USAID HONDURAS FISCAL TRANSPARENCY ACTIVITY
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USAID HONDURAS
FISCAL TRANSPARENCY
ACTIVITY
Quarterly Performance and Financial Report
October 1, 2018 – December 31, 2018
First Quarter FY2019
Submission Date: January 30, 2019
Contract Number: AID-522-TO-17-00003
Contract/Agreement Period: September 2017 – September 2020
COR Name: Denia Chavez
Submitted by: Paul Sisk, Chief of Party
Deloitte Consulting LLP
July 2008 0USAID HONDURAS
FISCAL TRANSPARENCY
ACTIVITY
Quarterly Performance and Financial Report
October 1, 2018 – December 31, 2018
Prepared for:
USAID/Honduras
Prepared by:
Contract No. AID-522-TO-17-00003
January 30, 2019
This report is made possible by the generous support of the American People through the United
States Agency for International Development (USAID). The Contents are the responsibility of
contractor and do not necessarily reflect the views of USAID or the United States Government.”.
iTABLE OF CONTENTS
1. Activity Overview ...................................................................................................... 1
2. SECTOR CONTEXT ................................................................................................ 2
a. Anti – Corruption Initiatives AND CORRUPTION Cases ................................... 2
3. Program Highlights................................................................................................... 4
a. Key Activities..................................................................................................... 4
4. Achievements and Major Activities ........................................................................... 5
a. Cross Cutting Support ....................................................................................... 5
b. Component 1: Improve Transparency and Effectiveness of Public Spending .... 8
c. Component 2: Institutionalize Public Private Dialogue on Transparency, Fiscal
Policy, and Anticorruption issues ............................................................................. 17
d. Component 3: Steps taken to professionalize the civil service ......................... 20
5. Planned Activities for Next Quarter......................................................................... 22
6. Administration and Budget information ................................................................... 23
7. Problems encountered and proposed remedial actions .......................................... 25
8. Subcontractor Progress.......................................................................................... 25
9. Monitoring, Evaluation and Learning ...................................................................... 26
a. M&E Software ................................................................................................. 26
10. Collaborative Learning and adapting (cla) .............................................................. 27
11. Integration and collaboration with other USAID Activities ....................................... 31
12. Coordination with other Donor Agencies and Activities ........................................... 31
13. Annexes ................................................................................................................. 31
a. Pilot Tracker .................................................................................................... 31
b. Table of Counterparts by Result ...................................................................... 35
c. In-Country Training ......................................................................................... 35
d. Meetings with Government Officals ................................................................. 36
iiACRONYMS
AWP Annual Work Plan
BANASUPRO Supplier of Basic Food Stuffsi
CEH Association of Economists of Honduras (Colegio de Economistas de
Honduras)
COP Chief of Party
COSO Committee of Sponsoring Organizations
CSO Civil Society Organization
DARA Customs Directorat (Dirección Adjunta de Rentas Aduaneras)
DEGEPEZCA Fisheries Directorate (Direccion General de Pezca)
DGR Directorate General of Irrigation and Drainage (Direccion General de
Riego
DGSC Civil Service Directorate (Dirección General de Servicio Civil)
DPE Ethics and Probity Division (División de Probidad y Ética)
DTME Presidential Directorate of Transparency and Modernization (Director
Presidencial de Transparencia y Modernización del Estado)
FLAI Latin American Federation of Internal Audit (Federación Latinoamericana
de Auditoría Interna)
FT Fiscal Transparency
FOSDEH Foro Social de Deuda Externa y de Desarrollo de Honduras
GEIS Gender Analysis and Gender Inclusion Strategy
GOH Government of Honduras
HICD Human and Institutional Capacity Development
INTOSAI International Organization of Supreme Audit Institutions
IP Implementing Partner
JOH Juan Orlando Hernández
MACCIH Mission to Support Anti-corruption and Fight Impunity (Misión de Apoyo
contra la Corrupción y la Impunidad en Honduras)
PEA Political Economy Analysis
PFM Public Financial Management
PRONAGRO National Agroalimentary Development Program Programa Nacional de
Desarrollo Agroalimentario
PN Partido Nacional
OBI Open Budget Initiative
OECD Organization of Economic Cooperation and Development
OGP Open Government Partnership
ONADICI National Office of Internal Control (Oficina Nacional de Desarrollo
Integral de Control Interno)
ONCAE National Procurement Office (Oficina Nacional de Contrataciones y
Adquisiciones del Estado)
OTA Office of Technical Assistance (US Treasury Dept)
RFA Request for Application
RNP The National Register of Persons (Registro Nacional de Persons)
SAG Ministry of Agriculture (Secretaria de Agricultura)
SAR Revenue Service (Servicio de Administracion de Rentas)
SCGG General Coordination Ministry (Secretaria de Coordinación General del
Gobierno)
SEFIN Ministry of Finance (Secretaría de Finanzas)
SLT Sustainable Learning Transformation
SICOP Suppliers, Inputs, Process, Outputs, and Customers
SINACOR National System of Control (System Nacional de Control)
STAR Strengthening, Transparency, Accountability and Results
TF Fiscal Transparence (Transparencia Fiscal)
TSC Supreme Audit Organization (Tribunal Superior de Cuentas)
iii1
1. ACTIVITY OVERVIEW
The United States Agency for International Development (USAID) Mission in Honduras
has launched the Fiscal Transparency (FT)1 Activity to assist the Government of Honduras
(GOH) to implement transparency and anti-corruption commitments made in the Alliance
for Prosperity of the Northern Triangle (A4P) Plan and Open Government Partnership
(OGP) Fourth Action Plan (2018 - 2020 to ensure that public money is spent most
economically and efficiently, with minimal waste and theft.
The purpose of FT, a 36-month USAID activity implemented by Deloitte Consulting LLP,
is to contribute to fighting corruption and impunity by building strong accountable
institutions, improving procurement, and strengthening public expenditure management.
