets and liabilities of the government; and b) providing comprehensive, reliable and timely information on the financial position of the Government of Turkey to facilitate government financial management. The Financial Ledger System would be the central element of financial management and accounting operations and would be the core financial management information systems of the Government. It would be used by: a. The General Directorate of Public Accounts (including accountancies) to perform the basic accounting functions b. The General Directorate of Budget and Fiscal Control to perform the control functions associated with budget execution and monitoring c. The Cash Management Department of Treasury to obtain the information it requires for cash management, and to implement funds allocations, as may be required d. The SPO to obtain the status of actual expenditures on ongoing projects to update the major projects data base. 14. A basic underlying principle would be that the system would be structured along functional rather than organizational lines and would provide support to all organizations involved in the expenditure and personnel management processes. This approach has the advantage that it enables the creation of integrated systems and data bases in which the primary responsibility for the timely provision of a particular sub-set of data resides with the agency responsible for that function. However, all data in the system data bases is accessible by all relevant central agencies (subject to appropriate security controls). This eliminates duplicate data gathering and, more importantly, enables all agencies responsible for financial functions to work with the same set of data, thereby removing chances of data inconsistencies which are inevitable in separately gathered data. 15. Thus, each of the departments mentioned above will be responsible for the integrity of the information that they are responsible for, within the system. In return they will have access to information provided by the other agencies. Thus all departments will jointly "own" the system and use it for their day to day operational purposes while the MOF will "manage" the system centrally. 16. Such a system would need to be comprehensive in terms of a coverage and be a source of reliable and timely data to become a credible source of information for users. The information contained in the system data bases would provide the MOF and other central agencies with a foundation for a comprehensive management information system related to the country's financial resources. The information contained in the data bases would be available to other ministries and government agencies on an as required/approved basis to enable them to better manage the financial activities connected with approved programs. - 47 - 17. Specifically the FLS should have the capability to: a. Include core functional requirements for the execution components of the government budget through an integrated accounting system. In general, this would include recording of revenue collections, appropriations, commitnents, verifications, and fund allocations leading to payment (covering accounts payable, accounts receivable, general ledger options, and report generation). b. Cover all elements of expenditure and revenue for the central government of Turkey (that is, including the general budget, annexed budgets, extra budgetary funds and revoving funds) c. Record and report budget appropriations and distribution, as approved by the legislature, to spending ministries and keep a record of initial budgets, revised budgets, and budget transfers, for a typical government ministry/spending unit. d. During the course of a year, record distribution of appropriation and commitrnent authorizations to ministries/spending units and to record commitments incurred by a ministry against the approved limits and the appropriation. e. Record and report distribution of funds allocations to ministries/spending units and keep a record of funds allocations against the appropriations. f. Record and report all relevant stages of the payments and receipts processes and enable reports to be made on key variables, such as commitments, funds available, bills outstanding and payments and receipts (both cash and accrual basis); for individual agencies and at various levels of aggregation; g. Incorporate controls on any specified variable. The system should have the facility to check availability of appropriation, commitment authorization and funds allocation prior to approval of a payment. h. Record and report revenue and other receipts against appropriate account heads. i. Print consolidated payment instructions for actioning by the banking system. j. If required, print checks against payment instructions and/or initiate instructions for the electronic transfer of payment information to an external paying entity. (e.g. a Bank). k. Generate standard monthly reports and provide query facilities to determine the budgetary position of agencies, and the Government budget. The information contained in the system data bases would provide the MOF and other core financial agencies a foundation for a comprehensive management information related to the country's financial resources. MOF, Treasury and SPO would have - 48 - access to a full set of data base. Other agencies would have access to portions relevant to their needs. 1. Maintain data according to the budget classification for as many past years as required, and allow projections of up to three years m. Facilitate reconciliation between Financial Ledger System accounts and banking data by generating chronological lists of transactions in a form comparable to those generated by the banks. n. Ensure compatibility of the system with other systems, e.g., the budget preparation and management system, systems for tax and customs administration, the debt management systems of the Treasury. o. Consolidate data at the Center and Provincial Accounting offices and other sources. p. Consolidate data from all ministries/accountancies at a spending unit, town, provincial or central levels, as necessary. q. Have facilities to restrict access only to duly authorized staff. r. The consultants should specify the security class the system will support. 18. The system will need to be designed in accordance with generally accepted accounting principles and standards, a double entry accounting model and policies and procedures developed as part of preceding consultancies. 19. The FLS will be a fully automated accounting system, with data captured only once as an accounting transaction progresses through the system. This system will be introduced along with a modern budget classification system and an appropriate chart of accounts, and would enable expenditures and revenues to be recorded at a detailed level and related to specific programs and projects. Data recorded at this level will then be directly available for use for program and project management. This data will also be easily amenable to cross classification for financial and economic analyses. The introduction of an automated accounting system would ensure completeness of data capture (that is no transaction would be processed outside the system) and rigorous application of all relevant financial controls to all transactions processed by the system. 20. The FLS will be required to specifically produce the Financial and Management Reports required by the Government as well as meet the requirements of the various users. This includes the monthly civil accounts, annual appropriation accounts and combined finance and revenue accounts as well as agency accounts for the respective agencies. In support of expenditure management the system will incorporate a reporting system to enable management to identify problems and bottlenecks in a timely manner. The reporting capability of the system should address all matters affecting the efficacy of the accounting function. In addition the system should have facilities for easy retrieval and reporting on data in the system data bases, in a - 49 - variety of formats. The system will also enable user departments to download relevant data and perform required analysis and reporting. 21. At present there are about 1,700 accountancy offices (including about 400 tax accountancies) within Turkey. They cover, inter-alia 76 provinces and 840 towns. The total number of accountancies in Turkey is expected to be reduced as a result of the financial reforms undertaken as part of this project. However, setting up computer system for all remaining accountancies across the country, even with a substantial reduction in the number, would be quite expensive. An analysis of the distribution of the volume of transactions by expenditure and revenue, indicates that about 90 percent of the expenditures are incurred through about 150 accountancies. It would therefore be appropriate to target these accountancies for automation in the project. This approach would optimize the deployment of hardware and software. 22. It is therefore proposed that computer hardware and software will be located at the MOF in the center and the 76 provincial accountancies and additionally at those accountancies which fall within the 90 percent limit described above. The remaining accountancies located in the provinces would continue to forward non-automated documents to the provincial or computerized town accountancy offices for processing. C. Personnel Management 23. The ability to exercise effective post/position control is important to regain control over civil service employment. In addition, line agencies require systems to effectively manage the personnel on their rolls. To be able to implement the reform measures in the area of personnel management it is necessary to implement the following systems: a. A Position/Post Management System to maintain records of the authorized posts/positions for government agencies, of authorizations to fill vacant positions, and of appointments to permanent positions. b. A Personnel Information System to maintain the personnel data for which civil servants and all personnel actions related to these civil servants; including retirements, resignations, removals, deaths and transfers. It would also maintain information to be able to produce manpower profiles including data on age, departmental distribution, skill categories, compensation and tenure etc. c. An automated Payroll System, at the major accountancies to cover salary and related payments to civil servants. 24. This group of systems are essential for the government to regain control over civil service employment. Effective control would be possibly by the following steps: The post management system would ensure that all fresh recruitment is against appropriated and budgeted position. Personnel actions for civil servants on board will be recorded by the agency personnel systems and used to calculate the payroll. The agency record of budgeted positions would be used to ensure that no personnel are added to the payroll who do not have an authorized budgeted - 50- position. The payroll systems would be fully integrated with the FLS - Government Budgeting and Accounting system described above. 4. SCOPE OF WORK 25. The scope of work for this consultancy involves the tasks associated with the design, development and implementation of the high priority application systems described above at designated sites and with the procurement of related hardware and software for pilot site. PnAsE I - SYSTEMS DESIGN AND ACQuISrrIoN OF REQUIRED HARDWARE AND SoFTWARE A. Preparation of the detailed functional design, systems specifications, related manuals, and procedures for the specified systems. 26. The tasks involved in this activity would include: a. Studying the functional processes including administrative procedures, transaction documents, forms and information flows, (including data flow statistics), related to the Budget Preparation, Budget Execution Accounting and Reporting, Payroll, Position Control and Personnel Management currently in use, and recommendations for changes made by any preceding consultancies. b. Developing and defining a new set of functional processes, information flows, procedures, transaction types and associated documents and forms, and related organization required to operate the proposed new systems. c. Developing a full functional design and systems specifications for the computer systems required, including the specification of the major data bases and data entities, the output reports, the input formats, transaction documents, input screen designs, processing and controls for the systems required at various nodes of the information flow network, the interfaces and data flows between these nodes and with external systems. 27. The functional analysis for the design of the various systems would need to be conducted jointly by one or more functional specialists such as e.g. Finance and Accounting Specialists, in the case of the Budget Preparation Systems and the FLS, and by Human Resource and Compensation specialists in the case of the personnel related systems, on the one hand, who will develop the functional design and define the overall system from the functional point of view, and; systems development specialists, who will develop the systems specifications of the necessary computer based software required to automate the systems. It is important to note that the new systems may need to be operated manually at some sites for some time before the computer based systems are designed an programmed, and implemented progressively across all sites. A full set of procedures and documentation will therefore need to be developed to operate the manual systems. - 51 - 28. The consultants will undertake this analysis in consultation with counterpart GOT officials designated for this purpose by the GOT. The consultants may be required to be part of, and advise, one or more task forces to be set up by the GOT to define the legislative, administrative and operational aspects required by the new systems. On completion, the results should be documented in a form that meets government approval. 29. The primary deliverables for this activity will be: * Functional design documents for each of the Information Systems specified above * Complete set of specimen transaction documents, reporting formats and a description of procedures and associated manuals required for the implementation and operation of the systems. * Application systems design and systems specifications, including the data model and the data flow diagrams B. Design of the Technology Architecture Required to Implement the Information Systems 30. This component would include drawing up specifications of the H/W and S/W to be installed at various nodes and the mode of interconnection of this Hardware and Software. The overall H/W, S/W strategy to be employed for implementation is determined by the fact that a Government wide accounting system will require a multi-tiered network with modules at the central, provincial and other accounts office levels. The system would require facilities for generating, storing, and processing data at each level and for exchanging data between levels. The data volumes encountered could vary widely across the nodes of the network, dictating the size of the computer at each node. Application software should therefore be scaleable for small or large computers and usable on a variety of H/W platforms. The system should utilize a distributed computer architecture with computing power located at the various nodes of the network. The software development environment should be portable to different platforms (UNIX based) and use modern application development tools such as Relational Data Base Management Systems (RDBMS), Fourth Generation Languages (4GLs) and Graphical User Interfaces (GUIs). The system should have Turkish as a national language support (NLS). The consultants should ensure that these aspects are kept in mind while developing the technology architecture the systems. 31. This task would include: a. The consultants will need to survey some sample sites. They will however work on the basis of data provided by MOF. This data would cover the associated transaction volumes (current and projected) and data requirements, to determine sizes and configurations of the H/W, S/W to be installed at these nodes and the mode of the interconnection of the nodes between the Center, the Province and Towns to ensure accurate and timely data transfer between the nodes. - 52 - b. Preparing the specifications for the hardware, systems software, application development software and the application software package (based on the earlier task), required at the various sites, for each phase of the project, for incorporation in tender documents. c. Drawing up specifications for associated facilities required for the installation of the system, such as power stabilizers, Uninterrupted Power Supplies (UPSs), telecommunication interfaces, computer site requirements, for incorporation into the tender documents. d. Preparation of an implementation schedule for the computerization of selected accountancies. 32. The Deliverables of this activity will be: * Specifications for Hardware and Software, Communications facilities and other associated facilities required for the implementation of the Computer Systems. * Functional Specifications for the Application Software for each module of the required system. * An implementation schedule for comupterization of accountancies. C. Investigation of Alternatives for Application Software 33. On the basis of the functional analysis carried out as above the consultants will investigate alternatives for application software. This would include: 34. Investigating and ascertaining whether one or more 'off the shelf' software packages are available which can meet the functional requirements of one or more of the systems as defined above. While conducting a review of software packages the consultants will ensure that: a. The software package provides the required functionality b. Local support is available for the package and it is possible to obtain and install upgrades and/or changes to the packages in Turkey as they become available c. The vendor for the package provides customization assistance as may be required, or alternatively the package source code is available for making changes as may be required d. The costs associated with any customization are identified clearly in the total cost e. The package runs on a range of hardware and operating software which is compliant with the hardware/software strategy proposed for MOF systems (above) f. Adequate documentation is available to enable package installation and use g. Potential licensing arrangements can accommodate the use of the package at multiple sites in Turkey. - 53 - 35. In case it is not found feasible or cost effective to purchase an off the shelf package to satisfy the requirements of a particular system, the consultants will be required to develop a plan for the development of the application systems, and estimate the resources required to carry out the development. In this case the consultants will also extend the functional and systems design carried out above and develop the full systems and program specifications for the various modules of the systems mentioned above. These would then be used as the basis for the contract or in-house, development of the application software. These documents should be detailed and specific enough to enable the software contractor to develop the software module without further recourse to the end users. 36. The deliverables for this activity will be: * The results of the application software package evaluation process with recommendations for possible packages which could satisfy the functional requirements of the proposed systems. * In the event that a package option is not found to be feasible, a full set of detailed systems specifications and program specifications which could be used by MOF for contracting the development of this software module by local software houses, or for in house development. D. Preparation of Tender Documents for and Acquisition/Development of H/W and S/W. 37. During this activity, the consultants will assist the Government in the procurement of the H/W and S/W for pilot sites. 