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Spending Reviews - Naida CARSIMAMOVIC, World Bank


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This presentation was made by Naida CARSIMAMOVIC, World Bank, at the 15th Annual Meeting of OECD-CESEE Senior Budget Officials held in Minsk, Belarus, on 4-5 July 2019

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Spending Reviews - Naida CARSIMAMOVIC, World Bank

  1. 1. Spending Reviews in PEMPAL Countries Public Expenditure Management Peer Assisted Learning (PEMPAL) Network Budget Community of Practice (BCOP) Program and Performance Budgeting Working Group (PPBWG) OECD CBO CESEE meeting, July 2019 Naida Carsimamovic Vukotic, BCOP Resource Team, World Bank 1
  3. 3. About PEMPAL 3 Aims to promote and facilitate efficient and effective use of public funds resulting from applying good PFM practices through supporting a peer learning and knowledge exchange platform for practitioners to connect within three ‘Communities of Practice’ - budget, treasury, and internal audit.
  4. 4. PEMPAL’S Budget Community of Practice (BCOP) 4 Aims to strengthen budget methodology, planning, and transparency in member countries. 2017-2021 priorities: 1. sharpening tools for effective fiscal management with primary focus on performance and program budgeting 2. strengthening fiscal transparency and accountability with focus on budget literacy, transparency, and public participation initiatives 3. expanding internationally available data on PEMPAL countries through identification and sharing of budget- related good practices and benchmarking within and outside of the PEMPAL region
  5. 5. BCOP’s Collaboration with OECD • A long-standing valuable relationship, primarily through BCOP’s participation in the meetings of the OECD Senior Budget Officials’ Network for Central, Eastern, and South-Eastern European countries (CESEE) • Moreover, work of the OECD Performance and Results Network is an important content source for the work of PPBWG • PPBWG facilitated PEMPAL’s participation in the OECD Performance Budgeting (PB) Survey in 2016 and 2018 • Participation in the Survey contributes to the WG’s objectives by:  providing data on status of program and performance budgeting reforms in PEMPAL countries  providing opportunity for PEMPAL countries to benchmark their progress against the OECD countries  providing information on newest trends and best practices 5
  6. 6. BCOP’s Program and Performance Budgeting Working Group (PPBWG) Goal: To identify main trends observed in program budgeting and spending reviews in developed and PEMPAL countries so that efficient approaches to such practices can be subsequently developed and spending effectiveness improved. BCOP members continuously identify program and performance budgeting as a priority area in their budgeting reforms, including in 2019. PPWBG Objectives:  to identify key trends in program and performance budgeting implementation and spending reviews  to learn from specific PEMPAL and international country examples in these areas. Working Group members (16 countries): Albania, Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Kosovo, Kyrgyz Republic, Moldova, Republic of North Macedonia, Russian Federation, Serbia, Turkey, Ukraine, and Uzbekistan.
  7. 7. PPBWG Activities 642 Spring-Summer‘16 Fall‘16 Fall‘17 Spring2018 Spring-Summer‘17 Winter‘17 Fall-Winter2018 Launch and 1st meeting in Ljubljana Participation 2016 OECD PB Survey Launch and Taking Stock Country Cases & Knowledge Product Decision Report for Knowledge Product on Indicators Examining 5 PEMPAL countries Presentation of 2016 survey results to OECD CESEE SBO Decision to work on KP on indicators International Practices Review Attending OECD P&R meeting Workshop to review latest WB research, French, Irish and Dutch experience Work on KP on Indicators Collecting indicators from 9 countries Workshop to define 10 criteria for analyzing indicators for KP and collecting data Attending OECD P&R meeting and presenting preliminary findings from KP and country case of Russia Collecting further data on health and education indicators Prepared the report on Performance Indicators in PEMPAL Countries: Trends and Challenges Participation in OECD PB Survey Examining PB in Austria and OECD Best PB Practices Workshop with Austrian MF and Performance Management Office Examining Draft OECD Best PB Practices Examining 2 PEMPAL country cases Participation in 2016 OECD PB Survey Attending OECD P&R meeting and presentation of preliminary 2018 survey results 8 NEXTSTEPS Spring2019 Review of survey results Examination of spending reviews in PEMPAL and OECD countries Presentation on spending reviews in PEMPAL countries and PB in Russia to OECD CESEE SBO Analysis of Results of 2018 OECD PB Survey, and Examining Spending Reviews Workshop on spending reviews in advanced countries, hopefully back-to- back with OECD P&R meeting Knowledge product on spending reviews In-depth Focus on Spending Reviews
