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KEY PUBLIC FINANCE MANAGEMENT REFORMS

KEY PUBLIC FINANCE MANAGEMENT REFORMS. PRESENTATION BY THE MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT LOCAL GOVERNMENT BUDGET CONSULTATIVE WORKSHOPS FY 2019/20 17 th September - 2 nd October 2018. Outline of the Presentation. Introduction Programme Based Budgeting (PBB)

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KEY PUBLIC FINANCE MANAGEMENT REFORMS

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  1. KEY PUBLIC FINANCE MANAGEMENT REFORMS • PRESENTATION BY THE MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT • LOCAL GOVERNMENT BUDGET CONSULTATIVE WORKSHOPS FY 2019/20 • 17th September - 2nd October 2018

  2. Outline of the Presentation • Introduction • Programme Based Budgeting (PBB) • Inter-Governmental Fiscal Transfers • Budget Preparation for FY 2019/20 • Other Operational Issues • Conclusion

  3. Introduction • These consultations are organised in line with Section 9 of the PFM Act (2015) • Consultations are part of the budget processes and part of the input for formulation of LG BFP. • Consultations are to elicit input from LGs as major stakeholders in the budget process • This paper discusses Key Public Finance Management Reforms (PBB, IGFT) being implemented by Government to improve processes and execution for improved service delivery. • The paper also provides clarifications on some operational issues.

  4. PROGRAMME BASED BUDGETING (PBB)

  5. PBB Reform in LGs • The Government of Uganda started the implementation of Program Based Budgeting (PBB) replacing Output Oriented Budgeting in FY 2017/18. • Program Based Budgeting is a budgeting framework where all budgetary information is organized around an Entities' (LG) s programs and services • The main objective is to link performance to results. Under PBB, the main emphasis is on outputs & outcomes so as to assess achievement of strategic objectives • The programmes represent the main budget units of a Vote and a responsible person is assigned to oversee its functions, activities and responsibilities towards the achievement of results • PBB was rolled out to Local Governments effective FY 2018/19 • The existing departments will become programmes and the Sections will become the sub-programmes

  6. Why PBB • Output Oriented Budgeting had challenges that included: • It is based on “output costing”, a system which has never worked world wide; • As such it assumes there is a mechanical link between outputs and inputs; • The term “Output” is used as part of the structure of the budget process (against which accountability of LGs is supposed to be enforced) rather than a measure of performance; • A well defined system to enforce accountability was missing

  7. Why PBB • PBB was therefore adopted because it: • A well-defined system to enforce accountability was missing • Enhances budget outcome through the exercise of an accountability framework • Allows targeting of resources to solve specific problems and their effectiveness to be monitored • Gives decision makers a clearer understanding of the relationship among policies, programs, resources and results • Makes the use of budget resources more transparent • NOTE: The budget process will largely remain the same.

  8. PBB Implementation in LGs • The respective sectors will identify the programme measurements including indicators (outcome and outcome indicators) for each programme that are linked to the Sector Implementation Plans, LG Dev’t Plans and the NDP II. • LGs will be responsible for identifying their performance targets and these should be unique and relevant to the issues or problems facing them • The LGs will be trained on the concept of PBB and on how to develop outcome and outcome indicators. The training will be conducted by a team of trainers from MoFPED, MoLG, OPM, UBoS, NPA and any other relevant MDA.

  9. INTER-GOVERNMENTAL FISCAL TRANSFERS

  10. Objectives of Inter-Governmental Fiscal Transfer (IGFT) Reform • The objectives of the Inter-Governmental Fiscal Transfers (IGFT) Reform are to: • Restore adequacy in financing of decentralized service delivery • Ensure equity in allocation of funds to LGs for service delivery through review of the allocation formulae; • Provide incentives by improving the efficiency of Local Governments in the delivery of services; and • The reform is coordinated by MoFPED in collaboration with LGFC, MoLG, OPM and supported by the World Bank • Under the reform, we have the Uganda Inter-Governmental Fiscal Transfers Program for Results

