PEFA Performance Measurement Framework

A Tool For Budget Reforms

THE GEORGIA EXPERIENCE

TOPICS OF DISCUSSION

Budget Reform Objectives Process Description PEFA Criteria Findings Recommendation Actions Next Step

Need for Budget Reforms

Improved Public access Budget and Organic law changes Improved decision-making Simplify process Increase linkages between documents

Main Components of Georgia Budget System

Basic Data and Directions– Macro Economic Assumptions– Multi-year forecast– Government priorities– Ministry multi-year strategic plans– Initial budget ceilings

Ministry Budget Requests Draft Budget Law

Georgia Budget (Continued)

Parliament Review Approved Budget Law Budget execution Quarterly reports

Objectives of Project

A budget circular providing clear and comprehensive guidance in developing the budget consistent with existing laws.

Enhanced content for improved decision-making

Strengthen interconnections between budget documents

Improved strategic focus within the budget.

Process

Two Work Groups Convened– Budget Circular– Budget Format and Content

Selected PEFA Standards for Evaluation– Criteria applicable to objectives

Applied standards to current budget Identified actions to improve compliance Conducted interviews and surveys with:

– Budget department managers and staff– Line ministry budget staff– Parliament staff

Presented findings and recommendation Implemented changes Re-evaluated Budget against PEFA Criteria

PEFA Performance Criteria

Selected PEFA Performance Indicators

Comprehensiveness and Transparency– Comprehensiveness of information included in

budget documentation (PI-6).

Policy Based Budgeting– Orderliness and participation in annual budget

process (PI-11).

Comprehensiveness Elements (PI-6)

Budget should include: Macro-economic assumptions for three years

including the prior year. Fiscal deficit Deficit financing Debt stock Financial Assets

Comprehensive Elements(Continued)

Prior year’s outrun Current year’s budget in same format as the

budget proposal Summarized budget data for both revenue

and expenditures for main classifications including for current and prior year.

Budget impact of new policy initiatives

Orderliness and Participation (PI-11)Elements

Budged process should exhibit:– Existence of and adherence to a fixed budget

calendar.– Political involvement in preparing the budget

circular– Timely budget approval by the legislature

Initial PEFA Assessment of Format

Scored “C+”“Document fulfills 3-4 of the 9 Benchmarks.”

Identified 14 improvements:1. Add 2007-2010 macroeconomic summary table

2. Include government priorities

3. Add summary tables by classification for expenditures

4. Add five year fiscal impact table

Format Improvements (continued)

5. Add grant summary table by organization

6. Add information on capital revenue sources

7. Include prior year actual in all budget tables

8. More information on deficit financing

9. Use GFS 2001 to calculate data

10. Add external debt by country table.

Format improvements

11. Add state financial assets table

12. Include spending institution programs and priorities.

13. Show capital projects for each spending institution

14. Create Citizens Guide to the Budget.

Initial PEFA Process Assessment

Self-assessed “C” Identified 7 areas of improvement resulting in

the following actions:– Multi-year conversion of budget to GFS standards– Additional explanatory information for:

Financial condition Government priorities Basis of expenditure ceilings New programs and services

Process Improvements (Continued)

Revised and improved all budget forms Simplified economic classifications Merged two forms. Added form to collect information on donor and grant

revenues. Added form on program enhancements Added form for three year budget summary Revised capital expenditure information

requirements

Budget Improvements

Added form for ministries to provide four years of information on:– Priorities– Strategies– Actions– Programs– Budget

Budget Improvements

Added form identifying by ministry how any excess funds will be allocated.

Improved communications and coordination between ministry and central budget staff.

PEFA Assessment After Improvements

Process: B Format: B+

Summary of Improvements

Improved strategic connections between BDD, Ministry Budgets, and budget laws.

Pre-planning for revenue surpluses. Simplified budget process Improved content Increased utility for decsion-maiking Clearer budget preparation guidelines Improved working relationships between Ministries

and Central Budget Department

Observations on the Use of PEFA

Provides useful tools for assessing the process and format of the budget.

Can result in focused and meaningful changes.

Promotes international standards and therefore comparability of budgets.

Improves communciations

Next Steps

Strive to reach an “A” grade for both the format and process category.

Complete conversion to GFS 2001 classifications

Institutionalize changes, e.g. annual publication of citizens guide.

Assess budget against other PEFA elements Use elements to improve capital budget

Questions?