ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

1. ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1) Linking Strategic Plans with Budgets January 28, 2010

2. Session 4: Day 4Contents of Presentation EXERCISE 1 • Question 1: What is the meaning of NSDP and SDP? Define the relationship between NSDP and SDP, then highlight the main elements of SDP for your department/entity (under MAFF/MRD/MOWRAM) • Answer 1a: NSDP is the National Strategic Development Plan (Ministry of Planning) SDP is Sector Development Plan MAFF/MOWRAM/MRD ADB Grant 0133-CAM: Component 1

3. Session 4: Day 4Contents of Presentation EXERCISES • Question 1: What is the meaning of NSDP and SDP? Define the relationship between NSDP and SDP, then highlight the main elements of SDP for your department/entity (under MAFF/MRD/MOWRAM) • Answer 1b: The NSDP is the foundation for the SDPs and it is referred to in the MAFF SDP. However, in MRD and MOWRAM their mandates are quite specific and therefore they refer to mandates and sector policies – while MAFF plays a larger role is fulfilling the goals and objectives of the NSDP through it own Sector Development Plan (SDP). ADB Grant 0133-CAM: Component 1

4. Strategic Development Plans MINISTRY OF AGRICULTURE, FORESTRY & FISHERIES 2006-2010 • Answer 1c: • Elements: • Review of the 2001-2005 • Sub-sector analysis • Rice & crop production • Animal health & production • Rubber production • Fisheries activities • Forestry activities • Vision, Mission, Goals & Objectives for sector and sub-sector • Strategy • Action Plan • MAFF Budgeting plan & Strategy ADB Grant 0133-CAM: Component 1

5. Strategic Development Plans MINISTRY OF WATER RESOURCES & METEOROLOGY 2009-2013 • Answer 1c • Activities • Irrigation – Construction & Rehabilitation • Irrigation – Maintenance • Dams – Maintenance • Canals - Construction & Rehabilitation • Drought Intervention, flood mitigation & Management • Hydrology & Meteorology • Human Resource Development ADB Grant 0133-CAM: Component 1

6. Strategic Development Plans MINISTRY OF RURAL DEVELOPMENT • Answer 1c • Vision and aims: • Rural poverty reduction • Capacity Building & Human resource development • Integrated local planning • Rural water supply • Primary health care & rural sanitation • Rural economic & rural community development ADB Grant 0133-CAM: Component 1

7. Question 2: What is the meaning of Logical Framework? • The log frame is a conceptual and analytical tool for undertaking sector analysis, project planning and project management. • The log frame matrix layout is shown ….

9. Meaningof terms • Goal: the higher order objective to which a development intervention is intended to contribute • Outcome (or Purpose): the likely or achieved short-term and medium-term effects of an intervention’s output • Outputs: the products, capital goods, and services which result from a development intervention; may also include changes resulting from the intervention which are relevant to the achievement of outcomes. • Inputs: the financial, human and material resources used for the development intervention

11. Original table

12. Session 4: Day 4Contents of Presentation EXERCISE 3 • Question 3: What is the meaning of budget? Explain its rationale? ADB Grant 0133-CAM: Component 1

13. Budget Structure of the Royal Government of Cambodia Answer 3: MEANING OF BUDGET & ITS RATIONALE • Definition: A budget is a financial document used to project future income and expenses. The budgeting process is carried out by the government to estimate whether it can continue to operate service delivery and investment with its projected income and expenses. ADB Grant 0133-CAM: Component 1

14. Budget Structure of the Royal Government of Cambodia Answer 3: MEANING OF BUDGET & ITS RATIONALE • Rationale: • balanced budget a government’s use of resources for operating purposes does not exceed available resources over a defined budget period. • structural balance maintaining a balance between operating expenditures and operating revenues over the long term, not just during the current operating period. ADB Grant 0133-CAM: Component 1

15. Budget Structure of the Royal Government of Cambodia Answer 3: MEANING OF BUDGET & ITS RATIONALE • Principles: • Comprehensiveness: the budget cover all government entities and institutions • Unity: captures all revenues and expenditures • Universality: No offset – no net positions • Specificity: Information must be in the format required • Balance: Proposals for expenditure must be countered with proposals for savings ADB Grant 0133-CAM: Component 1

16. Budget Structure of the Royal Government of Cambodia Answer 4: STRUCTURE OF THE GOVERNMENT BUDGET • Administrative Classification: The budget signifies this classification by ministry but not lower. For example MAFF is code 17, MRD is 20, MOWRAM is 29 • Economic Classification: Expenses, allowances for staff, staff salaries • Period: One year ADB Grant 0133-CAM: Component 1

17. Budget Structure of the Royal Government of Cambodia Answer 4: Main elements of budget {Article 13 of the Law on Public Finance System} • Current Revenue • Group 1: Real Revenue • Category 1: Tax Revenue • Category 2: Non-tax revenue • Group 2: Revenue by Order • Category 3: Revenue by order • Capital Revenue • Group 1: Real Revenue • Category 1: Revenue from own sources • Category 2: Revenue from external sources • Group 2: Revenue by order • Category 3: Revenue by order ADB Grant 0133-CAM: Component 1

18. Budget Structure of the Royal Government of Cambodia Answer 4: Main elements of budget BUDGET EXPENDITURE 2007 • Current Expenditure • Group 1: Real Expenditure • Category 1: Operations & Maintenance • Category 2: Financial expenses • Category 3: Public intervention • Category 4: Miscellaneous expenditure • Group 2: Expenditure for order and unforeseen expenditure • Category 5: Expenditure by order • Category 6: Unforeseen Expenditure ADB Grant 0133-CAM: Component 1

19. Budget Structure of the Royal Government of Cambodia Answer 4: Main elements of budget BUDGET EXPENDITURE 2007 • Capital Expenditure • Group 1: Real Expenditure • Category 1: Repayment of borrowings • Category 2: Fixed assets • Group 2: Expenditure by order • Category 3: Expenditure by order ADB Grant 0133-CAM: Component 1

20. Q5: Main points of correlation between Strategic Budget Plan and Annual Budget • SBP and Budget should be prepared using the same budget classification • Preferably this should have dimensions for economic items, administration structure, programme structure, function and funding • Annual budget must link directly to the first year of the SBP • SBP should be a rolling three year plan.. • Work each year should focus on forecasts for year 3 and minor changes for years 1 and 2, NOT a complete rewrite of the plan

21. Q5: Main points of correlation between Strategic Budget Plan and Annual Budget 4. SBP should be a ‘living plan’, not just something that is prepared in April-May • Agreed annual budget should be immediately reflected in the SBP 5. SBP must show future changes in recurrent costs that result from capital investment now 6. Estimates in the SBP should be backed up by good costing records. 7. SBP should distinguish ongoing committed plans, existing plans not yet started, and new plans.

22. Q5: Advantages of effective linkage between program plans, SBP and annual budget • Making three-year SBP estimates reduces the need to set over-optimistic annual budgets. • Annual budgets are easier to set, because planning has already taken place for the program and SBP. • The annual budget is linked to strategic plans, not made on an ‘incremental basis’. • Hence sectors and ministries can plan to progressively improve their operations and achieve longer term objectives. • MEF can plan to allocate resources to sectors targeted in national strategic plans.

23. Q5: Difficulties of linkingprogram plans, SBP and annual budget • The master copies of three-year plans are often held at ministries, and are often significantly rewritten from year to year, which should be unnecessary. • Finance Ministry should hold master copy of agreedthree-year plans. Submissions from ministries should focus on changes to this plan • Ongoing plans can be ignored if arbitrary budget cuts are made.