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Lesotho icgfm presentation-powerpoint2007

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  • 1. Budget Transparency in the Kingdom of Lesotho: The Roles of PFM Reform and Public Outreach
    ICGFM 25th Annual International Conference
    Miami, Florida USA
    May 15-20, 2011
  • 2. Overview
    • Country Background
    • 3. PFM Reform – Budgeting Processes
    • 4. PFM Reform – Integrated Financial System
    • 5. Promoting Transparency with Enhanced Budget Information
    • 6. Lessons Learned and Next Steps
    2
  • 7. Country BackgroundMs. Sheryl Kelly
    3
  • 8. Country Background
    • General
    • 9. An enclave within South Africa known as “The Mountain Kingdom”
    • 10. Lowest elevation is 4,600 feet
    • 11. About the size of Belgium
    • 12. Population = 1.9 million
    4
  • 13. Country Background
    • Political
    • 14. Constitutional monarchy
    • 15. Established as British protectorate in 1868
    • 16. Gained independence in 1966
    • 17. Bicameral Parliament, with a 33-member Senate and 120-member National Assembly
    • 18. Cabinet is comprised of Prime Minister and Ministers/Assistant Ministers from the 19 ministries
    5
  • 19. Country Background
    • Economic
    • 20. Manufacturing (textiles and clothing)
    • 21. Royalties from water transfers to South Africa
    • 22. Diamond mining
    • 23. Agriculture
    • 24. Miners’ remittances
    • 25. Construction
    • 26. Southern African Customs Union (SACU) revenues
    6
  • 27. Country Background
    • Budget
    • 28. 27 Ministries and Offices
    • 29. FY 2010/11 Recurrent Budget = M7.4 billion (US$1 billion):
    • 30. 22% to Ministry of Education and Training
    • 31. 11% to Ministry of Health and Social Welfare
    • 32. 11% to Ministry of Finance and Development Planning (student scholarships)
    7
  • 33. Country Background
    • Budget
    • 34. FY 2010/11 Capital Budget = M3.6 billion (US$ 491 million)
    • 35. About half is government-funded:
    • 36. 11% to Ministry of Public Works and Transport
    • 37. 8% to Ministry of Local Government and Chieftainship
    • 38. 7% to Ministry of Health and Social Welfare
    8
  • 39. Country Background
    • PFM Reform
    • 40. PFM Programme commenced in January 2005
    • 41. Funded by several donors, including the European Union (EU), UK Department for International Development (DFID), Irish Aid, World Bank, and African Development Bank
    • 42. Seven Areas of Focus:
    Strengthened macroeconomic analysis and forecasting linked to fiscal policy, budget performance and monitoring
    Integrated planning and budgeting systems
    Modern procurement systems
    9
  • 43. Country Background
    • PFM Reform
    • 44. Seven Areas of Focus:
    Modern integrated accounting, revenue and expenditure management systems
    Strong independent oversight bodies and mechanisms
    Information to facilitate effective Cabinet participation in the budget process
    Enhanced capacity within Ministry of Finance and Development Planning (MFDP) to support and sustain reform
    More on those areas related to budget processes
    and systems…
    10
  • 45. PFM Reform – Budgeting ProcessesMs. ‘Mapalo Grace Moejane
    11
  • 46. PFM Reform – Budget Processes
    • Budget Processes Enhanced through Implementation of a Medium Term Expenditure Framework (MTEF)
    • 47. MTEF:
    • 48. General Overview
    • 49. Medium Term Fiscal Framework (MTFF)
    • 50. Budget Framework Papers
    • 51. Programme Budgeting
    • 52. Successes to Date
    • 53. Issues Currently Being Addressed
    12
  • 54. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 55. Introduced in 2005 to improve planning and budgeting processes. Prior to implementation:
    • 56. Incremental approach to budget preparation
    • 57. Input focused budget
    • 58. Annual budgets
    • 59. Ceilings set without consultation with stakeholders
    • 60. No link between planning and budget
    • 61. Limited integration between recurrent and capital budgets
    • 62. Weak linkage between government objectives and allocation of resources
    13
  • 63. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 64. Implementation Strategy:
    • 65. Establishment of MTEF Task Team
    • 66. Selection and training of MTEF Facilitators
    • 67. Establishment of Cabinet Budget Committee
    • 68. Formation of ministry Budget Committees
    • 69. Pilot approach using six ministries, which were selected on the basis of ministry size and prior experience with results-based reporting
    • 70. Subsequent phase-in of non-pilots, which continues today
    14
  • 71. 15
    MTEF Process Followed by Lesotho:
  • 72. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 73. Medium Term Fiscal Framework (MTFF)
    • 74. Implemented in 2007
