Terms of Reference - Ministry of Works and Human Settlement

SECOND BHUTAN URBAN DEVELOPMENT PROJECTTerms of ReferenceConsultancy Services for Strengthening Municipal Financial Management – Terms ofReferenceIntroduction: The Royal Government of Bhutan (RGoB) has secured an IDA credit of US$12million to (a) strengthen municipal management systems starting in Thimphu and Phuentsholingand (b) improve infrastructure services in northern Thimphu. Accordingly, the Bhutan UrbanDevelopment Project II (BUDP II), which is now under implementation, has the followingcomponents:Component #1: Municipal Finance and ManagementComponent #2: Thimphu Northern Area DevelopmentComponent #3: Capacity BuildingComponent #1 (Municipal Finance and Management) aims to strengthen the institutionalsystems and financial processes of the two Thromdes (city governments) in Bhutan, viz.Thimphu and Phuentsholing Thromdes as well as the Ministry of Finance (MoF) and theMinistry of Works and Human Settlement (MoWHS) to put in place a sustainable policy andprocess framework for financing municipal services. The project aims to achieve this objectiveby implementing various activities that can broadly be grouped under three broad categories viz;(a) Strengthening and implementing Local Revenue Policies and mainstreaming the policies inrevenue administration (b) Introducing commonly used revenue collection systems and preparinga comprehensive database of tax payers (c) Design and Piloting of a principle-basedIntergovernmental fiscal system for urban local governments and (d) Strengthening LocalGovernment Expenditure Management and Financial Management. The component activitiesare implemented by the Policy and Planning Division (PPD) of the MoWHS in closeconsultation with Thimphu and Phuentsholing Thromdes and the Ministry of Finance MoF.Implementation of the component activities has started with the digitization of tax/non taxrecords and the computerization of the asset register. Complementing these efforts underway,PPD proposes to procure the services of an experienced consulting firm to undertake thecomponent activities relating to strengthening of Municipal Financial Management.Scope of work: The consulting firm is expected to undertake the following tasks which areaimed at providing policy advisory and implementation support for strengthening the municipalfinancial management systems and processes of the two Thromdes. Though scope of theactivities will be focused on Thimphu and Phuentsholing Thromdes, the outputs from thisconsultancy will also be made available to the newly formed Gelephu and Samdrup JongkharThromdes. It should be noted that for some of the tasks described below, some preparatory workin the form of reports and studies has already been carried out through other consultants andtherefore the consultant for this contract is expected to build upon these reports and studies1. Preparation and Implementation of a Budget Manual for Thromdes: The consultancy willprepare a Budget Manual that will provide guidance to the Thromdes on preparing1

ealistic capital and recurrent budgets as well as on efficient budget execution (Theconsultancy will draw upon the report on budget preparation in Thromdes that wasprepared in “Strengthening Public Management Project of the Asian Development Bank).The consultancy will be required to provide support to the two Thromdes to preparecapital and operating/recurrent budgets in accordance with the redesigned budget manual.The consultancy will also provide training and support for the preparation of the annualbudget of the Thromde using the new Budget Manual2. Review and finalize strategy paper for accounting reform and provide support for itsimplementation: Thromdes are presently using computerized Budget and Accountingsystem (BAS) from Ministry of Finance, RGoB. The BAS is based on cash system ofaccounting. With the increase in the scope and complexities of the activities of theThromdes, there is need to adapt the mode and processes of accounting to fit theThromdes’ requirements. The consultancy will review the existing accounting systemsand procedures of Thromdes and will:‣ Review the draft strategy for accounting reform and finalize the strategy in consultationwith stakeholders.‣ Prepare the Accounting Manual for Thromdes‣ Provide handholding support and capacity building of the Thromde accounts personnel inoperating the municipal accounting system in accordance with the Accounting Manual‣ Prepare comprehensive annual financial statements and Balance Sheet for the twoThromdes for the financial year 2014.3. Implementing effective internal controls: the consultancy should review the draft note oninternal controls already prepared, support PPD to finalize the note, and support the twoThromdes to implement an efficient system of internal controls. The consultancy willprepare an internal control manual that will compile internal control procedures andinclude guidelines and instructions for implementing the control procedures.4. Design and implementation of a system of Performance Reporting: the consultancyshould review the draft Manual performance reporting prepared and finalize it. Thisshould also include performance indicators, performance reporting formats, andguidelines for performance reporting. The consultancy will then support the twoThromdes to prepare two consecutive half yearly performance reports and providetraining to the Thromde staff in the preparation of the performance reports.5. Improving the cost efficiency of municipal services: the consultancy will ascertain thecost of municipal services provided in the two Thromdes. Based on the cost assessment,the consultants should identify areas for improving the cost efficiency for providing thevarious services and recommend strategies for efficient cost management in municipalservice delivery. The consultancy will also design suitable formats and reports to enablethe Thromdes to monitor the cost of providing services.6. Reengineering the Business Process for Local Revenue Collection and Management: withthe objective of improving the efficiency of the local revenue collection process and to2