  11. Uganda Inter-Governmental Fiscal Transfers Program for Results (UgIFT) • The objective of the UgIFT is to improve the adequacy and equity of transfers and improve fiscal management by LG for Education and Health Services; • Government negotiated a loan of USD 200m (equivalent Ush 710bn) for development grants in health and education and program management over four years effective FY 18/19. In FY 18/19, Ushs 176.56bn has been provided broken down as follows: • 69.36bn to upgrade 124 HCIIs to HCIIIs in Sub Counties with none • 96bn to start construction of 127 seed secondary schools in Sub Counties with none. • Government is expected to match this with non-wage recurrent and wage grant increases starting from FY 2019/20.

  12. The Program has been jointly designed, and will be implemented through: • The Oversight Committee • Responsible for providing policy oversight and guidance to the design and implementation of all aspects of the Program. • is comprised of the Minsters of MoH, MoES, OPM, MoLG, MoPS, MoLHUD, MoWT, and Chairperson of LGFC.Other Ministers will be co-opted depending on the issue being discussed. • The Steering Committee • Responsible for providing strategic direction and guidance to the design and implementation of all aspects of the Program • Comprised of Permanent Secretaries of MoH, MoES, MoWE, MoWT, OPM, MoLG, MoPS, MoLHUD, Secretary LGFC and ED PPDA.Other Permanent Secretaries will be co-opted depending on the issue being discussed • The Technical Committee • Responsible for overseeing and coordinating, at a technical level, the grants, assessment and targeted technical support • Comprised of representatives at senior level from MoFPED, PPDA, MoLG, LGFC, MoWT, OPM, MoES and MoH

  13. How will the LGs access the Funds? • Funds were budgeted and directly disbursed to Local Governments as part of the health and education and development grants • The Local Governments should utilize the funds in line with the grant guidelines issued by the Ministries of Education and Sports and that for Health • Budgeting and Reporting will be done using the established Government mechanisms/channels • There will also be Joint monitoring by the Sectors and respective stakeholders to ascertain progress of the projects as well as the utilization of the funds in the course of FY 2018/19

  14. BUDGET PREPARATION FOR FY 2019/20

  15. Preparation of Detailed Budget Estimates FY 2018/19- Experiences • In FY 2018/19, all Local Government Budgets were prepared off the PBS and uploaded onto the IFMS as opposed to using the Ms. Excel templates that was extracted off the OBT • The detailed budget estimates for some LGs were approved late, leading to delays in the budget upload and consequently the Warranting of funds and invoice payments. • The affected Local Governments especially those that delayed to submit their budgets did not access funds on time, thus not able to pay salaries by the 28th day of the month as required and yet Expenditure limits for Q1 were issued on 5th July 2018 • The above notwithstanding, there are Local Governments who have not yet paid their salaries and Pension for the month of August 2018 and yet the expenditure limits were issued funds for Q1 transferred to respective LGs

  16. Preparation of Detailed Budget Estimates FY 2018/19- Experiences C’td. • This was also coupled by the limited capacity of some Local Government Technical staff • Many LGs seemed to have relegated budget preparation to District Planners with minimal involvement of Heads of Finance (Chairpersons of Budget Desk) • Consequently, a number of LGs allocated funds on wrong items like: Councilors allowances on 211102- Contract Staff Salaries, 314202-Work in progress.