By fostering transparency and accountability and the implementation of anti-corruption
legal frameworks, this Activity will contribute to improving the business-enabling climate
in Honduras to promote a level playing field for investment.
Table 1. Activity Details
Activity Name Fiscal Transparency Activity
Activity Start / End Date September 15, 2017 - September 14, 2020
Name of Prime Implementing
Deloitte Consulting LLP
Partner
Contract/Agreement Number AID-522-TO-17-00003
Name of Subcontractors/Sub-
Deloitte Honduras
awardees:
Geographic Coverage
Honduras / National Government Counterparts
(Governorates / Districts)
Reporting Period October 1, 2018 to December 31, 2018 (Quarter 1 FY2019
Components
Component 1 Improve transparency and effectiveness of public spending
Institutionalize public-private dialogue on transparency, fiscal
Component 2
policy & anticorruption issues
Component 3 Steps taken to professionalize the civil service
1 The Public Accountability Activity (PAA), AID-522-TO-17-00003, will be referred to as Fiscal Transparency (FT) in this report.
12. SECTOR CONTEXT
A. ANTI – CORRUPTION INITIATIVES AND CORRUPTION CASES
Both public control entities and civil society organizations involved in oversight continue
to uncover cases of malfeasance, which mostly relate to prior presidential periods, that
highlight the current administration efforts to crack down on corruption. On the other hand,
Congress attempted this quarter to introduce limits on executive power and re-establish
funding for grants implemented by Congress – which were the source of the abuse
uncovered last year.
Budget Approval - While the national budget for the 2019 Fiscal Year was approved on
time, the opposition parties and civil society budget analysts severely criticized the lack of
debate, as the budget was approved after just one debate in Congress. Foro Social de
Deuda Externa y de Desarrollo de Honduras (FOSDEH) noted that there is a real need
for training of congress members on budget management. Specifically, the deputies of the
Liberal Party voted against the budget proposal because, in their view, it does not prioritize
spending in health and education.
Public Procurement - In October, The State Contracting and Acquisition Regulations
Office (ONCAE), announced plans for the implementation of the Honducompras V2
Platform. HonduCompras is the official procurement information system for Honduras
which will be upgraded in V2 to facilitate access and process procurement online in 5
pilots in 2019.
Tax Exemptions - There is growing interest in and support for a thorough review of the tax
exemption structure (tax expenditure in general). In view of the massive exodus of firms
from Hondurans to Mexico and the United States, the Chamber of Commerce and
Industries of Cortés (CCIC) has proposed that the sales tax be reduced, tax exemptions
reviewed, and businesses that generate jobs be exempted from taxes by December 2019.
CCIC informed the Minister of Finance, Rocio Tábora, that its members are ready to
initiate a thorough review of the exemptions granted to organizations that are not
generating employment. The head of the Revenue Administration Service (SAR), Miriam
Guzmán, is also calling for tax exemptions to be reviewed to lower the tax burden on
Honduran companies. Tax exemptions in Honduras are the highest in Central America,
equivalent to 7% of the Gross Domestic Product (GDP). The GOH announced that
Economic Cabinet will hold a series of meeting on the topic.
IMF – While the head of the technical mission of the International Monetary Fund (IMF)
for Honduras, Esteban Vesperoni, declared in November that the outlook for the Honduran
economy is encouraging, he did not specify a date to begin negotiations of a new
agreement with Honduras. Media sources noted that the issues standing in the way of a
program include the excessive use of tax exemptions and the operating losses in the
national energy company.
Supreme Court of Accounts (TSC) Change in Organic Law - In October the Chief
Magistrate of the TSC presented to Congressional leaders a reform proposal for the TSC
law that would give TSC a hand in the selection of internal auditors in the public sector.
He explained that there are weaknesses in the internal audit units, and that the auditors
should be evaluated by the TSC and new auditors should be appointed. In November,
the president of the Congress, Mauricio Oliva, introduced the bill proposed by the TSC.
This reform is not in line with international leading practices, as it confuses the role of the
internal auditor with external audit and reduces the independence of the external auditor.
2Despite not being in line with leading practices, this arrangement has been adopted
recently in a number of countries in Latin America.
TSC Public Promotion of Ethics - The TSC hosted the Fifth Congress of Committees of
Probity and Ethics in December as an initiative to promote the values of public employees
and officials. The congress aimed to encourage the work carried out by the governmental
Probity and Ethics Committees, in their task of developing strategies that stimulate and
guide transparency, the proper use of State resources and contribute to the culture of
reporting irregularities in public administration.
National Register of Persons (RNP) - RNP in recent years has been plagued with serious
administrative, technical and logistical deficiencies and is unable to comply with current
standards in keeping reliable records of persons. There have also been public allegations
of criminal influence in the RNP. In order to solve these deficiencies, the GOH is
undertaking a reform program financed by the European Commission. However, this
assistance is conditioned on the depoliticization of the Institution. Fiscal Transparency is
providing technical assistance on the restructuring of the RNP.
Transparency International - In November, Delia Ferreira, president of Transparency
International (TI), visited Honduras. She met with the Attorney General (Óscar Chinchilla),
to review the framework of the agreement that exists between TI and the Public
Prosecutor. She also met with several civil society organizations, specifically those
focused on the protection and rights of women, and gave a lecture on Corruption and
Women.
Open Data – This quarter, the Secretariat of General Government Coordination (SCGG)
initiated the Open Data Dialogue Round Table. The event was supported by the
Organization of American States (OAS) and the Open Government Alliance-Honduras
(AGAH). The round table will lay the foundations for the formulation and implementation
of a national open data policy. Participants included State institutions, civil society, private
sector and academia. The event was headed by the Presidential Commissioner of
Transparency, Alfredo Cantero, on behalf of the SCGG Martha Doblado Andara.
Proposed Changes to the Constitution - In November, the National Congress proposed
amendments to the Constitution to limit Presidential veto powers. There was significant
backlash from the public, and ASJ and CNA publicly denouncing the move. As a result of
the negative reaction, the Secretariat of the Legislative Branch withdrew the proposal.
