Introduction – The Austrian Federal Budget Reform Friederike Schwarzendorfer Budget Directorate Tallinn

Austrian Fiscal Equalization (including the role of the MoF) Austria: Federal system - Cooperative federalism, closely interlinked Federation: 3 levels of Government - Federal Government - 9 State Governments - 2.357 Local Gov. = Municipalities - additional: Social Security Authorities All Governments: - Budgetary Autonomy - Supervision of Municipalities by Länder Governments Competences: - Legal framework: Federal Constitution of Austria

Austrian Fiscal Equalization (including the role of the MoF) Fiscal Constitutional Law - constitutional framework Federal Intergovernmental Fiscal Relations Act: - tax sharing - intragovernmental transfers - cost bearing Main goal: fiscal equity MoF: negotiations with other stakeholders; collecting most of the taxes, which have to be shared and transferred.

The Austrian Ministry of Finance-Overview Overview: the Austrian MoF

The Austrian Ministry of Finance: Function, Staffing Going into detail:

The Austrian Ministry of Finance: Function, Staffing Functions, Duties and challenges of the MoF: The MoF serves as an strategic executive institution in the area of customs, tax- management, economic policy, budget affairs and international financial institutions concerning the federal state of Austria. A tight cooperation with our nine provinces has to be kept alive. Budget consolidation as crucial condition for a positive economic development and for an ongoing accomplishment of the consequences of the financial crisis. Constancy of the levy of taxes, combating of black economy: through controls; conforming to the law: fair relationships of clients. Increase the efficiency of E‐Government‐projekts Despite of the demographic development: the MoF can further fullfill its duties. Effective combating of tax-fraud

The Austrian Ministry of Finance: Function, Staffing Staffing of the MoF: Directorate Generale II Budget and Public Finances: 106 persons

Contents The Austrian Federal Budget Reform: Motivation and Strategic Approach 1st Stage as of 2009 2nd Stage as of 2013 New Budget Structure New accounting system (including IPSAS) Performance Budgeting including Gender Budgeting Result-Oriented Management of Administrative Units

Budgetary Reform in Austria Primary motivation: Improved budgetary decision-making Addresses the following weaknesses of the current system: No binding medium-term perspective Prevailing focus on inputs Control monopoly of classic cameralistics The budget as a comprehensive steering instrument for resources & outputs & outcomes Implementation in two stages: 2009 and 2013

Amendment of the Constitution National objectives for public finances (as of 2009) Macroeconomic equilibrium Sustainable public finances Gender equality Medium-term expenditure framework (as of 2009) New budgetary principles (as of 2013) Outcome-orientation incl. gender budgeting Efficiency Transparency True and fair view

Overview 1st and 2nd Stage of the Federal Budget Reform

Medium-Term Expenditure Framework (MTEF) MTEF law sets expenditure ceilings for 4 years for 5 headings (headings cover several ministries) and for about 30 budget chapters (ministry specific) MTEF = binding for budget planning and execution: heading level: n+1 to n+4 budget chapter level: n+1 (& n+2) 2 kinds of ceilings: nominally fixed: ̴ 75% of expenditure variable according to predefined indicators for expenditure areas with high exposure to economic cycle, depending on tax receipts, refunded by EU, and payments from due liabilities Rolling forward planning: n+4 is added annually

Win-Win-Situation for Budget Stabilisation and Ministries Clear commitment to medium-term fiscal discipline, in exchange for increased flexibility and improved medium-term planning for ministries, since: unused funds at the end of the year may be carried forward to future periods same rules apply for receipts over budget during the current year no earmarking of these reserves

Expenditures

Experiences Parliament, public and line ministries get a long term perspective for discussing and planning Line ministries meet their expenditure limits According to the new flexibility granted they are able to build up reserves to be used in the upcoming years Amendments to the MTEF law for the current year are to be discussed in parliament and in public and therefor are to be avoided Learning process for the line ministries to shift their attention from the yearly budget law in autumn to the MTEF in spring Drafting the yearly budget law as a technical procedure

Contents The Austrian Federal Budget Reform: Motivation and Strategic Approach 1st Stage as of 2009 2nd Stage as of 2013 New Budget Structure New accounting system (including IPSAS) Performance Budgeting including Gender Budgeting Result-Oriented Management of Administrative Units

Austrian Federal Budget Reform - 2nd Stage, as of 2013

New budget structure Objectives: Greater transparency and accountability (for parliament and public) Greater flexibility for the line ministries Improved governance and efficiency in the administration through consistent structures for the budget, the organisation and personnel

New budget structure

Budget Chapters (BC) Budget Chapter (BC): Every BC has to be completely distributed to different global budgets (GB). Global Budget (GB): Budget line, only as special case: one BC = one GB. There are 3 – 4 GBs in each BC, describing the expenditures and outcome objectives for the main tasks of each BC. Each GB is further divided into different Detail Budgets. First level Detail Budget: Oriented by entities and used for transferring budgetary responsibility to executive entities. One First level Detail Budget has to be completely distributed to different Second level Detail Budgets, if this is voluntarily chosen. Second level detail budget: Is used for transferring budgetary responsibility to executive entities if this seems appropriate for a better steering at the operational level.

Integration of Organisational, Budget, and Performance Management Structures

Budget structure budget chapter 13 Ministry of Justice

Performance Budgeting Objectives and Benefits of Performance Budgeting Establishes comprehensive link between outputs & outcomes with existing budgetary resources Facilitates priority setting in policy-making Strengthens performance accountability Enables transparent presentation of results achieved by the government and its administration for the public and the parliament

Performance Budgeting Objectives and Benefits of Performance Budgeting Establishes comprehensive linkages between outputs & outcomes with existing budgetary resources Facilitates priority setting in policy-making Strengthens performance accountability Enables transparent presentation of results achieved by the government and its administration for the public and the parliament

Impact-Oriented Budget Management – Definition of Roles Minister (Chief Budget Officer): responsible for performance budgeting and performance controlling on ministry level Budget managing bodies: responsible for budget management of their “detail budgets” including implementation of measures to achieve performance objectives Ministry of Finance: defines the framework for impact-oriented budget management incl. performance budgeting Federal Chancellery: responsible for performance controlling on federal level Court of Audit: responsible for annual financial statements, audits, advisory role to the government. New element: recommendations from recent audits may be included in the budget statement on global budget level

Performance Budgeting on the Different Budget Levels P e r f o r m a n c e C o n t r a c t s

Steering administrative units according to results Units receive global envelopes plus intended results and are responsible for achieving those results Each unit receives a 4 year plan on a rolling basis that integrates resources and results Incentives: unused funds are carried forward within the relevant unit; premiums for civil servants, if financial and performance goals are reached Sanctions: if violations of budget regulations occur, Ministry of Finance can deduct the respective sum from the ministry‘s envelope; line ministry is forced to accord projects with the Ministry of Finance on a reduced financial level

The Austrian Federal Budget Reform is a comprehensive reform addressing the whole system and not only specific elements is more than a mere change of managerial, budget and accounting rules involves cultural change within the administration as well as on the political level (setting priorities, defining measurable objectives, transparent decision-making, etc.)

Thank you for your attention! Contact address: Friederike Schwarzendorfer Deputy Director General Directorate for Budget and Public Finance Austrian Federal Ministry of Finance Tel: +43 1 514 33 50 2200