  8. 8. Subtopic of Spending Reviews Within PPBWG • This subtopic chosen to be in focus of PPBWG over the next period • Monitoring and evaluation of expenditure effectiveness including spending reviews are again the most common subtopic identified as a priority by PPBWG member countries in pre-event survey for this event • Spending reviews generally rare in PEMPAL countries, with some conducted over the recent years in the context of urgent fiscal consolidation needs, i.e. savings needed to be identified quickly (e.g. in Croatia) • As PEMPAL countries progress and increase quality of program and performance budgeting, more information becomes available to conduct performance-informed spending reviews 8
  9. 9. Data on Spending Reviews in PEMPAL Countries from 2016 • First attempt to collect data on spending reviews in PEMPAL countries was within the 2016 OECD Performance Budgeting (PB) Survey – PPBWG facilitated participation of PEMPAL countries in this survey • Based on the survey responses, it was evident that there were different interpretations of what a spending review is, with some PEMPAL countries using much less rigorous definitions than those used by OECD/World Bank • In 2016, Croatia, Uzbekistan, Armenia reported having conducted spending reviews, but only Croatia answered all subsequent questions on the details of spending • PEMPAL countries that answered the question on spending review obstacles (Croatia, Armenia, and Uzbekistan) ranked poor quality of performance information as the top challenge, followed by lack of time, and lack of capacity • All PEMPAL countries that answered the 2016 survey noted that spending reviews are under consideration 9
  10. 10. • The results from the 2018 OECD PB Survey for PEMPAL countries indicate that different interpretations of spending reviews remain for some countries. To double check the data and collect additional data, BCOP Resource Team included a section on spending reviews in pre-event survey for this event. • We stressed the definition and general characteristics of spending review: i. the process of identifying scope to make savings to reduce overall government expenditure or to identify fiscal space to be reallocated in line with the government’s policy priorities ii. reviews baseline expenditures and may include specific targets for spending reductions iii. can be broad based, covering all government expenditures (in rare cases) or limited to certain spending programs/projects, processes (e.g. IT systems and process, procurement processes, or human resources management processes), or ministries 2018/2019 Data: Spending Review Definitions and Criteria 10
  11. 11. • We stressed the definition and general characteristics of spending review (continued): iv. differ from regular or more detailed analyses conducted by the Ministry of Finance in the process of drafting budget - much more in-depth, take longer time to be conducted, and they are conducted by a designated team/body that in addition to Ministry of Finance staff also includes other experts – typically from the line ministries/agencies responsible/relevant for spending that is being reviewed, as well as external experts v. typically requested and in the end decided on by the Executive (the Government or the Chief Executive), rather than the Ministry of Finance vi. integral part of spending reviews in most cases is examination of performance of the programs that are being reviewed, including performance information 11 2018/2019 Data: Spending Review Definitions and Criteria
  12. 12. • Out of 12 PEMPAL countries that answered the question, 7 countries report that they have spending reviews in line with international definitions and characteristics:  Croatia,  Bulgaria,  Russia,  Belarus,  Serbia,  Moldova, and  Bosnia and Herzegovina (BiH) • Montenegro, Kazakhstan and Georgia report that there are plans to introduce spending reviews, while Kosovo and Armenia report no plans • Analyses conducted by international organizations in several countries, such as World Bank, and IMF work in Belarus, BiH, Serbia, Kazakhstan, and Georgia, as well some World Bank assistance in spending reviews in Croatia Spending Reviews in PEMPAL Countries as of 2018/2019 12
  13. 13. • Where exist, spending review in PEMPAL countries have weaker regulatory and methodological basis compared to OECD countries • Out of 7 PEMPAL countries that report having spending reviews:  Croatia and Moldova report having both executive order/decision and guidelines/methodology (published in Croatia)  Bulgaria reports having guidelines/methodology  Serbia reports having executive order/decision  Belarus report each review having its own ToR  BiH reports only reviews done within IMF program Regulatory and Methodological Basis 13 2 7 19 10 11 0 0 3 3 3 A separate law on spending reviews Basic/organic budget law Guidelines/methodology for spending reviews An executive order There are no established guidelines (each spending review has its own ToR) PEMPAL OECD
  14. 14. Topics/Objectives of Spending Reviews 14 Belarus 2011 - Pension system sustainability; social assistance targeting; and energy and agriculture subsidies 2013 - Intergovernmental fiscal relations; and education and health BiH 2009 - Reduction of wage bill and material costs 2011 - Reduction of material costs 2012 - Reduction of wage bill 2015 - Reduction of material costs Bulgaria 2018 - Improving efficiency and effectiveness of waste management 2018 - Policing and firefighting 2015 - Judicial performance, caseload and expenditure review 2015 - Agriculture and rural development Croatia 2014 - Reducing spending: i) wage bill; ii) subsidies apart from agriculture; iii) healthcare; iv) operation of agencies, institutes, funds and other legal persons with public authority; and v) tax expenditures Moldova 2018 - Education (higher education and vocational education), to identify savings for other priorities Russia 2018 - International obligations and events (relevance, appropriateness, and necessity) 2018 - Spending for acquisition of communication services by government agencies (analysis of current practices and develop uniform cost standards) Serbia 2014-2018 - Salaries and pensions, for fiscal consolidation