    • 75. Includes three-year macroeconomic revenue and expenditure projections, which are used in setting overall budget ceilings
    • 76. Reflects the impacts of government policies on the national budget
    • 77. Comprised of data from four Macro Accounts
    16
  • 78. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF):
    • 79. Budget Framework Papers (BFP’s)
    • 80. Used in the setting of ministry ceilings
    • 81. Ideally, ministries whose functions are more relevant to government priorities receive a larger share of the total funding
    • 82. Current format includes: ministry objectives linked to national planning documents; service delivery issues; key performance indicators; and costing of new funding/savings proposals
    17
  • 83. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 84. Programme Budgeting:
    • 85. Programme-based budgeting introduced in 2007
    • 86. Financial/budget system lacked the needed functionality at the time
    • 87. Various approaches attempted, with some being too complex and creating confusion; activity-based budgeting as a method for producing programme-based estimates was particularly problematic
    • 88. Approach was simplified in 2010, and focus was narrowed to five pilot ministries
    • 89. Implementation was successful and will be reflected in the FY 2011/12 budget
    18
  • 90. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 91. Successes to Date:
    • 92. Strengthened macroeconomic forecasting capability
    • 93. Budgeting approach changing from an input-based incremental approach to a results-oriented approach
    • 94. Budget horizon has been expanded from one year to three years
    • 95. Recurrent and capital budgets are being integrated
    • 96. Stronger linkage being developed between government objectives and resource allocation through programme budgeting implementation
    19
  • 97. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 98. Successes to Date:
    • 99. Ministry preparation of Budget Framework Papers has made resource allocation decisions (setting of ceilings) more transparent
    • 100. More budget information now available to Cabinet for making informed decisions
    • 101. More involvement by Cabinet in the budget process as a result of the establishment of the Cabinet Budget Committee
    • 102. Expenditure implications of new policies are better quantified
    20
  • 103. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 104. Initial Challenges:
    • 105. Lack of government ownership of the reform
    • 106. Limited number of MTEF Facilitators, and limited training for these Facilitators
    • 107. Training material for ministries too complex, training period insufficient, and poor attendance at trainings
    • 108. Confusion over MTEF elements/concepts
    21
  • 109. PFM Reform – Budget Processes
    • Medium Term Expenditure Framework (MTEF)
    • 110. Issues currently being addressed:
    • 111. “Reform Fatigue”
    • 112. MTEF interpreted as a tool for increasing ministerial budgets
    • 113. Quality of BFP data needs to be enhanced
    • 114. Focus remains on first year of three-year budget
    • 115. MTFF impacted by time lags in updating, as well as revenue data availability in IFMIS
    22
  • 116. PFM Reform – Integrated Financial SystemMr. KekeletsoMosala
    23
  • 117. PFM Reform – Integrated Financial System
    • GoLFIS (Government of Lesotho Financial Information System)
    • 118. Existing Regulatory Framework
    • 119. IFMIS implementation
    • 120. Accompanying Reforms
    • 121. Sustainability
    24
  • 122. PFM Reform – Integrated Financial System
    • GoLFIS (Government of Lesotho Financial Information System) was previous financial system
    • 123. GoLFIS shortcomings:
    • 124. Back office payables system, maintained by the Treasury Department and not available to the ministries
    • 125. Marred by errors and omissions, with users able to override controls
    • 126. Ex post entry of transactions for Sub Accountancies and foreign missions led to lengthy delays in production of public accounts
    25
  • 127. PFM Reform – Integrated Financial System
    • GoLFIS shortcomings:
    • 128. Limited Chart of Accounts prevented the following:
    • 129. Integration of capital and recurrent budgets
    • 130. Compliance with international standards
    • 131. Comprehensive reporting on budget execution
    • 132. Budget entries on both a cost centre and programme basis
    26
  • 133. PFM Reform – Integrated Financial System
    • GoLFIS shortcomings:
    • 134. Manual vote books were maintained by ministries:
    • 135. used to control commitment but not kept up to date
    • 136. controls easily by-passed and not reconciled with GoLFIS
    • 137. Allowed commitments without available funds
    • 138. Budgets prepared on spreadsheets
    27
