Bosnia & Herzegovina Fiduciary Update Dissemination Workshop

1. Bosnia & HerzegovinaFiduciary Update Dissemination Workshop Presentation by: Sanjay Vani The World Bank Washington DC

2. Fiduciary Update Report • Introduction • based on the findings of a series of missions • maps various developments since the previous assessments, identifies success factors in implementation of reforms, and provides a road map to implement remaining reforms • Final report submitted to the government/s in February 2007

3. Fiduciary Update Report • Scope • Covers strategic planning, MTEF, and annual budget preparation and downstream budget management including procurement, treasury and cash management, internal controls and internal audit, accounting and reporting, external audit, and parliamentary scrutiny • State and the two Entities

4. Fiduciary Update Report • Key findings: • good progress in establishing modern public financial management institutions and systems since the war • fiscal policy remains fragmented among the State, the two Entities, and the Brcko District • Strategic planning has improved : yet the link between policy and budget is still very weak

5. Fiduciary Update Report • Key findings: • preliminary steps to move from line-item-based budgeting process to a program-based approach • improved budget execution and cash management thanks to the automated treasury system • Public Procurement Law based on international best practice yet public procurement remains weak

6. Fiduciary Update Report • Key findings: • Compliance with internal controls needs to be improved • legislative and organizational framework for an internal audit system does not yet exist • newly enacted Supreme Audit Institution laws unify key principles and eliminate contradictions

7. Fiduciary Update Report • Key findings: • Corruption is reportedly widespread • Parliament has specialized committees to review the budget, but its influence is extremely limited

8. Fiduciary Update Report • Key recommendations: • Fiscal Council should establish a medium-term macroeconomic and fiscal strategy • Build capacity within the finance and line ministries in the area of fiscal management • Extend the treasury system to local government level and to extrabudgetary funds • Establish a procurement review body

9. Fiduciary Update Report • Key recommendations: • Establish a joint Government Accounting Standards Board • build capacity in tax audit and enforcement • Stipulate within the law explicit accountability for ministers, heads of departments, and managers (PIFC) • Adopt a legislative and organizational framework for a sound internal audit system

10. Fiduciary Update Report • Key recommendations: • Develop a strategic development plan for the SAIs • Establish a joint parliamentary research service

11. Drivers of future PFM reforms • Entry into the EU will increasingly shape the future reform program of BH in several areas • Committed leadership • Efforts of BH authorities • Sustained external technical assistance