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UZBEKISTAN 2018 National PEFA Assessment Dissemination Workshop

EUROPEAN UNION Delegation of the Republic of Uzbekistan. UZBEKISTAN 2018 National PEFA Assessment Dissemination Workshop. March 14, 2019 Tashkent, Uzbekistan. 2. Overview. Assessment Overview The PEFA Program Highlights of the PEFA Assessment

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UZBEKISTAN 2018 National PEFA Assessment Dissemination Workshop

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  1. EUROPEAN UNION Delegation of the Republic of Uzbekistan UZBEKISTAN 2018 National PEFA Assessment Dissemination Workshop March 14, 2019Tashkent, Uzbekistan

  2. 2 Overview • Assessment Overview • The PEFA Program • Highlights of the PEFA Assessment • Review of the Strengths and Weaknesses by Pillar • Comparison between 2012 and 2018 Assessments using the 2011 PEFA Methodology • Next Steps

  3. 3 Assessment Overview • PEFA training workshop held on September 20-21, 2018 – Over 50 participants from various government institutions attended. • Two PEFA Field Assessment Missions conducted. First, from 24th Sept. to 12thOct. 2018. Second from 26th Nov. to 7th Dec. 2018 including consultative workshop on Dec. 4th. • About 40 meetings held with 16 institutions (listed under Annex 1) of the Republic of Uzbekistan and other key stakeholders. • Report has been independently reviewed by PEFA Secretariat and peer reviewers from IMF, EU and World Bank. • “PEFA check” quality label deliveredby the PEFA Secretariat on January 18, 2019.

  4. 4 The PEFA Program PEFA: Public Expenditure and Financial Accountability PEFA partnership founded in 2001 The PEFA program provides a framework for assessing Public Financial Management

  5. 5 • Client Services (data base management, research facilitation) • Advise to PEFA Framework Users (planning & preparation, queries) PEFA Secretariat • Learning & Knowledge Products (Training, videos, social media) Program Administration & Support to the SC • Guidance Material (PEFA process, PEFA Fieldguide) • Quality Assurance

  6. 6 What is the PEFA methodology ? 5. Means to highlight PFM trends 1. Set of PFM performance indicators 4. Tool to identify fiscal challenges 6. Basis for identifying PFM strengths & weaknesses 2. PFM performance report PEFA IS 3. Database of PFM performance information 7. Support government to achieve policy goals

  7. 7 What is PEFA? https://www.youtube.com/watch?v=kjKaken8-DQ

  8. 8 • Provide a thorough, consistent and evidence-based analysis of PFM performance at a specific point in time Assessment Overview - The PEFA Framework • Assess how PFM impacts on key budget outcomes: fiscal discipline, efficient resource allocation, efficient service delivery • PEFA does not assess government policies • : Purpose • Establish the foundation for analyzing and improving PFM

  9. 9 Assessment Overview - PEFA ASSESSMENTS BY REGION January 2019 - USED BY 150 COUNTRIES - 602 ASSESSMENTS - 21 ASSESSMENTS PLANIFIED Source: https://pefa.org/countries-regions#/

  10. 10 Assessment Overview - PEFA ASSESSMENTS TOOLS The PEFA framework was upgraded in 2016. It is the most comprehensive upgrade since it was first published in 2005 and slightly revised in 2011.

  11. 11 Assessment Overview - PEFA ASSESSMENTS TOOLS 7 PEFA Pillars of PFM Performance Pillar One Budget reliability Pillar Two Transparency of public finances Pillar Three Management of assets and liabilities Pillar Seven External scrutiny and audit Pillar Six Accounting and reporting Pillar Five Predictability and control in budget execution Pillar Four Policy-based fiscal strategy and budgeting

  12. 12 PEFA and the Budget Cycle Policy-based Fiscal Strategy and Budgeting Transparency of public finances Management of Assets and Liabilities Budget Reliability Predictability and Control in Budget Execution External Scrutiny and Audit Accounting and Reporting

  13. 14 Highlights of PEFA Assessment • 61% (19 out of 31) of the indicators have score of C+ and above. • 4 out of 7 pillars have average of C+ and above. They are: Budget Reliability; Management of Assets and Liabilities; Policy-Based Fiscal Strategy and Budgeting; and Predictability and Control in Budget Execution. • A comparison of 2012 to 2018 PEFA scores shows an improvement in 7 indicators (25%), 15 indicators (54%) maintained their results and 6 indicators (21%) had a decline in performance.

