Budget Practices and Procedures - Results of 2013 OECD/PEMPAL Survey -

Joung Jin JANG (OECD) / Deanna AUBREY (PEMPAL)

Presentation to 10th Meeting of OECD-CESEE SBO

26 June 2014

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Outline 1. Who are the Budget Community of Practice of PEMPAL? - Gelardina Prodani (Secretary General, MoF, Albania and PEMPAL BCOP Chair) 2. OECD Developments and Priorities in Budgeting - Joung-Jin JANG (Budgeting and Public Expenditures Division, OECD) 3. OECD-PEMPAL Budget Practices and Procedures Survey - Joung-Jin Jang (Budgeting and Public Expenditures Division, OECD) - Deanna Aubrey (PEMPAL BCOP resource team) 4. Next Steps and Reform Priorities for PEMPAL Countries - Deanna Aubrey (PEMPAL BCOP resource team) 5. Budget reforms – PEMPAL Country Case Studies - Russian Federation (Ilya Sokolov, Director of Budget Policy Department) - Turkey (Hakan Ay, Deputy Director General, DG Budget and Fiscal Control, MoF)

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1. Who are the Budget Community of Practice?

• Total of 147 representatives from Ministries of

Finance from 21 countries in Europe and Central Asia attended 13 BCoP events in 2013 and 2014.

• Funded by MoF Russian Federation and Swiss Government SECO

• PFM reforms supported by benchmarking and sharing information through video conference and face-to-face meetings, study visits, website library, BCOP wiki.

• Led by Executive Committee of 8 member countries, World Bank resource team, and supported by Secretariat (Slovenian Center of Excellence in Finance).

BCOP, Antalya Turkey March 2014

2. OECD Developments & Priorities in budgeting

• from annual to medium-term budgeting • Heightened focus on management of fiscal risks • Budgeting across levels of government • from inputs to outputs, performance and impacts • from MoF to independent institutions • Greater engagement of parliament and citizens • Budgeting as an instrument of public governance

3. OECD-PEMPAL Budget Practices & Procedures Survey

• Covers key aspects of public budgeting

• Standard questions / topics for all OECD countries – Fiscal sustainability / fiscal rules – MTEF – Capital budgeting – Budget flexibility – Budget transparency – Independent fiscal institutions

• Regional : LAC-PEMPAL, Asia-MENA (future)

3. OECD-PEMPAL Budget Practices & Procedures Survey

• 13 PEMPAL BCOP countries participated in the survey in 2013 – Albania, Azerbaijan, Belarus, Bosnia and Herzegovina, Croatia, Kyrgyz Republic,

Macedonia, Montenegro, Russia, Serbia, Tajikistan, Turkey, Uzbekistan

• Workshop at Riga (OECD-PEMPAL, 26th June 2013) – Presentation of preliminary results of OECD Budget Survey – Q&A sessions on Survey Questionnaires – Logistics of the survey participation (entering the data and data cleaning etc)

• Answering the on-line questionnaire (PEMPAL, ~Oct 2013)

• Data quality control (OECD-PEMPAL, ~Dec 2013) – Comparison with IMF data and 2007 survey results – Check internal consistency among the answers

• Analyzing the data and drafting the survey results (~Feb 2014)

Fiscal rules

2.7

3.6

0

1

2

3

4

Average number of fiscal rules when applied

PEMPAL OECD

54%

94%

0%

20%

40%

60%

80%

100%

Percentage of countries using fiscal rules

PEMPAL OECD

Number of fiscal rules

0%

10%

20%

30%

40%

50%

One Two Three Four Five Six

% of countries using fiscal rules according to number of rules applied

PEMPAL OECD

Types of fiscal rules applied

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Budget balance Debt Expenditure Revenue

PEMPAL OECD

Medium-term Expenditure Framework (MTEF)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

MTEF in place MTEF not in place

% of countries with MTEF in place

PEMPAL OECD

0%

10%

20%

30%

40%

50%

60%

70%

Overall/ totalexpenditure

Otheraggregate

levels

Organisationallevel

Other level

Levels of ceilings of MTEF

PEMPAL OECD

Length and Revision of MTEF Ceilings

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3 years 4 years 5 years 6+ years