38. The consultants will: a. Investigate the possibility of using for the project existing equipment within the MOF. b. Incorporate the hardware and software specifications prepared as part of earlier tasks into an RFP for procurement of the hardware and software. These tender documents should be prepared in accordance with the Wold Bank procurement guidelines and procedures. It should be noted that it is proposed to procure the Hf/W, S/W via a single integrated procurement package. The specifications for procurement must include provision for maintenance and support of the hardware and software for a period of 3 years, and for consumables for three years. HIW requirements should also include associated facilities, such as UPSs, etc. c. Develop criteria for the evaluation of vendor proposals. d. Assist the government in the tendering process, in evaluating vendor proposals and selecting a preferred tendered. e. Assist the government in the acquisition of the hardware and software. - 54 - f. Assist the government in drawing up the specifications for, and monitoring the installation and carrying out quality assurance during the suppliers testing of the hardware and software procured for the project. In the case of procurement of software packages (if this is found to be a feasible alternative) the consultants would be required to assist the Government in monitoring and ensuring quality assurance of the suppliers testing of the software to ensure that the packages have the required functionality. In case a package requires customization to meet specified functional requirements, the consultants will specify the changes required and arrange for the changes to be implemented. g. In the event that some of the systems modules are to be custom developed the consultants will assist the Government in contracting with a selected software development firm and provide technical management and quality assurance and plan and prepare for data conversion, user training and systems acceptance testing. h. In the event that in-house development is preferred, the consultants will assist the government in supervising a team of local GOT staff in the programming, testing and implementation of the system modules. 39. The deliverables for this Activity will be: * Specifications and RFP documents for the procurement of Hardware and Software for the implementation. * Specifications for the application software, taking into account the result of the evaluation of the application software packages. * Evaluation Criteria for Hardware and Software, including test data required to ensure the proper functioning of the application software; * Assistance to the Government in the tendering process, in evaluating vendor proposals, contract negotiations, and in the acquisition of hardware and software. * Technical management and quality assurance of the vendor's work in constructing systems modules; * Data Conversion Plan * User Training Plan * User Acceptance Test Plan * Provide the supervision plan and acceptance plan for the software development phase. - 55 - E. Development/Upgrading the MOF data processing organization. 40. The MOF will require the development/upgrading of its in-house data processing facilities to maintain and operate the treasury and associated systems developed as part of this project. The MOF computer has a staff of competent analysts and programmers. A team of about 8-10 staff from this department will be designated by the government to work with the consultants on a full time basis. This staff will need to be involved in all tasks associated with systems design, software development, installation and operation. In the event that one or more software packages are selected to satisfy the requirements of the Financial Ledger or other systems, the staff will need to be trained in their use and maintenance. In the event that in-house development is required, staff will be required to undertake the in-house development of the system, or manage the work of the contractor if an outside contractor is selected (within the single H/W, S/W procurement package) to carry out the development. 41. The consultants will accordingly analyze the existing GOT/MOF EDP resources and develop a plan to upgrade the DP organization. This would include assisting the GOT, in developing a training program for its staff, including specialized training in the use of the various tools such as operating systems, DBMSs application development facilities etc., and more general training in EDP project management, maintenance and provision of end user support and training for a country wide system treasury system, etc. The consultants will also assist the government in the procurement of training services from specialized vendors and in setting up appropriate structures to train end user department staff in the use of the system. 42. The deliverables for this Activity would be: * A human resources plan for the first 5 years, including a training plan for the new hardware/software, training in EDP project management, end user support and country wide systems training. PHASE II - PILOT SYSTEMS IMPLEMENTATION 43. Pilot Systems implementation will involve preparation of an implementation schedule, installation of hardware and systems software DBMS, and Application Development tools etc., installation and testing of the application systems and training end users. 44. The consultants will assist the MOF in managing the installation of the hardware, systems software, application development and package software. Each of these tasks are discussed in detail below: a. The consultants will develop a detailed implementation plan and schedule listing all associate tasks and their logical dependencies. This schedule will show all tasks associated with the procurement and installation of the hardware and software, a plan for in-house systems development, as may be required, including the design, development, programming, testing and implementation activities, training of local personnel, and installation of the system at selected sites. - 56 - b. Installation of hardware: The consultants will assist MOF in supervising the supplier in the installation and testing of the hardware procured. This would include supervision of site preparations for the hardware including electrical power requirements, voltage stabilizers, telecommunications, and other elements as required. c. Installation of software: The consultants will assist the MOF in installation and testing of the software. In the event that case package software is identified, assistance would include ensuring that any modifications required to the software have been carried out, and installation of the software on the hardware acquired above, including setting up any code structures, files and data bases that may be required by the software package. The consultant will be expected to design and conduct such tests as are necessary to ensure that the package provides the required functionality. d. The consultants will assist the government in developing necessary technical and user documentation for the application systems modules. 45. Deliverables for this phase include: 3 Assistance to Government in the Installation and testing of the hardware and software. * Ensuring that the H/W and S/W supplied by the selected vendors meets the design specifications. * Ensuring that tested systems modules, including the modules that will be implemented at the HQ, Provincial and other Accountancies, are fully functional. * User manuals and other technical documentation to enable the full operation of the systems. * Training manuals for end users. * Training of sufficient local staff to a level which will enable them to operate and maintain the systems, and to provide necessary end user support. * All documentation will be in the English and Turkish languages. * The consultants will assist with procurement acceptance of the downstream hardware and software. 5. LEVEL OF EFFORT ESTIMATES 46. It is estimated that this consultancy will require a total of about 70 consultant-months of effort. Annex 2c PUBLIC FINANCIAL MANAGEMENT PROJECT Expenditure and Personnel Component Detailed Cost Table Turkey Public Financial Management Project Expenditure and Personel Component - Detailed Coal (USS'OOO) OMWNI TOTAL Bae Coa Due Toal O(ld4g Usk t Flonkdw 1995 1996 1997 1998 Totad & Tazxe Ceutluclu Coetheand.) A. ClI Weab 1. SitePuePaticn-F wocanstioSyutm bmyin GOT - 25.0 75.1 - 100.1 - 73 107.4 Subotal 25.0 75.1 100.1 - 7.3 107.4 B. Eqidpun 1. H14 i and Syd Sowta hmy IBRD - 1,499.2 1,417.4 - 2,916.6 608.9 193.8 3,110.4 Z DBMS aApica&. DevOm TD11k \a bap - 3D - 241.8 260.4 - 502.2 107.7 33.1 536.0 3. Appicatio So ) bb b1y - I RD 1,250.0 1,250.0 - 2,500.0 522.2 166.9 2,666.9 S ahttl - 2,991.0 2,927.1 - 5,911.1 1,231.8 394.5 6,313.3 C. Tra_g I. Budrtaryia b r,yM GOT - 100.1 100.1 - 200.2 - 13.4 213.6 x s - ~~~~~~~~~~2Qd. 150. _0. - ZL1 a) lAw C,,s hmp muy Gor 100.1 100.1 - 200.2 * 13.4 213.6 b) SqputtoT..u'a 4p _nmu MRD - 50.0 50.0 - 100.0 - 6.7 106.7 a 3. StodyTown 2Oiaff BRD - 100.0 100.0 - 200.0 - 13.4 213.4 Scal - 350.2 350.2 - 700.4 - 46.9 747.3 DL Taled Ama' e a) R3aWd Advir 20 p IwoB 3RD 30.0 170.0 170.0 30.0 400.0 - 27.1 427.1 b) Shoat Tem Ce_ 27 paB medth IRD 20.0 250.0 250.0 20.0 540.0 - 36.3 576.3 2. 465.0timaJM 9.0 960. 22M 2,610.0 - 17. 2)S0. a) P _MIT_fl ut 30peranmoods GOT 15.0 60.0 60.0 15.0 150.0 * 10.3 1603 b) Pool of coqdap 120 pon GOT -a 300.0 60.0 360.0 . 30.4 390.4 c) GFMI1 Devalo t ad Pielo hpIamotio 701 Mcs BRD 450.0 900.0 600.0 150.0 Z100.0 129.7 2,22.7 Subtda 515.0 1,330.0 1,30.0 275.0 3,550.0 - 233.8 3,733.1 E Pejecd Suppot bay - GOT 20.0 40.0 40.0 - 100.1 6.1 106.2 TOTAL 5350 4,7862 4,773.1 275.n 109.4 1,23M8 6S36 11,10 \s Died Proo vib Wevey oma may be aocy to p a DBIW citble delopoot toc cunily available i tiw MOF. % Pitly Dimce p c ifam ideod adwa9 package m_eb fdioa e m \:STo be vo wue waIh bscai am1lbm_ Annex 2d PUBLIC FINANCIAL MANAGEMENT PROJECT Expenditure and Personnel Component Implementation Schedules CIL~~~~~I !! fX tit *0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~b1 I r1 ''111t Xl ............. ................................................................................................. ...... .......................... ....................................................... .............. ..................................................................................................................................................................................................... _ _ _ C9 _ 1 ii | i| f0 i25;i aS S :S i X II I' 1- iiiiItii Z Z . D f S4~~I .............. - S9 - or CO C - C~~~~~~~~9 Publc Fiancial Mangreent Prct Publi Expenditure Managemnt lemetbtIon Plan 1996 1996 1997 ID TaskNamne _ Duratlon Start FDuration Start Finish Q1 Q2 Q3 04 01 Q2 Q3 Q4 01 02 Q3 Q4 01 45 Prepare functonal analysis 194d 11296 9/27196 46 Prepare tender for application (or customization of packages) 23d 9/30/96 10/30/96 47 Procurement for appication (or packges and customization) 21d 10/31/96 11/28/96 4U 2. Application Development or Custonilzation of Packages 195d 11/1/96 7131/97 49 Financial Ledger System 195d 11/1/96 7/31/97 50 Payroll and Post Management System 195d 11/1/96 7/31/97 61 Budget Preparation System 129d 2/3/97 7/31/97 62 3. Pilot site 435d 7/3/96 313/98 53 Prepare H/W and DBMS specifications 20d 7/3/96 7/30/96 64 Prepare tender for HNV for pilt ie 23d 23/97 3/5/97 65 Procurement for HAN and DBMS 22d 4/1/97 4/30/97 PNot site preparaion 85d 2/3/97 5/30/97 C., 57 PMot site installabon 65d 6/2/97 8/29/97 59 Conduct trainhg for user staff at piot sites 132d 9/1/97 3/3/98 59 4. Assistance to System Design and knpiementation 610d 11/1/96 3/3/98 ' 60 I.T. Advisor 610d 11/1/95 3/3/98 ---: - ---- 61 Pool of local experts 282d 2/3/97 3/3/98 - 62 Ill. Project Managemt Support 653d 9/1/95 3/3/98 Task Milestw Roled Up Tak Rold Up Progre Progres Surm _ y Rolled Up Mlbstone O Amex 2e PUBLIC FINANCIAL MANAGEMENT PROJECT Expediture and Persnnd Management Component Elembuts of the Govement Fiancdal Management Information System The Logical Operation of a Financial Ledger System within a GFMIS 1. Presentation of a Financial Ledger System 1. The objective of this annex is to illustrate the logical operation of the FLS concept, not to define in detail the operation of the system. Full functional analysis and system definition would be the principal component of a consultancy to be executed under the project. Conceptual Overview of a GFMIS 2. A broad indication of the modules or components involved in a fully integrated GFMIS is at Chart 1. The core of the system is the Financial Ledger System (FLS), which is best described as a set of self-balancing budgetary and proprietary (asset and liability) accounts covering all central government financial operations. (This section only addresses the budgetary accounts). Accounts would be formulated for consistency with the Government Finance Statistics (GFS) functional and economic requirements and would be organized on an administrative basis so that operations of different institutions could be processed without confusion of their various transactions or statements within the system and, most importantly, so that automatic consolidation of such statements could take place. 3. The data bank constituting the GFMIS can also be viewed on a time line reflecting also different levels of aggregation. Chart 2 shows this relationship based on year zero (YRO) as the year of budget execution. The GFMIS data bank thus contains information relating to a number of years: for historical analysis purposes, and for budget execution and preparation, including estimates for future years. The FLS component used for Budget Inplementation is further expanded to show key control fields used in the budget execution process. 4. The proposed GFMIS would be structured in two levels, with a very clear functional distinction between the level 1 that would process and keep consolidated data and the level 2 that would execute operational functions and keep detailed data. Information Ownership and Access 5. It is essential that all Government financial operations be included in one Financial Ledger System, so that the agencies responsible for financial management have access to the necessary data for analysis and reporting purposes. That is not to say, however, that one agency should control all the data. Indeed, the system should be designed such that sections of the Ledger System are controlled by the most appropriate agency (for instance in the case of public debt interest payments, Treasury would be the logical control agency) with the overall system managed by one agency; in this instance the Ministry of Finance. -72 - Chart 1: Govwnuant FanaiS Managment Iormation Systn-Moduflee Budget Implementation Budget Execution Budget Economic Trend - Appropriation Preparation Analysis - Commitment - Verification - Funds allocation Inv-stment. Financial Planning Planning - lllllllllllllll - Forecast of revenues inancial Ledge and *xpenditure- - System - Forecast of debt Fiscal Data Bank servicing Reporting - Cash management Financial Exocution - Inflows to Banks Debt Management - outflows from Banks Internal - Internal - Payments and - External - Receipts External Controls Accounting - Chart of accounts - Accounting rul-e - Controls Each niodue is a sa of opotins utilizing dh Financi Ledger Sydsm (Data Bank) (FLS) with information flowng both to and from the FLS. - 73 - Chart 2: Govmnuent Flnancal Managunent Information Systu-Data Aggregated Financial Aggregated Ledger Ledger Ledger Systm YR -5 -4 -3 -2 -1 0 | 1 2 3 Budget Historic Economic Execution Preparation Forward Estimate Trend Analysis Financial Control Fields for Each Budget Item Expenditure Appropriation Comimtment Verification Funds Payment Allocation (a) (b) (c) (d) Revenues Revenue Not Not Not Actual Estimate Applicable Applicable Applicable Revenues and Receipts Ia) An appropriation is the maxirnum aount of pubic tund authorized by the Parwaent In the Dudget Law for *xp endl e on a particuar purpose from the Governmnt Account. (b) Commitment h the process of entering Into an arrangement that obigates the governmnt to make expenditures of pushl funds. (c) Vrifiation h the process of confirrnhg an obigation to pay. (d) Funds aIocatiorn I the process of alocsthg cash amounts to Miitries and pending units for expnditure from the Govrment's Account in the tme period designated In the alocatlon advice. - 74 - 2. Execution of budgetary expenditures Overview 6. The various budget implementation activities (identified in Chart 1) are summarized in information flow terms in Chart 3. The process begins with the recording of the approved budget (and any amendments thereof) by the Ministry of Finance (MOF) in the FLS, by individual appropriation item or revenue estimate. Using this as a basis, commitment limits may also be determined, against which spending units can make commitments (the commitment stage). A funds allocation limit will be determined periodically on the basis of cash availability, and entered by Treasury against an appropriate aggregation of appropriation items. (In the longer term, once proper budgetary processes are in place this step may no longer be necessary) When deliveries have been made or services rendered, and invoices received, the spending unit acknowledges the fulfillment of the commitment and confirms an obligation to pay (the verification stage). In this final stage, the spending unit also prepares the documentation for making the payment, for forwarding to the Accounting Office, where the payment is initiated and recorded in the FLS. Information flow 7. The General Directorate of Budget and Fiscal Control (GDBFC) prepares and registers in the FLS the detailed allocation of budgetary appropriations by ministry, and advises ministries accordingly (flow 1). This should be done within the limits of appropriation approved by the Parliament. The Directorate, in consultation with the General Directorate of Public Finance (GDPF), Treasury, may also set and register quarterly limits on commitments by ministry (flow 2) and by category of spending (at the level of aggregation deemed appropriate). Ministries would then advise budgetary appropriations and commitment limits to their respective spending units and enter the limits in the system (flow 3). 8. Registration of actual commitments would be made by the ministries directly linked to the system (flow 4), or by the spending units (SU) not linked in a parallel system through a Provincial Accounting Office (PAO).' (flow 5). The SU will be periodically informed by the PAO of their limits (flow 6). In the verification stage, once all the requirements for a particular obligation have been met, the spending unit should confirm that the commitment is ready for payment (Flow 4 and Flow 5). 9. It should be noted that the process outlined above can be simplified for certain types of expenditure, either administratively or by automated procedures in the FLS. For example, salary commitments may be advised only once a year on an estimated basis and adjusted as necessary during the year. The commitment (and verification) of small expenditures (up to a predetermined limit) can be entered into the system simultaneously with the order for their payment. However, 1/ Accounting Offices will be established at a level below that of the Province and will be connected, electronically or manually, to the Provincial Accounting Office (PAO). This description, for simplicity, only addresses operations from the Provincial level. - 75 - the system must know in advance which appropriation items allow such simplification, to prevent misuse. 10. Commitment control for the current component of the budget can be operated satisfactorily on a within year basis, primarily as an aid to sound cash management activities. However, in the case of the Investment component, where many projects have a financial life of more than one year, it is often useful to maintain an accurate record of the forward expenditure commitment generated by undertaking the project. If this is done Government has a better understanding of the flexibility available to it for future investment decisions. This process can be accommodated in the FLS by extending the commitment control field against each investment appropriation line item to cover 2 years beyond the budget year. As long term commitments are entered the financial impact is recorded, for budget and 'out' years. 11. To encourage advance planning of the larger expenditures, it may be appropriate for Treasury to propose limits on cash availability against spending unit expenditure items. These would be advised to ministries (flow 7) in accordance with the financial plan developed by the General Directorate of Public Finance, specified by category of spending. Ministries would, in turn, advise spending units (flow 7). The advance knowledge of indicative cash limits, as well as of quarterly commitments limits, will allow agencies to make the best arrangements and to set priorities in a situation of scarce resources, so that any necessary cuts in expenditures by agencies can be made in a more orderly and effective way. (The proposed cash limits component of the process (flow 7) is not shown in the FLS control fields in Chart 2.) 