  14. 13

  15. Uzbekistan National PEFA Assessment Scores for 2018

  16. Comparison of PEFA Pillar Performances for Uzbekistan,ECA Region and 32 Countries Средний балл по 32 странам Страны ЕЦА Узбекистан

  17. Comparison of Uzbekistan's 2012 and 2018 PEFAPillar Performances based on 2011 Methodology

  18. 18 Results of PEFA Assessment by PillarsStrengths and Weaknesses • PILLAR I: BUDGET RELIABILITY • Strengths: • The overall budget is reliable in terms of both expenditures and revenues. Outputs are close to expectations. (PI-1=A, PI-2=B+, PI-3=B+). • Weaknesses: • Reducing departments' adjustments during budget execution.

  19. 19 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR II: TRANSPARENCY OF PUBLIC FINANCES • Strengths: • The budget classification is comprehensive and consistent with international standards, including functional classification (PI-4=B). • Parliament is properly informed about the budget it has to adopt, though the budget documentation could be further enriched by including information on details of debt stock, financial assets, fiscal risks, medium-term fiscal forecasts and quantification of tax expenditures (PI-5=B).

  20. 20 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR II: TRANSPARENCY OF PUBLIC FINANCES • Weaknesses: • Reducing central government off-budget operations not included in fiscal reports (PI-6=C). • Establishing rule-based and transparent procedures for transferring resources to subnational government, and increasing predictability of the transfers (PI-7=D). • Performance information for service delivery is lacking, as annual performance plans and reports are not prepared (PI-8=D+). • The citizens were not sufficiently and not timely informed about the budgetary and financial activity of the government (PI-9=C).

  21. 21 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR III: MANAGEMENT OF ASSETS AND LIABILITIES • Strengths: • Financial statements of most public corporations (especially JSC and LLC) are published (PI-10.1=B). • Monitoring of subnational governments is well-integrated in financial management system and reporting on subnational finance is consolidated with the report on the financial position of the state budget and state targeted funds (PI-10.2=A). • Debt management tools are of good quality (PI-13=B).

  22. 22 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR III: MANAGEMENT OF ASSETS AND LIABILITIES • Weaknesses: • The government has no comprehensive picture of public corporations and the risks they pose to the country’s public finances (PI-10.1=B). • Central government entities and agencies do not quantify significant contingent liabilities in their financial reports (PI-10.3=D). • Procedures for managing large public investments are not sufficiently established and do not meet international standards (PI-11=C).

  23. 22 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR III: MANAGEMENT OF ASSETS AND LIABILITIES • Weaknesses: • Management and reporting of financial and non-financial assets is not adequately centralized and dispersed over various institutions (PI-12=C). • There is need to develop a debt management strategy (PI-13.3=D)

  24. 23 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR IV: POLICY-BASED FISCAL STRATEGY AND BUDGETING • Strengths: • Budget preparation process is weak but well followed (PI-14=C, PI-17=B). • Annual budget proposal is of good quality and Parliament’s procedures for budget analysis are well established (PI-18=B+).

  25. 23 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR IV: POLICY-BASED FISCAL STRATEGY AND BUDGETING • Weaknesses: • Multi-annual management of the budget is not binding enough (PI-16=C). • Results-based management is still under development (PI-15=C). • There is still no budgetary policy debate and expenditure envelopes by ministries are only finalized late (PI-17.2=D).

  26. 24 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR V: PREDICTABILITY AND CONTROL IN BUDGET EXECUTION • Strengths: • The taxpayers are well informed of their rights and obligations and there is a redress mechanism with clear procedures (PI-19=B). • Revenue administration is efficient (PI-20=A). • Predictability of in-year resource and allocation and cash management is efficient (PI-21=A). • Expenditure arrears are well monitored and limited (PI-22=A). • Personnel database and payroll are well integrated and controlled (PI-23=B+).

  27. 24 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR V: PREDICTABILITY AND CONTROL IN BUDGET EXECUTION • Strengths: • Procurement is well monitored with complete and accurate records. It was recently well equipped with electronic platform and with functional complaint mechanism. (PI-24=B). • There is solid internal control for non-salary expenditure with clear segregation of duties and effective commitment control (PI-25=A). • The internal audit function covers most budgeted expenditure and revenue (PI-26.1=B).