Departmental Development Fund (Fondo de Desarrollo Departamental) - The National
Congress attempted to introduce a new fund, Fondo de Desarrollo Social, for projects
implemented by Congress, to replace the discontinued and misused Fondo De Desarrollo
Departmental which was introduced in 2006 and abolished in July 2018. The proposal
received bi-partisan support while Doris Gutiérrez opposed the bill. Since there are
outstanding corruption charges relating to the use of the previous fund which have not
been properly accounted for, the TSC has been ordered to conduct a special audit on
these cases but the work has yet to begin. Subsequently, despite complaints by some
Congress members, the President of the Budget Commission, Mario Pérez, affirmed that
the Fondo de Desarrollo Departmental will not be reactivated.
Approval of 2018 Budget- The Public Ministry, through the Fiscal Unit Against Corruption
and Impunity (UFECIC), accused Tomás Zambrano and Román Villeda Aguilar, Deputies
in the National Party, of forgery and abuse of authority. The UFECIC says that the
deputies are responsible for misleading Congress during the approval of the 2018 Budget
and manipulated the record of the debate.
3Arrest of Former President Lobo’s Brother - In November, the Public Ministry through the
Special Prosecutor's Unit against Corruption and Impunity (UFECIC), presented before
the General Secretariat of the Supreme Court of Justice a fiscal injunction against Wilfredo
Francisco Cerrato Durón, former Secretary of State for Administration and Presidential
Financial Management, and Ramón Lobo Sosa, brother of former President Porfirio Lobo,
for fraud and embezzlement of public funds. This is the sixth case of malfeasance during
the 2010-2014 presidential term uncovered by the UFECIC this year.
Illegal Enrichment - In October, the Public Prosecutor's Office for Transparency and
Combat against Public Corruption (FETCCOP) under the Public Ministry (MP) has 20
cases under investigation related to illicit enrichment. The cases were submitted by the
TSC between 2015 and 2017. FETCCOP statistics show that in 2015, ten cases of illicit
enrichment were sent by the TSC and in 2016, prosecutors received seven reports, while
in 2017 only three reports were submitted.
ASJ Reports on Procurement Corruption - In November, the Association for a More Just
Society (ASJ) sent to the Public Ministry and the Support Mission against Corruption and
Impunity in Honduras (MACCIH) two fraud cases. The first case relates to the overpriced
sale of medicine to the Ministry of Health. The second case involves the approval by the
National Congress, of 23 twenty-year solar energy generation contracts to 21 newly
created companies, many without experience in solar power generation.
Former First Lady Process - The Special Corruption Court denied another appeal by
lawyers of the former First Lady Rosa Elena Bonilla, to change the detention conditions
and ordered her to remain in prison. This is the third time the judicial authorities have
denied a change in the custody arrangement of the wife of the ex-Honduran President
Porfirio Lobo Sosa.
CNA Investigates the Ministry of Health - The National Anticorruption Council (CNA)
reported corruption cases of in the Ministry of Health and the Hospital Universitario (HEU).
These cases led to the establishment of a Board of Trustees in HEU to oversee
administrative operations.
3. PROGRAM HIGHLIGHTS
A. KEY ACTIVITIES
The following key activities were carried-out during the quarter.
Component 1 - Transparency and Effectiveness in Public Spending Improved
This quarter, FT positioned itself to support SEFIN’s priorities on advancing transparency
and expenditure efficiency and initiated work on a number of activities:
SEFIN Web Portal – FT finished the designed and developed a new SEFIN portal which
will improve access to fiscal information and improve compliance with open data
standards. This assistance will improve access to fiscal information and encourage citizen
participation in fiscal affairs.
Citizens’ Budget – FT established the requirements and received USAID approval to issue
a grant to support the development of an interactive citizens’ budget that will include both
the Executive’s proposed budget and the approved budget. The product will comply with
international guidelines and leading practices for citizen’s budgets and use interactive and
4innovative technology. The citizens’ budget is one of the 8 key budget documents required
under transparency best practice and will provide the public with relevant, understandable
budget information to improve citizen participation and support for government operations.
Creation of a Trust Fund Management Unit – FT designed and established the terms to
support SEFIN in the creation of a trust fund office that will monitor and control the use of
resources allocated to two of the Government’s main administration trust funds (FINA 2
and Poverty Reduction). The office will also work on producing more public disclosures on
the use of assigned resources. These steps will address a major failure in transparency
that arises from limited oversight by SEFIN, and the public, of funds raised and spent
under public trust funds.
Results-Based Budget – FT having concluded the development of a strategic plan for the
Ministry of Agriculture (SAG) and the Institute for Access to Public Information (IAIP), went
on to design and initiate technical assistance over the course of the quarter to support the
adoption of results-based budgeting in IAIP. A budgeting specialist was mobilized to
develop the methodology for the gradual application in the General Government sector,
which will significantly impact accountability, allocation of public resources, and the quality
of spending over time.
Component 2 - Public-Private Dialogue on Transparency, Fiscal Policy and
Anticorruption Initiatives Institutionalized
SEFIN decided not to conduct the remaining workshop on the 2019 budget consultations
which was planned for quarter 1, largely as a result of competing demands for SEFIN’s
time. As such, FT drew on lessons learned from the two events organized in Year 1 and
began the report to wind-up the exercise and started discussion with SEFIN on the plan
for consultations on the 2020 budget.
Component 3 - Steps Taken to Professionalize the Civil Service
FT is working on a the reorganization of Registro Nacional de Personas comprising a functional
review and the design of an organization structure and staffing appropriate for its current mandate
and demands. Similarly, FT documented and analyzed the legal framework of civil servant
compensation, which will feed into proposals for a new public-sector salary policy and salary
scales.
4. ACHIEVEMENTS AND MAJOR ACTIVITIES
The achievements and major activities during the reporting period are presented below
for cross-cutting activities, then by component.