  • 139. PFM Reform – Integrated Financial System
    • Existing Regulatory Framework:
    • 140. Finance Order of 1988 – based on centralised accountability model, with Accountant General responsible for compiling Public Accounts
    • 141. No responsibility of ministries to report to Parliament on use of funds appropriated
    • 142. Updated framework required to implement modernized financial processes
    28
  • 143. PFM Reform – Integrated Financial System
    • IFMIS Implementation:
    • 144. In 2006, a process was initiated to implement an Integrated Financial Management Information System (IFMIS)
    • 145. Underpinning of PFM reform efforts
    • 146. Formal project management methodology used to manage scope, budget, expectations and risks throughout implementation
    • 147. Required establishment of a modern technical platform
    • 148. System delivered to whole of government within 16 months
    29
  • 149. PFM Reform – Integrated Financial System
    • Accompanying Reforms:
    • 150. Revised organisational structure to reflect new business processes
    • 151. Re-skilling of Accounting staff across government
    • 152. New regulatory framework to govern and underpin new business processes
    • 153. New Chart of Accounts to exploit reporting capabilities of the IFMIS and bring reporting into compliance with international standards
    • 154. New Chart of Accounts also provides more flexibility for the integration of recurrent and capital budgets and the entry of budgets on both a cost centre and programme basis
    30
  • 155. PFM Reform – Integrated Financial System
    • Sustainability:
    • 156. Implementation achieved but sustainability now the challenge:
    • 157. Retention of skilled staff
    • 158. Ongoing training capability to ensure minimum competency levels for users
    • 159. Ability to support the system and manage upgrades (outsourcing where necessary)
    • 160. Demand-side – use of reporting capabilities to inform financial management
    • 161. Adequate budget provisions to maintain system capability – life cycle replacement of equipment
    31
  • 162. Promoting Transparency with Enhanced Budget InformationMr. Tom Mpeta
    32
  • 163. Promoting Transparency
    • As a result of PFM reform efforts just highlighted, significant improvements have been made to budget data and documentation
    • 164. Dissemination of this information has also improved
    • 165. All have contributed to enhanced budget transparency:
    • 166. MTEF
    • 167. Performance oriented Budget Book
    • 168. Information made available on MFDP web site
    • 169. Public outreach efforts
    33
  • 170. Promoting Transparency
    • MTEF:
    • 171. More transparent methodologies for estimating medium-term revenues through the implementation of the MTFF
    • 172. A transparent and evidence-based bidding process for budget resources by ministries through the use of Budget Framework Papers; also, more information available to Cabinet for decision making
    • 173. Integration of recurrent and capital budgets reflect full cost of projects and, ultimately, the delivery of programme outputs
    34
  • 174. Promoting Transparency
    • MTEF:
    • 175. Greater transparency in funding of government priorities through Programme Budgeting implementation:
    • 176. Budgets traditionally prepared using cost centre structure, which generally represents a ministry’s administrative structure
    • 177. The cost centre structure does not always align well with ministry objectives/outputs; therefore, difficult to align with overall government priorities
    • 178. The new programme structure being designed based on government priorities, which will present a clearer picture of the resources allocated to support these priorities
    35
  • 179. Promoting Transparency
    • Better Access to Ministry Performance Data through New Budget Book
    • 180. Budget Book contained only budget data by economic classification, no other supporting information
    • 181. Budget Book currently being piloted has ministry descriptions and performance information:
    • 182. Ministerial Vision, Mission Statement, Objectives
    • 183. Primary challenges and how they are being addressed
    • 184. Primary achievements
    • 185. Performance indicators by programme
    • 186. Combined recurrent/capital budget by programme and sub-programme
    36
  • 187. Promoting Transparency
    37
    • Example of performance information provided in new Budget Book:
  • Promoting Transparency
    • Information made available on MFDP web site www.finance.gov.ls (some published as a result of donor requirements):
    • 188. Budget Book
    • 189. Budget Speeches
    • 190. Budget Guidelines
    • 191. Budget Framework Papers
    • 192. Circulars and Notices
    • 193. MFDP Reform Initiatives (IFMIS, MTEF, Procurement, etc.)
