PEFA Performance Measurement Framework A Tool For Budget Reforms

1. PEFA Performance Measurement FrameworkA Tool For Budget Reforms THE GEORGIA EXPERIENCE

2. TOPICS OF DISCUSSION • Budget Reform Objectives • Process Description • PEFA Criteria • Findings • Recommendation • Actions • Next Step

3. Need for Budget Reforms • Improved Public access • Budget and Organic law changes • Improved decision-making • Simplify process • Increase linkages between documents

4. 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

5. Georgia Budget (Continued) • Parliament Review • Approved Budget Law • Budget execution • Quarterly reports

6. 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.

7. 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

8. PEFA Performance Criteria

9. 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).

10. 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

11. 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

12. 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

13. 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 • Include government priorities • Add summary tables by classification for expenditures • Add five year fiscal impact table

14. Format Improvements (continued) 5. Add grant summary table by organization • Add information on capital revenue sources • Include prior year actual in all budget tables • More information on deficit financing • Use GFS 2001 to calculate data • Add external debt by country table.

15. Format improvements • Add state financial assets table • Include spending institution programs and priorities. • Show capital projects for each spending institution • Create Citizens Guide to the Budget.

16. 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

17. 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

18. Budget Improvements • Added form for ministries to provide four years of information on: • Priorities • Strategies • Actions • Programs • Budget

19. Budget Improvements • Added form identifying by ministry how any excess funds will be allocated. • Improved communications and coordination between ministry and central budget staff.

20. PEFA Assessment After Improvements • Process: B • Format: B+

21. 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

22. 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

23. 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

24. Questions?