12. After taking into account the balance in the Central and Agricultural Bank accounts and the balance in spending units' expenditure items in the system, the GDPF would make funds allocations (set cash limits) to ministries for each category of spending (flow 8), thereby allowing them to distribute these financial releases (limits) anong their respective spending units and enter the limits in the system (flow 9). 13. Under ideal circumstances, the funds allocation would be consistent with the proposed cash limits advised to ministries earlier (flow 7). Both proposed and actual cash allocation quarterly limits would also be consistent with the quarterly commitment levels and budget appropriation made on an annual basis, thereby minimizing the necessity to replan activities. The degree of consistency in the process will largely depend on the quality of the budget initial prepared, the initial financial planning process and the revenue collection outcome. 14. Following the verification for a given expenditure, ministries directly linked to the system would record the corresponding payment order in the system (flow 10). The system would automatically check that the order falls within the funds allocation limit set for that Ministry. The spending units would process a payment order through the Provincial Accounting Office (flow 11). The latter would check the payment order issued by SU and register it in the FLS (flow 12). - 76 - Chart 3: Logical Flows-Budget Expenditures Treasury .~~~~~7 . : Spefding GDBFC u Unit HOF : v .... 3.... Budget | 3 MDirector- ... Ministry . 9 . s rate1 M4OF FLS~~~2 L Level 2 12 ~ ~ ~ eve FLS Level 1 6 :5 :11 Central Bank/ (Central Unit) Agricultural Bank Spending ~~ ~ ~~~~~~13 |Govern-| Spenkding16 mn Unit -= Commercial 15 Banks Si.LWiers Govt public .......s....... Legen: I Information flow. Financial flow. System Registration (SR) or information provided by the system. Entities Linked to the system _ Entities not Linked to the system. (SR- System Registration) 1. SR--Budget appropriation limits per ministry. 2. SR--Quarterly Limits on commitments. 3. SR--Budget appropriation and commitment Limits per spending unit, by quarter. 4. SR--Actual comitments and verifications of ministries directly Linked to the system. 5. Actual comitments and verifications of spending units indirectly Linked to the system, in a paraLlel systm. 6. Information on the budgetary and financial limits to the SU. 7. Indicative cash Limits for subsequent months, specifying the main expenditures groups. 8. SR--Financial releases (funds allocations) to the ministries, for each expenditure group, taking into account the balances in the Government account nd in the ministries' expenditure items. 9. SR--Financial releases to the SU accounts. 10. SR--Payment order (PO) to pay expenditures, subject to prior committment and verification. 11. PO to pay the SU expenditures, subject to prior committment and verification. 12. SR--POs Issued by the SU. 13. Daily fiLe of the payments of Ministries and Spending Units. 14. Credit to commercial banks of the amount authorized by the SUs for payment to central goverrment creditors (suppliers, pubic employees, etc.) 15. Credit to central government creditors' accounts. 16. SR--Information on debits/credits made to the Government account. - 77 - Payment Arrangements 15. At the same time as payment orders are registered in the FLS, the banking system must be advised in order to make the necessary payment (that is to transfer funds from a Central Government account to the creditor). In a fully developed system this can be done automatically. At the end of each day, the FLS would structure a file with complete information on the creditors and payments to be made, as advised by ministries and spending units. This file would be sent to the Central Bank or,by the Provincial Accounting Office to the Agricultural Bank, which holds the Government account (flow 13). The applicable Bank would transmit the relevant information (and funds) to each commercial bank (flow' 14), to credit to the appropriate account (flow 15), and debit the government account. The appropriate Bank would confirm to the FLS (through the PAO) the debits in the Government account (flow 16). 16. Alternatively, and until banking arrangements have been reformed and the final structure of the Government account settled, the applicable Accounting Office could forward to the appropriate bank a consolidated listing of the registered payment orders requiring payment. Action by the banking system would be as described earlier, but confirmation to the Accounting Office would be manual. 17. One category of payment is worthy of special mention - namely Civil Service salaries. In theory each payment of each civil servant could be treated as a discrete payment and processed in the manner already described. However, given the number of individual payments involved, the similar structure of each payment, the regular occurrence of payments, and the addition personnel issues which need to be considered, it is preferable to develop a separate sub-system for processing salary payments -- usually referred to a payroll system -- in a manner compatible with the overall expenditure process. Annex 3a PUBLIC FINANCIAL MANAGEMENT PROJECT Customs Modernization Component Implementation Plan Annex 3a Customs Modernization Component Implementation Plan Table of Contents I. The Customs Modernization Component ............. ................ 83 A. Objectives and Scope ...................................... 83 B. Description . ...................................... 84 C. Project Costs and Financing Plan ................................... 0 D. Accounting and Audit Plans ..................................... 92 II. Implementation Arrangements .................................... 93 A. Responsibilities of the Implementing Agencies ........ .................. 93 B. Inter-Agency Coordination ...................................... 95 C. Role of World Bank Supervision ............................... .. . 95 111. Implementation Activities ....................................... 97 A. Implementation Schedules ..................................... . 97 B. Procurement Arrangements and Schedules ............. .. ... .. .. .. .. . . 97 C. Disbursement Arrangements and Schedules ........... .. .. .. . .. .. .. . . . 101 IV. Benefits and Risks ......................................... 103 A. Benefits ....................... ..... ..... ..... .... ..... . 103 B. Main Project Risks ......................................... 103 C. Other Factors Affecting Project's Success ........... .. .. .. . .. .. .. . . . 103 V. Monitoring and Evaluation ................................. ... . 105 A. Monitoring and Evaluation .................................... . 105 B. Indicators.. ........................................ 105 C. Reporting Arrangements ...................................... 106 Box 1: Customs Modernization Component--Major Tasks ......... .. . . .. . . .. . . . . 85 Tables 1: Costs Summary by Expenditure Accounts ............. ... .. .. .. .. ... . 91 2: Financing Plan.. ...................................... 92 3: Proposed Procurement Arrangements .................. ... ... .... .. . 99 4: Procurement Implementation Plan ................... .... .... .... . 100 5: Estimated Bank Disbursements .......................... ...... . . 101 I. THE CUSTOMS MODERNIZATION COMPONENT A. OBJEcTIvEs AND SCOPE 1. The Turkish Customs Administration is reorganizing its operations with a view to modernizing its administration to become more efficient. The primary impetus for the change is the entry of Turkey into a customs union with the European Union (EU) in 1996. At the same time, the administration, is facing the same issues and problems of other customs administrations including: increases in the volume of trade; changes in the types of goods being traded; application of complex regulations of other government departments; and, more sophisticated means of smuggling. 2. As a first step towards modernization, the administration was removed from the Ministry of Finance in July 1993 and created as a separate Ministry of State. Several other measures have also been undertaken, including the implementation of anti-dumping legislation, introduction of the GATT Valuation Agreement, and the review of the current Customs Law to identify areas where it is necessary to introduce amendments to bring it in line with EU requirements. One of the most important requirements of the customs union is the requirement for the Customs Administration to apply the EU common external tariff to goods originating from outside the EU. In this regard, the administration will be required to apply not only the rates of duty in the tariff but also its commercial policy provisions (e.g., EU quotas). ' 3. The Customs Administration is now developing the changes in legislation, procedures, organization, and computerization that are necessary to support modernization. These changes will enable the administration to both comply with the EU legislative and procedural requirements and provide support to the Turkish trade commnunity to compete in the customs union. This is very important as the trade regime has already been liberalized significantly and importers and exporters are facing, already, increased competition. It will even more important after Turkey joins in the customs union, as importers and exporters will become more and more concerned with the costs of doing business. Through simplification and automation, Customs has the opportunity to reduce these costs while, at the same time, to increase the effectiveness of its control and revenue collection responsibilities. 4. The major outcome of the Customs Modernization Component will be to shift the Customs organization from its present costly and inefficient ex ante, full coverage, sanctioning approach to a more efficiency-seeking stance, supportive of the trade community yet still capable of gathering appropriate revenues and enforcing relevant national and international laws. To achieve the desired results, the objectives of the plan are to: * Implement modern, up-to-date customs legislation. * Simplify and automate customs procedures. * Introduce greater reliance on post release controls. ' The Customs Administration received technical assistance from the EU to identify the legislative and procedural changes required by Customs to implement the customs union requirements (the program began in September 1993 and included experts visiting Turkey to assess the needs and Customs sending officers to the Community members to review customs procedures). - 84 - * Provide good service to the trade community. * Delegate increased responsibilities to regional and local offices. B. DESCRIPrlON 5. The Customs Modernization Component will take almost four years to develop and implement at a total cost of approximately US$68 million. It will require a major investment in information technology (about US$56 million) which will be complemented by investments in advisory services, human resource management and training, site preparation and project management support services. 1. Principles for Development 6. The Customs Modernization Component will be developed based on the following principles: self-assessment; selectivity for physical inspection and document review; strengthening of the post release review function; simplification of procedures as a pre-requisite to automation; reduced reliance on physical controls (more trust in the trade community to comply); and, rationalization of controls of other government departments. 7. The modernization plan has been developed by responding to the following questions: what procedures are to be simplified to benefit from automation; how are the systems to be developed; what are the priority components of the system; and, how are the benefits of modernization to be delivered to the trade community. 2. Major Subcomponents 8. In order to develop and implement the Modernization Component, four subcomponents have been identified: (i) legislation and procedures; (ii) computer systems development and implementation; (iii) human resource management and training; and (iv) advisory and project management support services. Box 1 provides a breakdown of the major activities to be undertaken within each of these subcomponents. 9. Legislation and Procedures. For the most part, laws and procedures related to customs administration are governed by international rules, conventions, and codings. For Turkey, with the entry into a customs union with the EU, the customs administration must not only be able to apply the usual international standards but, at the same time, they must also apply certain EU legislation. In addition, the customs procedures must be similar to those applied in the EU. Consequently, the automated systems must be able to support administration of certain EU laws (e.g., application of the common external tariff) and procedures. 10. Drafting of the Customs Law is complete and awaits passage through Parliament. Many parts of the required new legislation are being promulgated expeditiously through decree laws. The Customs Tariff Legislation is being modified to ensure that it conforms to EU common external tariff and is scheduled for completion in September 1995. New regulations would be published once the legal framework is in place. - 85 - - ;-,,.... ..... .'': :: :m-mm ::. X::;':i': :i: i; i. : :.' ::::.: : : , ::7" 1: .. :. ... . .. ..-i:-..l--.--.-'-.l.-.-l- .'.-.: ... :- . -. 11.. . .m.. ,... . ... .... ... ....:x:j.':: ,:.:!, .'- :: -.:... ,... .. .....'.. ... .., e! .... !:. : 1.:...: :.:': :-::::: . : ::: ' --i. . . .. .... % ...:... .... ':, ", ' , '',..... .. ... ... . ....... . . . .. ..:." , " ,-.:. m.: : .:..:. .. ::.:. ::.:::.... . .--.: , --.j: :... - , :. ::;j" :i. ..:: :].: .::- . .: :. :'... ' : : ::: - .....-...' '' '' '.. .. ..-.... . ....::: - mr::,., ..:::,: :: : ::. ... . .. .'... .. -'-..-*--.- -'..' - .. .' - i: i: .'. ..::: :: ..... . .....'. . I.... .... ..I........:.: :-::m... : :,:: :..'. ..:m.:. . sw t c ":' ro-O op.':'.... .. .. .. -ml.I.' , "o.... ...... ::...... -:.:-:....... ...,.::. -:::-:.....m::: : ": .. ..:-..... .:.:: - :..:.,.. .. .. . .. ..... I..;:: .:I .::::::::::::::::::::::.:.. .. -. . . .. . ...... :::.:: :: .:::: ::::::,..:.:::.::.::.:::::..;..'..::;,.:.:.::::..:::;:,;::;::,,. I.....,...'."..'....,.,..i:,:,::,:: ' :..:_" .:::::.: .... .e. .- . . .... -............. ......... .: : . : .'. .::.. ...... .... .. .. .. .. ... ...:.-. ::: :: :.,.,.:.:.:. .: ....: : :.. : ...:-:.. . .-.-...- ..... .. . .... ..... ..,.:.......: :' .:..: :..: .. ........:. :: . .. .... . . ....:::.. .::::. . ::. :..: :: :... :: ::: : :. : ::.:: :: :.:.. ..:: : .:.. : :. .. .. .. - . .. .. ... - ::. .:...... . . .... ..-. ... .:" .:.::. .. .. .. .-- .. .. ..-- .: - .:,:-..:: .... . .': V.: .: ..m.... .1?**::m:,:m:. i.-..-'. ::i"-.-'-.::! :: !i j : "-.::'--.:.: .. . .. ...I.I..:. ...............i.... .. im ...... :a:-....-:..-. ..... ...-. . .......... ..... :. .. .... X. ... m ::..: ..... . . ... ...-::..::...-.-. .. .. . .".:.:.::.'':''.. .. ................... .. . . . .:::: -'--. ... .. .. ... ... ... .. ....::..: 1:m. ,: .::::::'.:-%.:. -:- . .---...... ... : :,'-: ::::'. .. . .. ... . ...... . . ...-..luvt: wkw: "w': ,.: ::: : :::.::::i.::':..:.... ...:.... ...:..-..:.::i:.i:.ii:::::: .. :co . .... ':.:.: :.:.: :.:::.:..::..-.. . . .:. . . .:.' i*!:i*: ::::..:..::::::' :: i :.: ::: ,...:.::,. : . .. ]-- l..'...:: :-::. . - : : :' , .'..:.::.:.:::: .... . ... .. . ..... ... :.. ....%...:. :.... .. ... ... .q... ....-.. ":-::'::::;:j:::j:::;;. .. i6:644":Tigjrfuw .:.. :.:.:.:.:..::--. ,%::::: . :-.-...........:.. . -.:.. ........... .. ........... .......... . ........ ........ .: -.:.:.--: r. ... ................... ... ............. -i iim -.!'. .. --... ......... . . ." .. .:...:........ .. ... ........... .. .. .......... .:::::.:--:::::'::j:::i ..'.:. :]:'' : --- -.il:!'. .":.:..' :::... " ' ' '': .... ... :.: ::..:::.:::::. :.,.:,:.::: -::'--::::::::-.:::.-...: X.:........... ................. .. ... . .:.. I- -..I: 1: 1: ::'... ...............-. ..... .. .......'"" .. ... ......e;- .- ... .. . ... ti...............- ..: . :::.-::::'- -'..:.: : : .: .. :. . :: :. . ... ....; ::,..::.::...:::.,. . .:::::::::::::j:j': . Su............e....: , .... .... .... .. ... .. .. ..:: ': .::. ': .... .... . .. .:..%... ........ . .... .a....: . :...... .. ... ..........-... , ::: ..::..: ..:.. ..'''''.. ...... .. ........ ....::: :..'''"..: .. ............... ... :::...... .. .. :46W..pmw4i4.::.... .: .. ::' . ..... . .1, .. .::.:.-::....: .::...:::.: .:::.::::::: ::::::..::: :. ........:...'.:. . . ..t:..':m ::.: --. .'. e... ': .. . .... .twosaiI*..... : :r:.::,!:.;:I.::................. ... .... 0.:......... ..:..::.:-'.':!. ..... ..I. ..::: ''. : .::: '.:.:..............................:::.. :::.,::: ..'--..... . - ..i6:....... .. -...: . ....... ::..:. .!:-.'---'.:...- ..1101..... . .... .: .. . ,:::.. ':.:.:: : . ....:::: :T -and..:.::::::..:...::':.: ::.:::..:.:.::: :.:.:: .:.::::,...:.: ...cal!so: repg ns.::...:...:.:.. .. ... . ....... ..:.;: .. .. . .. ..........-.:... ...: ::..I... :....... . .,:::.::... ..... . ..... ... . . . ..... . . .'%......... .. ... ................: ..-..... . .. . ........ .::: .. .... . ........... ..:.. :m :::::.: - '. :. ..:.,..... ..... ....... ...'..... . .- .::.::..:..: ..:...::.. ........... .. :... .. . I.....' .... . .... ......: ...... .... ..... - - ,...-. . ..M.... ...,..... .. . ...... . ... :: ........ .. ... .....: .. . ..; :. ...... .. ...........:.: .. .. ... . . .... ..... -.-..:::::.:: :::: .:. ... .. - m: 4: ::.:Dwunooll ptwea4t:.'. :.:. .. ... ..... ... . . .... ::..:::..: ..... ... ..... ...-....... .... . .:.:: ... .. e. :'.' ... . ... .. . . . .......... ... . m....:: :::::::.:.:,:: :::: : .:: ..:.::: . ... .... . ....... . ... ..:-. ., ,.,- .. .. .. ..... .... . ..... .......... .::,'..... .. . .. ... .. .......::,: : ......... .. .-. ....... .. . .. ..... ........ .. .... :: ... ...'...'... .:..... .. ... ....:e.... ... .. ... .. ... ::M:.::Ph ucxHu (I .: ::.:.:::. ::- .::. .. Y. . mpp.c. on::.:: m.. .: . . .... ::. .. .. ..:,: -.::::... : .. .. ............ ... . :'.:::':::'..-:.: . .::.,::',:::,. -.:::':.:::::.::::::.:- -:.--:-'.:'-'_ :'..::: ..-.% .... ......... ... ... ... ......... . ... .. . ... .. .. ... .......:::..' ....!. :. .... ....-.... -: .. .. .... .. ..,... .. .................- .....:.: . . ... . ... , :.... ,.::......... .. ::'Y::::..m:'f66dx ' '::' . :....!:::: '"...... .. -......... X .. ' '.'... ..Nail 0 and'release.'o 'g. : -- ..: ....:.. :. . -...:.:.m:.:..'. .......... ..................,.:,.:::. .... ...Y=....':.::i.: '%..':..",. ..... ..* .. .6... .. X. :. -m.:.--.:-.-m.....: ....::: ::..:.::: :1 ... .......... ... ::::.:.::.:::: :..'.%....'... .... ....... . .. .:.... . .. : .:.........,: ..... ....:::..- .... .. ....... .. :..:..:''.-.: - - -.: ::.., -:.... . ..... ... :.i::: - - ....... ... :Y..:. : :otat obooics : '. 1: .:. :.: - -'m .:::.:. -...',. ....':.. :.. . .... ..... .. ...:.: llon:ol.. . ........, .. ....... ... . ...: ::::.-:.i: --:'.--.:'.!!'--!.-:.... .... . ...... .:.. . .%.... ......... .. ... ............... .: . .......... .. .. ...'..., .. .... ...... .. .....%.:. :..: ......... . .. ..I ... ....m..' ..:.:, : .. .. :,..:".:..:.:-:;: -., .. .... m ..,,.. ::a::...:' . ....--. ..::%..-. ... ...:....,... ...%:... 1::. .::: %- . -.:::.:.. .. v i.....-..m:..:-..-.:::-.:'.. .:: '..'..'.: ... . ........... ... ...'4m.niolA..... .....- .. ...... . .................... .... .. ..::.. :.-...: :.... WOV66....... ...............'..'..... ...,:",:. -::.jx:j.::.::::.: ................. ....................mm-..::.:.:::::: .' '.. :.' ....: .. .. .... .. .... .... .. .: ........ ... ... . -..... . .:..:.: .. ...... . ..........& .:.:.: . :... ,.......... . ......... ,:: . . ........ .. .- %. .: ..: .: .. .... . .. .... .. ....:...:. .:: : :::j%'.-a... .. .. e....... .... I. .. :... P. lww'o - .to#..::., : :.. :..:. ::. ''' ''' . : ': .:..:..:.::: : %X::..'::::.::'::::::.m': .:.. .. ...- %.:. .- % ''' X. ..VolCptow"!n9.pwcp.,.. --'i: ::.:.-..:.. ...... m.... .......... .... ........ ...:.:.::m::::..: :.: .. ..... ...m-... q-.. ... ..:i. : .r .. ....... ....''.. - . . : i.'.':i.'...::: -.'-: -'.-.-.'--'.--,.:...: ..- ............'.. - !'. -.'.:: ....-..:::...:.. .... .. ........ ... ........:::: :'.: ..-:: ...'.'.........!'..-.':'.' . .. .. ... ...... .. ... .... .. ......... ....:::: .::::: : :: ":::: ... ...... 1:.. .. .. . ......... .. ... .. ...... .. . .. ...... ... .. .. .: ':':""::"':'.' ..::..: :...:.:...' ......::: "... .... ..... ..........: -.m. '- . ..:. . .,,. .. ..... ..4.:..: ... ... .............. I M.. :. :::::. ::.. ..::: ..::::'' ''::::::.: :.. . :.. ...:::::..:.: ..m: :::::::::. ;.. ..............:::::::::::. ::: - ',.,. . ::-.:'.:*:::'-. " .. SymmoDeveloptIMM and bnple 'OoootiQu..... -... . ---%....