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CASH MANAGEMENT STUDY TOUR

CASH MANAGEMENT STUDY TOUR. VILNIUS LITHUANIA 15-16 FEBRUARY PRESENTED BY: NIKOLA VUKICEVIC DEPUTY MINISTER FOR BUDGET REPUBLIC OF MONTENEGRO. ORGANIZATIONS INVOLVED. MINISTRY OF FINANCE – REPUBLIC OF MONTENEGRO STATE TREASURY DEPARTMENT MINISTRY OF FINANCE – LITHUANIA

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CASH MANAGEMENT STUDY TOUR

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  1. CASH MANAGEMENT STUDY TOUR VILNIUS LITHUANIA 15-16 FEBRUARY PRESENTED BY: NIKOLA VUKICEVIC DEPUTY MINISTER FOR BUDGET REPUBLIC OF MONTENEGRO

  2. ORGANIZATIONS INVOLVED • MINISTRY OF FINANCE – REPUBLIC OF MONTENEGRO • STATE TREASURY DEPARTMENT MINISTRY OF FINANCE – LITHUANIA • US DEPARTMENT OF THE TREASURY OFFICE OF TECHNICAL ASSISTANCE

  3. REFORM OF PUBLIC FINANCE IN LITHUANIA – INTRODUCTION • LEGAL FRAMEWORK • Organic Budget Law • Strategic Planning Methodology • Government Resolution on Budgeting, Calendar, etc.

  4. PRINCIPLES OF REFORM • UNITY • SPECIFICATION • TRANSPARENCY • SOUND FINANCIAL MANAGEMENT

  5. UNITY • CONSOLIDATION OF NON BUDGETARY FUNDS • Five included, four still EBF • TAXES AND OTHER INCOMES ARE REDISTRIBUDET THROUGH CONSOLIDATED NATIONAL BUDGET, SOCIAL AND HEALTH INSURANCE FUND

  6. TRANSPARENCY • ADDITIONAL INFORMATION TO THE PARLIAMENT, LEADING ANNUAL DRAFT BUDGET: • Programmes to be executed • Investment projects to be implemented • Performance information • Information available on the internet

  7. SPECIFICATION • ISSUE - APPROPRIATION MUST HAVE A GIVEN PURPOSE AND BE LINKED TO SPECIFIC OBJECTIVE • SOLUTION - IMPLEMENTED BY STRATEGIC ACTIVITY PLANNING SYSTEM

  8. SOUND FINANCIAL MANAGEMENT • IMPLEMENTATION – THROUGH CREATION OF STRATEGIC PLANNING SYSTEM • Governmental Level • Institutional Level – Spending units • Based on Budget Routine Process

  9. BUDGET INSTITUTIONS STRATEGIC ACTIVITY PLAN • GOVERNMENT DEFINES STRATEGIC GOALS AND PROGRAMS FOR LINE MINISTRIES • LINE MINISTRIES DEFINE SPECIFIC TASKS AND INDICATORS

  10. STRATEGIC PLANNING 1 • First step in annual budget cycle – budget priority setting for mid-term period • Sector strategies for investment based on budget priorities • Fiscal plan expenditure targets based on budget priorities • Linking ministerial strategic action plan to priorities • Linking inter ministerial programs to priorities • Linking measures inside ministerial programs to priorities

  11. STRATEGIC PLANNING 2 • Principal framework for the hierarchy of strategies of different duration (15, 7 and 3 years) • Harmonisation of investment planning and strategic activity plans (budget programmes) • Harmonisation of EU planning instruments with investment planning and budget

  12. IT SYSTEM FOR BUDGET EXECUTION • IT SYSTEM FOR AUTOMATED FORECASTING OF BUDGET EXPENDITURE • More accurate forecasts of budget expenditure • Forecasts of expenditures for borrowing and investment planning • More accurate data – less balance kept in accounts for unexpected expenditures • Lower interest expenses

  13. MONTENEGRO - HIGHLIGHTS • ORGANIC BUDGET LAW - 2001 • TREASURY IMPLEMENTED – 2002 • SAP SYSTEM FOR BUDGET EXECUTION – IMPLEMENTED IN 2003 • PROGRAM BUDGETING STARTED IN 2004 – ONGOING PROCESS • HOME MADE SOFTWARE FOR BUDGET PLANNING – 2005 • CAPITAL BUDGET IMPLEMENTED - 2007

  14. APPLICABILITY TO MONTENEGRO • UNITY • Inclusion of all EB Funds in TSA from 2008 • SPECIFICATION • Program Budgeting improvement – spending units takes more responsibility for formulation of performance indicators • Redefinition of Program Structure

  15. APPLICABILITY TO MONTENEGRO – cont • TRANSPARENCY • Budget Rationale better presented by functional classification • SOUND FINANCIAL MANAGEMENT • Government Responsibility in definition of Sector Strategies

  16. APPLICABILITY TO MONTENEGRO – cont • FORECASTING PROCESS • Assigning responsibilities to spending units in process of budget execution

  17. MONTENEGRO NEXT STEPS • EB funds in TSA – 2008 • Improvement of implementation of Program budgeting based on experience of Lithuanian case and other countries • Medium Term Budgeting Framework – explore possibilities for multiyear budgets • Ceilings for spending units for three year period

  18. MONTENEGRO NEXT STEPS – cont • Unification of all spending units through SAP system • Unification of all spending units through Budget Planner system and connection with SAP • Improving municipality reports on public expenditures • Improving Public enterprises reports on assets and liabilities

  19. KNOWLEDGE GAINED • Role of well-established principles in budgetary reform • Quality of IT system in cash management process • Innovative methods for budget execution forecasts • Advantages of combination of both top down and bottom up principles in public finance management

  20. THANK YOU

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