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Budget Process and Medium Term Expenditure Framework (MTEF)

Budget Process and Medium Term Expenditure Framework (MTEF). Natia Gulua Main Specialist of Financial and Budget Division Ministry of Labour , Health and Social Affairs of Geogia September, 2012. Budget process and Medium term expenditure framework (MTEF). Budgetary Process;

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Budget Process and Medium Term Expenditure Framework (MTEF)

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  1. Budget Process and Medium Term Expenditure Framework (MTEF) NatiaGulua Main Specialist of Financial and Budget Division Ministry of Labour, Health and Social Affairs of Geogia September, 2012

  2. Budget process and Medium term expenditure framework (MTEF) • Budgetary Process; • Program Budget; • Stages of Program Budget Implementation; • Basic Data and Direction Document (BDD) and MTEF.

  3. Budgeting Process • Reforms in the Georgian budgetary process have been started since 2004; • Since 2005 implementing Midterm Expenditure Framework (MTEF) has been started and it was the first time when the Government’s Basic Data and Directions Document (BDD) was prepared; • Gradually all the Ministries, other spending agencies and Autonomous Republics have been included in the process of preparing the above-mentioned document; • In 2010 priorities of all the self-governing entities and information about their budgets were included in the BDD Document; • In 2008 we moved to GFSM-2011 Classification, worked out by the International Monetary Fund; • In 2010 a new electronic system of Budget Planning was elaborated, in which all the spending agencies were included and the budget of the current year was planned using the electronic program; • Electronic Treasury System was also elaborated the previous year with the help of which all the spending agencies are able to manage their Budget resources from their own offices;

  4. Budget Code. The main Public Financial Management (PFM) reform in 2009 was the adoption of a new budget code in December, aiming at consolidating and simplifying budget legislation; unifying central and local budgets; and accelerating the budget approval and execution process. Medium-term budget planning is more closely integrated into the annual budget cycle. The budget code also introduces program budgeting. • Since 2005 implementing Medium Term Expenditure Framework (MTEF) (for 4 years) has been started and it was the first time when Georgian Government’s Basic Data and Direction Document (BDD) was prepared.

  5. Program Budget • Goals for the future: • Further improvements in Efficient Spending; • Strengthening interrelations between the Government priorities and Financing of the Public Sector organizations; • Georgian Government moved to new principles of the Public Finance Management, which includes: • Planning budget according to prior determined outcomes; • Developing midterm programs, which will be directly linked to the national and sector priorities of the government; • Determining subprograms and activities in order to reach the desired outcomes of the program as well as determining the financing of those activities across the years; • Introducing performance measurement indicators for each program and subprogram in order to measure the reached outputs/outcomes; • According to the Budget code elaborated in 2009 implementing program budget for the year 2012 has become obligatory.

  6. Stages of Program Budget Implementation • Preparing Program Budget was first started in 2009, when the ministries as follows also prepared their program budgets together with the ordinary budgets for the year 2010: • Ministry of Justice of Georgia; • Ministry of Education and Science of Georgia; • Ministry of Labor, Health and Social Affairs of Georgia; • Program Budgets prepared by the above mentioned ministries have been discussed and positively evaluated by the European Union and other donor organizations, though it was also stated that those document needed further elaboration in regards to improving format, expected outputs and performance assessment criteria; • In 2010 “Program Budget Implementation Plan” was approved by the decree of the government #284, according to which the ministries as follows were asked to prepare program budgets: • Ministry of Justice of Georgia; • Ministry of Education and Science of Georgia; • Ministry of Labor, Health and Social Affairs of Georgia; • Ministry of Corrections and Legal Assistance of Georgia; • Ministry of Agriculture of Georgia; • Ministry of Environmental Protection and Natural Resources of Georgia;

  7. Stages of Program Budget Implementation • Under the government’s decree representatives of the pilot ministries and the Ministry of Finance of Georgia were asked to take part in the working group which covered the issues concerning program budget implementation process; • Examples of other countries’ program budgets and issues concerning the Georgian Program Budget format have been discussed during the working sessions; • In April, 2010 International Monetary Fund (IMF) mission visited Georgia which discussed Program Budget Implementation related issues. Stages of the program budget implementation process as well as the different versions of the budget format were discusses with the mission; • Format of the Program Budget of Georgia and corresponding instructions have been elaborated based on the recommendations of the IMF and the suggestions declared during the working group sessions; • Program Budget Annex and instructions were included in the Budgetary Request prepared for the year 2011; Since 2011 Budgets of all Ministries rearranged in Program Budget Format.

  8. BDD and MTEF • BDD is the basic plan of Georgian development, which defines midterm strategies of country, includes the information on medium-term macroeconomic and fiscal forecast, as well as information on main issue-areas of the development of the central, autonomous and local self-government authorities of Georgia. BDD document describes the medium- term priorities and the programs to be implemented by the central and local government and by the Autonomous Republics over the next four years. The BDD provides information on the objectives, activities, expected results and financing needs of the programs; • MTEF is one of the main part of BDD document of Georgia. According to the “Budget Code” of Georgia, before March 1 of every year the Government of Georgia defines in its decree the list of information to be presented by office of payment, the state representatives in the administrative-territorial units – governors, the authorities of local self-government bodies and the terms for presentation of the information.

  9. BDD and MTEF • Basic Data and Direction Document (BDD) of the Ministry of Labour, Health and Social Affairs of Georgia, as BDDs of other spending agencies, includes the following information: a) Evaluation of last year activities of the ministry according to the programs and their funding and achieved results; b) The action plan of current year budget and expected results; c) Medium term action plan for four year which includes description of each programs and activities, importance of each program, program outcomes and indicators; d) Medium term budget for four years; e) Administrative expenditures and number of employees. • From March of every year the ministry should prepare all abovementioned information periodically (as it is defined in the “Budget Code of Georgia”) in accordance with annexes and according to these information the Ministry of Finance determines the budget ceilings and maximum number of employees for each ministry and budget spending agencies.

  10. BDD and MTEF • As BDD is the basic framework for the next year state budget with its particular importance in budget process, working on this document has become especially important for the last 2-3 years. Because of preparing budget in program budget format in 2011 it was first time when the priorities of the country had strong link to the programs implementing by the spending agencies. • The fundamental benefit of MTEF is that it enables governments to produce better results for the public; • Linking strategic planning and long-range financial planning; • Planning programs for long-term period (in Georgia MTEF is prepared for 4 year); aligning activities with outcomes.

  11. BDD and MTEF • Main parameters (inter alia budget funding of several programs for the next year or administrative expenditures etc.) of BDD document of the Ministry of labour, Health and Social Affairs of Georgia may change during the year in several reasons: • Country Reforms – new priorities and the need of new programs implementation; • Health and social program format changes. Etc. • Improvements are noticeable in regards to budget format as well as the quality of the information in the Budget.

  12. BDD and MTEF Irrespective of the positive evaluation there were several issues to consider: • Performance measurement indicators are in most cases general and don’t give possibility to assess expected outputs/outcomes; • There are given certain percentage of improvements in the indicators but there is no mentions of the starting point, so there is a difficulty in assessing the success of the program; • Activities to be carried out, expected output/outcomes and performance measurement indicators are mixed up in many cases.

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