% %. :.. .. .... :::..: :::.: -...: :.. :::.:: .,.:: i...-:i:...:. i.,.'....'...... ". -' .::.:..: ... - '' .- .. .. .. ........1 :::: . .. ....... .......... :::::::i..,:. - - - .. .:y..''. .:V....... .. .:.:. -.:... .. :::::... .%. ..:-:. .. SW . ....... .::. ..:::... .::::.:, .:..... :.... . . -..% .:O*w Oystow:to support OAN-1,. .... . M::: :.:.: ..::,-.. -:::'.. : ":] ,.,,.:i...i.-'.'.'.':..i.'..i-'.:'..:i:i...:::.'.'..'..i....,:,..,.. ...:... :.-:::.:*'.-'.:::]:. .. .... ..... . .. . ..... .. .....Y... ... ....lgw.. ....- .............. . ........ . ... ... .. .::.-- ,..m..... . ......... . ........- ...... ..... .. . . ..:. som-... ... . ..:...... .... ... .. ... .:.. .:.. .. .., .. . ......... ... ..-.... ..: %... .... .. "' ' '- aamevoldo And impUment. pildt systo . a....... ....... ..: : .: :...:: -'..i:.'. m::i]::: : i:..:...'.::.:i. '.......-%: :j...m Ulu... %..:::. :. ..: ...Y.: - .:.:." US.. .. .. .-.--.. I.. .. . .... --o% ... --'--. -.'-..'--.'--. ................... ..... ...... . ...............%.m m. ..,..::.-:::..j:-. ., .... . . .... .. . ... .... ' ... : . .. :: . -. : .. . .:..... ........ ... ... i.. :.. .:...... .... ..... . ..... -... .. -i.. (btain Alreenient. tD. Uw:.96FX.:. . ... ......'. . '.. . . . . ... .. ...... :.:::: ... .. ... ........ ..:::: .::.:..:::.:::----- :::,:, .. ... .....' -: ... %..I.. ... .:::: .::.. -. _.: .. .::. .: .. .... :... ..:%. .: -: ..:. .. .:::.. .....::: . :.:.::%::... ................. . .:,%:.:. -..... .:.. .......... :m .... - - , - -.... :. .-....:.'' ... . . ... -.. .-.... ... ......-...:.... ........ :.:.: : A::: : ::AcOiroui insta 40yol,. ..:. ::. ...: ..::........ .. . .. ...... ......... -... :...... . ppnwot':$':... .:... .. .: - .:::. .:.:.:.:.:. i. i:.i::: r: :'::: ]'.':::.'.:.'..'.:jij:- .:::::..:..:.::. ..' :..-.:.:.:. .... .. . ..,.%.... ......- :. .. . . .: ... ... .... ..: .. :'-p -:..... . . :: :.::: .:. :. ... .I... . ..:.-'.. ... ::: :: ::.Ifj::..:..on 4quarte'-.:......... . - ..:,..%,: .., ::%..:..' .::.-:. ::' -S'.- ..::. ....... .... .-.. ... . ...Ito pftp.krati be& . . ..- :... ........ :...I%:.... .io ot.. ..... .. ............... .. .;1s: 64toucct6qpjj SItc;x...... ...: .. .......... ..-......... .. ... .: " .. ... ... ............ .: :.:.:::::::..:i.:.,.:::,..,..: ]:: -.: i: ..:.:,:.:.: . . .-.:,:, .:,: .: :. .-.:: .. :...: . l......... .:'. : :::..:...: ::...:..: ..: ..-... : - ... .:: :: blifta poot: sit6(s) do ..... .. . .:.::.. . .',,.::..;: ..: ....::. .JV..opeP q.: ...... ...:... ..:],.... .. ... ... .. . .::m... .. . .......:.......:.:....... ...... .....:.... ..........a.- .. :.-- - - :.'-:-.- i ........... ...........i : :.i:-'.-'--:'-. -'--."-. .:.-;--'.:. ........ ........... .:. ::... ii . j..:: ..: ::: .. -.:%:%... :.:..::::. ... '... ...:.. .... ......... ..... . .-r - % -..:. ..:.;:: :... .. .:..:v :::: .:' Am)11....... .. .... . .::. ...... ......:.: :::::: .'e.-.'...... .. ... .-.. v OMOMPI ix.. .. .... .:m. .. .. . .r: : :...... .: ...:. -:.: Xe.. -.. ..... ..... . ....... .. ..... ........ : .: :..:.:: . ...:. .............. ... ...... ............ ... . .. .. :.. . ... .. ... :': :.::..:::... ..:. ... V.. .. .. ...............:. ...... .. ......I.1...... ..... .:.:. .:: .-'.::' ::,.:::. I %.:.. :Dt:dmtibnd svstem..:....:::::".:. .... . :.::.: .... mem...... .::....... .. - .. . ... ...... :... . .. .. %...... :.......: ..:.::: X. ...... ....'.......... .... : :.:.: .X ........... .... i... .::: ,; : :. .:. .::.: :...' :::::::::m.::..::::.:-. ::..:.. . ... ....... .. .'::: ..::. %:. ......... ... ... .......... ........ .. ....-.. .: .. a ::.%..:::- .......... ... . ... ''- ', ...pv co. ha)o.**: Stid.-... -::.aLle is ::::-, - - ...:. .. ...: ...i. ..:i ... ... .... ..... . ... .M.. . *iw , .0114. lea to v ,Iolhva i:.: I i:m 1. : .......... . .::: .'...::.. .... .. . ... .--... . .q.....: .... %:...........- ... .. .......... ......... ........ ............. .. .......PMIP .. .. .. .....I ..:::..,..:.,...:.:::....,.:::..:.:...::.'......:.j..... ': -.................... -'.::.:: ::.,::.::.': .:: .:::.:: ::.::::.:::: .......... .... ... ::'.'::'. .:..'.:.-. ...'... :..::.::: ...... ...::::- BkluotaUds tW awAorc.o;igqo::. . ..'.. ......!-"::'..- % .. ...... .. .. ....: ....''... ....... .:::. ::. :.:..,:. ' '..." .. , ", .. : .. . ... .. ..- :..--::.. - .. ......,.: ....... . . ...... .X .-,..:.:. ........ ..:. .: .::.:.: ..: . :: .:: .. .. ...... .. .... ...... .. ... . .....-.-..... .:. ...-....:!:.: :: ,. .. .. ..........i........... ...... ::.::.:.::...: :.: ... ''. - -".:. . .... ............... .... ..- .. .: .:::..::::,:.: :: .Q'.-.:.'..-:--. ........ : .::;:tiii:: i: .:: -... :..::::: :.. ::..:. ....... ....... ::. xwloimld BY 16 i.mliklow ..::::.:.. .:.:.:. - :::.m.::.::::.. ::. :::::::-::....:::::::::::::: ..':::::. ... :.: .... ::: .:::::::::. :: .. ... .. ... .::..' ...I..::.::.'..-: ....r... ...: :..:.::..: '' .. .. ........ Iltdin. n . r.. '"""'"' ::.... ....... .. :':...::.'.... .....:: ..I1: : '.:. ::." . ..... .. .. . ..... ..... .e.. :::;.......... . .. ...... .. -.--....%......: :..' '..::... ....... :......:.......... .. ..r::..:. . ... :.' .. :::....' -::.:.:.i.::.'.':-'.: -'' . '' - ..:...::::::::, m: - ..' .: I .... - ..q. ... . . . .... ........I.. ... . ..:.: m ..::::::::::-:.::::.. ..... ..... .....MPPOK.Sovi:. .::: :..: :.. .:. ,h4rmoiopn tochrology M) ....::m.. .. .."...., ... .0.:::-::....:::: ... .1 ...... ..... ..... . . .... ..'e% ...........-: ::. . .-...:.. ..... ....... ....a...:.. .:: . .::. ' .: .::.:: .. .... ..... ..:::: ..::...*-... ......... .. .....:. :.::.. ..-' '''' :::... . .. ... ... ... ....- .: .. .... .:.::... ...... ... ... .... - .:.. .m. -.: ... ....... ... .. :-.: :: j.:,:..:...',i:...' -, ,.,.,. ... . .. ' , . ..l. :..--.-mi --':.:iz:'.':';---:.-' ..' 1,...Emiabliah: KauftW aLdd6..m .. ... ..-... :1, ....:: ... .... ... ... ......... -....... . ..Ow .Uok.: :. ... . :.- -- -.. . .. ......... .: ..i'. --'... ..'.'. : - ': :::.. .. ... . . ... .... .. ........ ;.--.::.::... : I: :-:-:..:: 01.7 : .. ... .. .. .. ::: ...... ........... ". .:.. .. .::. . ..... . ... ..:". .-.: .:::.:.: ....... - - - - ... ...'... .. ...:.::.. . .. . .... ......,,..........%. .. . .. .. . .4..looelop. W: irviement vvlntee 1A : :': ..:.:::... ... , "'--." - '::' ............ .......... q.:'.-....-.:. ...........-.-:.: --.. .. :.-. . ..... ........ ..... -.. .......I P.!I:::.... :.. ... ... .... ... ...... :..: ].. ---'..-: .. - :- - :..: ..;,.:.:.:. .e,:.:..:.:........ . ... -. , -:' :',... ..............I. ...'- ,:...e..::.:..:.. ..:.:..... ......:::::::.::...::.: .:::::.: ]:::.-...'.::.. ..:....: .: . ..: .: ..: -:.::.. ..: ...:.. X%. :q. '.:..:::.. .....-..i.."..... ...:,.:. i i'.-'..i i::::: ::i::::'.'::'.: .........I..... ..._'.. .... . %.. .::. ... .... . ..r ,. ... ............................ . ... . ... .......... .....: .. .::: ...: ... .-.'.m:;"..%.'%.:..::::: .:::.- ................ .... .......... ...... .... ............. ... ....... . ........ :::.: ::: :.. . .,.:: ... ..:,::::;.,.:::.::.:.:::.:.:.:.:::.:.,. .. ... . ....... .. .. ... ....... ..-. :. .. ....-:: :: .:.::........................... ... ..... :.. -:.:...: ..... :. .. .. ' 'li.'...]-.. -',...:...'..: .. . ................................ ......[- ........l. ... .. .. .. ... .. ..:..:::. m... .. ..... ....: : -.':-.:.'-.. . ..:..:: .::.'' ... ...%i............. ........... . .. .i:. j ; ...:.. :-:X.......... -e.: .."umm N Od 'ituns.::. ......r.. . ............... .... . ...... . .. . ..... . ... -'......:..::.:::.::.:l...- ... ....... . . . . . . . . . . . . ..... ... . : . : - . - ... : .: : : - : - ..... . .... ... . - - . ....... .. . ...- : ::: , .. .............. .. . ... .... .. -:.-.:.-:..::::-, - -, ...... .'. .. ........ .....:.......... ...............::.. ::..: .m:..-.:::::'- -:'.::::...... ::::.: - - %.-. .. .... .: .. % .: .: ...... .. .. .. ............-:........ ..ro ' -.. ::: :::.:..: %:::........................ ..mm. .. . ..... . .: ...bewo 6 muctu..... ... ......--::: ..%..... .'' ... . . .::.: .:::.......::. : ::. :: ..:: .. ...... ......... ..... .. :'.'.:.-.:ii]-'.-'.:::'. .. .. .. .. ......:. :.::::..::.... . a.. .... .. -il .*...'. .... ....-...... .......--....... ... .'.. ............ .:..::: .. ....... ...-.%....... ... . ... .. .. ..: .:::::::::]:.' ..... ....... ...... ... ..m..-..... . :.:. ...:: ...:lw ... 1... .:..:. ' :- '. ... .....:::::.::,::::..::::::,:::i:::.."%. ...... . :.clioml MO- bmAdquaftm *.. ......... :m]:-.].-'..-'.-x-'-'...'-:;- .. ......:......'s.. e...' .'.'' .. .... .: :k:::::: ' R, .................:.:........ .... ....... ... .. .. ... . .:.' ... pagAug *W4twm-..:..:.;:.: . .:..,,, '.' .... .... ........... .. .. :: ::.:..:..: . ..... ............... .... , .":..::.: ...... --.:..'.--. .r .::. .: rr.: .. .... M. . .. - .. t. a r t.u:.:-..:''':.::.::,--:-:::...: '.:::.'.-.Zm:::: ...mcilx mainw :..::: X.: .:.:.- :" -'" - ''... .:.' ... ..... :::.'.".:..:'.:.m:.'.:::.:::: :: ] :i.'-:ii'. Am-naw'q a .0mu ... M:-.. ....... . .. ... ......I.... .. pmtlotla.W.........: ... ..... ..... .,%::: :::,: :;::::. ..... ..:::: -::.:: :... . . .. -. '. .19...... , .m:: i : .::.:...::::::...::::::::::.::::::m ......... :.% . .:...:t'i41.. ..... . - ..: ..... .... . . ......... .. ..: .: -...:: .: . ::.... .::. .m:.:.:....%.. ..Ilftt4:'''...... . . . . .. .. ........ .. ........:. . .. .... .... .. ......... m. ..: -... . ... . ... ''........W. %. ww .:'...... ..... ....... .. .... .. .. ... ........m::....-..:: ...... .: .: - - .. ::: :.: :::: ..::.,. %,..:.::... .......-: .:: : .'...:i:' . ii::::'.'.--.] . ............ -. ......- ..::...:... .....'.K. _ X.: ......... ......:.::-:..'... m. ......i........ . ... ..... ..... .. ...... . .... ..... ... ::. .. .: .:.:. .: - ............................ ...... .tili :1 mQuiromenwawArwel timkk4 pliin -:: ' '.'-...... -:. .::.:,.:.::: m::.:.::::..::.::::::.:.::::::.:::.::.:::.: %....::.....::::-'. .. ..... ::.:::: .::: %-.:..... ... .... ..... ........: ... . ...."..I..... ....:.:.:: .:: ..: .. . ........ .. .. ::,::.:i::!:i,.ii:..,.",:,.:.-...,.: .. ... ..,..: :::.:::::.:::;::..::.....:.:...-...:::: ........... ..... ... :......:. .. .. ...........:: :.:: .. ..... ... .:! r: ::: :..: ::: .i. ..:-:.:::.. .....:.-.:.. ...i:::. .............:::: .: .:: . .. " ;. ... .. .:::I.:::.Open..... ....m.. ... :e:..'::.% :::::::.'.'...,::,......::::....:.":m tA-V.nd:OToeedUl;6$:for:: ' .. ..::-:.m... ........ . .:. " ..... .::. . . . . ...'11166611 el donal, -siiiff :: . .. ::' .,.::.: :... .. . .. . .. :... .:. . ..:.... ::::::..'.::::. ... ... .. . .::........:. .. .:::.. :.-.::..... ...:. :::. -.::..'::.::::.:::::;m.. ......... .......,.:::.j: .: i:;:i::'-.-'. i'.......:,.......:...;,....,....:"... .:V':.:.. ... . ...... . .... .. ... ... ........ ..:.::.: . :::.:. : :. .... ... .:::::::.. . ., ,.'--. ..:.,. ", '' :'..... .. ... .....lillu fowclu6wl. .. .: mm. ...:::.:.:. .:.. . -: :.. .. . .. .... . ...... ....... ... ... : :. - : -;i:.'.::]:i::::] ''. ... ... :....... %... ... ..... .. . . .. %. ... .... ...... . . ...... .. . .... ... ... ....r................. ... .... . ...........:... : .:...... %. % -... ..... .,-;lll_:l :... . -:.:. -.. .. -..::.. :.:....j: ''.':::.::i -': :;.:.:.'--. - -, .,.: '.. .... ........ ... ... .....:. .......... .... . .. -:m.:.:i: :.:::: ........... ,;:::: .:: ... -:: M ::: : ..:: ififoitafibn ukhnoll?gy...... .... ... .:%.: -.'.--''. .'..:.. : .. ......:: . ..... . ... .. ..:. ..-.'::'.]i-.;'.:-'..'.::.. ...... . .:: .. ...... : ...:- . . - ........ ............ ... ... ::.. . ::::i::".:......;............:::., .:,...:.. ...aI... ::: .... .. .a . ........ . ..... . .. . ...'..':. -........ . ... ... .' . ..-.: .. .... ...''' ....Iraw ............ .. .. . ... ...-.:: ...:'wo tw:..:::: :..:: :'. ::::: ...:.w:::.,.........:. . ..... m.... rimseme..... ...... '...:... . .:,'." .. ..... ........ .. ........::.... ......... ... .: .. E- - - .'.... ---"-. ........ .............. .. ......... ... ...........:::. : .: m ..:'.::r:::-:.::::...:.:..:.:: .:::..::::..-;,. o:i.'-". .. ::: .... .. . : .::. ., . . . . .. . . . . .. . ..:: : : : . :: : .: :: .:. . ... . ... ..... ... . . . . .. . . :.. .- : .- ': .. .... . _ - . .. .. .1 .: alionalizzw k igu m fion : ; , . . .. . . . . . . . . ..:.. . .. V ::. :: . x .m.. . . . . . . . . . .. . ..... ..... ... M .::.::.:... .::. ::: -. .........::.: :::.:.:.:. .. . .. ..... .. .. ...: . .: . -. .............:.:-:..'.:. ...: ::.:::.:::.:..::. - .::.: ....: .... ......... .....m. ::.: :.... .. ..... :::x'...-.:m:....'.:-...:.:::. '. ......''... ' '' ... ... ..... ............' ' ", . . '-::%'.:- :.......... :. ..::'......... . .... ... .-'' .... i " DOvelop publk.lurphrAdon pm,pm...........:..: -::-'-.:.'. .....:::.:.............:: :: '' ... :::I,. ::::: :.:, ..... ...... ...;.--. M.,..........:. ......... .... .... .... ::.:.. .::. .... .. . . ........ .... ..... .......... .......... . .....: .: ...:::, .:.:.::. ..:.:...:. ..:::.::::::,:. :' ......... ..... ..... ............. .... .. .. ,' ,..... . . .. .. ............'.... ..- . ............ . . .. .- .. -'.-:.:..:.........: .'...-....... ...'-.". -, : .-: - -- ...... ..: : -:.::. . .... .. ..... .......:'. - .. ...... ... . ..- ..... %:..:.... -.............:.:..... .... ::i:: ' i,.,.:::..:i:!::'.-...'.-;I: --i ..: .: --i'..'..'. ... .. ...............m .. .:::::.:::; :.:,::: ,''. .- -.. - ' - ...'..... .:. ....... .....:............. ....... .. .. .. . . ..:........... ............... ... ..: .......... ... . ....... .. .1 ..:......:... .. .... .. ... ....................... ... ...... ..... . ....::..:...:::%: ::: .......... ...::.."-.::..:::..j.'..:::.:. -:- ..... .- .:%:::. .... ..:.: :r.. ..:::..: .. . aDd pro* M'cfii setvk0c. ..' .::: ::.": , .... l.. :.. ...:.:.. .. . ...--. .:.:, . .A=PM ... ............ ...: .. .. .... . ...... ...,':j:::....m:: .:.: :.....:::::. '::m::'.-.::...:...: .. . ... .. ''i: .. " ....... .. ..:..:'.... I.:..:. ..... ...... .......''....:. .::::::: .::.. ....::.:....-%.:.::.:..:...:::::.::...::.:.::.:-.:- - .. e.'-..' ".i]:j'i:i.:. 1: '.:m:::...!:.. ..:::.:. '..... ...: .:-':.:.:: .::::. ............ .. .. ....::....... ..'.. ...'...:..... .. ............ :::::..::. '..... . . ..... ... . ...........:: :: , ''.:" ....::....... ....IM)" 4mo ibr txs sixnca .. .. .. . I .......:..:.:::..... ...... ...... .:.::.:,:. ::: -, .": - .:. ... .. ..... . .. ....... .. .. i:m .. .. i:--.:i:::::3'..'-':-.. .*:: : ..: .. ... ... .::::.: .: .. .. .r:...:....:....:..:.::::..::...::.:.- ...:.. ...: ''-..:''-. ..:::. ... .......... ..- ... :: ..... ...... .... ... ........ ... V:::.... u&Aioo. wbwtog..:::. . :::. ::.::.e .'. ....::-: X. -.:.-.: ....:. .:::: ": ,.:... ..... .::::.::....' -r -.: .:.]::..:.::::::]:::iii::.,........ ....... .. .. .. YjmAdvioo:: ... ............:.:..:::::,..::.::::,::::i::::,.... ;:_'-:!::e..-.: ...... ..... -... I. ... 11i:...::,:::......... .. . .. .. .: ::.:..:.: ';:: : %.:..:...... ........ ., :::..: ':.:... ... :..::::m.w iciiwarii *ibi6i......m. ::.: :.:...:: .:.. ..:.:.:.::: :::m...:.:.:::-'. :..::..:.:::::.::::::.:.::::.:::::.,....".-.. . :...:::...:.. . :.:.-:::Ij..: :. .;: ..... ........ ........ ....... .. .... ............. : :.,::::..::,.:::m::.-.. :::: '. ,.:.'.'. .'.. .:: :: j.:.:::::..-:::::: '.:%.::'.'.:.::::..: ...''..... . .............. . . ..... .. ... . .:. ....... ......... ......: '.... j:.:.'...., ,,. ............. ..... ........... ..... : .,.,. , '- ia.. ...:.''''''': .......... .... , :...' .... :.:'.:.'--m.'.'-m.:'.--. .....:.: :.:. : .::. .. ': --.. ..... -.. : :.: .:... - ..Oct nianagemens........ .:.:..:: :.::.:: - .: -- :wtv-.... ..::::..::::................ ... I".-.- .. .:!::....': ..: .--.:.:. ....' -'. -.. .t gumrt .lci MO )'' .'. . ... .... . .. .- ..... .. .... .... .. m ::. .:.. ... ...... . ... .... .. . ..... ... .,.., .:.:::.:::..::: - .. .. .. .. -............:. r.I.: . ......... . .. ..::::.::.:% ::: ' . " ..:. ....... ......b...... iiiii.w......m.. ....! .::-: ....... .nu:. -.... ...:. ...... ......... . ...... ......... ..:..e:.:.:l..:%.... .... -..'- ...::m:;.::.: .:. ..:..........: . .:..:: :.:: . ..... ......: .. . ... ... ......'..... .. ... : .. .. I... . .. .. ....... .. .. ... ..::::::: .:. . . ., ,.....:...... -.. .. . ....-.:ii::. .... ....... ...........:.m.m.-...... .'.P.Wasults . .... .. .:.....:... ....... ......... ....:.... ....... .. ... ... :: . .. i'. ... .. . ..... ...... '' :.e. .. ::::............ :.: ...... .::. ....._.....':. .... --. .' .. :.; '. .... ";---...... ::. ..::.:: .::'nIplime ion pqan',.. -:::..... . .'. :.%:, ' "' :.......... . ..P.-Yelp .::. ::. %. . ;....:..::.:::.-.m ''.. :::::i::::.;.::.::.::::::::::::::::::.::.......:: .:::: :::..::. .: :.::.::.::..' -...:.: . ..... ;..:...::..:.:.;. :....... *: . . .p detsiW11 aTat-..-.m :: -.:.: ...... - 86 - 11. As part of the process of developing the plan for modernization, with the assistance of the Bank, a review of the customs procedures was undertaken (using the principles for development described above). The new procedures meet both international and EU standards. The procedures, when implemented, will simplify significantly the import and export customs regimes and will lead to successful implementation of automated systems. Procedures have been developed for: * Import processing - Transit and cargo reporting - Declaration processing - Physical inspection - Payment of duty and release of goods - Post release checks * Export processing A detailed description of these procedures is provided in Annex 3e. 12. Computer Systems Development and Implementation. Headquarters, 18 regions and 45 customs offices will be automated over a three and a half year period. The 45 customs offices account for 90 percent of workload and 90 percent of revenue (non-automated offices will forward documents to automated offices for processing). The following subsystems will provide automated processing at the customs offices: * Import declaration processing * Export declaration processing * Revenue accounting * Manifest * Transit * Warehousing * Management information * External interfaces. 13. Automated support will be provided to headquarters to produce management information and trade statistics, perform analyses, and receive and distribute updates to the EU integrated tariff. The regions will be supported by automation to perform post release reviews and monitor local office activities. In addition, headquarters and the regions will be supported by office automation. 14. After implementation of these subsystems at the automated customs offices, a second automation phase will extend automation to other customs offices and the following additional subsystems will be developed: * Enforcement analysis * Passenger processing * Appeals, refunds, and rulings - 87 - Although these sub-systems are not included in the scope of the component, the design of the system includes provision for their future development and implementation. 15. Automation is to be based on the "community system" approach. It is to be developed using an open computer architecture to permit ease of interconnection with members of the trade community and other government ministries using electronic data interchange (EDI).2 The objective of these systems is to provide the opportunity for all participants in the trade system to submit and receive informnation electronically. Verification activities are carried out prinarily through the use of automated selection criteria to determine which goods require physical inspection, documents requiring review, and audits of the books and records of enterprises. 16. The proposed system is comprised of a three-tier (headquarters, region, and local office) network of computers with higher organizational levels containing a subset of lower level databases.3 To support this approach, a UNIX operating system is recommended to operate with a relational database. Initially databases will be updated daily by file transfer using an X.25 network and on-line access to databases will be by dial-up. After implementation of the new system, a feasibility study will be performed to determine whether on-line updating of the headquarters database would be cost effective. 17. The information technology (IT) department has limited experience with the recommended UNDX environment and with data base management systems. In addition, the system must be developed in a short period of time to support administration of the EU legislation and procedures. Therefore, developing application software 'from scratch" is not a practical option. In recognition of this fact, the Customs Administration has entered into a bilateral agreement with French Customs to acquire the SOFIX application software which is based on French Customs automated system software.4 By using this software, the customs administration will be assured that the tariff and supporting procedures are compatible with EU requirements. The software will operate in the recommended architecture. In addition, SOFIX is supported by French IT and customs administration experts who will assist in adapting the software to Turkey's specific requirements, the pilot implementation and with initial IT training. Even before the signing of the formal protocol in July 1995, significant joint preparatory activities was being carried out by the two customs agencies for the pilot. 