    38
  • 194. Promoting Transparency
    • Public Outreach Efforts to Disseminate Budget Information and Obtain Stakeholder Input:
    • 195. Major public outreach event occurs every year as the Honourable Minister of Finance and Development Planning tables the Budget Estimates before Parliament for approval. During this time, the Budget Estimates are broadly distributed to the citizens:
    • 196. Honourable Minister participates in media events and meetings with the business community to explain the budget
    • 197. Budget Teams from MFDP are assigned to travel to each of the Districts of Lesotho to conduct public forums with stakeholders in the Districts:
    39
  • 198. Promoting Transparency
    • Public Outreach Efforts:
    • 199. These meetings are attended by people from different sectors, including farmers, business community, Non-Governmental Organizations (NGOs), as well as public servants from different government departments in the Districts
    • 200. In these forums, the stakeholders have opportunities to inquire about the current Budget Estimates and to learn about progress made from the funding of projects/ initiatives under previous budgets
    • 201. The stakeholders are also given an opportunity to provide their own input, including the identification of priority requirements and recommendations for future year budgets
    40
  • 202. Promoting Transparency
    • Public Outreach Efforts:
    • 203. Budget Teams then report back to the Honourable Minister on the stakeholder input
    • 204. These meetings are very effective because they aid in identifying public priority areas for resource allocation
    • 205. The following pictures were taken by the Budget Teams to help justify the priority requirements and recommendations of the stakeholders, as well as to document progress on previously funded projects/ initiatives:
    41
  • 206. 42
    Public Priority Area – Bridge Construction:
  • 207. 43
    Documenting Progress on Bridge
    Construction Project:
  • 208. 44
    Final Outcome – Strategic Allocation of Resources Based on National Priorities:
  • 209. 45
    Public Priority Area – School Construction:
    Supports Lesotho’s Primary Education Priorities for 2011/12, which include increasing access, efficiency, and equity of education through construction of primary school classrooms and toilet blocks in the remote areas of Lesotho
  • 210. Next Steps and Lessons LearnedMs. Sheryl Kelly
    46
  • 211. Next Steps and Lessons Learned
    • PFM reform initiatives related to budgeting have resulted in a number of successes thus far
    • 212. These have been accompanied by a host of challenges, some resolved and others still being addressed
    • 213. Good foundation now in place for both ongoing and future initiatives – a result of introduction of MTEF, as well IFMIS implementation
    47
  • 214. Next Steps and Lessons Learned
    • Next Steps
    • 215. Revise Budget Framework Paper template to enhance value/relevance and allow for a programme orientation
    • 216. Develop template for a consolidated Budget Framework Paper and make publicly available
    • 217. Require the ministry preparation of comprehensive and defensible budget requests for the indicative, or planning, years of the budget horizon
    • 218. Strengthen usage of Budget Module in IFMIS, particularly for budget development
    48
  • 219. Next Steps and Lessons Learned
    • Next Steps
    • 220. Roll out programme budgeting to remaining ministries using a phased approach
    • 221. Incorporate performance data for all ministries into the Budget Book
    • 222. Enhance quality of ministry performance monitoring systems
    • 223. Ensure strong linkage between ministry programmes and Lesotho’s National Strategic Development Plan (currently being drafted)
    49
  • 224. Next Steps and Lessons Learned
    • Lessons Learned
    • 225. Reform initiatives should be country-specific (not one-size-fits-all)
    • 226. Initiatives should be designed such that they avoid unnecessary complexity and compliment existing institutional and human and physical resource capacities in the ministries
    • 227. Initiatives must be properly sequenced, and donors should ensure that support for initiatives is well coordinated with other contributing donor partners
    50
  • 228. Next Steps and Lessons Learned
    • Lessons Learned
    • 229. Financial and payroll system functionality must be considered well in advance of implementing any reforms that are dependent upon these systems
    • 230. New systems may be implemented, but, if staff are not adequately trained, they many undermine the effectiveness and sustainability of the systems
    51
  • 231. Next Steps and Lessons Learned
    • Lessons Learned
    • 232. Exposure to budget concepts and basic knowledge of the budget process can enhance citizens’ ability to effectively monitor government performance and accountability of taxpayer money
    • 233. Government ownership of PFM reforms is required for long-term sustainability, with Ministries of Finance leading the initiatives, carefully guiding the design and implementation, and ensuring sufficient capacity to fully support the line ministries
    52
  • 234. Comments/Questions?
    53

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