TOR for Development of Medium-term Expenditure Framework (MTEF) Guidelines for Local Governments

USAID Public Financial Management (PFM) 

Terms of Reference for Short-Term Technical Consultant

1. Background

Deloitte Consulting and WSP, together with Georgia State University and the Niti Foundation are implementing a five-year USAID funded Public Financial Management Program (USAID PFM) whose purpose is to provide technical assistance and strengthen Public Financial Management (PFM) functions, performance, and accountability of targeted agencies at the federal, provincial, and local levels of government, and to provide targeted assistance to the Government of Nepal (GON) aimed at strengthening national PFM institutions and systems to sustainably advance PFM.

The project commenced in October 2022 and will run for a five-year period to October 2027. The major stakeholders of the project are selected Federal Agencies including Ministry of Finance (MOF), Ministry of Federal Affairs and General Administration (MOFAGA), Financial Comptroller General’s Office (FCGO), PEFA Secretariat, National Natural Resources and Fiscal Commission (NNRFC), National Planning Commission (NPC), Office of the Prime Minister and Council of Minsters (OPMCM), Public Procurement Monitoring Office (PPMO), Provincial Governments of Madhesh and Lumbini Province, and Local Governments located in these two provinces.

The objectives of the Project are to provide technical assistance and strengthen PFM functions, performance, and transparency and accountability of targeted agencies at the federal, provincial, and local levels of government, and to provide targeted assistance to the GON aimed at strengthening national PFM institutions and systems to sustainably advance PFM. The Project’s two objectives and key activities are:

In general, the expected outcomes of the Project are to enhance transparency and accountability by accomplishing: 

• Selected PFM related laws or policies or regulations or standards or norms or guidelines or tools or manuals developed.
• Selected local governments have increased their own resource revenue.
• Elected and Government officials trained on public financial management system.
• Selected PFM institutions, governments and agencies adopted improved public financial management system.
• Selected local governments have improved gender-responsive budgeting. 
• Coordination mechanisms for coordination are established.
• Standardized training modules in the PFM disciplines are developed. 

2. Title/Purpose

The purpose of this assignment is to engage a short-term consultant to work with the concerned Government of Nepal (GON) Counterparts and the USAID PFM to develop a Medium-term Expenditure Framework (MTEF) Guidelines for the formulation and institutionalization of MTEF into LGs fiscal management process with an aim of establishing robust and sequential linkages between policies, long-term and periodic plans and annual budget. The guidelines will take into consideration the MTEF Management Information System (MIS) of the National Planning Commission. 

(Please note that the ToR are subject to change in line with the Government Counterpart’s requirements which will be informed to the applicants prior to selection)

3. Rationale

In general, “Annual Budget” consists of “Annual Expenditures” from a mix of “Revenue and Borrowing”. It also determines where those expenditures will be spent, by whom, and for what over the course of the year. Annual budget is still the most concrete vehicle for fiscal policy because it: (i) is legally binding, (ii) provides key moment of fiscal debate, and (iii) provides details of collection and allocation of resources. It has been greatly recognized for the decades that annual timeframe is not enough because:

• Short-term decisions may be unsustainable because they don’t consider multi-years’ commitments/resource requirements and fiscal circumstances,
• Policies to be completed in multiple years need future fiscal considerations, and
• Lastly, annual timeframe doesn’t provide a multi-year vision of budget allocation.

In order to cater the two objectives of fiscal policy: (i) Fiscal Responsibility & Flexibility, and (ii) Expenditure Efficiency and Inclusive Growth while considering the above-mentioned issues, any government should consider “Beyond the Annual Timeframe of Budgeting”. In view of this, it has been recommended that governments should broaden their horizon from annual timeframe into the medium-term perspective while making fiscal decisions and budget allocation choices. In the recent days, medium term perspectives have been widely used by the governments as it considers future consequences of new and current policies, prepares for impact of unexpected events, and enables more strategic allocation of resources and efficient planning process over time. In order to materialize medium term perspective, one of the key instruments is "Medium Term Expenditure Framework - MTEF". Considering these technical and legal rationales behind the medium-term perspectives, a couple of legal provisions has also been articulated in Nepalese context.  