18. Human Resource Mananement and Training. Customs modernization involves not only new systems and procedures and the integration of automation into the work place but also implies increased delegation and responsibility for regional and local management. It will have 2 Information regarding imports and exports by enterprise will be shared with the Revenue Directorate for tax enforcement purposes. This collaboration would be facilitated considerably by the use of the secur Taxpayer Identification Number that is being developed by the General Directorate of Revenues. 3 Thirteen regional computer systems will support the eighteen regions (smaller regions will share a computer system). 4 The acronym for the software is based on the French Systeme d'Ordinateurs de Fret International (S.O.F.I.). - 88 - an immediate, significant impact on human resource management and training within the organization. 19. The key human resource management issues to be addressed as Customs undertakes the modernization effort are: * Orgfanization structure. The new organization structure must be designed in a way that will best deliver the new program. The principles envisaged in the new structure include: decision making delegated to the lowest possible level to support better service; strong monitoring at the regional level; and, policy formulation, monitoring and internal audit at headquarters. * Number of staff required at headquarters. regions. and local offices. The relative size of headquarters, regions, and local offices will change to reflect increased delegation, the introduction of effective post release controls, and the use of selectivity. It is also anticipated that much fewer total staff will be required in the administration once the new systems and procedures are in place. * New skills. The systems and procedures introduced to support modernization will require staff with skills not now present or in short supply in Customs (e.g., computer systems development, audit, and analysis). 3 Training. The training requirements of the organization are multi-dimensional. Re- training of all customs professional staff will be required to support the new systems and procedures resulting from changes in legislation, simplification of procedures, and the introduction of computerization. In addition, training will be necessary to support entirely new requirements (e.g., audit) and new approaches to supervision and management. The major training requirements are, as follows: - Local offices--systems and procedures related to cargo manifests, TIR transit, import and export declaration processing, tariff classification, valuation, and physical inspections. - Regions--systems and procedures related to analysis of information to develop selection criteria for physical inspection and for detailed documentary checks and audit. Training is also required to develop the technical expertise required for in- depth tariff classification and valuation review and for the audit of the books and records of enterprises. - Headquarters--analysis skills related to using information from the computer system to help identify problem areas, develop national selection criteria, monitor staff performance, and identify areas for staff re-allocation. - 89 - - IT--use and operation of 4th generation languages, UNIX operating systems, relational databases, CASE tools, and EDI. In addition, IT staff will require training related to the modification and maintenance of the application software (SOFIX). 20. Advisory and Project Management Services. Technical assistance requirements have been identified for four major areas: customs administration; information technology; human resource management; and project management support. Customs Administration Adviser. Technical assistance is required from a variety of sources and it is important that it be coordinated to ensure that it supports the overall modernization plan. For this reason, Customs will appoint an in-house Senior Customs Administration Advisor (SCAA) to provide specific advice related to customs administration and to coordinate all technical assistance. The responsibilities of the SCAA will also include: (a) the development of detailed implementation plans and the ability to monitor progress against these plans; (b) identification of other technical assistance needs; and (c) developing and implementing evaluation criteria. This advisor will be selected and supervised by the IMF. The terms of reference for the SCAA are described in Annex 3b. Information Technology Adviser. Similar assistance would be provided by the IMF through an Information Technology Adviser (ITA) to coordinate the automated systems development, including the writing of software, acquisition of equipment, and site renovations. Specifically, the support would include: reviews and assessment of existing information systems; assessing the skills of the IT staff and recommending training; establishing the IT structure and organization; writing tender documents for acquisition of hardware and software; and, evaluating tender bids. The terms of reference for the ITA is also contained in Annex 3b. Short Term Advisers. In addition to the SCAA and ITA functions described above, other technical assistance would be required to support: (a) development and implementation of simplified regulations and procedures; (b) use of risk analysis and development of selection criteria for physical inspections and documentary review; (c) use of automation for valuation and tariff classification post release reviews; (d) improved enforcement with the introduction of mobile inspection teams and in-depth inspections; (e) rationalization of inspection procedures with other government departments; and (f) development of a public information program for the trade community. The detailed terms of reference for these advisers will be developed by the SCAA in consultation with Customs and the IMF. Human Resource Management. Technical assistance would also be provided to support: (i) training of managers to operate in an automated environment; (ii) development of staffing plans related to the new procedures; (iii) development of training plans; (iv) development of a new organization structure; and (v) identification of the approaches to rationalize staff requires. The detailed terms of reference for these advisors will be developed by the SCAA in consultation with Customs and the IMF. - 90 - Project Management Support Services. A project of the size and complexity being undertaken by the Customs Administration requires full time project management support. A Project Management Support Services (PMSS) contractor will be procured to assist Customs with the following requirements: (a) development of the detailed implementation plan, including identification of interdependencies among key milestones and integration of the automated system into the operation; (b) the writing of tender documents and component reports; (c) the evaluation of bids, negotiations and contracting; and (d) the tracking of component budget and financial expenditures. The terms of reference for this assignment is contained in Annex 3b. C. PROJECT COSTS AND FiNANCING PLAN 21. Cot. The total cost of the Customs Modernization Component is estimated at about US$68.3 million equivalent, including contingencies. Project costs include goods and equipment, advisory services, civil works, training services and materials, project management support services and a refund of that part of the US$2 million advance from the Bank's Project Preparation Facility allocated to this component. 22. The total baseline cost is estimated at US$62.3 million. Physical contingencies are estimated at US$2.7 million or 5 percent of the baseline costs of equipment, software, other materials and public works. Price contingencies are estimated at US$3.3 million or 5 percent of total baseline costs over the period of component execution. These are based on the assumptions of an average local inflation rate of 51 percent in 1995-96, and 15 percent thereafter. Price increases for foreign costs (estimated in US dollars) are assumed at 1.6 percent in 1995-96, and 2.6 percent each year thereafter. Cost calculations assume an average exchange rate of 66,000 Turkish Lira to US$1.00 for the 1995-99 component execution period. Foreign currency costs, including contingencies, are estimated at US$49.7 million or 73 percent of total cost. Local costs are estimated at US$18.6 million equivalent, and are mostly for civil works and local training. Of the local cost amount, taxes and duties are estimated at about US$10.9 million or 16 percent of total cost. A summary breakdown of costs by expenditure category is shown in Table 1. A more detailed presentation is contained in Annex 3c. 23. Financing. The proposed Bank loan would finance US$44.4 million of the costs of the Customs component, 65 percent of total component costs (see Table 2). It also would meet 89 percent of foreign exchange requirements. The Government's contribution (US$18.6 million) would finance the acquisition and pilot implementation of the SOFIX customs software, as well as a variety of local costs, notably site preparation. Assurances were received from the Government during negotiations that adequate budgetary provisions will be made to meet counterpart financing requirements throughout the period of project execution. - 91 - Table 1. Costs Summara By Exnenditure Accounts (CL bl_s) (US $ 'oe) Of Whikh Of Whh % FoNrsi Do". & % Forcim % Total Du". & Echmpge I ToWa Lal Foreip Total Tx Fxchane Bes Cos LocIa Foreiga Total Tax Bm Cein Civil Works 264 0 264 0 0 9 5,471 0 5,471 0 0 9 Equipum-M 47S 1,992 2,470 478 Sl 82 9,905 41,272 51,197 9,897 81 82 Vehiclna 1 3 4 1 81 0 14 60 74 14 81 0 Training alAr. 86 0 56 0 0 3 1,775 0 1,775 0 0 3 hErndomlod 0 38 33 0 100 1 0 778 773 0 100 1 Suueald 86 33 124 0 30 4 1,775 778 2,553 0 30 4 TechalAl Azdoame htanotlbYm 0 75 75 0 tOO 2 0 1,560 1,560 0 100 2 Projea Support 0 72 72 0 0 2 0 1,500 1,500 0 100 2 BASE COSTS a1s 2,180 3,M 479 72 10 17,165 45,170 62335 9,911 72 109 Phyd Caomitqm 32 96 123 22 75 3 666 1,917 2,653 449 75 4 PGce C t_tamias 1,101 3,424 4,525 753 76 149 765 2,550 3,315 567 77 5 TOTAL COSTS 1,961 5,749 7,1 1,25 74 25S 13,I9% 49,707 6 10,927 73 I1 - 92 - 24. Preparatory activities for the PFMP as a whole have benefitted from a Japanese PHRD grant in the arnount of Yen 128 million (approximately US$1.3 million). The French Government has also provided a grant of about US$132,000 specifically for preparatory studies for the Expenditure and Personnel Management component. The Government has obtained an advance in the amount of US$2 million from the Bank's Project Preparation Facility. These monies have allowed the timely initiation of the most time-sensitive preparatory activities. Table 2. Customs Modernization Component: Finandi PIan (US$ million equivalent) Local Foreign Total % of Total IBRD 0.00 44.4 44.4 65.0 Government 18.6 5.3 23.9 35.0 Total Financing 18.6 | 49.6 | 68.3 100.0 D. ACCOUNTING AND AUDIT PLANS 25. A project account and special account will be established for each of the three implementing agencies. The Project Management Unit of each of the implementing agencies will prepare quarterly statements of expenditures, consolidate component accounts, and prepare and submit disbursement withdrawal applications for project expenditures (beginning from the date of Loan Effectiveness). The project accounts and special accounts would be audited annually by independent auditors acceptable to the Bank. The audit reports will contain a separate opinion on the use of Statements of Expenditure. During negotiations, the Government confirmed that an annual audit of all project and special accounts would be undertaken by an independent auditor in accordance with the Bank's Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank., March 1982 . Audit reports in English will be submitted to the Bank not later than six months after the end of each fiscal year (December 31). Details of the schedule for project reporting and annual reviews are presented in Table 4.7 of the Main Report. IL IMPLEMENTATION ARRANGEMENTS A. REsroNsi Es OF IMPLEMENTNG AGENCIES 26. The borrower is the Republic of Turkey which is represented by the Undersecretariat of Treasury (Treasury). The Undersecretariat of Customs (Customs) in the Prime Ministry will have overall responsibility for implementation of the Customs Modernization Component of the PFMP. The Customs Undersecretary has established a Project Management Unit (PMU), headed by a Deputy Undersecretary, to supervise and coordinate implementation of the Modernization Component. Actual implementation is being carried out by seven Working Groups. 27. The Deputy Undersecretary will be responsible for the day-to-day management and supervision of the Customs Modernization Component of the PFMP. Specifically, the Deputy Undersecretary will oversee, guide and approve the requirements, specifications, operational and organization proposals and other changes that result from the study, analysis and design activities conducted as a part of the Customs component. The Undersecretary will establish such review committees as he deems appropriate, or may be recommended by the State Minister for Customs, to review and evaluate the results of work done in component activities. Through this process, it will be ensured that the activities conducted under this component remain consistent with the objectives that have been established and with Government intentions. The responsibilities of the PMU as a whole are as follows: * Ensuring the training, assignment, and placement of Customs staff and consultants as required by activity work plans. * Providing liaison with the Bank and involved Government units for project administration and supervision. * Assisting Working Groups in the preparation of procurement strategies, plans, and tender documents, and ensuring compliance with Bank procurement guidelines in the acquisition of products and services. * Preparing and distributing quarterly reports to the Undersecretary and the Bank, and (as required) to other Governmental units covering the progress, problems encountered and corrective actions needed, and activity and financial status of tasks. * Ensuring the movement of official documents and contracts through approval processes and undertaking measures to expedite their release. * Supporting component activities by providing necessary translation and administrative support. * Monitoring availability of funds, project costs and expenditures, processing loan disbursement applications and tracking disbursements of the Bank loan and GOT funds. * Preparing a Component Completion Report within six months of the completion of the component, which will be incorporated eventually into the Project Completion Report. - 94 - The PMU will be assisted in the above tasks by the PMSS contractor. 28. As noted above, the Undersecretary of Customs has established seven Working Groups that are responsible for carrying out component activities with the assistance of contracted technical advisors. Additional short-term teams may be formed from time to time to assist with the preparation of tender documents and with the evaluation of proposals. The specific task responsibilities of the main Working Groups are as follows: * Tariffs Working Group. After completion of the preparatory work for the integrated tariffs by the Directorate General of EU Affairs and Foreign Relations and the Directorate General of Customs, members of this Group will redesign the Turkish Tariff Schedule. A format will be prepared of the tariff schedule to be used in the Customs Automation System. This format will include tax (tariff) rates, special permissions that will apply to organizations, and all explanations. * Trade Documents Harmonization and Standardization Working Group. This Group will develop a Turkish version of the Single Administrative Document (SAD), which will be used as from January 1, 1996, the scheduled date of entry into the Customs Union, and any other documents that may be required as a result of the new Customs Regulations. * Customs Procedures and Organization Working Group. The work to adapt the Customs Law and the Customs Regulations to the Customs Legislation of the EU is being conducted by this Group. Upon completion of this work, the same Group, in collaboration with the information technology Working Group (see below) will determine the process, workflows and the user needs for future automation, consistent with the envisaged simplified procedures and organizational changes. * Information Technology Working Group. This Group, consisting of information processing staff only, will carry out work to specify the computer hardware and software requirements that will be established as a result of the user needs and analysis work undertaken by the Procedures and Organization Group. The work of this Group will take the form of research and feasibility studies, culminating in the drawing up of the specifications necessary for issue of tenders. * Technical Assessment Group. This group, consisting of information processing staff, will deternine the criteria necessary for tenders to be held and assessed in accordance with World Bank guidelines. * National Implementation Working Group. This Group will be responsible for coordinating the nationwide implementation of the organizational and IT changes that will be defined and piloted by the foregoing groups. * Training Working Group. Two subgroups will be responsible respectively for training of IT personnel and for end-user training in the new procedures and systems. - 95 - B. INTER-AGENCY COORDINATION 29. Components are essentially independent of each other and will proceed according to separate component implementation plans. The implementation of the Customs component will be undertaken solely by the Undersecretariat of Customs. Consequently, there are no substantial requirements for coordination with the other agencies implementing the other two components. Any necessary coordination among the organizations will be effected at the ministry level by the Undersecretaries of Customs and Finance. C. ROLE OF WORLD BANK SUPERVISION 30. Bank supervision of project implementation will concentrate on the consistency of component activities with agreements reached during appraisal, performance of the implementing groups and assessment of emerging needs for adjustments to project parameters. The day-to-day implementation and monitoring will be carried out by the PMUs. The basis for Bank monitoring will be quarterly progress reports prepared by the PMUs. The reports will describe the status, deviation, if any, from the implementation plans, reasons for deviations as well as corrective actions being taken. In addition, Bank supervision missions will hold substantive discussions with the Working Groups implementing the various subcomponents as well as higher echelon officials. Annual work and procurement programs will also be required to be agreed with the Bank each year, and will include quarterly benchmarks for monitoring and evaluating progress in implementation. 