Budget Reforms and Considerations for FY 2017/18

1. BUDGET REFORMS AND KEY CONSIDERATIONS IN PREPARATION OF BUDGET FOR FY 2017/18 MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT AT THE REGIONAL BUDGET CONSULTAIVE WORKSHOPS FOR FY 2016/17

2. Structure of the Presentation • Introduction • Budget reforms • Highlight of the GARP and NBC on: • Execution for FY 2016/17 • Budget Preparation for FY 2017/18 • Conclusion

3. 1. introduction • Government has on many occasions, introduced reforms to improve the overall management of public resources in MDAs and LGs. This has been done in line with the existing legal framework (Constitution- 1995, PFMA- 2015, Local Government Act among others); • Generally, the need for reforms has been recommended as a result of studies & reports done within and outside government, review of past performance and monitoring reports, local and international based practice as well as from existing challenges on some policy pronouncements and options- (governments across the world can’t run away from reforming its systems); • This presentation therefore highlights the key reforms done by and within the mandate of the MoFPED both on the budget execution and Budget Preparation;- and • It also emphasizes some key issues for raised concerning LGS highlighted in the recently concluded GAPR & National Budget Conference for FY 2017/18 in a bid to improve service delivery.

4. BUDGET REFORMS • Releases to LGs: LEGACY TO IFMS • whereas funds to LGs are released on time, there has been a time lag between which MoFPED releases funds and when they reflected on the LG Accounts. Some LGS receive the funds early & others later (a month or more). Yet those at the CG take a shorter period; • Prior to 1st July 2016, releases to LGs were done using IFMS & Legacy System; Votes on IFMS, got funds earlier than those on Legacy; causing a lot of delays in execution; • From 1stJuly 2016, government made a decision to have all releases done under the IFMS, all votes under Legacy system had to shift to IFMS (Ref. BPD 86/268/01 circular on 21st July 2016); • Implication: LG Accounting Officers were included in the release process as noted in the flow chart.

5. process flow chart

6. Legacy to IFMS: LG Accounting Officer roles • The soft copy of the warrants will be in a Ms. Excel format which will be reviewed by this Ministry and then loaded on the system; • The details of the funds that fall under the category of direct transfers should be attached to the warrant and broken down by each service delivery unit (Town Councils, Sub-counties, UPE and USE Schools, Tertiary Institutions, Hospitals and Lower Level Health Facilities); • Based on the review of the warrants, those that are above or below the expenditure limit will be rejected in writing clearly stating the reason(s) for the rejection/non-approval; and • Accounting Officers will then enter the invoices on the system following the approval of the warrants just like they handle Wages, Pensions and Gratuity.

7. Transitional Arrangements: Done in Q1 FY 2016/17 MOFPED loaded the warrants for the expenditure limits that were communicated in our circulars of 15th and 21st July 2016 on the IFMS for only this quarter (Q1): Challenges in Q1 FY 2016/17: • No advance training (Capacity concerns arose): LG were not familiar with their roles since no training was held. However sensitization training began for Q2 and LGs will be given support • Therefore, when requested to submit the warrants, Not all Accounting Officers submitted on time for warrants to be uploaded to IFMS. As a stop measure, MoFPED did warrants on behalf of the AOs. • On the MOFPED side, even when warrants were loaded, there were some technical issues, which resulted into bouncing of warrants, but our team did their level best to sort the concerns; • We still continued to receive complaints from LGs and MoFPED decided to handle LG concerns on a case by case and now we believe all funds have been received;

8. Challenges in Q1 FY 2016/17 • Bank account information for Direct transfers: On the part of the AOs the 2nd BCC for FY 2016/17 requested for details of bank accounts for A/C for Sub-counties/Divisions, TCs as part of the Performance Contracts for FY 2016/17, a number of LGs did not submit complete lists; • Education and Health: these releases delayed since it took time for MOES and MoH to validate the information (lists and Bank A/C information to facilitate direct transfers to Education institutions and health Facilities) submitted by AOs. • Detailed break down: Whereas we send letters detailing the release and publish it on but website, some LGs still travel to MoFPED for this information. Note: The above challenges have been overcome and we hope that in Q2, the process will be smooth. Key: submitting the required information on time.

9. BUDGET REFORMS- Con’t 2) Intergovernmental fiscal transfers-Recap • This began in FY 2015/16, following recommendations from two key studies Done by LGFC and MoFPED in partnership with WB • In FY 2015/16, new structure for the grants was formed with each Sector having one Non-Wage, Wage and Development grant; • In FY 2016/17, review of allocation formulae & Sector Grant Guidelines was done in consultation with the Sector MDA as well as LGs; and LGs submitted their Final Performance Contracts in line with the guidelines; • As follow up, in FY 2016/17, there was an independent assessment done by an Audit firm was done to ascertain whether LGs had complied as per the guidelines and the results of the assessment will be discussed in the parallel sessions;

10. Reform on Intergovernmental fiscal transfers • Preliminary results done on the draft Performance Contracts for FY 2016 indicate that a number of LGs did not follow the guidelines to the dot: details will be discussed in the parallel sessions; • Some LGs did not send the relevant data in addition to the Performance Contracts. Hence the challenges experienced during the Q1 releases of lack of information for HCS and Schools; • The following has been done: • Increased consultations and trainings (various meetings in the center and also during this Workshop, parallel sessions will focus on understanding the guide); • The Formulae and guidelines have also been refined in various consultations from last FY across all Sectors and new grant guidelines will be shared in this Workshop.