Length of ceilings

PEMPAL OECD

0%

10%

20%

30%

40%

50%

60%

70%

80%

More thanonce per year

Annually Every 2 to 3years

Other

Frequency of revision of ceilings

PEMPAL OECD

Long-term fiscal projections

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

OECD PEMPAL OECD PEMPAL OECD PEMPAL OECD PEMPAL OECD PEMPAL

Up to 5 years Between 6-10 years Between 11-30 years Between 31-50 years Over 50 years

Revision frequency

Time span of long-term fiscal projections

Time span and revision frequency of long-term fiscal projections

Every year Every three years Other intervals Not applicable

Ceilings on the line ministries' initial request

0%

10%

20%

30%

40%

50%

60%

Total/overall expenditure ofthe line ministry

Other aggregate levels (e.g.programme or sector)

Agency level or otherorganisational level

No such limits

PEMPAL OECD

Budgetary settlement

0%

10%

20%

30%

40%

50%

60%

Resolved by thecabinet

Resolved by the financeminister

Resolved by thePresident or the Prime

Minister

Other The issue is sent to aministerial committee

Resolution of disputes between ministries in the budget formulation

PEMPAL OECD

Key findings (summary) : Fiscal rules & MTEF

• More than half adopted fiscal rules, but still less than OECD • 2~3 fiscal rules are adopted in general (OECD : 4~5 rules) • Four types of rules are almost evenly adopted (OECD : BB & Debt)

• Legal basis : mostly Legislation (OECD : Int’l treaty & legislation)

• No enforcement mechanism : more than 30% (OECD : 14%)

• MTEF in place in more than 80% (= OECD)

• Level of ceilings : Overall (= OECD) & Organizational level (≠ OECD)

• Length of ceilings : mostly 3yrs (OECD : 3 or 4 yrs)

• How often are ceilings revised? : once or twice a year (OECD : annually)

• Long-term fiscal projections : mostly up to 5yrs (OECD : 31~50 yrs)

Capital budgeting

0%

10%

20%

30%

40%

50%

60%

70%

Separate capitaland operating

budgets

Integratedcapital andoperatingbudgets

Other

Capital budgets in central governments

PEMPAL OECD

0%

10%

20%

30%

40%

50%

60%

70%

80%

Incrementallyeach year

The entirecost up-front

Other Case by casebasis

Funding of multi-year capital projects

PEMPAL OECD

CBA approval in capital projects

0

1

2

3

4

5

6

7

8

9

10

Yes for allprojects

Yes forprojectsabove acertain

threshold

Yes on ad hocbasis or other

No

PEMPAL

PPP TIP

0

2

4

6

8

10

12

14

16

18

Yes for allprojects

Yes forprojects above

a certainthreshold

Yes on ad hocbasis or other

No

OECD

PPP TIP

Is CBA required to approve capital projects in line ministries?

Carry-over of expenditure from year to year

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

PEMPAL OECD PEMPAL OECD PEMPAL OECD

Yes without requiring any approval Yes but requiring approval No, carry over not permitted

Discretionary Operational Investment

Reallocation of funds

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Reallocationspermitted

Reallocationsnot permitted

Reallocation regimes

PEMPAL OECD

0%

10%

20%

30%

40%

50%

60%

PEMPAL OECD PEMPAL OECD PEMPAL OECD PEMPAL OECD PEMPAL OECD

Approval ofMinistry of

Finance/Economy

Approval oflegislature

Approval of bothMoF and

Legislature

Other type ofapproval

No approvalneeded

Types of approval of reallocations Ex-ante approval Ex-post approvalCombination ex-ante/ex-post No approval needed