31. Implementation of the proposed project, and the extent to which it is achieving its stated objectives, will be reviewed and evaluated annually and upon its completion. In addition, there will be three formal joint Bank-Government reviews. The first of these would be conducted early in 1996, about four months after Loan Effectiveness, to provide a basis for proceeding with preappraisal of the proposed follow-up investment operation for the Ministry of Finance components of the PFMP, and for making any early adjustments as may be necessary in project parameters. The second (in FY1997) would cover the formal assessment of the pilot implementation of the new Customs system, and the third (FY1998) the assessment of the pilot Government Financial Management Information System (GFMIS) for the Expenditure and Personnel Management Component. A proposed schedule of supervision and review missions is provided in Table 4.7 of the Main Report. During negotiations, the Government agreed to a joint-Bank review of project implementation in October/November of each year for assessing progress toward achievement of agreed policy, institutional, financial and physical targets and for determining and agreeing on needed budget resources (both local funds and Loan proceeds) to be requested for the next fiscal year. 32. The Bank's supervision efforts concerning the Customs component will be substantially enhanced by the fact that Customs has decided to engage the IMF to help it implement the technical components of its modernization plan. An agreement to engage the IMF's Fiscal Affairs Department (FAD) to provide this technical assistance is to be arranged through an exchange of letters between Customs, the Bank and the IMF, and financed under the loan. FAD will supervise the Customs Administration Adviser and Information Technology Adviser that will be appointed under the agreement as well as short term advisors appointed to provide specific - 96 - technical assistance. As a result of this arrangement, the PMU's quarterly reports will be supplemented by monthly reports from the Technical Advisers to FAD, copies of which will be provided to the Bank. There will also be regular inspection visits by FAD (approxinately every six months). The assessment of the pilot customs operation will also be assisted by FAD. III. IMPLEMENTATION ACVIT A. IMPLEMENTATION SCHEDULES 33. The three components of the PFMP are essentially independent of each other and would proceed according to separate Implementation Plans--see Annex la for Tax and Annex 2a for Expenditure and Personnel. There are no substantial requirements for coordinating the components at the implementation level. Any needed coordination among the organizations will be effected at the ministry level by the Undersecretaries of Customs and Finance, with the assistance of the Treasury. Annex 3d shows the major activities to be undertaken in this component, including the tasks related to each subcomponent. 34. The Customs Modernization Component will be implemented over a period of almost four years. The schedules in Annex 3d take into account the work that has been carried out during project preparation. In particular, new legislation and regulations are already under preparation, as is the pilot customs operation using SOFIX. Terms of reference for major consultancy and other technical assistance assignments to be financed under the loan have also already been prepared (see Annex 3b). B. PROCUREMENT ARRANGEMENTS AND SCHEDULES 35. Procurement arrangements and schedules have been prepared independently for each component. The executing agencies' capabilities and purchasing regulations and procedures were reviewed during Appraisal. It was determined that the Customs Undersecretary would benefit from the services of a professional procurement specialist familiar with the Bank's procurement guidelines. This support is to be provided under the PMSS contract. 36. All procurement of goods and material to be financed from the Bank loan proceeds would be carried out in accordance with the Bank's Guidelines: Procurement Under IBRD Loans and IDA Credits (January 1995) and procurement of services, including the selection of consultants for technical assistance and training, would be in accordance with the Guidelinesfor the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (August 1981). Project procurement would be limited to the purchase of goods, material and services, including training. The former consists mainly of the hardware and software for the IT subcomponents (including substations, personal computers and peripherals). 37. Contracts for goods and material with a value of more than US$300,000 equivalent per contract will be arranged in accordance with the Bank's procedures for international competitive bidding (ICB). In that event, goods manufactured in Turkey and procured through ICB may be granted a margin of preference of 15 percent in accordance paras. 2.54 and 2.55 of the Bank's Guidelines and paras. 1-6 in Appendix 2 of the Bank's Guidelines. Contracts below US$300,000 equivalent per contract will be procured under the Bank's procedures for international shopping. The Bank's Standard Bidding Documents will be used for all procurement under ICB. 38. Contracts for equipment and material estimated to cost US$300,000 equivalent or more and any direct procurement contracts would be subject to the Bank's prior review of procurement documentation and approval of contract award. This would result in the prior review of 99 - 98 - percent of Bank financed contracts. Other contracts would be subject to ex post review after contract award. 39. Procurement of sgvices, including the selection of consultants, would be based mainly on a shortlisting of firms. The exceptions are the advisory services contract with the IMF and proposed study tours, which are to be sole sourced. The services of individual specialists not to exceed US$50,000 per contract may also be contracted for diverse tasks of short duration (up to six months). The total value of services to be procured is estimated to be US$4.01 million. Prior review of consultant contracts would not apply to contracts estimated to cost less than US$100,000 equivalent per contract for firms and US$50,000 per contract for individuals. However, the terms of reference for all contracts will be pre-reviewed by the Bank. 40. Items will be grouped into packages to encourage competitive bidding and permit bulk procurement. Major procurement categories include: about US$49.8 million equivalent to be procured through ICB; US$230,000 equivalent through international shopping; US$2.2 million equivalent through shortlisting of consultant firms; and US$1.81 million through sole sourcing. 41. Customs will furnish the Bank quarterly procurement reports indicating: (a) changes in individual contracts' cost estimates, including best estimates for physical and price contingencies; (b) revised timing of procurement actions, including advertising, bidding, contract award and completion time of individual contracts; and (c) compliance with aggregate limits on specified methods of procurement. Further, the annual project operating plans would include any revisions in the agreed implementation schedule regarding employment of consultants. A summary of the procurement arrangements for the major categories of the component are shown in Table 3. Details of the procurement packages for the Customs Modernization Component, by category and showing the estimated costs, procurement method and relative timing of different procurement actions are shown in Table 4. 42. There are several procurement actions in the Customs Modernization Component that must be effected by Customs. The most important of these is the acquisition of the SOFIX software and related equipment and technical assistance for the pilot implementation. As noted earlier, the entire pilot package is to be procured through a bilateral arrangement between the Governments of Turkey and of France. This includes the equipment for the pilot. The Bank will review the hardware system design of the pilot both prior to installation of pilot equipment and upon completion of the pilot installation in order to ensure the strictest standards for competitive bidding on the downstream equipment procurement for nationwide replication. 43. A study has already been conducted to define the functional and information requirements of new systems that will meet EU customs administration requirements, the required overall systems architecture and technology architecture (including hardware, systems software, identification of already developed software application to be used, and data networking communications requirements). It is envisaged that, in order to complete the required automated information systems in a timely manner, and to obtain early benefits from the envisaged Customs' automated systems, the main IT elements would be procured, as much as feasible, in turnkey contract arrangements through international competitive bidding with the contractor responsible for delivering a working network of systems. - 99 - Table 3. Customs Modernization Component: Proposed Procurement Arrangements (US$ million equivalent) Item International Other ' N.B.F.' Total Competitive Cost Bidding 1.Civil Works 5.76 5.76 (0.00) (0.00) 2.Equipment/Goods 49.76 0.23 6.51 56.50 (40.14) (0.04) (0.00) (40.18) 3.Training 0.64 1.91 2.55 (0.64) (0.00) (0.64) 4.Technical Assistance/Advisory 1.67 1.67 Services (1.67) (1.67) 5.Project Management 1.00 1.00 Support Services (1.00) (1.00) 6. PPF 0.85 0.85 (0.85) (0.85) Total 49.76 4.39 14.18 68.33 (40.14) (4.20) (0.00) (44.34) a/ Other includes intemational shopping (US$0.23 million); shortlisting of firms (US$2.2 million); and sole sourcing (USS1.81 million). b/ Not Bank Financod Note: Numbers in parenthesiB are the respective amounts financed by the Bank loan. Differences due to rounding. - 100- Table 4: Procurement Im0lementation Plan (US$ million) TOTAL Prepare (Including Procurement Tender Bid Award Contract Contingencies) Method Documents Invitation Contrct Completion 1. Information Technology 49.76 ICB 11/96 2/97 5/97 6/99 a) Hardware and System Software b) Auxiliary Equipment c) Initial Consumable Products d) Hardware nd Software Maintenance e) Office Automation Equipment 2. Office Automation Equipment & Supplies for PCU 0.15 IS 9/95 10/95 11/95 3/96 3. Vehicls 0.08 IS 4/96 7196 9/96 12/97 TOTAL Prepare Letter (Including Procurement Terms of of Award Contract Contingencies) Method Reference Invitation Contract Completion B. T 1. Information Technology 0.16 SL 12/96 2/97 4/97 6/99 2. Translation of Training Material (Multi Media) 0.54 SL 12/96 2V97 4197 6199 3. Cutono Operations & Study Tours 0.14 SS TBD TBD TBD TBD C. Thnkal ace 1. In-Houwe Advisor 1.67 SS 8/95 8/95 9/95 5/99 a) Customs Administration Advisor b) I.T. Advisor c) Short Term Consultants D. Priwt MaRmeumi SuaiWort PMSS Contractor 1.50 SL 8/95 10/95 12/95 6/99 low 54.00 a/ Includes duties nd taxes esimated at US$9.66 million, which are to be financed by the Government ICB - lwnstional Competitive Bidding IS - hiernatioal Shopping SS o Sle Sourced TBD - To Be Determined - 101 - C. ISBURSMENT ARRANGEME Am ScREDuLs 44. The Loan would be disbursed separately for each component. Table 5 shows the disbursement forecast for the Customs Modernization Component by semester. Disbursements for this component are expected to be completed by December 31, 1999, approximately six months after the end of component execution. Loan Closing will be June 30, 2000, allowing ample time for the processing of final withdrawal applications. Table S. Estiuated Bank Disbursanents (US$million Equivalent) IBRD Fia Year FY96 FY97 FY98 FY99 FYOO I II I |I I I I | I I] Annual - 0.9 1.1 1.2 4.5 4.8 8.0 8.0 9.0 6.9 rumulative - 0.9 2.0 3.2 7.7 12.5 20.5 28.5 37.5 44.4 45. In order to facilitate disbursements, the Bank's share of project expenditures for the Customs Component would be disbursed through a Special Account which would be opened in the Central Bank, and managed by the PMU. The authorized allocation for the Special Account would be US$1.3 million, equivalent to an estimated four months of component expenditures under the Bank loan. However, initially this level of allocation would not be allowed until the project has disbursed an aggregate amount of US$8.7 million. Until such level of disbursements is reached, the Special Account deposit would be limnited to US$650,000. 46. To ensure that critical initial project activities are not delayed, provision has also been made for retroactive financing of up to US$6.2 million for all eligible project expenditures (for the whole PFMP) between September 29, 1994 and the expected date of loan signing. Disbursements are expected to commence immediately at Loan Effectiveness with the initial deposits into the Special Accounts along with the refinancing of the PPF advance. All disbursements would be fully documented, except for expenditures on contracts for equipment and material of less than US$300,000 and contracts for services of less than US$100,000/50,000 with firms/individual consultants. In these cases, disbursements will be made against statements of expenditures, whose documentation will be retained by the PMU until at least one year after dte Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account or payment out of the Special Account is made. - 102 - 47. The Government has agreed to the specific loan conditions for the Customs Modernization Component described below (see also Main Report, paras. 6.4 b. and 6.5 c.): Condition of Disbursement * The Customs Administration shall have entered into a technical assistance agreement with the IMF, including the customs administration adviser and the information technology adviser, both of whom shall be assigned permanently in the Customs administration. Dated Covenants * By December 31, 1996, the Customs Administration shall issue new and/or revised customs regulations. * By December 31, 1996, the Customs Administration shall have conducted a successful implementation of the pilot customs operation, with the success of implementation to be assessed on the basis of criteria agreed with the Bank, including: (i) simplification of procedures; (ii) reduction of release times from customs control; (iii) improvement in the accuracy of duty and tax calculations; and (iv) reduction in the rate of physical inspections. * By June 30, 1997, the Customs Administration shall furnish the Bank a satisfactory plan for the reorganization of the Customs Administration (headquarters, regional and local offices) prepared on the basis of the new regulations and automated systems. IV. BENEFITS AND RISKS A. BENEFITS 48. A modem Turkish Customs Administration will be based on up-to-date legislation, a new streamlined organization, and simplified, fully automated customs procedures developed in partnership with the trade community. The benefits to be expected from modernization include: * More efficient revenue collection * More effective customs controls * Better service to the trade commnunity * Uniform application of customs laws * Better use of personnel resources * Efficient production of trade statistics. B. MAIN PROJECT RISKS 49. The main project risk is that a final agreement between Turkey and the EU related to the customs union may be delayed, with a consequent loss of momentum for reform. Nevertheless, modernization of the Customs Administration, including computerization, is still necessary to support the trade community and to meet the Government's revenue effort. Consequently, even if agreement on the customs union is delayed, the project should proceed. Nevertheless, a protracted delay would mean that implementation of the EU common external tariff will not take place and development of the tariff module of the automated system will take longer than currently planned (i.e., the SOFIX tariff module will require significant modifications). The project development and implementation schedule will have to be revised substantially and it is likely that there would be extensive delays in implementation of the pilot site and the national system. C. O1WR FACTORS AFFEcTING PRoJEcT's SuccEss 50. Other factors affecting the success of the project include: * Coordination of the advice and assistance being provided to the project is extremely important in order to ensure that it supports the overall implementation plan. To ensure that all activities are coordinated, the SCAA, supervised by FAD, will provide advice directly to the Deputy Undersecretary responsible for the project on all matters related to the project. The SCAA will be responsible for coordinating the activities of the other consultant groups providing assistance in this component. * Resistance to the strategy to simplify significantly the regulatory and procedural regime--The simplification of the trade regime is key to reducing costs for importers and exporters to enable them to compete in an environment where tariff barriers are being eliminated with a significant number of Turkey's trade partners (i.e., the EU). For this reason, it is believed that the Customs Administration is committed to this aspect of the Project. Nevertheless, if there is a perception that - 104- control is being sacrificed or jobs are threatened by simplification, there may be resistance. One of the most important activities of the SCAA will be to ensure that simplification is pursued rigorously. * Lack of support from the Government for organizational change in the Customs Administration. including staff reductions, where warranted--The Customs Administration realizes that a modem administration must include a streamlined and rationalized organization. However, its efforts must be supported by the other government agencies responsible for civil service rules and regulations. * Technical risks associated with implementation of a large national computer network--Risks associated with implementation of a nation wide computerized system will be minimized through the 'turnkey" approach to hardware and software acquisition and implementation. The Customs Administration, with the assistance of the IT adviser and PMSS contractor, should be able to manage this contract successfully. V. MONITORING AND EVALUATION A. MONITORING AND EVALUATION 51. To assess progress and to determine whether or not the project is achieving the intended results, objective and measurable project evaluation criteria are needed. Furthermore, it is important that the criteria be agreed upon before development and implementation of the project and that certain information be gathered prior to any changes being made. This will ensure that valid comparisons can be made following implementation of the changes. The intended results of the project are to provide more efficient revenue collection; more effective customs controls; better service to the trade community; uniform application of customs laws; better use of personnel resource; and, efficient production of trade statistics. 52. The following specific criteria will be used to evaluate the functional success of the pilot customs operations: * Declaration processing procedures are simplified based on the principle of self declaration by the importer and exporter (or their agent). The number of forms and processing steps are reduced to a minimum and are similar in most respects to those in operation in the European Union. e Customs formalities are completed for 90 percent of shipments within 24-48 hours from arrival of the shipment * A physical inspection rate of no more than 20 percent for imports and 1-2 percent for exports for which there is no duty drawback * Appropriate and adequate information is made available to the trade community so as to enable it to comply with the required changes in a timely manner * 90 percent accuracy rate in tariff classification and valuation at time of declaration processing. B. INDICATORS 53. The intended results of the overall project component which will be used to determine its long term success are: * 90 percent of shipments are released within 24-48 hours from arrival of the shipment. * Reduce the physical inspection rate to no more than 20 percent for imports and 1- 2 percent for exports for which there is no duty drawback. * Trade community is well informed about the changes being introduced and is able to comply with the required changes in a timely manner. - 106- * Workload per officer is similar to customs administrations in the EU. * Staff is reduced to match workload. * Reduce the number of refunds to no more than 10 percent of declarations processed. * Achieve 95 percent accuracy in tariff classification and valuation at time of declaration processing. * Staff at the local offices are able to administer the legislation in a manner that is acceptable both to Turkey and to the EU. * Improve the ratio of re-assessments to declarations reviewed. * Increase the ratio of detections to physical inspection. * Increase the detection of serious infractions. * Complete and accurate information is data entered. * There will be no degradation in the accuracy or timeliness of the trade statistics. 54. Annex 3f provides details of the evaluation criteria, key indicators related to the current sitation, the method of measurement and the intended results. C. REPoRN ARRANGENSEr 55. Based on the methods of measurements described in Annex 3f, reports will be prepared for each site that has been implemented on a quarterly basis to determine actual performance against the intended results. A major review will be undertaken four to sixn months after implementation of the pilot site operation to determine if the criteria have been met. Some adjustment to the criteria may be required, at this time, prior to national implementation. Annex 3b Public Financial Management Project (PFMP) Customs Modernization Component Undersecretariat of Customs (Customs) Terms of Reference Annex 3b Customs Modenization Component Undersecretariat of Customs (Customs) Terms of Reference Table of Contents Consultancy 1: Introductory Information Technology Training ............ 