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PFM REFORM - PUTTING THE THEORY INTO PRACTICE- Croatia

Learn about the implementation of Public Financial Management (PFM) reforms in Croatia, including strategic frameworks and key deliverables.

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PFM REFORM - PUTTING THE THEORY INTO PRACTICE- Croatia

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  1. Ministryof Finance PFM REFORM - PUTTING THE THEORY INTO PRACTICE-Croatia Ivana Jakir-Bajo Assistant Minister and Chief State Treasurer, Ministry of finance, Republic of Croatia Zagreb, June 2016

  2. HOW (IN THEORY) • Develop a strategic reform framework • Adress structural issue • Make a commitment to change (political will) • Establish and empower key institution • Managing reform • Monitor progress of PFM reforms

  3. WHAT (IN THEORY) • Budget Comprehensiveness and Transparency • Budget Classification • Policy-Based Budgeting • Medium-Term Expenditure Framework • Performance Budgeting • Predictability and Control in Budget Execution • The Revenue Administration • Cash and Debt Management • Procurement • Payroll Management • Internal Control and Internal Audit • Accounting and Reporting • External Audit and Legislative

  4. WHEN (IN THEORY) PFM reform actions should focus on three main management deliverables in the following order: • Putting in place controls to ensure some minimal level of financial compliance – fiscal control • Establishing mechanisms to improve fiscal stability and sustainability • Introducing systems to promote the efficiency and effectiveness in service delivery

  5. PFM REFORM 2001/2002 (CROATIA) • Accounting and Reporting • From cash to a modified accrual accounting principle • Budget Comprehensiveness and Transparency • Budget Classification – including program classification • Predictability and Control in Budget Execution • System of internal financial control DRIVERS: • New IFMIS(SAP - problems with customization; changes in business processes;) • Donors

  6. PFM REFORM 2001/2002 (CROATIA) SEQUENCE: • Determined by the Drivers FRAMEWORK: • New Budget Act

  7. PFM REFORM 2007/2011 (CROATIA) • Policy-Based Budgeting • Development of MTBF • Introduction of strategic planning • Predictability and Control in Budget Execution • Implementation of automated system of commitment control, including multi year commitments • Increasing flexibility in budget execution • Integration of FMC tools and technics into budget system DRIVERS: • Technical issue (establishment of the STA in 2006) • Experienced and motivated MoF staff/organisation culture • Political will

  8. PFM REFORM 2007/2011 (CROATIA) SEQUENCE: • Available financial resources • MOF technical capacity • Relationship between the MOF, line ministries and CB FRAMEWORK: • Strategy for the Development and Modernization of the State Treasury 2007 – 2011 • Strategy for PIFC 2009 – 2011

  9. PFM REFORM AFTER ESTABLISHING CORE PFM FUNCTION • Establishing core PFM functions and achieving the expected outcome of meeting “basic” PFM processes, change: • the scope of the future PFM reform (reducing the number of actions; more fine-tuning) • drivers • sequencing

  10. „PFM” ACTIVITIES 2012/2013 (CROATIA) • Predictability and Control in Budget Execution • Fiscalisation of cash transaction • Reorganization of the Customs Administration and the Tax Administration • LIMITED SCOPE DRIVERS: • Fiscal crises/high budget deficit • Political change FRAMEWORK: • Act on the Fiscalisation of Cash Transactions

  11. „PFM” ACTIVITIES 2014 (CROATIA) • Accounting and Reporting • Supplementing the content of the account plan • Revising the content and deadlines for the submission of financial reports • Simplifying the consolidation of financial reports • LIMITED SCOPE DRIVER: • EUROSTAT • Croatian Bureau of Statistics and the CNB for statistical needs FRAMEWORK: • Amendments of the by-laws on government accounting and reporting

  12. „PFM” ACTIVITIES 2015 (CROATIA) • Predictability and Control in Budget Execution • Improvement of internal financial control system and expansion of the scope regarding companies owned by the state and local units • LIMITED SCOPE • DRIVER: • EK recommendations • FRAMEWORK: • Legal act

  13. „PFM” ACTIVITIES 2016 (CROATIA) • Policy-Based Budgeting • Strengthening the MTBF • External Audit and Legislative • Upgrading of the system and the role of SAO - the adoption of the model for the development of sanctioning the failure to act upon SAO recommendations • LIMITED SCOPE • DRIVER: • EK recommendations • FRAMEWORK: • Amendments of the Budget Act and the SAO Act

  14. AFTER PFM REFORM • As well as technologies, budgetary process or some of their parts are becoming outdated • After establishing core PFM functions and achieving the expected outcome of meeting “basic” PFM processes, it is not common to have further major developments in the upcoming long-term period • In the meantime during the monitoring phase, it is expected to carry on smaller fine-tuning PFM activities • Sequence can not be determinated upfront

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