A. CROSS CUTTING SUPPORT
Gender. Gender-related work was advanced during the present quarter with regards to
the salary analysis being carried out under Result 2. That is, information is being gathered
to establish the salary gap between men and women, broken down by position, and
various strategies are being discussed for how these gaps can be addressed through the
amended salary policy.
5Grants. A detailed grant pipeline was developed during the present quarter that defines
how FT is planning to allocate its full grants budget during Y2 and Y3. An update of
activities by grant is detailed below.
Grant Name Short Description Spanish Name Maximum Status
Funding Limit
Technological Donation of a fully Equipamiento de $ 88,000.00 Agreement signed.
Laboratory equipped computer Laboratorio Tecnológico y Tender process has
Equipment and laboratory and Sala de Producción finished, and a winning
Audiovisual audiovisual room to Audiovisual para la vendor will be soon
Production improve Transparencia en el selected to deliver the
Room for IAIP Transparency Instituto de Acceso a la goods.
trainings and Información Pública
communications
Technical Computers, Data Fortalecimiento técnico a $ 49,800.00 Agreement signed.
strengthening shows and Office ONADICI por medio de una Tender process has
of ONADICI Equipment donation Donación En Especie finished, and a winning
through an In- for ONADICI, to help vendor will be soon
kind Donation Staff train the selected to deliver the
affiliated institutions goods.
Citizen Budget Reconfiguration of Reconfiguración del $ 150,000.00 Prospected Grantee is
the Citizen Budget Presupuesto Ciudadano, drafting the proposal for
with interactive web con herramientas a 2019 and 2020 citizens
app and easy to read interactivas web y app budget. Application will
pdf móviles, incluyendo un pdf be submitted on February
de fácil lectura 15th 2019.
Strengthening TF will improve Fortalecimiento de ONCAE $ 150,000.00 TF and ONCAE have
of ONCAE's ONCAEs process of en el proceso de agreed on common
process of certification of public certificación de ground to develop this
certification of buyers with new compradores públicos initiative. USAID will be
public buyers guides, guidelines, soon fully informed on
methodologies and the scope to begin the
will aim to have 200 grant application process.
people certified by
the end of the grant.
Fiscal Education Fiscal Education Campaña de Educación $ 75,000.00 SEFIN and TF are working
Campaign of Campaign for Citizens Fiscal del Proceso on a common scope that
the Budget on the Budget Presupuestario desde las benefit both, however
Process Formulation Stages dimensiones de this is also tied to the
Formulación y Liquidación. completion of the new
SEFIN web portal that is
scheduled to be launched
in January 2019.
Parliamentary Train Parliamentaries, Participación Parlamentaria $ 50,000.00 Although TF wishes to
and Citizen budget committees, y Ciudadana en el Proceso improve methodologies
Participation in CSOs and technical del Presupuesto and capacity building, it is
the Budget committees to discuss important to have
Process budget formulation National Congress on
board. During the
following months, TF will
engage and manage
congress expectations to
pick up this initiative.
6Gender Gender Indicators and $ 20,000.00 One of the most
Indicator tagging initiative in important grants that will
tagging budget. go live during year 2019 is
initiative the gender-based tagging
initiative. SOW is being
fine-tuned and expected
to be presented to USAID
during the Y2Q2
Support Conferences and $ 25,000.00 Fiscal Transparency
Honduras training to wishes to collaborate the
Digital participants of the ongoing Honduras Digital
Challenge Honduras Digital Challenge with youth in
Initiative Challenge. This will order to bring important
incentivize young speakers to generate
people to be aware of interest in programmers
what is Fiscal in fiscal transparency
Transparency and its topics. This grant
importance opportunity if approved
will be ongoing by the
end of Y2Q2 or beginning
of Y2Q3
Iniciativa de Work with SEFINs $ 50,000.00 Grant proposal is in
utilizar Open open data sets, design stage and early
Data de SEFIN promote use of those SOW have been drafted
sets and make of for discussion and
public awareness exploratory engagement
with key stakeholders
Strengthening Improve ethics and $ 150,000.00 SOW has been discussed
the integrity integrity culture of with USAID and will be
and ethics public employees finished during Y2Q2 to
culture of with training, and publish the opportunity
Honduran improving the DPE for prospective grantees
public servants and CPE units of the to submit their
TSC applications.
$ 907,800.00 99% of funds
Snapshot of Grants’ Financial Status
Funding Status Amount in $ % of total funds
Signed and Agreed $137,800 15% of Funds
Reserved for ongoing grant $150,000 16% of Funds
applications (to be awarded
immediately)
Available funds but already $633,780 68% of Funds
identified for use of Y2 and Y3
Communications
Biweekly updates have been sent to USAID to inform on activities, results, and next steps
to accomplish results under each Component.
FT’s social media sites followers on Facebook went from 117 on Facebook in October to
121 by December 31, 2018, while FT’s Twitter page went from 70 followers to 94.
7Ongoing weekly media monitoring reports were produced in order to evaluate the public’s
engagement and awareness of USAID and FT efforts. However, upon USAID’s request,
FT maintained a minimal social media presence during quarter one due to Government
Shutdown on December 21-Decemebr 31, 2018 . During this period, FT was also not
mentioned in social media or news outlet posts by third parties either.
FT celebrated the Day of the Fight Against Corruption by launching the new Code of
Ethics, in coordination with TSC. The event took place in Tegucigalpa on December 10,
followed by five half-day dissemination sessions, ending on December 12. Along with 683
staff of TSC, representatives from the Activity of Action Against Corruption and Impunity
attended the event. The code is called for in the basic standards for public sector external
auditors and documents the standard of behavior they are held to. This must be obtained
from the Code of Ethics for Public Servants because this auditor’s code of ethics covers
matters of independence, objectivity and competence which are explicitly dealt with in the
civil servant code.