111 Consultancy 2: In-House Advisory Services ...... 121 Consultancy 3: Project Management Support Services ....... 127 Republic of Turkey Prime Ministry Undersecretariat of Customs (Customs) Department of Data Processing and Communication (DPC) Public Financial Management Project (PFMP) Customs Modernization Component Terms of Reference CONSULTANCY 1: PROVISION OF CONSULTANCY SERVICES FOR INFORMATION TECHNOLOGY (IT) INSTRUCTOR(S)TO CONDUCT IN-HOUSE INTRODUCTORY TRAINING SESSIONS BACKGROUND 1. The Government of Turkey (GOT) has received a grant of approximately US$1.3 million from the Japanese Government to help finance preparatory activities for a modernization and reform program in the area of public financial management sector, including Customs, Tax Administration, and Public Expenditure and Personnel Management. 2. As part of the Customs modernization program, GOT intends to finance from the proceeds of the Japanese grant a four-week generic training session of Customs' existing ADP staff in the following four major subjects of modern computing: - Introduction to Relational Data Base Management System (RDBMS) e UNIX Operating System i Introduction to Client/Server Computing e Telecommunications and Wide Area Networking (WAN). 3. At present the Customs is carrying out a plan to replace its existing computer systems with modern computer systems nation-wide utilizing the Client/Server computing as well as LANs and WANs. In order to prepare the existing and new ADP staff to participate in this modernization program, Customs would like to proceed with the basic training program as soon as possible. There are currently 15 ADP staff programmed to attend the above generic training courses. 25 additional ADP staff will be recruited in July 1995. If time permits, some of the new ADP staff may also be assigned to attend the training sessions. The existing Customs' ADP staff are very familiar with the application systems development methodology under the third generation computer systems and programming tools as well as the use of office automation software products under DOS and Windows environment. They will need to upgrade their technical skills in order to be productive in the modem computer system environment. It is anticipated that all initial training sessions will be conducted in-house with all training facilities and related equipment to be provided by the Customs. - 112 - SUMMARY OF OVERALL REQUIREmENTS 4. This terms of reference outlines the required technical assistance to carry out the generic training sessions of the above subjects. It includes the scope of training, deliverables, timing and level of effort, and qualification of the IT instructor(s). The successful bidder's participation in this project will be limited to this activity. However, this assignment can be extended by mutual agreement between the contracting parties. Specifically, the successful bidder is prohibited from bidding on procurement of equipment and software products under this project. SCOPE OF TRA1NNG REQUIREMENTS 5. Based upon the above general background, the Customs seeks the service of IT instructor(s) with a broad experience in providing technical training classes and seminars in Turkey and elsewhere. The IT instructor(s) are expected to work closely with the Director of the Customs' Data Processing and Communication Department and conduct training sessions according to the schedules, priority order, and locations to be established by the Director. This assignment is estimated to required about four weeks duration. 6. For this particular training assignment, the required topics to be covered by the IT Instructor(s) for each of the four subjects are listed in the Attachment. At a minimum, the IT Instructor(s) must cover all topics listed. DELIVERABLES 7. The major deliverables of this contract is the presentation of detailed technical materials in the form of IT professional short courses or seminars as being provided in the computing industry. S. Specific deliverables of this engagement are: a. All required training subjects will be presented to trainees in sequential order as specified in the Attachment b. All required training materials will be given to each trainee for future references c. If training equipment and related software products are provided for some selected topics by Customs, then the IT Instructors must also provide workshops/hand-on exercises for the trainees. REPORTING AND COMMUNICATIONS 9. The Instructor(s) will work closely with the Director of ADP. At the completion of this training assignment, in consultation with the ADP Director, the Instructor(s) will evaluate each trainee's technical skills and make recommendations for further training to be provided to each trainee in various advanced subjects at a later stage. - 113 - TIMNG AND LEVEL OF EFFoRT 10. The first training subject is expected to start as soon as possible and no later than August 1, 1995. It is anticipated that four weeks of instructions, average one week per subject, would be required from the IT Instructor(s). QUAL;IFCATIONS 11. The IT Instructor(s) to be selected for this training assignments are expected to have the following minimum qualifications: a. Comprehensive technical knowledge and training experiences in the required subjects stated above with a minimum of 5 years training experiences as a professional IT instructor b. A sound technical knowledge of various type of application software systems development with emphasis on modern RDBMS-based client/server architecture suitable for use in a centralized Customs environment c. Demonstrated relevant experience in training of IT personnel operating and supporting information systems utilizing X.25 PSDN and other data communication facilities nationally and internationally d. All IT Instructors must offer fluency in Turkish language. ATTACHMENT (1) A LiST oF REouTRED Topics To BE CovEREPD By Suimmr= 1. Introduction to the Relational Data Base Management System (RDBMS). Ihis subject should be designed to provide the trainees with the knowledge to: * Work confidently in a Relational Data Base environment * Develop a data model to describe and application's data * Design a relational data base using data modeling and normalization * Use SQL to access data in a relational data base * Work with a relational data base in a Client/Server environment * Evaluate the strengths and weaknesses of RDBMS. Content: (i) Introduction * An overview of DBMS technology * Three-level information architecture (external, conceptual, and internal schemes) * DB server/user toolkit architecture (query languages, report writers, 4GLJapplication generators, data-modeling CASE tools (ii) How a relational DBMS works 3 Relational technology fundamentals 3 Components of a relational DBMS 3 Comparison with hierarchical and network data bases (iii) Designing relational data bases * A step-by-step approach and techniques 3 Entity-relationship modeling * Normalization techniques * Physical data design (iv) Accessing a relational data base * Using SQL to access the data base * Programming vs. interactive access (v) Data base directions * Data bases in a client/server architecture * Distributed data bases - 116 - * Evolution of SQL * Impact of object-oriented technology * Review of representative DBMSs (vi) Trends 2. UNIX Operating System. This subject should be designed to provide the trainees with the knowledge to: * Apply key services and utilities of UNIX operating system V * Employ the system V shell, the korn shell, the C shell, scripts, pipes and filters * Use the X Windows system, Motif, OpenLook and applications * Perform key maintenance functions (backup/restore) * Use UNIX mail and UNIX network commands * Browse and search online documentation. Content: (i) Introduction and overview * The UNIX operating system: understanding and using features * Present versions * Standards (ii) Commands, files and filters * Commands, arguments and options * Using UNIX files * UNIX filter programs * Reading online documentation (iii) The UNIX file system * Organization of data in UNIX files * Directory hierarchy (iv) The UNIX shells * System V (Bourne) shell * C shell * Korn shell (v) X Window system and application * X Window system concepts * Window managers and applications - 117 - (vi) Shell and filter programming * Advanced filters, regular expressions * Shell programming (vii) The programming environment * The C programming language * About the programmer's workbench (viii) Local and network communication * Mail, write, and talk (ix) UNIX system administration 3. Introduction to Client/Server Computing. This subject should be designed to provide the trainees with the knowledge to: - Eevaluate the benefits of a client/server approach vs. traditional data processing 3 Migrate legacy applications to client/server - Compare major client/server architectures 3 Adapt software design approaches to the client/server model 3 Apply the client/server model to the distributed computing environment (DCE) 3 Test and tune client/server applications 3 Identify the key client/server vendors and their products. Content: (i) Attribute of client/server systems - Defining client/server systems * Benefits (ii) Client/Server architecture * Distributed processing architecture * Client/Server technology (iii) Designing successful client/server applications * Segmenting and allocating functions * Design considerations - 118 - (iv) Client/Server connectivity * Client/Server communications * Client/Server protocols (v) Implementing client/server applications * Programming support * Testing strategies * Migration strategies * Performance and optimization (vi) Client/Server system management (vii) DCE and the client/server model * Distributed computing environment (DCE) * DCE services (viii) Vendors and visions 3 Traditional platforms 3 Client/Server software (ix) Emerging trends 4. Telecommunications and Wide Area Networking (WAN). This subject should be designed to provide the trainees with the knowledge to: * Relate fundamental voice and data concepts to real-world wide area networking * Make sense of current and future WAN/telecom technologies * Select analog and digital transmission options for cost, performance, and reliability * Use WAN services to interconnect LANs * Benefit from open standards such as ISDN, TAPI, TSAPI, X.25, TI/El, V.34, and V.42bis * Evaluate cost-saving approaches including frame relay, ATM and voice/video/data compression. Content: (i) Getting started * The drive towards WAN/telecom integration * Basic telephony * Basic data communications - 119 - (ii) How WANs work * WAN system components * Transmission basic * Switching approaches * Multiplexing (iii) Voice services * Assessing your needs * Telephony APIs for PCs * Carriers (iv) Network signaling and routing (v) Impairments and error control (vi) Circuit-oriented data services * Leased lines and private lines * International links X Dial-up standards * Switched digital services (vii) Optimizing bandwidth * Sharing services * Compression approaches (viii) Packet-switched data services * Profile of packet services - Frame relay * X.25 * Other packet services (ix) Summary * Building and managing networks * Application examples and product review Republic of Turkey Prime Ministry Undersecretariat of Customs (Customs) Public Financial Management Project (PFMP) Customs Modernization Component Terms of Reference CONSULTANCY 2: IMF TECHNICAL ASSISTANCE IN-HOUSE AND SHORT-TERM ADVISERS 1. In response to a request from the Turkish authorities for technical assistance in improving customs administration, the Fund would provide advice to the authorities to assist in the implementation of the plans put forward in the World Bank Staff Appraisal Report, Republic of 7hurkey: Public Financial Management Project, Annex III: Customs Modernization. The principle areas for which advice would be provided are: legislation and procedures; computer systems development and imnplementation; and human resource management and training. This advice is to be provided through the recruitment and supervision of a long term Senior Customs Administration Advisor (SCAA), a long term Information Technology Advisor (ITA), and other experts responsible for advising on specific technical and organizational topics. The technical assistance is to be delivered over an 18 month period, beginning in November 1995. BACKGROUND 2. The Turkish Customs Administration is reorganizing its operations with a view to modernizing its administration to become more efficient. The primary reason for the change is the entry of Turkey into a customs union with the European Union (EU) by the end of 1995. At the same time, the administration, is facing the same issues and problems of other customs administrations including: increases in the volume of trade; changes in the types of goods being imported and exported; application of complex regulations of other government departments; and, more sophisticated means of smuggling. 3. As a first step towards modernization, the administration was removed from the Ministry of Finance in July 1993 and created as a separate Ministry of State. Several other measures have also been undertaken, including the implementation of anti-dumping legislation, introduction of the GATT Valuation.Agreement, and the review of the current Customs Law to identify areas where it is necessary to introduce amendments to bring it in line with EU requirements. One of the most important requirements of the customs union is the requirement for the Customs Administration to apply the EU common external tariff to goods originating from outside the EU. In this regard, the administration will be required to apply not only the rates of duty in the tariff but also its commercial policy provisions (e.g., EU quotas). 4. The Customs Administration is now developing the changes in legislation, procedures, organization, and computerization that are necessary to support modernization. These changes will enable the administration to both comply with the EU legislative and procedural requirements and provide support to the Turkish trade community to compete in the customs union. This is - 122 - very important as the trade regime has already been liberalized significantly and importers and exporters are facing, already, increased competition. It will even more important after Turkey joins in the customs union, as importers and exporters will become more and more concerned with the costs of doing business. Through simplification and automation, Customs has the opportunity to reduce these costs while, at the same time, to increase the effectiveness of its control and revenue collection responsibilities. OBJECTIVES 5. The major outcome of the Customs Modernization Component will be an organization that is flexible and capable of responding quickly to the needs of the government. To achieve the desired results, the objectives of the project are to: * Implement modern, up-to-date customs legislation * Simplify and automate customs procedures * Introduce greater reliance on post release controls * Provide good service to the trade community * Delegate increased responsibilities to regional and local offices. 6. The advisors would assist the authorities to implement the plans put forward in the IBRD Staff Appraisal Report 'Republic of Turkey: Public Financial Management Project'. More specifically, the advisors would provide project management advice to the Undersecretariat of Customs and overall direction to the modernization project. The advisors would ensure that the components developed and implemented at the local offices, regions, and headquarters in Customs are compatible and that all technical assistance is coordinated (e.g., ensure that the plans for the implementation of the SOFIX system are integrated with the total plan for modernization). Specific responsibilities are as follows: * The SCAA would work directly with the Deputy Undersecretary responsible for the modernization project and provide advice related to the overall direction to the modernization project. This would include: directing the advice being provided by all IMF advisors; ensuring that a detailed project plan is in place to provide for the monitoring of progress on the project; identification of types and timing of other expert assignments; and developing and implementing project evaluation criteria. The advisor would also ensure that the components developed and implemented at the local offices, regions, and headquarters in Customs are compatible and that all technical assistance is coordinated (e.g., ensure that the plans for the implementation of the SOFIX system are integrated with the total plan for modernization). The SCAA would work closely with the IT expert(s) to ensure that the plans for development of the computerized system support the simplified procedures. The expert would assist the authorities to identify suitable training both in country and overseas. * The IT advisor would work directly with the Head of the Electronic Data Processing Department responsible for the computer systems development to support the modernization project and provide advice related to the overall IT strategy. This would include reviewing and assessing: the existing and proposed information systems; - 123 - implementation plans and schedules; IT organization; staffing and training; IT standards and procedures; and the preparation and completion of Bidding Documents. Particular attention would be paid to the development and operation of the automated system, using the SOFIX software, to support the pilot office operation. The Advisor would review the technical specifications for the hardware used for the pilot and ensure that the International Competitive Bidding requirements are met for procurement of the hardware for implementation of the system on a nationwide basis. * The other technical assistance, to be provided through short term expert assignments, would cover specific areas, such as: (a) Development and implementation of simplified regulations and procedures (b) Use of risk analysis and development of selection criteria for physical inspections and documentary review (c) Use of automation for valuation and tariff classification post release reviews (d) Improved enforcement with the introduction of mobile inspection teams and in-depth inspections (e) Rationalization of inspection procedures with other government departments (f) Development of a public information program for the trade community (g) Development of a detailed IT migration plan (h) Preparation and completion of Bidding Documents for all ICB procurement packages. (i) Development of the office automation systems for regional and headquarters users 0) Training of managers to operate in an automated environment (k) Development of staffing plans related to the new procedures (l) Development of training plans (m) Development of a new organization structure (n) Identification of approaches to rationalize staff requirements STRATEGY AND PLAN OF ACTION FOR MODERNATION OF THE CusTOMS ADmriITRoN 7. The strategy for modernizing the customs administration includes: legislation and procedures, computer systems development and implementation, and human resource - 124 - management and training. The SCAA will ensure that a plan of action is in place for each one of the major project components. 1. Legislation and Procedures 8. The laws and procedures will be based on international rules, conventions, and codings and will be compatible with EU requirements. As part of the process of developing the plan for modernization, a review of the import and export procedures has been completed and an outline of the new procedures was developed. It will be used by the SCAA as a basis for developing new detailed procedures for the following: * Import processing - Transit and cargo reporting - Declaration processing - Physical inspection - Payment of duty and release of goods - Post release checks * Export processing 2.. Computer Systems Development and Implementation 9. Headquarters, 18 regions, and 45 customs offices will be automated over a three and a half year period. The 45 customs offices account for 90 percent of workload and 90 percent of revenue (non-automated offices will forward documents to automated offices for processing). The following subsystems will provide automated processing at the customs offices: * Import declaration processing - Export declaration processing - Revenue accounting * Manifest * Transit * Warehousing * Management information * External interfaces 10. The SCAA and ITA will work closely together to ensure that the plans for development of the computerized system support the simplified procedures. Of particular importance will be the review of the SOFIX pilot operation and the changes that are required in the software to support the procedures being developed for Turkish customs. 