  17. Preparation of Detailed Budget Estimates FY 2019/20 • Given the delays in the upload of the detailed Budget Estimates this FY and in order to avoid further delays for FY 2019/20, LGs are reminded to ensure that they submit their BFPs by 15th November 2018 in accordance in Section 9(2) of the PFMA, 2015 • The PBS has been updated and all the issues that caused the delay in submission have been addressed including blocking non budgetary items for LGs, estimates for LLGs, among others • Should there be any request for capacity building on the PBS, this Ministry will be at hand to offer you technical support and/or training upon your request • Ensure that you minimize cases of virements, re-allocations and supplementary as you prepare your budgets for FY 2019/20. All budget revisions should be done during budget execution in accordance with Section 22 of the PFMA, 2015;

  18. Budgeting for Locally Raised Revenues • The Local Revenue Budget for FY 2018/19 was appropriated by Parliament and Warrants for access of the funds will be issued by the Accountant General once the collections by LGs are deposited in the LG Revenue collection account; • There were a number of challenges in FY 2018/19 in the budgeting of Local Revenues by a number of LGs with cases of shortfalls and over provision, among others. These issues will be addressed on a case by case basis • The budgets for Local Revenue for FY 2019/20 should be clearly captured by budget category (Recurrent and Development) indicating the entire provision (100%) and should be made indicating the 65% transferred to the Sub-counties and 50% for the divisions • In FY 2019/20, this Ministry will develop the strategy for issuance of Expenditure limits and warranting of funds for Local revenue which will be communicated to you in due course

  19. Budgeting for Funds appropriated at the Centre but transferred to LGs (Other Government Transfers) • There are categories of funds that are appropriated by Parliament at the Centre but transferred to the LGs such as Youth Livelihood Programme, UWEP, NUSAF III, among others. • Concerns have that some Central Gov’t Votes where the funds are appropriated to do not inform and share the budgets with the LGs during budget preparation which causes distortions in their budgets during the course of budget execution by way of numerous supplementary requests. • In order to address the above, in the budget for FY 2018/19, the respective funds will be transferred from the budgets at the Centre to the LG votes through a grant and released directly to you. • This Ministry will engage the respective CG votes on this issue.

  20. Budgeting for External Financing • It has been noted that a funding from Development Partners and Donors are not fully captured in the budgets for some Local Governments which are approved by their respective Councils • You should ensure that budgets for funding from Development partners for FY 2019/20 are captured the budgets and submitted to Council for approval and finally to MoFPED for submission for appropriation by Parliament; • In FY 2019/20, the budgets for funding from Development partners will form part of the Appropriation Bill • All the requisite codes for the various sources of funding from development partners have been assigned on the IFMS. In case of any sources that are not coded, Accounting Officers should inform this Ministry in writing and attach the MOUs for assignment of codes on the IFMS

  21. Budgets for Cost Centres in Local Governments • It has been noted that a number of Schools and Health Centres in Local Governments are placed under wrong Votes by the respective Sector MDAs that have grants with direct transfers to LGs • The respective Ministries will share with you the list of the cost centres by Lower Local Governments, Education Institutions and Health Facilities for your confirmation at these Workshops • The Local Government Accounting Officers will be held personally responsible for having budgets for Cost Centres that do not belong under their vote once the budgets for FY 2019/20 is finalized

  22. OTHER OPERATIONAL ISSUES TO NOTE FOR FY 2018/19 AND FY 2019/20

  23. Appointment of LG Accounting Officers • Section 11(2)(g) of the PFMA requires PS/ST to appoint or designate Accounting Officers who have accounted for resources or assets for a vote according to a report submitted by an Internal Auditor General or the Auditor General • Some Accounting Officers do not respond to queries raised by the Internal Auditor General in a timely manner leaving no other option bu to recommend them for disappointment. • In addition, some Accounting Officers persistently submit budget documents very late beyond the required timelines • For FY 2019/20, all Local Government Accounting Officers should ensure that they adhere to the above requirements and execute their roles as indicated under Section 45 in the PFMA, 2015 if they are to be considered for appointment

  24. Payment of LG Elected Leader’s Allowances • A number of complaints have been raised that Local Governments are not paying their Political Leaders as required. • LG elected Leaders were budgeted for under the Unconditional grant and should be utilized for payment of monthly allowances to the respective beneficiaries as follows: • The Municipal Deputy Speakers each at Ushs. 300,000 per month; and • The District and Municipal Councilors each at UShs. 250,000 ; • LCIII Chairpersons UShs. 413000 per month; and • The LC III Councillors each at Ushs 35,000 per month • The Ex-Gratia for LC I and LC II Chairpersons - Ushs 120,000 per year. • Given that funds for LG elected Leaders was budgeted for under the Unconditional grant, their payments should take the first call on the resources once releases are made