Private Sector
Meeting with Digital Challenge – The Honduras Digital Challenge initiative is driven by
private companies and academia to promote digital entrepreneurship. Honduras Digital
has a schedule of activities planned for January through June of 2019 where young people
will be able to participate in Hackathons and will be accompanied by experts, as well as
given tutorials for three months to refine their ideas for developing and applying new
technology.
These activities are important because FT is ultimately interested in improving and
promoting citizen access to information and transparency in budgetary and fiscal matters.
Therefore, in December, FT met with José Luis Moncada, Advisor to the CEO of the Banco
Atlántida and Coordinator of Honduras Digital, to learn more about the Honduras Digital
Challenge initiative and to discuss ways of potentially collaborating in the future. Mr.
Moncada indicated that Banco Atlántida is open to work on transparency and noted that
he would like to see an outline of a thematic proposal for a hackathon on budgetary and
fiscal issues.
B. COMPONENT 1: IMPROVE TRANSPARENCY AND EFFECTIVENESS OF
PUBLIC SPENDING
Result 1, 2, 3 Transparency: Status Green2
Activities on advancing the legal framework and improving control over salaries and
access to information are all advancing in line with plans.
Result 1: Strengthened implementation and enforcement of prioritized laws to
improve the transparency of public spending
Improve Compliance via follow-up on PFM Legal Review. In coordination with SEFIN,
SCGG, Electric Power Distribution Trust Technical Committee and TSC, FT carried out
three ideation workshops in Year 1 to develop proposals related to reducing gaps in
adherence with the Organic Budget Law (LOP) and Organic Law of the Supreme Audit
2
In agreement with USAID the report rates advance on component with a traffic light system
(green -on track, yellow – risk of delay, red risk of no completing in the year)
8Organization (LOTSC) respectively, The objective of these workshops was to define the
problem of adherence and identify possible solutions while leveraging the knowledge and
experience of the main actors involved. On this basis, a report was prepared that outlines
the tentative action plans on the initiatives chosen, by consensus of the representatives
at the meetings. The most pressing actions include: (i) improving budget programming by
aligning different planning and budget tracking tools; (ii) improving the disclosure of the
execution of the trust agreement via the trustor (the public client that contracts the service);
and (iii) improving the audit of declaration of wealth by public employees.
In this quarter, FT advisors consulted with counterparts on the PFM legal framework
review recommendations in light of the proposed Transparency and Anti-Corruption Policy
and ensured that steps in the action plans were included in the terms of reference for
consulting on budget programming and in the terms of reference for an expert in Public
Trusts in coordination. This work implied in the TORs will lead to more transparency in
government operations under trust funds, since the detail of their income and expenditure
is not currently disclosed in budget documents and procedures will be set for better
reporting. (Year 2 AWP 1.1.1, 1.1.2, 1.1.3)
Result 2: Improved planning and budgeting for civil service positions in targeted
ministries
Improve accuracy of the budget and improve control over actual expenditure. In August
2018, Minister Tabora signed a request for support for the formulation of a salary policy
through the execution of Activity 2.1. "Development and Implementation of the Salary
Policy including a unified salary scale" that aims to define a unified, viable and sustainable
long-term wage policy for the centralized and decentralized public sector based on the
analysis of remunerations in 10 pilot institutions. This will provide the basis for the
determination of a single salary scale for positions of centralized and decentralized
institutions based on the hierarchical ordering of positions (internal balance) and its
contextualization in the environment (environment and external balance) as well as
estimating the fiscal cost of applying the proposed salary scale. With this input, FT can
propose an implementation strategy which determines the best scope of the application
of the new salary policy, e.g. to be applied to the Executive and Legislative or just the
Executive. (See Annex A – Pilot Tracker.)
In this regard, FT carried out an inventory and analysis of the current wage legislation
during this quarter, as well as the labor statutes and collective labor agreements in force
in the institutions included in the scope of the project. This inventory and analysis is divided
into three chapters: a) constitution and constitutional framework which compiles
information on the mandates of order and constitutional hierarchy, but also those that
delineate the policies of the Honduran State; b) the regulatory framework integrating public
administration, which refers to the legal documentation that permits the integration of
management in the government administration; and c) legal provision of general
application in public institutions. Each of the sections has a common denominator, which
refers to the principles, policies and issues themselves, as they relate to remuneration and
social benefits in different public institutions, particularly the pilots chosen for the program.
The Pilot institutions that have confirmed their participation include: Secretary of
Education, Secretary of Health, Secretary Infrastructure and Public Services, Secretary of
Finance, Honduran Telecommunications Company, National Institute of Migration,
National Institute of Teacher Training. Institutions that have been proposed but have not
9confirmed include: National Port Company (replacing the National Electric Power
Company that is expected to be divided into three companies in the coming months) and
the Fire Brigade of Honduras.
It should be noted that within the analysis to be carried out, in addition to the salary policy,
there will be gender perspective commentary to identify the salary gap between men and
women for the same position and outline potential strategies to address this.
Given the significance of the wage bill in Honduras, the savings from introducing horizontal
equity in public servant compensation could be significant. (Year 2 AWP 2.1)
Result 3: Select GOH systems generate credible and timely information for
decision-making, including information and procedures for citizens to access
services
SEFIN Portal. During this quarter the design of a new SEFIN web portal was completed
and approved by SEFIN’s Director of Transparency. FT advisors developed an application
for the website, and the full application was presented in a meeting with the Minister and
Heads of Departments on December 3, where observations were made to tweak a few
features. On December 7, a revised version was presented to the Minister, who gave her
official approval at that time. The new portal will be installed within SEFIN servers in
January with a public launch to follow. This new user-friendly portal allows for machine-
readable information on the approved and executed budget, as well
infographic/visualization tools to simplify data access and analyses to ultimately enhance
public access to fiscal information. FT will monitor the use of the website and support
SEFIN with maintenance as needed. (Year 2 AWP 3.1.2)
Results Based Budgeting. The Secretary of General Coordination of Government and the
Secretary of Finance has underway a process of implementing a series of methodologies
for the development of Results Based Budgets (RBB) in six pilot institutions and asked FT
to support this initiative, which is needed to comply with the provisions of the Organic
Budget Law regarding the incorporation of results throughout the budget cycle to improve
fiscal transparency and accountability.
