Training Workshop on Education Policy Formulation &

MonitoringUNESCO Bangkok

May 27th-31st, 2013

Bangkok OfficeAsia and Pacific RegionalBureau for Education

United NationsEducational, Scientific and

Cultural Organization

The Linkages Between Policy, Planning and

BudgetingLe Thu Huong

Programme SpecialistEducation Policy and Reform Unit

Bangkok OfficeAsia and Pacific RegionalBureau for Education

United NationsEducational, Scientific and

Cultural Organization

1.Budgets and Budgeting: Some Concepts

2. Linking Policy, Planning and Budgeting

3. Experience and Lessons from Nine Countries in Asia

Outline

Budgets and Budgeting: Some Concepts

General terms: A statement of the estimated income and expenditure of a

country, an organization, or an individual over a given future period

National budget:“Act according to which the annual income and

expenditure of the State are estimated and authorized”

Legal dimension (Legal regulations, legally-binding) Economic dimension (Instrument for macro-economic

policy) Functional dimension (Contribution to achieving

objectives, collective utility, optimization of the utility under constraints)

.

Budgets: A definition

Roles of the budget

Planning instrument Real short-term programming

Policy instrument Translation of policy choices

Management tool Distribution of resources

A budget is a law Imposing legislative framework

The budget as a policy instrument - How?

budget is the means by which the government

A budget is the means by which the government exercises the policy goals through: ‘Fiscal discipline’, i.e. controlling overall government spending

so it does not go beyond what money has been raised

Allocation of resources in line with the government’s policy goals, i.e. good budgets should start with an assessment of what needs have to be met, followed by plans of how to meet those needs, followed by a budget.

The efficient and effective use of resources in achieving policy goals

A budget guides policy implementation through informing public institutions how much may be spent for what purpose

What information can be obtained from a budget?

Adequacy – how much is budgeted? Is it enough to cover the cost of carrying out the policy?

Priority – how does the budget for education compare to resources spent in other sectors/areas?

Progress – is the government’s response to meeting education needs improving?.

Equity – are resources being allocated fairly? Is funding being used to even up the differences in education provision, or is it being allocated in a way which maintains these differences or even makes them worse?

Efficiency – is the money being spent efficiently? Is there a big difference between allocation and actual expenditure?

Effectiveness – is the money being spent on the right things? E.g. if the objective is improved levels of education achievement, where should spending be allocated to have the biggest impact on learning achievements? Classrooms, teachers, teacher training…?

Development vs. Regular budget

Development / Investment budget often linked to external funding (in aid dependent

countries) often based on list of projects implementation can be outside the budget often involves longer spending time low implementation rate

Regular / Recurrent budget domestic funding subject to national budget rules for implementation

Budget systems

Budget System Budget PolicyBudget

Outcomes

The system bywhich resources are collected, allocated, recorded, monitoredand accounted for.

Policy to ensure that totalspending is affordable, thatresources are spent on priorities and are spent well, not wasted oninefficiency and corruption

Can be assessed based on the information on:• How much money is spent?• On what is it spent?• How well is it spent?

Transparency and accountability

Characteristics of a good budget system

Transparency

Accountability

Comprehensive

Predictability

Flexibility Contestability

Budgeting

Process of expressing quantified resource requirements

amount of capital amount of material number of people

into time phased goals and milestones

IncomeExpenditure

Some approaches in budgeting in education

Traditional method- Structure based on spending units and nature of expenditure- Incremental method for budgeting- More concern with control and accounting Programme budgeting- Structure by programmes and activities- Costing based on resources required for an activity- Budget decisions based on utility- More concern with policy choicesResults- based budgeting- Linking allocations with outputs- Structure can be by programmes and activities- Clearly defined indicators for expected results- Reporting on the results of spending using performance indicators- More concern with performance and effectiveness of public spending- Can involve a contract between government and an implementing agency

Linking Policy, Planning and Budgeting

Policy, plan and budget

Policy

Guiding principles Policy making Abstract Legally or not

legally binding

Plan

Guiding document

Planning Concrete Not legally

binding

Policies are concretized through planning, reflected in plan document and implemented through the budget approved for plan implementation

