Tools in the Reform of Fiscal Transfers Budget Guidelines, Formulae and the Online Transfer Information System, Budget Requirements Ministry of Finance, Planning and Development

Overview 1.Guidelines 2.Allocation formulae and OTIMS 3.Budget Requirements and Assessment Tools 4.Availability of Materials 2

Guidelines General budget guidelines Key stages in budget preparations Managing the budget process (LG call circular, LLG processes, etc) Preparation of department work plans Sector Grant and Budget Guidelines Roles, responsibilities and mandate of LG Structure and Purpose of transfers Allocation Formulae Overview of Budget Requirements Budget Requirements Assessment and Compliance Table Expenditure budget structure and performance indicators 3

Allocation formulae and OTIMS New allocation formulae aim to improve the equity of transfers to LGs Formulae designed using a common set of principles: Formulae should be simple and transparent Allocations should be equitable, within the resources available Variables should not be easily manipulated by LGs and should not give disincentives to improve performance Variable values should be predictable and politically viable The choice of variables and weights was made through an iterative process in consultation with line ministries. The process involved balancing variables for scale, need and cost 4

Allocation formulae and OTIMS Formulae are made up of a combination of variables and weights. Variables are the indicators use as the basis of deriving the allocations between local governments. Weightings define the relative importance of different variables. Each variable has a weighting. All weightings must add up to 100% The formula calculates the share of the national grant allocation going to a local government. Phasing in of a formula Formulas typically need to be phased in over time. The phase in involves 2 parts 1: Additions to total grant allocation distributed to those local governments receiving less than they should under the formula in addition to 2015/16 base allocation. 2: Set the % of the formula to be rolled out. The actual allocation to a LG is a weighted average of the allocation under step 1 and the new allocation formula. The roll out can be effected through a combination of the two steps or by one alone. 5

Allocation formulae and OTIMS OTIMS is an online tool for: Developing and Storing Allocation Formulae for Transfers Developing the variables and Weightings for Allocation Formulae Construct a phase in / rollout plan consistent with the MTEF Storing information on variables used in formulae Providing visualisation tools to: test the equitability of formulae proposals; asses the before and after effects of formulae and funding changes; and Generating LG allocations that can be easily inserted into budget documents Making LG allocations transparent Making information on transfers publicly available on

Before and After - All Education Transfers Per Child of School Going Age CentralNorthEastWest 2015/16 Allocations Formula applied to 2015/16 Total Grant Allocation 7

Budget Requirements Recap of Rationale for Budget Requirements Shift from earmarking and input conditions to establishment sector LG budget requirements linked to policy objectives Allow flexibility in allocations provided requirements are met These are set out in Sector Grant and Budget Guidelines, which include Budget Requirement Assessment and Compliance Tables. LG adherence will be assessed independently, to ascertain whether they adhered to budget requirements. These results of the assessment will be validated by sectors and used to inform whether the PS/ST signs performance contract Sector Budget Requirement Assessment and Compliance Tables Define specifically and objectively how local governments can comply with budget requirements Set out how LGs will be assessed on compliance. The source information that will be used to assess compliance. These tools are to be used by Local Governments in ensuring combpliance By Heads of Department and the Budget Desk.. and by the independent assessors who will carry out the assessment of budget and accountability requirements The results of the assessment will be communicated to Local Governments to enable them to finalise their budgets and performance contracts.

Budget Requirements 9

List of Service Providers Need to establish common lists of gazzetted LLGs and service delivery units, used by sectors, MoLG, MoFPED: Consistency across OBT/PBS, MIS, OTIMS UBOS etc Line Ministries provide lists to LGs at LG training workshop for validation/updating LGs validate and complete lists alongside draft budgets by mid March Line ministries approve lists, which are used in final budgets and as the basis of releases in 2016/17 Templates based on central government information have been compiled of for Health Facilities Education Facilities Lower Local governments These lists provide information on The Location of facilities based on standard list of Lower Local Governments Non Wage Recurrent Allocations Staffing levels in facilities Status of Infrastructure of facilities Bank Details 10

List of Service Providers A set of excel templates have been prepared for you to complete 11

Availability of Materials OTIMS can be accessed here: All guidance materials will be made uploaded to: A temporary set of files for this workshop are available here 12

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