Nepal transformed from a unitary system to federal system of governance with three tiers of governments namely federal at central, provincial at 7 provinces and local levels of 753 municipalities six years ago. There are altogether 761 governments in the country having 761 separate fiscal and treasury systems. Each level of government has to formulate periodic and annual plans, programs, and budgets for carrying out its functions relating to socio-economic and physical development, and service delivery. As mentioned in Clause 230 of Constitution of Nepal, 2072, LGs should lay an estimate of revenues and expenditures of every fiscal year. Similarly, Clause 21 of Inter-government Fiscal Arrangement Act, 2074 also articulates that LGs should submit annual estimation of revenues and expenditures to their assembly. This Act through Clause 17 imposes that LGs should prepare MTEF with three-year expenditure projections. In the same way, Clause 71 of Local Government Operational Act, 2074 states that LGs should submit annual estimation of revenues and expenditures (budget) for the coming fiscal year to the assembly. In this regard, in order to improve the budgeting process of LGs by formulating and institutionalizing MTEF these need methodological and procedural MTEF guidelines. Though, a MTEF guideline has already been developed for LGs by MoFAGA, it has been reported that the guidelines need to be upgraded and enhanced for including many other key elements and provisions of MTEF as per LGs officials and other practitioners’ realizations. Hence, there is a need to develop a methodological and complete MTEF guideline for LGs based on the existing legal frameworks, and best practices considering the already developed MTEF related documents in close coordination with NPC and MoFAGA. 

4. Methodology

The methodology to be undertaken for this assignment shall be as follows:

• Consultation meetings with concerned officials of the NPC, MOFAGA, FCGO, provincial Ministries of Finance, provincial Planning Commissions, selected District Treasury Comptroller Offices (DTCOs), selected LGs, Inter-Local Government PFM Coordination Committees (ILGPFMCCs) and others.
• Collection of relevant data, information, and views from concerned agencies through primary sources such as questionnaires, interviews, and secondary sources i.e., published documents through appropriate sources. The consultant should prepare the minutes of meeting / interview and include the photographs of consultation meetings.
• Triangulation of the collected data, information, views, feedback with the consultation meetings and published materials collected from the concerned sources as well as validation workshops with concerned officials or representatives of federal, provincial and local governments, professional institutions, and development partners.

5. Tasks

This work assignment is to develop Medium-term Expenditure Framework (MTEF) Guidelines. The Consultant shall carry out the following tasks to achieve the objective:

• Review and understand the financial and executive rights and duties of the LGs in order to carry out functions related to socio-economic and infrastructure development and service delivery. 
• Review the Constitution of Nepal, federal and local Financial Procedure and Fiscal Responsibility Laws, Local Government Operation Act, Intergovernmental Arrangement Act, MTEF documents/directives of NPC, publications of MoFAGA and other public and international agencies related to MTEF. 
• Conduct a review of the current situation of MTFF processes and practices of federal, provincial, and local governments.
• Consider international good practices of MTEF, especially in the sub-national governments.
• Develop and recommend a methodology/approach/procedure to formulate MTEF at sector and entire local-levels and a set of templates for producing MTEF at sectoral and local-levels including required key technical statements/reports/information with preparation guidance.
• Develop guidelines for preparing fiscal framework, budgetary framework, and result framework of sub-national governments. 
• Conduct consultative meetings and discussions with the officials of concerned government entities, Inter-Local Government PFM Coordination Committees, USAID PFM, and professional entities.
• Prepare and submit the draft MTEF guidelines for comments and suggestions from the concerned Government Counterpart and USAID PFM.
• Manage and conduct workshops in order to validate, qualify, and finalize the developed Guidelines; and
• Develop and submit the concluding MTEF Guidelines in the form of a Final Report incorporating the comments/feedback from the concerned Government Counterparts and USAID PFM Project and/or as stated in the deliverables.