Publicly available budget documents

0

2

4

6

8

10

12

14

Pre-budget report Budget proposal Citizens budget

PEMPAL

Publicly available Not publicly available

Not applicable

0

5

10

15

20

25

30

35

Pre-budget report Budget proposal Citizens budget

OECD

Publicly available Not publicly available

Not applicable

Legislative engagement in budget

0

2

4

6

8

10

12

14

16

18

20

PEMPAL OECD

Existence of a specialized budget research office attached

to the legislature

Specialised budget research office exists

No specialised budget research office exists

0%

10%

20%

30%

40%

50%

60%

Unrestrictedpowers

Within executive’s aggregates

Cut existingitems only

Approve orreject

Other

Legislative amendment power

PEMPAL OECD

Budget presentation and legislative debate

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

No.of months budgetpresented before start of

FY

No.of months forlegislative debate

PEMPAL

3 months or more Less than 3 months

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

No.of months budgetpresented before start of

FY

No.of months forlegislative debate

OECD

3 months or more Less than 3 months

Key findings (summary) : Capital budgeting/Flexibility/Transparency

• Separate Capital & Operating budgets (= OECD)

• Funded mostly incrementally (OECD : incrementally & up-front) • Mostly No PPP units (= OECD) or Within a line ministry (≠ OECD)

• Without CBA approval in PPP (≠ OECD), With CBA approval in TIP (= OECD)

• Carry-over : mostly not permitted (≠ OECD) and need approval • Cut/Increase of Spending : permitted in more than half (= OECD)

• Reallocation of funds : permitted in more than 80% (= OECD)

• Available budget documents varies (= OECD)

• IFI existence : only 3 countries (OECD : 18 countries)

• Legislative debate period : less than 3 months (OECD ≥ 3 months)

4-1. Next Steps

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• Draft report on results of OECD-PEMPAL Budget Practices and Procedures survey currently circulated for comment.

• Final Comments due end July 2014.

• Data of PEMPAL to be uploaded onto OECD International Database of Budget Practices and Procedures (on-line)

• Report and Database provide valuable knowledge resource for PEMPAL countries.

• BCOP Executive Committee will consider repeating survey in future and expansion to more PEMPAL countries.

4-2. Reform Priorities for PEMPAL Countries On the request of BCOP member countries, all members met and discussed:

• Selected aspects of program budgeting and performance management in Tirana, Albania, from February 25-28, 2013, attended by 21 countries.

• Results-based monitoring and evaluation in Antalya, Turkey from March 3-6, 2014, attended by 20 countries.

• Fiscal transparency and accountability from May 27-29 2014, in Moscow, Russia, attended by all three COPs (budget, treasury and internal audit)

Smaller study visits for sub-groups of members were also conducted to:

• Georgia on IT system for budget planning in Tbilisi from April 15-18, 2013 attended by 6 countries.

• UK on education financing reforms in London from April 23-25, 2013 attended by 6 countries.

• Ireland for BCOP Executive Committee on spending reviews from 11-14 November, 2013 attended by 7 countries.

Smaller study visits for sub-groups of members were also conducted to: • Poland on program budgeting at the local level, in Cracow from December 9-

12, 2013 attended by 7 countries. • Austria on the role of Parliament in budgeting from January 30-31 2014

attended by 5 countries.

Other smaller group meetings: • OECD Budget Practices and Procedures Survey peer review meeting in Riga on

June 26, 2013 attended by 10 countries. • Participation in OECD Senior Budget Officers meeting June 27-28, 2013, Latvia

and 26-27 June 2014, the Hague to promote knowledge exchange with OECD and OECD accession countries in Europe and Central Asia

• Review of revised PEFA framework in the Hague, June 25, 2014 • Two video-conference meetings on wage bill management (November 2013,

February 2014) and one face-to-face meeting in Moscow, May 26, 2014 • Future priorities 2015: fiscal consolidation, management and budgeting of EU

funds, budget transparency

4-2. Reform Priorities for PEMPAL Countries (Continued)

5. Budget Reforms : PEMPAL Country Case Studies

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Russian Federation

• 3rd out of 28 countries in OECD MTEF index after Netherlands and Denmark (see Box 3.2 and Figure 3.9 of draft report).

• 5th out of 32 countries in OECD Performance Budget Index after Korea, Mexico, Canada and Switzerland (see Box 7.1 of draft report).

• 1st in PEMPAL region for Budget Transparency (new initiatives in citizen budgets)

Turkey

• 8th out of 32 countries in OECD Performance Budget Index (Box 7.1)

• Identified in World Bank FMIS and Open Budget Data study as scoring ‘highly visible’ in publishing open budget data (along with Russian Federation)

Thank you

www.pempal.org www.oecd.org/gov/budget

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