  28. 25 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) PILLAR V: PREDICTABILITY AND CONTROL IN BUDGET EXECUTION • Weaknesses • Revenue collection is not sufficiently based on risk analysis (PI-19.2=C) • Revenue is audited and investigated but clear mitigation activities are to be elaborated (PI-19.3=C) • Internal audit procedures are not yet in line with international practice and standards (PI-26=D+)

  29. 26 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR VI: ACCOUNTING AND REPORTING • Strengths • Financial reports for budgetary entities are submitted for external audit within 6 months of the end of the fiscal year. (PI-29.2=B). • Financial data integrity about budget execution follow-up is good (PI-27=B).

  30. 26 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR VI: ACCOUNTING AND REPORTING • Weaknesses • Budget execution is well followed by quarterly reports but somewhat late (PI-28.1=C). • The authorities do not reconcile the monetary and fiscal financing data on a regular basis (PI-27.1 = D). • Annual financial reports need to comply with international accounting standards, which will improve on the completeness of the financial reports (PI-29=D+)

  31. 27 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR VII: EXTERNAL SCRUTINY AND AUDIT • Strengths • Reports on the budget execution are produced annually by the Chamber of Accounts and audit reports are submitted timely to the Parliament (PI-30.2=A). • Parliament reviews timely audit reports on budget implementation (PI-31.1=A).

  32. 27 Results of PEFA Assessment by PillarsStrengths and Weaknesses(Continued) • PILLAR VII: EXTERNAL SCRUTINY AND AUDIT • Weaknesses • The audits of the Chamber of Accounts need to cover material issues and systemic and control risks. (PI-30.1=C). • Parliament issues recommendations but there is no record of the decisions on actions to be implemented by the executive (PI-31.3=D).

  33. 28 RESULTS OF PEFA ASSESSMENT - Evolution Comparison between 2012 and 2018 using the (2011 PEFA Framework) • Positive Development noted in the following areas: • Public has better access to key fiscal information. • Transparency of taxpayer obligations and liabilities have improved. • Recording and management of cash balances, debt and guarantees have improved (debt data is better tracked). • Effectiveness of payroll controls have improved. • Competition, value for money and controls in procurement have improved. • There is more effectiveness of internal controls for non-salary expenditure.

  34. 28 RESULTS OF PEFA ASSESSMENT - Evolution Comparison between 2012 and 2018 using the (2011 PEFA Framework) • Positive Development noted in the following areas: • Audit reports are submitted more on time to Parliament, which conducts hearings. • Central management of state accounts have improved. • Departmental budget managers have more visibility on the pace of their spending during the year. • State treasury is better centralized (implementation of the CUA).

  35. RESULTS OF 2018 PEFA ASSESSMENT - Evolution Compared to the Previous PEFA Assessment (2011 framework) Comparison of Uzbekistan's PEFA Scores by Pillars

  36. Comparison of PEFA Scores for 2012 and 2018

  37. 31 RESULTS OF PEFA ASSESSMENT - Evolution Comparedto the Previous PEFA Assessment (2011 Framework) • The scoring of the following indicators has decreased (resulting only from a different appreciation of the situation by the assessors): • Composition of expenditure out-turn compared to original approved budget • Extent of unreported government operations • Transparency of inter-governmental fiscal relations • Effectiveness of internal audit • Timeliness and regularity of accounts reconciliation • Legislative scrutiny of external audit reports

  38. 31 NEXT STEPS • This will mainly involve updating Uzbekistan’s 2018-2025 Public Financial Management Strategy to cover key weaknesses arising from the PEFA assessment such that they are addressed. • The World Bank, European Union and other interested development partners will be keen on supporting the updated PFM strategy.

  39. THANK YOU

  40. Annexes Annexes

  41. Annex 1: Institutions Met • Ministries: Ministry of Finance, Ministry of Economy, Ministry of Public Education, Ministry of Health and Ministry of Construction • National Agency for Project Management • Chamber of Accounts • Senate Committee on Budget and Economic Reforms • Legislative Chamber of the Oliy Majlis Committee on Budget and Economic Reforms

  42. Annex 1: Institutions Met (continued) • Committees and Agencies: State Tax Committee, State Customs Committee, State Investment Committee, State Committee for the Assistance to Privatized Enterprises and Development of Competition and Center for Public Asset Management. • Other institutions:Chamber of Commerce, Institute for Budget and Tax Research, UNDP and Asian Development Bank

  43. A B C D Comparison of PEFA Indicator Scores for Uzbekistan and Average Scores for ECA Region and 32 Countries

  44. Comparison of Uzbekistan's PEFA Scores for 2012 and 2018

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