6. Deliverables

The Consultant shall submit the following reports and deliverables:

• An Inception Report with detailed work plan and methodology in English language within 7 days of signing the agreement.
• The First Draft Report in Nepali within 30 days after signing of the agreement.
• Conduct Validation workshops / meetings within 10 days of the submission of the First Draft Report, utilizing presentations and/or other methods to facilitate discussion. Nepali materials shall be used to facilitate clear discussions.
• Submit the Final Report in Nepali within 60 days of the signing of the agreement incorporating the comments / suggestions received from the workshops/meetings.
• Summary Consultant's Work Completion Report describing actions taken to fulfill the above deliverables and provide observations/recommendations for any additional next steps in the process of rolling out of the Guidelines/manuals in English.

All deliverables shall be submitted in editable Microsoft documents, in electronic format. The final report shall also be provided in at least two hard copies and PDF format.

7. Period of Performance: 

The duration of this assignment will be around 75 days.  The total Level of Effort for this assignment will be a maximum of 50 person days. The expected start date is the fourth week of July 2023.

8. Technical Directions/Supervision:

• The Consultant will work under the direction and supervision of the Objective 1 Lead (Lead PFM Expert).
• The Project COP and DCOP will also monitor the Consultant’s work as and when required.
• The Consultant shall carry out her/his tasks in close collaboration and coordination with the concerned Government Counterparts and the Project team.

All deliverables required hereunder will be reviewed and approved by the COP/DCOP and Objective 1 Lead (Lead PFM Expert)

9. Required Qualifications and Experience of the Consultant:

The Consultant should at a minimum have the following qualifications:

• Master’s degree in Economics or Public Finance or Planning or Business Administration or Management.
• A minimum of 10 years’ professional experience in planning, budgeting, MTEF preferably in government sector.
• Specific experience about the preparation of directives/manuals/guidelines/regulations, conduction of study or research reports in the Planning or MTEF and related field will be an added advantage. 
• Good communication skills (oral and written) in Nepali and English languages.
• Good report writing skills.
• Proficiency in Microsoft Office software (Word, Excel, PowerPoint, etc.); and
• Ability to work in a multi-cultural environment and exhibit good inter-personal skills.

10. Facilities/Utilities and Logistics to be provided:

The Consultant shall be expected to spend time at the selected government entities, Project Office and from home.  As deemed necessary, the Project will provide working space, internet connection, printing and photocopy facilities as required to complete the assignment. The consultant must provide her/his own computer, including Microsoft Office software to produce compatible documents for review.

All the required field visits, consultative meetings and workshops shall be arranged in coordination with the concerned Government, whereas logistics and allowances shall be managed by the Project.

11. Contractual Amount and Payment Terms:

This will be a fixed price assignment awarded in Nepali Rupees. Payments shall be made in Nepali Rupees in the following manner.

• 20 percent payment upon submission and acceptance of the inception report, including a detailed work plan for the assignment; (Deliverable 1)
• 40 percent payment upon submission of first draft Guidelines which is ready to be presented at validation workshop; (Deliverable 2) and
• 40 percent payment after completion of the validation workshop, submission and acceptance of final report (MTEF Guidelines for Local Governments), and the Consultants’ Work Completion Report; (Deliverables 3, 4 and 5).

Travel costs, including the number of trips and length of trips should be estimated. Travel will be arranged and approved in advance by the Project, and actual costs will be reimbursed based on the Project’s standard practices and rates for hotel, per diem, and other billable costs (e.g., meeting costs), in accordance with US Government policy. 

Workshop costs shall be borne directly by the Project. Necessary arrangements for workshop costs (To Be Decided/Determined) if necessary, will be arranged by the project.

12. Application Instructions:

Only individual consultants will be considered for this opportunity. 

Interested and qualified individuals should email the following documents to recruitment@pfm-nepal.com with subject line “TOR-OBJ1-2023-11 Development of Standard Financial Procedural and Fiscal Responsibility Regulations for the Local Governments.”

1. Cover letter
2. Recent CV 
3. Dates of availability 
4. Contact information of three professional reference, and
5. Sample report of previous two assignments 
6. Daily rate.  A biodata form may be asked of the successful candidate in order to verify the daily rate.

Application deadline: July 18, 2023

Only shortlisted candidates will be contacted. The organization reserves the right to reject any/all applications without assigning any reason.