The adoption of RBBs will bring enhanced transparency and expenditure efficiency but in
addition to this, it will help GOH comply with the provisions of the Organic Budget Law
regarding the incorporation of results throughout the budget cycle. The implementation of
RBBs, are directly related to Results 1 and 3 of Component 1. Specially on Result 1,
strengthening the application and execution of prioritized laws to improve the transparency
of public spending, it is linked to the Open Budget Initiative score: Budget Transparency,
in that RBBs lead to greater clarity in the allocation of public resources because they
provide a link between the use of funds and the objectives or goals that are met with their
execution. For Result 3, selected GOH systems will generate credible and timely
information for decision making, including information and procedures for citizens to
access services. RBBs are also linked to the PEFA indicator on service delivery which
measures whether public resources are clearly identified in relation to the products and
services that the population receives.
In Year 1 FT supported the Fisheries Dept. (DEGEPEZCA), the Irrigation Dept (DGR) and
National Agroalimentary Program (PRONAGRO) of the Ministry of Agriculture (SAG) and
the Institute of Access to Public Information (IAIP) with the alignment of the strategic plan
and the operational tasks of the pilot institutions. This work contributes to consolidate in
the medium term an integral "process management" based on the systematic application
of the ISO 9000 standards for the assurance of the quality and sustained success of the
10entities. FT and SAG agreed that once this process was complete for all departments, a
new budget structure of the SAG based on the results (outputs) of this planning would be
developed.
During the work on the strategic planning in SAG, it was determined, however, that the
in order to have a successful implementation of RBBs, SAG needs to first carry out a
profound institutional reorganization which would include: establishing political support
for the restructuring of the SAG, which includes having personnel that meet the defined
technical requirements; obtaining financial resources to meet the costs of restructuring;
determining the unit or team leader of the restructuring process and be responsible for
preparing the plan for the reorganization.
In a meeting with the Minister of Agriculture on December 17, FT presented 5 reports: the
Strategic Plans for DEGEPEZCA, DGR, and PRONAGRO, the analysis of Processes for
DEGEPEZCA and the Evaluation of Internal Control over Fishing Licenses. At the same
time, the lack of readiness for RBB in SAG was discussed and SAG agreed to postpone
the work on the transition to RBB until Year 3 when these conditions could be met.
In the quarter, FT also mobilized technical assistance in December for the development
of a methodology and to define the new budgetary program structure based on the
Institutional Strategic Plan for a pilot institution (IAIP), in accordance with the defined
methodology. The FT consultant analyzed the guidelines and methodology proposals
defined by the SCGG and SEFIN for institutional strategic planning and results-based
budgets, then proposed modifications and adjustments to the guidelines and budget
methodology. The introduction of results-based budgets should contribute to greater
efficiency in expenditure because they can link expenditure to results with the expectation
that publication of performance information will spur budget makers to allocate funds on
the basis of results, or at least that including results in the budget document will help bring
a focus to opportunities to remedy shortfalls in performance. (Year AWP 3.2.1)
Result 4, 5, 6, 7 Procurement: Status Yellow
The review of the legal framework, along with support for the certification of procurement
staff and monitoring of payments are progressing, but training on HonducomprasII was
delayed because Millennium Challenge Corporation (MCC) and ONCAE have not reached
an agreement on the full implementation plan.
11Result 4: Procurement staff trained and certified in new web-based procurement
system, in coordination with MCC
ONCAE Institutional Strengthening. FT planned to support ONCAE to prepare an
Institutional Development Plan to include the preparation of a diagnosis, strategic plan,
organizational structure, processes and training plan. However, ONCAE asked FT to
reschedule this support to the third quarter because the department became absorbed
with the implementation of HonducomprasII and the reform of the national procurement
law. (Year 2 AWP 4.1)
Certification of Procurement Officers. To support the increase of legal compliance and
competition in procurement by providing and requiring qualified oversight of all processes
by certified staff, FT prepared a scope of work for a grant to respond to ONCAE’s request
to hire universities in an open competition to train public buyers. This approach aimed to
continue the work supported by MCC that was carried out from January to June of 2017
with the involvement of four universities, in which 200 public officials participated. The goal
was to train 200 public officials on regulations regarding government procurement.
However, during discussions with ONCAE on the current country conditions and what they
have managed to accomplish already, they indicated that they reconsidered their
approach because since 2006, universities in Honduras produced roughly 200 graduates
of public procurement diploma courses. However, rather than simply provide more
diploma-related training, ONCAE could instead focus on strengthening its certification
process, providing refresher courses to all public servants with the diploma in public
procurement, and conduct the certification examination under improved processes. A
grant proposal along these lines has since been prepared. (Year 2 AWP 4.3)
Result 5: In coordination with the World Bank, a broadcast module was designed
and implemented to provide citizens with access to information on public
procurement
Public Access to Honducompras. To contribute to putting in place an electronic platform
for public procurement to facilitate social control over the use of public funds, FT met on
October 24 and November 6 with MCC on HonducomprasII following a request by
ONCAE. During these meetings, it was clarified that certain program changes were
requested in order to deal with ONCAE registration requirements, which the Portal
application did not anticipate. Other requirements will be dealt with by manual work-
arounds.
In November, FT met with MCC HO staff, including the Director of MCC Procurement,
MCC Regional Director, MCA Director, and HonducomprasII Project Manager on the plans
for implementation. At this meeting, and others on November 14 and 15 (the latter
attended by ASJ as well), it was clarified that MCC would install the software and train
staff in line with the contract provisions but not take the counterparts in the five pilots to a
point of actually running transactions under HonducomprasII. MCC presented their plans
to hire 10 local implementers (i.e., two per pilot), who would help the counterparts with the
adoption of the system, but noted that the degree of implementation that it can attain is
limited by the MCC deadline (i.e., end of May) and its project budget. FT explained that its
planned activities were to flow from an assessment of the pilot experience and not to assist
in the pilots, since MCC is best suited to handle the pilots while the software provider is
still involved, with whom FT has no contractual relation.
