PROGRAM BUDGETING EXPERIENCES FROM SLOVAKIA

1. PROGRAM BUDGETING EXPERIENCES FROM SLOVAKIA Tbilisi June 2007 Ján Marušinec

2. General note on program budgeting WHAT IS PROGRAM BUDGETING GOOD FOR? 1. IT IS AN ALLOCATION TOOL Transparency 2. IT IS A MANAGEMENT TOOL Accountability Effectiveness and efficiency

3. Content of the presentation Brief history of program budgeting in Slovakia Current development stage Program examples Future challenges

4. Brief history of PB in Slovakia EARLY STAGES:DESIGNPHASE (2000-1) U.S. Treasury advisor (upon ministers request) begins with the program budgeting preparation in Slovakia obstacles: the understanding of program budgeting is limited only on time-limited Government activities; middle-management of MoF is not identified with the change in the system of budgeting Minister decides about gradual introduction of the system: 4 pilot line-ministries, expanded to 10 line-ministries in 2003 and for 2004 full program budget pilot line-ministries produce simple program structures for budget year 2002

5. Brief history of PB in Slovakia THESYSTEMISBECOMINGOPERATIONAL (2002-3) MoF issues PB methodology to be used in 2003 and guides the line-ministries intensively during the process of program budget preparation New minister of finance supports the change and confirms the decision to apply PB globally since 2004 Big revision of programs, goals and objectives is performed based on the Government Declaration, MoF heads a new Steering Committeeto coordinate budget reforms on line-ministry level Budget for 2004 is in full program structure, but doesn't include other subjects of the public sector Major reorganization takes place at the MoF

6. Brief history of PB in Slovakia THE SYSTEM IS MATURING (2004-6) Revised PB methodology is issued, Budgetary Rules include a definition of multi-annual program budget State Treasury becomes operational, but doesn't support program classification of expenditures MoF switches from inputs/activities to outputs/outcomes in budget negotiations, part of total budget expenditures is allocated for Government priorities, discussion on quality of performance indicators starts 6 pilot line-ministries get their own budgeting advisors within the WB project; their activity is aimed at improvement of budgeting and budget management through programs

7. Brief history of PB in Slovakia THESYSTEM IS MATURING (2004-6) program structures are relatively stabilized, MoF gives higher priority to goals, objectives and measurable indicators quality budget discussion is more structured, non-financial data are used also by ministers and other politicians during the negotiations State Treasury starts to execute the budget also by program structure since 1.1.2006 the new program budgeting module within the Budgetary Information System (BIS) becomes operational, fully integrated with all the other BIS modules

8. Current development stage INSTITUTIONS CONCERNED

9. Current development stage BUDGET PROCESS

10. Current development stage METHODOLOGY GOVERNING PB Budgetary Rules Law Methodological handbook of MOF on program budgeting Manual on formulating goals, objectives, and measurable indicators Manual on monitoring and evaluation of programs (in preparation)

11. Current development stage THE PROGRAM SETUP Programs, sub- programs and elements (permanent) or projects (temporary) Goals (strategic, long-term, without specific value), objectives (specific, annual or multi-year, specific value) Government approves program structure, Parliament approves programs, selected goals and objectives Monitoring is performed on half-year basis, evaluation is missing at the moment

14. Current development stage LOGICAL FRAMEWORK OF A PROGRAM Goals Results M-T outcome objectives Outcomes Specific objectives Output objectives Outputs Inputs Inputs

15. Current development stage PROGRAM EXAMPLE Program: Law enforcement Goal: Ensure citizens safety Sub-program: Area patrols Strategic objective: Reduce crime by 10 % to 2010 Measurable indicator: Crime rate Element: High crime area surveillance Objective: Increase police presence in the streets Measurable indicator: No. of hours guarded

16. Current development stage PROGRAM EXAMPLE II Program: Road infrastructure Goal: Increase transport speed and safety Sub-program: Highways and motorways Strategic objective: Increase East-West road traffic capacity by 10 % to 2010 Measurable indicator: Road traffic capacity in ths cars/hr Element: Highway and motorway construction Objective: Build 50 kms of new highway system in 2007 Measurable indicator: No. of kms build

17. Program 070: Prison system Goal Ensure the proper functioning of imprisonment, and security of judiciary and prosecution buildings in compliance with national requirements and EU recommendations Medium-term outcome objective Increase the imprisonment of sentenced persons from 84% in 2004 to 95% in 2010

18. Program 070: Prison system Specific objective Gradually increase the average of prisoners per guard, achieve an average ratio of 2,23 in 2007. Output objective Increase the capacity of prisons by 250 beds and achieve a total capacity of 10 733 in 2007.

19. Program 070: Prison system Result indicators % of citizens that feel safe in the streets Ratio of second offenders on total crime rate Outcome indicators % of imprisoned persons out of sentenced persons Average number of prisoners per guard

20. Program 070: Prison system Output indicators Capacity of prisons Average area (sqm) per prisoner % prisoners working while in prison Input indicators Number of sentenced Number of prisoners Number of guards

26. Future challenges INSTITUTIONAL CHANGES Building-up of a functioning M&E system Involvement of other institutions (mainly SAO) Unified top-down approach (strategic policies) Improve program formulation (objective hierarchy and quality) Decentralization of budgeting in the line-ministries

27. Future challenges TECHNICAL CHANGES Improve EU funds integration into the budget Improve management of multi-ministerial programs Bringing order into non-financial data Adjustment of IT systems to increased demands Improvements in the budgetary process (reform burden)

28. Thank you for your attention

29. Monitoring and evaluation There is no universal model for M&E function across the OECD countries Establishing M&E is a long-run process, starting with simple centralized model to enhanced decentralized one Should provide feed-back to policymakers and program managers how they could increase efficiency and effectiveness Should be integrated into the budgetary process in some way, otherwise M&E is just formal issue

30. Monitoring and evaluation MONITORING Regular (frequent) activity aimed at checking the progress achieved in program implementation During and immediately after the program execution phase Focuses on financial aspects and physical outputs Performed in-house by line-ministry monitoring units

31. Monitoring and evaluation EVALUATION Ad-hoc (can also be regular, but not frequent) activity aimed at evaluating the program performance Performed before (ex-ante) or after (ex-post) the program starts / ends Focuses on overall program logic, outcomes and effectiveness of their achievement Performed by external professionals, managed by evaluation cells and coordinated centrally

32. Monitoring and evaluation INSTITUTIONAL ARRANGEMENTS Monitoring and evaluation cells in the line-ministries Across the Government coordination of M&E methodology and implementation (MoF or committee) Close link to budgetary process to really enhance program performance (carrot and stick) Extensive re-education program for government employees (either new people are hired or workload of performing current tasks is reduced)

33. Data management FINANCIAL DATA Budget preparation phase Budget execution phase (modified budget, Treasury data) Accounting Classifications used have to be consistent Bridge tables help to keep up-to-date time series

34. Data management NON-FINANCIAL DATA Spread among various different sources / users The same logic should apply as with financial data An integrated IT management system should contain financial and non-financial data Budget analysis is impossible without non-financial data