  25. Budget Adjustments in FY 2018/19 • A number of Local Government budgets on the PBS were not balancing with that appropriated by Parliament due to budgeting on wrong item codes which are non-budgetary • The items include 314101-Petroleum Products, Finished Goods-314203, 314201 Materials and supplies, 314204 Goods for resale. Additionally, some local governments erroneously put funds for councillor's allowances on Pension, Gratuity and Salary Arrears. • Corrections were made on the PBS to ensure that the Local Government Budgets are in line with appropriation as well as facilitate invoicing and subsequently updated the IFMS. In FY 2019/20, all the non-budgetary items have been made inactive on the PBS to ensure that budgets are made on the right items • Any other adjustments on the budget other than those specified above will require a supplementary or Virement (10%) request in line with Section 22 of the PFMA, 2015

  26. Local Government Performance Assessment Exercise • Government introduced the Local Government Performance Assessment (LGPA) system under the leadership of Office of the Prime Minister. • The objective is to promote effective behaviour, systems and procedures in order to improve Local Government Administration and Service Delivery. • The LGPA covering FY 2016/17 was conducted in January and February 2018 and results released in June 2018. • The results for the assessment were supposed to be used to inform the: • Appointment of Accounting Officers; and • Allocation of development grants for FY 2018/19 but this was not done given that the results were released after the budget process for FY 2018/19 was already concluded.

  27. LG Performance Assessment Exercise…Cont’d • Based on the results of the LG PA, the Ministry of Local Government is coordinating the provision of performance improvement support to the LGs the performed poorly. • Five (5) Local Governments that performed poorly in Teso region were supported to develop Performance Improvement Plans in August 2018 and the implementation of these plans has commenced. Thirty three (33) other LGs are also going to be supported to improve their performance. • Currently, OPM has contracted firms that are conducting the LG PA covering FY 2017/18. • The firms will cover 144 Local Governments (121 districts and 23 Municipalities) • The 18 Municipalities under USMID are also being assessed by another firm using a similar but enhanced framework given the larger size of the development grants as well as the institutional strengthening support those Municipalities have received over the years. • The 6 districts that started operations in 2018/19 will not assessed because most of the indicators are not applicable to them.

  28. LG Performance Assessment Exercise…Cont’d • The results are expected to be approved in January 2019 in time to: • Inform the appointment of Local Government Accounting Officers for 2019/20; • Allocate 50% of the development grants in FY 2019/20. The development grants include: Discretional Development Equalization Grant, Education Development Grant, Health Development Grant and Rural Water Development Grant. • The LGPA will be cascaded to the LLGs, Education Institutions and Health Facilities for since this is part of the DLIs to be met. The MoES and MoH are going to design a system for assessing the performance of schools and health facilities respectively to ensure that funds transferred to these levels are properly used. • Yuo are requested to ensure that: • technical staff and elected leaders internalize the rationale and scope of the LG PA; • the respective LGs comply to all the requirements

  29. Conclusion • Government introduced key Public Finance Reforms to streamline Planning and budgeting in all MALGs • Substantial gains have been made in the implementation of Public Financial Management reforms to improve service delivery with your support. • We cannot afford to go back to the periods before the reforms but rather endeavor to make sure that the reforms work for all Ugandans. • LGs are also expected to exercise high levels of efficiency and prudence when preparing their draft budgets for FY 2019/20 • The MFPED will ensure timely release of funds during the course of budget execution and ensure Macro economic stability • Local Governments are also reminded to ensure that they submit their Budget Framework Papers for FY 2019/20 to MoFPED for FY 2019/20 using the PBS.

  30. Thank you

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