During the meeting on November 15, it was agreed that MCC should prepare a plan of
implementation for the pilots. The strategy for Honducompras’ full development and
12implementation could be left for later since it should, in any case, benefit from the
experience in the pilots. FT clarified that it would not participate in the pilots nor would it
provide technical assistance on the implementation plan.
World Bank (WB) Coordination. FT met with the WB team from the STAR activity on
November 28. They indicated that the WB has mobilized consultants in ONCAE and
SEFIN to support the transformation of datasets of Honducompras, Electronic Catalog
and SIAFI, following the specifications of the Data Standard for Open Contracts (EDCA).
The WB consultant in ONCAE is also supporting the review of the quality of historical
purchases data for access under the platform.
The WB also clarified that during the first quarter of 2019, a tender will be launched to
support the government with the development of an Open Contracting Portal. (Year 2
AWP 5.1)
Result 6: Regulations on the Law on State Contracts reformed so procurement
processes are open to public participation
Develop and Promote Reforms to the Regulatory Framework for Public Procurement. To
strengthen the legal framework for public procurement and reduce transparency and
accountability gaps, FT is supporting ONCAE with a comprehensive reform of the State
Procurement Law (LCE). Following the consultation workshops over the summer of 2018,
which FT supported, FT mobilized two consultants to record the proceedings and to
summarize recommendations on changes to the law in order to identify the problems and
develop solutions to strengthen the transparency, efficiency and competitiveness of
government purchases.
In November, FT mobilized two new Honduran lawyers with expertise in drafting legislation
to review the results and proposed changes, as well as to conduct consultations within
ONCAE and with industry sectors. During the quarter, these lawyers completed the
analysis of the proposed changes to the current LCE and prepared a comparative study
of the state contracting laws of other Latin American countries. On this basis, the
consultants prepared the adjustments to the first draft of the LCE, highlighting the most
relevant points, as well as the justification thereof using statistical data and other
indicators. The new draft will be presented to ONCAE for comment in January. (Year 2
AWP 6.1.1)
Result 7: System to measure and control payment arrears in place to ensure invoice
dates are entered correctly and vendors are paid on time
Monitoring of Payment Dates. During the quarter, FT updated the Guide for the Review of
Internal Controls of Payments to Suppliers with the support of the US Treasury
Department. Working alongside ONCAE, FT then developed the program for review of
payments as well as a questionnaire for the review of the internal control in the supplier
payment process. On November 28, FT provided a full-day training session on the new
tool for 21 internal auditors from the Attorney General's Office (PGR), the Ministry of
Education, and SEFIN, which are the pilot entities for the review of payments. The
improvements sought are more predictable payment dates, which would allow suppliers
to remove credit cost premiums from their bids and this would lead to lower cost of inputs
in government procurement. (Year 2 AWP 7.1.1, 7.1.2)
13Result 8, 9, 10 Internal Control and Audit: Status Yellow
The introduction of an ethics program for auditors, preparation of the external audit
framework, and support for public works audits are all advancing but the mobilization of
the expert to update the internal audit framework is pending agreement with TSC which
has caused delays for this group of results.
Internal Control and Audit
Result 8 – Strengthened institutional capacity and independence of the TSC
Ethics for Auditors. TSC is a member of the International Organization of Higher Audit
Institutions (INTOSAI) and therefore committed to its standards: the International
Standards on Auditing for Higher Auditing Institutions (ISSAI). ISSAI 30 stipulates that the
audit bodies must have an approved and implemented Code of Ethics to comply with
international standards. In Year 1, FT prepared a review of TSC’s draft Code of Ethics and
a work plan was agreed upon and the first outputs were produced, specifically a proposal
for an outline (i.e., index) of the Code of Ethics of the TSC along with strategies for its
preparation and presentations made to the Directorate of Probity and Ethics, for their
review and provisional approval. During the current quarter, a new code of ethics was
generated, with FT support, and was ultimately approved by the Ethics Department and
the TSC Magistrates council in October.
During three days of training from December 10 - 12, all TSC staff (683 individuals) were
given a thorough orientation of the new code of ethics by the FT audit advisor, with
particular emphasis on the policy basis of the code and employee responsibilities. All staff
who participated received certifications and their training attendance was recorded, which
is mandatory.
As ethical behavior is a key component in establishing and sustaining the needed trust
and reputation, this code of ethics is a critical prerequisite for a supreme audit
organization. Awareness of the standard requirements, which include the areas of
integrity, independence and objectivity, competence, professional behavior,
confidentiality, and transparency, should contribute directly to building higher capacity of
auditors, allowing them to play a stronger role in the scrutiny of public finance. (Year 2
AWP 8.1)
Strengthening External Control. The two key documents relevant to external control are
the framework of external control and the financial and compliance audit manual, with the
related guidelines (planning, execution, reporting and follow-up). These documents were
prepared with the assistance of IDB and are ready for approval by the TSC Magistrates in
January. During the current quarter, FT prepared a plan for the reproduction of the related
material and the roll-out of the training during the next quarter, which has been agreed
upon with TSC.
Public Works Audit. Article 3 of the Organic Law of the TSC assigns it the constitutional
duty of the ex-post control of funds, goods and resources administered by the State
powers. It also establishes a system of transparency in the management of public servants
by scrutinizing for illicit enrichment of civil servants and effecting control over public assets
and liabilities.
Through numerous discussions with management and technical staff at TSC it was
determined that public works is an area where TSC needs technical inputs and where
impact could be significant if modern audit techniques were applied. Since the related
14guides are either non-existent or out-of-date, FT agreed to mobilize an advisor to prepare
a manual for the performance of public works audits of the TSC according to the requisite
standards, issued by the Organización Latinoamericana y del Caribe de Entidades
Fiscalizadoras Superiores (OLACEFS), which is the regional standard-setting body for
supreme audit organizations.