11. Reform on Intergovernmental fiscal transfers Assessment of accountability requirements; • In FY 2017/18, another assessment will be done on all Budget documents to assess the adherence to these guidelines; • Sectors and MoFPED will discuss the findings of the assessment and feedback shall be given to the LGs to address the concerns; • AOs will be informed if/ or not they have adhered; what to do? • Guidelines should be well internalized and consultations be done in the budget conferences; • HLG therefore need to support LLGs in implementing these guidelines: The role of Sub-counties, Divisions and other LLGs is highlighted in most of the guidelines. • Participatory budgeting is key to make sure ownership of the budget. Avoid leaving planning units to budget for Departments.

12. Key reforms- Con’t 3) Performance Based Budgeting • In FY 2017/18, Government will transit from Output Oriented Budgeting to Performance Based Budgeting; • PBB is a budgeting structure where Funds are distributed by programme or functional area and based on the nature of the activities performed by the program; • A Programme brings together expenditures with a shared objective, often referred to as outcome. E.g. the Anti-Malaria prevention Programme might bring together the following outputs: • Anti-malaria awareness media campaigns; Distribution of mosquito nets. • Anti-malaria door –to-door campaign leaflets; and Indoor sprays.

13. PBB- continued • It recognizes that it is not enough to consider only outputs for measuring results but how a group of outputs contribute to improvement of welfare for citizens. • There is need to move from the exclusive focus on outputs to a more balanced system focusing on both outputs and outcomes. • Aims to improve the efficiency, effectiveness and equity of Government expenditure; • The PBB will follow a higher result chain that the OOB as indicated in the figure below.

14. Fundamental intended or unintended changes in the conditions of the target group, population, system or organization. Eg: Percentage of People living under the Poverty Line, Increase in Life Expectancy, Increase in Literacy rates Impacts Development Results (Program Budgeting) The Medium-term results for achieving specific outputs E.g: increased tonnage of Coffee Exports, Reduced Maternal Mortality Rates, Increased Exams Pass Rates Outcomes The final products, or goods and services produced for delivery E.g: Number of Functional Health Facilities Constructed, Number of Trained Teachers recruited, Number of Farmers supported with Agric. Extension Service Target Outputs (Output Oriented Budgeting) Outputs The processes or actions that use a range of input to produce the desired output Eg: Timely distribution of Coffee Seedlings, Immunization campaigns, School Inspections Activities The resources that contribute to the production and delivery of Inputs Eg: Funds, Human Resources, Seedlings, Inputs PBB Result-Chain

15. Transitional Arrangements for PBB • For the Budget Process of FY 2017/18, We shall use a new Tool called the Performance Based System and not the Output Budget System; • MoFPED with other Stakeholders are finalizing the process of formulation of the structure which will cover all the aspects of the result chain and form linkages and synergies on work outputs and outcomes contributed across Sectors; • The Tool is under final User Acceptance Testing and will go live within September 2016; and • The Roll Training will then be held to train All LGs in preparation of the Budget Frame Work Papers for FY 2017/18.

16. Highlight on GAPR FY 2015/16 & National Budget Conference FY 2017/18 • Budget Execution • Early completion of procurements: All development funds will be released in by Q3 (January) to avoid unspent balance. No authority will be granted to retain these funds at the end of the FY; • No Diversion from Performance Contracts (Annual Work plans): Should be done in line with the PFMA, and PS/ST needs to be informed of any alterations in the Performance Contracts since he is a party; • Supervision, monitoring and evaluation is important: this will improve quality of services and outcomes- All Government Service units need to be functional as per the regulatory standards;

17. GAPR FY 2015/16- highlights • Budget Execution • Payment of salaries: All Pensions and Salaries should be paid by 28th every month; and accounting Officers should at all time, ensure adequate funds are available- analysis on the wage bill is required on a monthly basis( know your balances) ; and • Delayed release of funds especially in Q1: MoFPED is committed to sorting these delays in subsequent quarters; • Submission of budget documents: All budget reports need to be submitted on time otherwise, there will be consequences as indicated in the AOs appointment letters: (this happened to AOs- Manafa and Nakaseke appointments were withdrawn); • Capacity building of Political Leaders: MoFPED will consider training Leaders on Budget Matters;

18. Highlight of National Budget Conference- Con’t • Budget Preparation for FY 2017/18 • Alignment of LG Development plans (86/156 LGs): The absence aligned plans in some LGs leads to implementation of non NDP II priorities: No resources for no aligned plans • Strengthening planning roles, Budget Desk and Technical Planning Committees: LGs to prepare adequately consultative Workplans • Focus on budgeting completion of running projects Adherence to Budget Requirements; • Submission of CORRECT and COMPLETE Planning data; information on Staffing, Enrollment, Details of Health Centers and Budgeting for salaries; and • Budgeting system- Performance based system will be used in the Budget process for FY 2017/18 and roll out training will be done;

19. Conclusion • MoFPED is planning to meeting the leadership of ULGA after the budget workshops to discuss how to address critical LG service delivery constraints; • However, Across government we need to find efficient ways of providing services and not just seek for more institutions, staff, funds since resources are scarce. • Proper Budgeting is paramount since. No Supplementary will be entertained save for circumstances mentioned in the PFMA (2015); • Early procurements and completion of projects; avoid politicking on projects • Performance Based Budgeting: Roll out training plan is available and training will commence after the workshops. • In a bid to improve communication, please register your email address with the Secretariate.

20. Thank You