  15. 15. Roles are mixed among PEMPAL countries and differ than in OECD countries, although in both MoF-centric spending review system mostly, with weaker role of line ministries in PEMPAL countries generally Spending Review Actors 15 Determining methodology Determining the scope Providing guidance/ steering Conducting the spending review and preparing reports Supervision and review of reports Final decision making Monitoring and follow up BiH President/PM MoF MoF Committee/team MoF President/ PM President/PM, MoF Belarus Committee/ team MoF Line ministries Bulgaria MoF MoF, line ministres MoF MoF, line ministries, committee/team President/ PM Croatia MoF MoF, line ministries MoF MoF, line ministries. committee/team MoF MoF, line ministries, committeee/team Moldova President/PM MoF MoF, line ministries, committee/team President/ PM President/PM, committee/team Russia President/PM, MoF President/PM MoF MoF, committee/team President/ PM President/ PM MoF, line ministries, committee/team Serbia MoF MoF, line ministries MoF MoF, line ministries President/ PM President/ PM President/PM, MoF
  16. 16. • Russia, Moldova, Bulgaria, and Belarus report that performance indicators used in budgetary process are considered (sometimes, to some extent) • Belarus, Croatia, Moldova, and Russia (upcoming) publish reports • Teams mostly mixed, with MoFs having primary role, similarly to OECD countries; however with somewhat weaker role of line ministries, and with weaker role of external expertise (WB/IMF take that role in several cases) Use of PIs, Publishing Reports, and Spending Review Teams 16 Country Composition of teams/bodies/working groups/committees Belarus Wor l d Ban k t eam compr ising r epr esentat ives of t he Min ist r y of F in an ce, Min istr y of Taxat i on an d Coll ect ion s, Min istr y of Econ omy, Min istr y of Educat ion , Min istr y of Healt h, Nat ion al St at ist ics Committee, National Bank, executive authorities of the Minsk Region etc. BiH Wor king t eams for med asn ecessar y an ddepen ding on t he subj ect of t he spen ding r evi ew . The Min istr y of Finance is usually in charge, while representatives of other institutions are called in if necessary. Croatia The Cr oat ian Government appoint ed a Centr al Committ ee for Govern ment Budg et Spen ding Revi ew s for each of t he five expen dit ur e ar eas. The Govern ment appoint ed a pr esi dent an d six me mber s fr om sen ior civil ser vice posit ion st ow or kin t he Centr al Committ ee. The me mber s come fr omt he Min istr y of Public Admin istr at ion, Min istr y of Healt h, Min istr y of Econ omy, Min istr y of Mar it ime Affair s, Tr an sport an d In fr astr uct ur e, Min istr y of Sci en ce an d Educat i on , an dtw o member s fr omt he Min istr y of F in ance (one of them is also the president of the Central Committee). Moldova Spen ding r evi ew t eam chair ed byt he Min istr y of fin an ce an din cludes alsor epr esent at ives of ot her lin e min istr iest hat have in st it ut ion s in educat ion sect or: Min istr y of Educat ion ; Min istr yof Healt h an d Soci al Protection; and Ministry of Agriculture. Serbia The Ministry of Finance, line ministries, and IMF.
  17. 17. • Belarus, BiH, Croatia, and Serbia report that most recommendations are implemented; Bulgaria reports that some are implemented; while Moldova reports that small part of recommendations are implemented • All challenges greater in PEMPAL countries compared to OECD countries, especially capacity, political support, and ICT challenges Usage and Challenges 17 1.4 1.4 1.5 1.2 1.6 1.9 2.0 1.3 1.7 1.7 1.3 1.5 1.4 1.5 1.6 1.9 1.9 1.9 1.9 2 2.2 2.3 2.5 2.5 Gaming behaviour Senior civil service support Political support (legislative) ICT Political support (executive) Quality of performance information/data Availability of performance information Framework/methodology Time constraints for implementation Inattention to implementation Capability (e.g. technical expertise) Lack of capacity (e.g. available staff) PEMPAL OECD 1 = Low 2 = Medium 3 = High
  18. 18. • Following specific plans reported:  World Bank-led review in Belarus, focusing on social sector spending  Review of Ministry of Internal Affairs in Bulgaria  Integrating spending reviews into budget calendar and institutionalize it in Moldova  Planning to involve line ministries in introducing spending reviews in Montenegro  In Russia, in April 2019, a list of topics of spending reviews until 2024 will be defined (6 topics annualy, of which 2 at institution level, 2 at program level, and 2 at cross-cutting level); plans to work on methodology improvement and integrating results of spending reviews in budget process on a regular basis as well Current Spending Review Plans 18
  19. 19. Thank you for your attention! 19