FT developed the Terms of Reference in Year 1 to increase the capacity of the TSC to
perform audits of public works, and specifically to provide a manual that incorporates the
new trends in government auditing and national and international regulations. During the
current quarter, a rigorous selection process was conducted, and a consultant was
contracted who will mobilize to work on site from February until June. The outputs will
include providing the TSC with an audit manual for the performance of public work audits
and audits of contracting processes, as well as conducting trainings for Works Department
staff on the application of the manual, assessments of the auditors (engineers, lawyers,
financiers and supervisors) involved in the public works audit, and the verification of the
application of the manual in a pilot audit.
Capital goods, which include works, were budgeted at over US$ 600 million in 2018 and
there has been practically no audit finding of wrongdoing in recent years. The need for
more reliable oversight in a high-risk environment is obvious and the improvement in audit
techniques will address this. (Year 2 AWP 8.2)
Update the Internal Audit Framework. The government’s control system is comprised of
external control and internal control. In Honduras, the external control system is
complementary to internal control of which the internal audit function is an integral part.
Within the framework of the National System of Control of Public Resources, SINACOR,
the issuance of the general internal control regulations is a responsibility of TSC. In this
regard, FT has agreed to support TSC in the establishment of an updated framework for
internal audits across government at the national level based on the International
Standards for the Professional Practice of Internal Auditing, version 201. During this
quarter, FT prepared the terms of reference and TSC agree to have a consultant update
the framework to align with the International Framework for the Professional Practice of
Internal Auditing issued by the Institute of Internal Auditors in 2017. The terms of reference
also call for the consultant to develop the related training guides and to conduct effective
training programs for staff. The consultant will be mobilized in April. (Year 2 AWP 8.4)
Result 9 – Strengthened Internal Controls in Selected Line Ministries
The three work plan activities reviewed below aim to strengthen elements of internal
control, which is a critical element in governance because it is the means by which
management ensures the its plans are carried-out and government policies and laws are
complied with. Without an effective internal control system, management will remain
unaware of the state of operations in its own organization.
Internal Control Framework. TSC and ONADICI agreed that, as one of the four activities
for FT with TSC in Year 1, an update to the internal control regulations was needed to
align these with COSO 2017. In August, FT proposed to the technical committee that TSC
appointed on this subject, that the new Internal Control Framework be principle-based as
opposed to a set of detailed guidelines like the current one, and that, through the National
System of Control of Public Resources (SINACOR), the detailed regulations could be
periodically updated without modifications to the Framework. One of the first detailed
regulations that would be approved by the Liaison Committee, implemented by SINACOR,
would be the Guidelines for the Implementation of Internal Control issued by ONACIDI,
15making it mandatory for the whole public sector and not only for the executive function.
Over the course of the quarter, FT concluded the TORs for the related work and these
were accepted by TSC. On this basis, FT identified a short-term consultant to mobilize in
February to prepare the new principle-based framework. The TORs call on the consultant
to: update Internal Control Guidance Framework to current international regulations, such
as the COSO reports for 2013 and 2017; facilitate the understanding of public servants
and other users of the technical requirements that must be met for the design; and
implement and evaluate institutional internal controls and update the outline for the
dissemination of internal control throughout the country. (Year 2 AWP 9.1)
Internal Control Committees (COCOIN). The foundation was set for improvements in the
effectiveness of the internal control committees with training events in September for
COCOIN members on the use of maturity measurement tools. Eighteen COCOIN officials
attended from the Attorney General’s Office (PGE), SEFIN, the Ministry of Education and
the Honduras Telecommunications Company (HONDUTEL). The training focused on the
role of the committees to support the assumption of responsibility by the organization for
determining the level of maturity of the control framework (i.e., the level of implementation
of the ONADICI guidelines), and to develop a plan to improve compliance.
During the present quarter, FT agreed with ONCADICI to apply the methodology for
determining the level of maturity of the control framework through three pilots (Central
Bank, The Banking and Insurance Commission and Hondutel). In this regard, an
Administrative Agreement was prepared by ONCADICI supporting the use of the maturity
model approach to evaluate internal control, which will be a point of focus during the next
quarter. (Year 2 AWP 9.2)
Training in Internal Control. During Year 1, ONADICI agreed that FT and the Capacity
Building Manager would work with specialists from ONADICI and related institutions of the
executive branch from June 2018 to March 2019 to develop an SLT program on internal
control. The Training Advisory Board was established and participants of Train the Trainer
beneficiaries (22 people) were identified and an evaluation of training needs in terms of
internal control was conducted. On this basis, FT developed an approach for capacity
building in internal control based on the ADDIE instructional systems model (Analysis,
Design, Development, Implementation and Evaluation), which focuses on developing
personal and institutional capacities to produce a group of specialist trainers who will
promote internal control in public institutions in Honduras. The aim of the course is to
develop skills that will allow participants to have a multiplying effect in public institutions
for strengthening internal controls
In September, FT, along with SCGG and ONADICI, inaugurated the Sustainable Learning
Transformation (SLT) Program – Train the Trainers (ToT), and from October 8 - 11 a series
of workshops were held at the Central American Technological University (UNITEC) to
design training modules on the range of topics pertinent to internal control under the
COSO3 approach: control environment, risk assessment and management, control
activities, information and communication, supervision and monitoring. During the weeks
following the training, the participants prepared the pedagogical guide (i.e., the training
modules), with the support and supervision on an internal control advisor who was
3
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is a joint initiative of the five private
sector organizations American Accounting Association, American Institute of Certified Public Accountants, Financial
Executives International, The Institute of Internal Auditors, The Association of Accountants and Financial Professionals in
Business) and is dedicated to providing thought leadership through the development of frameworks and guidance on
enterprise risk management, internal control and fraud deterrence.
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