Budget

Guiding policy implementation

Budgeting Concrete Legally

binding

Three different concepts but closely linked

 ü  Medium or long term plan10 years, 5 years, rolling,…

 ü   Guidelines, policy documents

 ü   Targets desirable situations, what would be good

Low legal value,not compulsory

Planning Budgeting

 ü  Short term, annual

High legal value, budget is

a law

 ü  Takes into account financial constraint, what is affordable

 ü  National budget, sector budget

Planning and budgeting

The policy, planning and budgeting link in education

--> Poor budget outcomes often result from failure to link policy, planning and budgeting

From policy to plan…

Possible reasons for missing link: Inadequate target setting (unfeasible plan

targets) Vague implementation strategy (unclear actions) Lack of a financing framework (plan is not costed) Inconsistent policies and plans in scope and time Failure to reach a consensus among stakeholders Misalignment of different policies and initiatives

within a wider development framework Lack of coordination among different concerned

departments / agencies

From plan to budget…

Possible reasons for missing link: Inconsistent plan and budget in scope and time Overly ambitious actions while financial capacity

is limited Divergence of priorities among involved parties Technical capacity in budgeting and financial

management of education ministry

From policy to impact: The problem with budget

Policy

Budget

Institutions and

structures for

implementing the policy

Service delivery

Impact of policy

Why budget problem?

Mismatch between what is promised in policies and what is affordable Lack of good information and accurate diagnosis of the

problems Variation of priorities (budget preparation is often separated

from planning with different priorities) Failure to direct government expenditure towards the priorities Lack of good feedback mechanisms Lack of accountability Difficulties in building the budget from the bottom up and to

ensure that grassroots priorities and resources are taken into account

Medium term approach as a solution…

22

Need for a budgeting tool To reconcile planning and budgeting To meet the requirements for a good budget system

Then a medium-term approach provides linkages between policy, planning and budgeting through expenditure programmes driven by policy priorities and disciplined by budget realities

In addition, if policy and budget are put in a medium term framework, it is likely that the mismatch (missing link) problem can be solved with the following advantages:

- Predictability - Result orientation (performance based)- Continuity - Efficiency- Transparency

Sector level medium-term framework

Developing this kind of framework requires: Agreement on sector objectives and policies A combined bottom-up/top-down process to develop a

clear vision for the sector Sector priorities and objectives identified and/or revised An effective cost projection tool, e.g. education

simulation and projection model Definition of sector resource envelope Assessment of expenditure implications of policies Coverage of all sector activities and organisations and

focus on whole of sector expenditures

Sector level medium-term framework (cont’d…)

In aid-dependent countries there is often separation between foreign aid and domestic policy, and management and budgeting.

A sector medium-term framework seeks to remove the separation by emphasizing all activities and overall expenditures

Medium-term Expenditure Framework (MTEF)

25

What is MTEF? A whole-of-government strategic policy and expenditure framework,

including a rolling plan of budgets, constructed for each year of a future time frame, usually between three and five years

How does it work ? MTEF consists of: A top-down resource envelope A bottom-up estimation of the current and medium-term costs of

existing policy, The matching of these costs with available resources. The matching of

costs should normally occur in the context of the annual budget process

Experience and Lessons from Nine Countries in Asia

Issues common to MTEF implementation in the education

sector

Capacity limitations and the implications for change management

The span of MoE control and MoE sector leadership

The relationship between the MoE and the MoF Integration of MTEF with the annual budget – Lack

of a hard budget constraint and unrealistic bottom up budget

Inadequate data for budgetary analysis and poor financial information flows

Lack of solid political commitment

Lessons

28

Successful implementation of MTEF requires: Engagement and commitment by MOE politically with

the process, i.e. identifying real, quick-win benefits and downplaying unrealistic legal and/or political commitments

Need for MOE to actively engage and partner with ministries of finance and other central planning agencies to make MTEF work, avoid meaningless game playing and work to align fiscal transfer and information flows to the needs of sector development.

Good management of donors Strengthened technical capacity in order in terms of

staff and information in order to engage in and internalize the process.

Better prioritisation helps win bigger budgets

Slide 29

In Vietnam, the savings from the reduced salary budget resulted from the increase made in the PTR at primary and secondary education levels (2006-2008) were used to fund other quality improvement activities

Thank you

In practice…..

Policy Plan Result

Gap