PROGRAM BUDGETING

EXPERIENCES FROM SLOVAKIA

Ján Marušinec TbilisiJune 2007

General note on program budgeting

WHAT IS PROGRAM BUDGETING GOOD FOR?

Accountability

Effectiveness and efficiency

Transparency

1. IT IS AN ALLOCATION TOOL

2. IT IS A MANAGEMENT TOOL

Content of the presentation

Current development stage

Future challenges

Brief history of program budgeting in Slovakia

Program examples

Brief history of PB in Slovakia

EARLY STAGES: DESIGN PHASE (2000-1)

obstacles: the understanding of program budgeting is limited only on time-limited Government activities; middle-management of MoF is not identified with the change in the system of budgeting

U.S. Treasury advisor (upon ministers request) begins with the program budgeting preparation in Slovakia

pilot line-ministries produce simple program structures for budget year 2002

Minister decides about gradual introduction of the system: 4 pilot line-ministries, expanded to 10 line-ministries in 2003 and for 2004 full program budget

Brief history of PB in Slovakia

THE SYSTEM IS BECOMING OPERATIONAL (2002-3)

MoF issues PB methodology to be used in 2003 and guides the line-ministries intensively during the process of program budget preparation

New minister of finance supports the change and confirms the decision to apply PB globally since 2004

Big revision of programs, goals and objectives is performed based on the Government Declaration, MoF heads a new Steering Committee to coordinate budget reforms on line-ministry level

Budget for 2004 is in full program structure, but doesn't include other subjects of the public sector

Major reorganization takes place at the MoF

Brief history of PB in Slovakia

THE SYSTEM IS MATURING (2004-6)

Revised PB methodology is issued, Budgetary Rules include a definition of multi-annual program budget

State Treasury becomes operational, but doesn't support program classification of expenditures

MoF switches from inputs/activities to outputs/outcomes in budget negotiations, part of total budget expenditures is allocated for Government priorities, discussion on quality of performance indicators starts

6 pilot line-ministries get their own budgeting advisors within the WB project; their activity is aimed at improvement of budgeting and budget management through programs

Brief history of PB in Slovakia

THE SYSTEM IS MATURING (2004-6)program structures are relatively stabilized, MoF gives higher priority to goals, objectives and measurable indicators quality

budget discussion is more structured, non-financial data are used also by ministers and other politicians during the negotiations

State Treasury starts to execute the budget also by program structure since 1.1.2006

the new program budgeting module within the Budgetary Information System (BIS) becomes operational, fully integrated with all the other BIS modules

Current development stage

INSTITUTIONS CONCERNED

Public, media

Parliament SAO

Government

Line-ministries

MoF

Current development stage

BUDGET PROCESS

EXECUTION

MONITORING

& EVALUATION

PLANING

Current development stage

METHODOLOGY GOVERNING PB

Budgetary Rules Law

Methodological handbook of MOF on program budgeting

Manual on formulating goals, objectives, and measurable indicators

Manual on monitoring and evaluation of programs (in preparation)

Current development stage

THE PROGRAM SETUP

Programs, sub- programs and elements (permanent) or projects (temporary)

Goals (strategic, long-term, without specific value), objectives (specific, annual or multi-year, specific value)

Government approves program structure, Parliament approves programs, selected goals and objectives

Monitoring is performed on half-year basis, evaluation is missing at the moment

Current development stage

LOGICAL FRAMEWORK OF A PROGRAM

Results

Outcomes

Outputs

Inputs

Goals

M-T outcome objectives

Specific objectives

Output objectives

Inputs

Current development stage

PROGRAM EXAMPLE

Program: Law enforcement Goal: Ensure citizens safety

Sub-program: Area patrols Strategic objective: Reduce crime by 10 % to 2010 Measurable indicator: Crime rate

Element: High crime area surveillance Objective: Increase police presence in the streets Measurable indicator: No. of hours guarded

Current development stage

PROGRAM EXAMPLE II

Program: Road infrastructure Goal: Increase transport speed and safety

Sub-program: Highways and motorways Strategic objective: Increase East-West road traffic capacity by 10 % to 2010 Measurable indicator: Road traffic capacity in ths cars/hr

Element: Highway and motorway construction Objective: Build 50 kms of new highway system in 2007 Measurable indicator: No. of kms build

Program 070: Prison system

Goal

Ensure the proper functioning of imprisonment, and security of judiciary and prosecution buildings in compliance with national requirements and EU recommendations

Medium-term outcome objective

Increase the imprisonment of sentenced persons from 84% in 2004 to 95% in 2010

Program 070: Prison system

Specific objective

Gradually increase the average of prisoners per guard, achieve an average ratio of 2,23 in 2007.

Output objective

Increase the capacity of prisons by 250 beds and achieve a total capacity of 10 733 in 2007.

Program 070: Prison system

Result indicators

% of citizens that feel safe in the streets

Ratio of second offenders on total crime rate

Outcome indicators

% of imprisoned persons out of sentenced persons

Average number of prisoners per guard

Program 070: Prison system

Output indicators

Capacity of prisons

Average area (sqm) per prisoner

% prisoners working while in prison

Input indicators

Number of sentenced

Number of prisoners

Number of guards

Future challenges

INSTITUTIONAL CHANGES

Building-up of a functioning M&E system

Involvement of other institutions (mainly SAO)

Unified top-down approach (strategic policies)

Improve program formulation (objective hierarchy and quality)

Decentralization of budgeting in the line-ministries

Future challenges

TECHNICAL CHANGES

Improve EU funds integration into the budget

Improve management of multi-ministerial programs

Bringing order into non-financial data

Adjustment of IT systems to increased demands

Improvements in the budgetary process (reform burden)

Thank you for your attention

Monitoring and evaluation

Establishing M&E is a long-run process, starting with simple centralized model to enhanced decentralized one

Should provide feed-back to policymakers and program managers how they could increase efficiency and effectiveness

There is no universal model for M&E function across the OECD countries

Should be integrated into the budgetary process in some way, otherwise M&E is just formal issue

Monitoring and evaluation

MONITORING

During and immediately after the program execution phase

Focuses on financial aspects and physical outputs

Regular (frequent) activity aimed at checking the progress achieved in program implementation

Performed in-house by line-ministry monitoring units

Monitoring and evaluation

EVALUATION

Performed before (ex-ante) or after (ex-post) the program starts / ends

Focuses on overall program logic, outcomes and effectiveness of their achievement

Ad-hoc (can also be regular, but not frequent) activity aimed at evaluating the program performance

Performed by external professionals, managed by evaluation cells and coordinated centrally

Monitoring and evaluation

INSTITUTIONAL ARRANGEMENTS

Monitoring and evaluation cells in the line-ministries

Across the Government coordination of M&E methodology and implementation (MoF or committee)

Close link to budgetary process to really enhance program performance (carrot and stick)

Extensive re-education program for government employees (either new people are hired or workload of performing current tasks is reduced)

Data management

FINANCIAL DATA

Budget preparation phase

Budget execution phase (modified budget, Treasury data)

Accounting

Classifications used have to be consistent

Bridge tables help to keep up-to-date time series

Data management

NON-FINANCIAL DATA

Spread among various different sources / users

The same logic should apply as with financial data

An integrated IT management system should contain financial and non-financial data

Budget analysis is impossible without non-financial data