3. Human Resource Management and Training 11. The SCAA will provide advice related to the key human resource management issues to be addressed as Customs undertakes the modernization and, in particular, the following: - 125- * Organization structure * Number of staff required at headquarters, regions, and local offices * New skills * Training FIELD VISITS 12. The advisers may, when necessary, visit customs offices outside Ankara. The consultants will notify the Fund in advance each time they plan to be out of the capital for 48 hours or longer. COORDINATION 13. The advisers will work in close cooperation with the Deputy Undersecretary of Customs and other senior officials in the Customs Undersecretariat, as well as with other governmental units whose work relates to the assignment. The advisers will also cooperate with Fund and World Bank missions at their request, and maintain contact with the other agencies involved in technical assistance. CoNsULTATIoN AND CORRESPONDENCE WITH FUND HEADQUARTERS 14. The advisers will submit a work plan at the end of the second month of the assignment, and report monthly thereafter to the Tax Administration Division. Copies of these reports will be sent by the Tax Administration Division to the World Bank, and formal reviews and assessments of the progress achieved will be made on an annual basis. Republic of Turkey Prime Ministry Undersecretariat of Customs (Customs) Public Financial Management Project (PFMP) Customs Modernization Component Terms of Reference CONSULTANCY 3: PROVISION OF CONSULTANCY FOR PROJECT MANAGEMENT SUPPORT SERVICES INTRODUCTION 1. The Government of Turkey (GOT) is embarking upon a program that will modernize substantially its Customs administration system. This process is fairly advanced, and a number of seminal studies, conducted under the auspices of a grant from the Government of Japan, have made extensive recommendations for modernization and reform (see Annex le). Implementation is to be funded by the GOT as one part of an omnibus project--the Public Financial Management Project (PFMP). The PFMP consists of the following major components: L. Customs Administration 1I. Tax Administration Ill. Expenditure and Personnel Management. BACKGROUND 2. The customs administration in Turkey is in the process of reorganizing its operations with a view to modernizing procedures and becoming more efficient. The primary reason for the change is the entry of Turkey into a customs union with the European Union (EU) by the end of 1995. As a first step, the administration was removed from the Ministry of Finance in July, 1993 and created as a separate Ministry of State. Customs is now developing the changes in legislation, procedures, organization and computerization that are necessary to support a modern administration that will be able not only to administer the EU common external tariff but also provide support to Turkish importers and exporters as they compete in the customs union. In addition to the requirements for change related to the entry into the customs union, Customs in Turkey is facing the same issues and problems of other customs administrations including: increases in the volume of trade; changes in the types of goods being imported and exported; application of other government department regulations; and, more sophisticated means of smuggling. 3. In preparation for entry into the customs union, several measures have already been undertaken including the implementation of anti-dumping legislation; introduction of the GATT Valuation Code; and the review of the current Customs Law to identify areas where it is necessary to introduce amendments to bring it in line with EU requirements. One of the most important requirements of the customs union is the administration of the EU common external integrated tariff and, in this regard, Customs will be required not only to apply the rates of duty - 128 - in the tariff but also its commercial policy provisions (e.g., EU quotas). To address this need, Customs received technical assistance from the EU to identify the legislative and procedural changes required by Customs to implement the customs union requirements. (The program began in September 1993 and included experts visiting Turkey to assess the needs and Customs sending officers to the Community members to review customs procedures). PRoECT OBJECTTVES AND DEscRIPToN 4. The objective of the component is to assist in introducing a modern customs system based on up-to-date legislation, a new streamlined organization and full automation of customs procedures in partnership with the trade community. To achieve the desired results, subsidiary objectives of the project are, as follows: * Technology supported customs procedures * Greater reliance on post release controls * Service orientation and good relations with the trade community * Delegation of authority and responsibility to regional and local levels. The benefits to be expected from modernization include: - More efficient revenue collection * More effective customs controls - Better service to the trade community * Uniform application of customs laws * Better use of personnel resource * Efficient production of trade statistics. 5. While modernization requires automation, it is not enough to introduce the most sophisticated technology as this alone will not guarantee successful modernization. All of the components of the modernization program must be in place, including the legislation and needed operational procedures; organizational structure and management systems; and human and financial resources. Substantial technical assistance will be need to ensure that the necessary coordinated action plan is carried out. 6. The main customs procedures to be automated are cargo inventory control; import and export declaration processing; customs enforcement; revenue accounting; and, external trade statistics. The key components of the future modernized system are: * Improvement of legislation and procedures * Computer system development and implementation * Human resource management and training * Project management support. 7. The total cost of the Customs component is about US$72.9 million, of which US$47.5 million is to be financed by the World Bank. A fuller description of the Customs component is given in Annex 3a of the Staff Appraisal Report. - 129 - 8. The project will be implemented by the relevant departments of the Undersecretariat of Customs, under the overall management and coordination of a Project Management Unit (PMU). Project implementation will be phased over three and a half years, including initial technical design, implementation of a pilot project, and then extension nationwide. The PMU will need to be staffed with personnel with skills in project management and planning, accounting, procurement, contract monitoring, information processing, and other relevant fields. External assistance will be provided as required. These terms of reference describe an assignment to provide professional project management support services to the Customs PMU. PROJECT MANAGEMENT SUPPORT SERVICES 9. The Undersecretariat of Customs has decided to procure support project management services during the implementation of defined activities of this component under the following categories: * National and international consultants * Subcontracts * Local training activities * Overseas study tours * Operational support services AcTIvIiEs AND EXPECTED OUTPUTS 10. The responsibilities of the contractor in relation to the five categories of activity under the Project Management Support Services (PMSS) are described below. 11. National and international Consultants. This category covers the recruitment and remuneration of national and international consultants and project support staff. Specifically, the PMSS contractor will be responsible for undertaking the following activities, all in consultation with the Head of the PMU. a. Negotiating and determining contractual arrangements and signing contractual documents with international and national consultants approved by the General Director. The terms of reference for each consultant will be prepared by the PMU and approved by the World Bank b. Undertaking all kinds of administrative tasks such as regular payment to the consultants, insurance and relevant taxes c. Undertaking all kinds of administrative tasks for the staff of the PMU, both GDR officials and consultants, such as travel arrangements, payments and per diems; in relation to project related field trips and attendance to national and international meetings, seminars, etc. d. Keeping financial and accounting records and regular reporting to the Head of the PMU and Director General. - 130 - 12. Sntracts. This category covers the contract management of planned studies and researches to support the changed procedures, new technology acquisition and implementation, and institutional development of the Customs' modernization program; supervision of training programs, including management training; development and production of public information materials and other project services as may be required. Specifically, the contractor will be responsible for undertaking the following activities, all in consultation with the Head of the PMU. a. Issue of Requests for Proposals (RFPs) to the selected firms according to the Terms of Reference (TORs) and the shortlist of firms proposed by Customs and approved by the World Bank b. Undertaking necessary activities related to the evaluation of bid proposals, amendments in TORs as requested by Customs upon the approval of the World Bank; and negotiating and contracting with the successful bidder upon the final approval of the Deputy-Undersecretary of Customs c. Undertaking all kinds of administrative tasks such as payments to the subcontractor(s) based on the payment plan agreed in their contract and upon the final confirmation of the Deputy Undersecretary of Customs d. Keeping financial and accounting records and reporting to the PMU regularly. 13. Training Programs. This category covers the management support services for the implementation of all training programs to be organized for Customs personnel under this component. Specifically, the contractor will be responsible for undertaking the following activities, all in consultation with the Head of the PMU. a. Undertaking all kinds of administrative tasks such as advance payments, reconciliation of advance payments and final payments to the regional and local staff and also to the PMU, as the case may be, based on the global training program to be prepared by Customs and approved by the World bank b. Keeping financial and accounting records and reporting to the Head of the PMU regularly. 14. Study Tours. This category covers the management support services to the implementation of overseas study tours, which will be provided for management and technical personnel. a. Undertaking all kinds of administrative tasks such as travel arrangements and payments for each of the fellow and the host institution(s) selected by Customs and approved by the World Bank b. Keeping financial and accounting records and reporting to the Head of the PMU regularly. - 131 - 15. Operational Support Services. This activity covers the procurement of translation services, office equipment, furniture, and supplies for the PMU to facilitate project activities. a. Undertaking procurement procedures for translation services, office equipment, furniture and supplies according to the technical specifications and itemized list of requirements prepared by the PMU and approved by the World Bank, and contracting with the successful bidder upon the final approval of the Head of the PMU b. Undertaking necessary activities related to the evaluation of bid proposals, amendments in technical specifications as requested by the Head of the PMU upon the approval of the World bank, and negotiating and contracting with the successful bidder upon the final approval of the Head of the PMU c. Undertaking all kinds of administrative tasks such as payments to the subcontractor(s) based on the payment plan agreed in their contracts and upon the confirmation of the Head of the PMU d. Keeping financial and accounting records and reporting to the PMU regularly. INPUTS FROM UNDERSCRETARIAT OF CUSTOMS 16. The Project Management Unit (PMU) of the Undersecretariat of Customs as the implementation agency is charged with the responsibility to carry out necessary administrative and support activities including the preparation of Terms of Reference, short lists, obtaining no- objections from the World Bank, and any other official clearances as required, approval of contracts, technical review of consultant's performance, and outputs as per the relevant rules and regulations established by the World Bank. 17. Customs will provide adequate funds in a timely manner from the proceeds of the IBRD loan and its own budget to meet component costs, including the PMSS contractor's administration fee. CONTRAcToR's ADMINsIRATIoN FEE 18. The contractor shall indicate, in its proposal, the fee for services such as accounting, payroll, financial reporting, computer time, secretarial and other assistance to be provided. The 'administration fee' must be justified by the staffing plan. Any increase or decrease in the amount of administrative costs resulting from increases or decreases in the amount of the services to be provided will be mutually agreed by Customs and the contractor. REviSIONS 19. The following types of revisions may be made to these TOR upon the mutual agreement of both Customs and the contractor: - 132 - a. Revisions which do not involve significant changes in the immediate objectives, outputs or activities of a project, but are caused by the rearrangement of inputs already agreed to or by cost increases due to inflation b. Mandatory annual revisions which alter the delivery of agreed project inputs or increased expert or other costs due to inflation. 20. In the event of any other changes in the Loan Agreement that cause a significant change in the type and amount of services to be provided by the contractor, the administrative fee may be rearranged upon the mutual agreement of Customs and the PMSS Contractor. REPORTING, REVIEW, AND EVALUATION 21. The consultants will report to the Head of the PMU. The lead consultant would serve as an ex officio member of the PMU. The assignment will also require close liaison with the Senior Customs Administration Advisor. The consultants will be required to assist the PMU to prepare period reports covering procurement, disbursement and audit issues to be submitted to the World Bank. The PMSS arrangement would be subject to annual review. Extension of the initial contract (for one year at a time) would be subject to a satisfactory review. TIMNG AND LEVEL OF EFFORT 22. This consultancy will be conducted in the capital city of Ankara, in the Republic of Turkey. A team of two-three professional project management specialists, equipped with the knowledge and skills-to ensure the timely provision of support services for the successful implementation of project activities, is required to assist Customs throughout the period of component execution. Short term consultants would be added on an as needed basis, e.g., translation services. 23. The assignment is expected to start by September 1, 1995 and will last until April 30, 1999, through a series of annual contracts. QUALIFICATIONS 24. Bidders will be required to submit qualification profiles for the consultant who will carry out the assignment. The profile will form an important part of the bid evaluation. The consultants must be fluent in both the English and Turkish languages. Prior experience with World Bank projects is an advantage. The selected consultants would be able to demonstrate superior professional and technical capacity, as well as experience in: a. Managing and coordinating complex projects of similar magnitude, preferably in the financial complex of large organizations b. Undertaking large volumes of financial transactions with several different entities within a limited time period. - 133 - SPECIAL CONSIDERATIONS 25. The Project Management Unit of the Undersecretariat of Customs (PMU) has overall responsibility for the management and coordination of the customs component of the PFMP. However, all of the activities covered under the component and described in this document will be implemented in accordance with the rules and regulations of the World Bank and within the terms and conditions set forth in the Loan Agreement. In case of conflict between rules and regulations of the contractor and the World Bank, the latter shall prevail. 26. Since the project aims to improve the quality of customs administration including services provided to the public and to other Government agencies, contractors are expected to give special consideration to the development of an institutional capacity in project management and implementation, at the central, regional and local office levels of the Undersecretariat of Customs. Timely provision of services and flow of resources by the contractor will be very critical for the successful implementation of the Project, since training on changed procedures, improved facilities and technology, will be implemented in a large number of locations through the life of the project (headquarters, 18 regional offices and 45 customs offices to be automated.) Annex 3c PUBLIC FINANCIAL MANAGEMENT PROJECT Customs Modernization Component Undersecretariat of Customs (Customs) Detailed Costs Table Turkey Public Flncil Managem nt Project Cuftm. Modemnzaton Cmnpont - Detailed Cotad (USS'OOO) O(XWM TOTAL BD Cod De TobI (Iuadudg Ult Rb_dw 199f 19W 1997 199S 199 TOW * Tam C _geodu Ca _dnmdm) A. CMl Wwb 1. Sim Bm,m 9s L471 50311 602 Q Q s) H.dqii1. haws= GOT 189 337 65 0 0 591 0 31 621 b) Rq*muuOffi huVmm OOT 125 223 43 0 0 390 0 20 411 c) LolOffim hmsp ,OOT 476 U 47 163 0 0 1,4g7 0 77 1564 d) C40W hmp mm OOT 961 1.712 330 0 0 3003 8 156 1159 SuMawl 1,751 3,118 602 0 0 5.471 0 2g5 5,755 L Iu Teeoskg 3qpm._ . fin. omQ g 7 13472 Li Q 1sS 1.113467 a)DwaopmmtSyd- I MlRD 0 37 149 186 0 372 79 34 406 b)C _ummkaoS Sw I 3RD 0 74 298 372 0 744 157 67 8II C)B aqf Syi I MRD 0 37 149 186 0 372 79 34 406 d LAN 4 IRD 0 4 17 21 0 42 9 4 46 e) PaUmmIC qWs 150 mRD 0 56 223 279 0 558 S 50 60S f) Ta 300 3RD 0 37 149 16 0 372 79 34 406 g) I_Prhim 50 11RD 0 12 50 62 0 124 26 11 135 1) k Pixpribm 100 MRD 0 12 50 62 0 124 26 11 135 ) LinePthauu 2 IBRD 0 4 16 20 0 40 8 4 43 j) Cammuic 25 - k ,X255 w 4Mo ) h u IBRD 0 62 24S 310 0 620 131 56 676 Q 2.07 IOS28 I123u Q 27 071 , 2.45 s) Syp_o Type A 7 3RD 0 434 1.736 2,170 0 4.340 916 392 4,732 b) Syiim Typ B 15 3RD 0 651 2604 3,255 0 6.510 1,374 588 7.091 C) SN T> C 34 3RD 0 1.054 4,216 5.270 0 10,541 2.220 952 11.492 4 Sy Typ D 600 3RD 0 m 293 1.116 0 2.232 471 202 2,434 G)).tPri.iuu 700 IBRD 0 87 347 434 0 i68 133 78 946 )L1_Pkim 100 IBRD 0 25 99 124 0 248 52 22 270 d) Lin Pim. 5 IBRD 0 10 40 50 0 99 21 9 IOt h)Tetnih 1.00 3RD 0 223 t93 1,116 0 2.232 471 202 2434 3. 0p_Spt : M131 2 0 I615 Q 2 m 119 a)Cs.(25616 U-) 1 BRD 0 4 16 20 0 40 a 4 43 b)LI-rRmgmu(128t.U) a 3RD 0 23 91 114 0 228 48 21 249 c) Mt&CaS.ARa(64tha) 14 3RD 0 33 132 165 0 330 70 30 360 dS=IIWR^ia(32 U-) 20 IRD 0 37 149 16 0 372 79 34 406 e)S _IIRc1kw(I6U-) 16 BRD 0 26 103 129 0 25t 54 23 281 O)CAwDOS?IOVLL alidmmD 2 3RD 0 1 4 5 0 10 2 1 11 S)Cui UNIX 2 3RD 0 1 4 6 0 11 2 1 12 h)Co- &Ro--Sp-S tAd 10 BRD 0 1 3 3 0 7 1 1 7 i)Cua&Rjio - W ordPt 20 BRD 0 1 4 5 0 10 2 1 11 j)Cer& Re-DiaCommt 10 3RD 0 1 5 6 0 12 3 1 14 k) C w - C Cc r I MRD 0 0 0 1 0 1 0 0 I 1)Ca - OCBOI C _Ci I IRD 0 0 0 I 0 1 0 0 1 u)C-X h Whmou I mm 0 0 1 1 0 2 1 0 3 n CaasW-dawWukCfr i(p 30 3RD 0 2 7 9 0 19 4 2 20 o) OdwA fflmSdwuPi 1mp BRD 0 1 5 6 0 12 3 1 14 P1 W. OftWm TOTAL B_ Cod Do" Tow aI._*g Ul. Ea1 199 1997 1996 199 TaI A Tar Csubpudsa C_d.ma) 4 B Sa uinu Q ZL 2J. LA 9 A Q 5L.2 5 a)Pff&a:ii(I61hUa) 15 IRD 0 44 176 219 0 439 93 40 473 b) Pto&mA(32 U-) 20 3RD 0 109 435 543 0 1.0t7 229 93 1,1t5 C)PM&Knim(64 Ut ) 14 BRD 0 143 573 716 0 1.432 302 129 1,561 d)Prod.imQ2ltU ) 3 am 0 164 654 333 0 1,636 345 148 1.784 s)Pftxbcnm(S12Ut=) I 13RD 0 62 24 310 0 620 131 56 676 f a.a3q (32Lhm) I BRD 0 13 S2 65 0 130 2 112 142 g)P mduiia~sLAN-16 Ua) 3 BRD 0 7 27 34 0 6t 14 6 75 bh)D-kp.W(PCSLAN- 16 U ) I mm 0 5 1I 23 0 46 10 4 50 134 914 9 Q Q LS27 376 L
Groupe de la Banque mondiale · Staff Appraisal Report
Turkey - Public Financial Management Project (Vol. 3 of 3) : Annex 2: Expenditure and personnel; Annex 3: Customs modernization
Voir le document original
Le texte intégral est hébergé par l’organisation qui le publie. lawenc.com indexe les métadonnées et renvoie vers la source officielle.
Texte intégral
Informations clés
Organisation
Groupe de la Banque mondiale
Type de document
Staff Appraisal Report
Pays
Turquie
Source
Banque mondiale