make it more citizen friendly, the business processes relating to the collection of localrevenues (taxes, charges, fees) need to be reengineered. The consultancy will review theexisting systems and procedures for local revenue collection in the two Thromdes andpropose a reengineering plan for improving the efficiency of the collection process. Thereengineering plan will propose changes in the processes as well as recommend theinvestments necessary to implement these changes. The firm will support the twoThromdes to implement the plan in a time-bound manner.7. Customizing the Revenue Administration Manual for Thromdes: the Department ofRevenue and Customs (DRC) has prepared a Revenue Administration Manual whichneeds to be customized to the requirements of Thromdes. The Consultant will draw uponthe existing DRC Manual for Revenue Administration and will prepare a ThromdeRevenue Administration Guideline that will provide detailed guidance on the assessment,collection and reporting of all sources of local revenues. The Guideline will draw uponthe recently approved Municipal Finance Policy as well as the currently ongoingdigitization of the tax and non-tax records. After the preparation of the Guideline, theconsultants will also provide at least two training programs to the staff of the Thromdeson the contents of the Manual.8. The Consultant will assess the municipal financial management systems of the two newThromdes (Gelephu and Samdrup Jongkhar) and prepare a report on the status andquality of those systems. The assessment report should provide recommendations on thesupport required for the strengthening on municipal financial management systems in thetwo Thromdes.3

Qualifications and Experience of key staff:Experts Title Qualification/Skills/Experience Numberof expertsPersonMonthsTeam Leader & Education: Post Graduate degree in a 1 5Municipal Finance relevant discipline like Management,SpecialistPublic Administration, Economics,Urban Management. Additionalqualifications/certifications in MunicipalFinancial Management are a plus point.Experience: A minimum of ten years’experience in the design andimplementation of reforms in localgovernment financial management.Specific experience in municipalbudgeting and local revenueadministration is essential. . Previouswork experience on local governmentfinancial management reform in one ormore countries in South Asia will be anadvantage.FinancialEducation: Bachelor/Masters degree inAccountancy, Management along withProfessional certifications in accounting(CA/CPA etc.). Additional qualifications 1 5ManagementSpecialistin public finance/municipal finance willbe desirableMinimum 10 years’ experience in thedesign and implementation of municipalfinancial management reforms. Specificexperience in the redesign of localgovernment accounting systems will bepreferred. Experience in the South Asiaregion will be an advantage.Systems Analyst MCA / MBA in Information Systems. 1 2Experience in the design andimplementation of MIS for seniormanagement and in business process reengineeringis essential. Specificexperience in the design andimplementation of local governmentinformation systems and businessprocess re-engineering in the publicsector will be an advantage. Previouswork experience in South Asia will bepreferable.4

Duration and Deliverables:The assignment is estimated to be completed within a period of fifteen calendar months from thedate of award of contract. An indicative schedule for the delivery of the various outputs underthe consultancy is provided below:TimingFour months fromaward of contractEight months fromaward of contractTwelve Months fromstart of contractFifteen Months fromstart of contractDeliverables1. Draft budget manual prepared and submitted2. Guidelines on internal controls and performance reporting preparedand submitted.3. Assessment Report on cost of providing municipal services in the twoThromdes prepared and submitted4. Draft Revenue Administration Guidelines Prepared1. Accounting Reform finalized and Accounting Manual prepared2. Thromde Budget manual finalized and staff trained in budgetpreparation3. Guidelines for improving cost efficiency of municipal servicesprepared and submitted4. Preparation of capital and recurrent plans1. The first set of performance report prepared2. Implementation of accounting reforms in Thromdes initiated3. Thromde staff trained in the use of the Accounting Manual4. Assessment of the Municipal Financial Management systems ofGelephu and Samdrup Jongkhar completed and report submitted1. Financial Statements and Balance Sheet of Thromdes prepared andsubmitted2. Revised Business process for local revenue administration designedand implemented3. Revenue Administration Guidelines completed and training onRevenue Administration delivered4. Second set of performance report preparedThe consulting firm will be chosen based on qualification and experience relevant to theassignment described above using the selection based on the Quality and Cost Based Selection(QCBS) Method as prescribed in the World Bank Consultant selection guidelines.Institutional Arrangements: The consulting firm will report to the Chief Planning Officer,PPD, MoWHS who will guide and supervise the consulting firm’s output in consultation with thetwo Thromdes. Necessary office space and administrative support for carrying out the tasks willbe provided by the PPD, MoWHS.5