1. Budget Community of Practice Program Budgeting Working Group (Concept) Nikolay Begchin Head of the Working Group Deputy Director Budget Policy Department Ministry of Finance of the Russian Federation

2. Decision to Establish the Working Group: May 2014 – Cross COP Plenary Session; Initiated by: Russian FederationKyrgyz Republic Republic of BelarusRepublic of Armenia

3. 9 responses out of 21 (excluding Uzbekistan and including three government levels in Bosnia and Herzegovina (BiH): program budgeting (PB) and performance management (PM) are not taken into account for decision-making on budget appropriations 4 respondents suggest that PB and PM information is widely used 8 respondents suggest that PB and PM information is used but most decisions are driven by other factors Capitation financing is not fully used – at least at the central government level. 3 MOF Budget Appropriation Decisions Based on Programs and Performance

4. Program Budgeting: Implementation Challenges Financing volumes planned ex ante by program designers greatly exceed budget capabilities; Too many unaligned policy documents which make it difficult for line ministries to formulate their strategic plans; Unresolved terminology issues – difference between evaluation and monitoring; Using performance evaluation mainly as a “punishment or incentive” tool rather than as a means to effectively improve performance; Unsure about the merits of allowing more fiscal flexibility to line miniseries and managers for fear that it might compromise control over budget spending; Practically impossible to formalize spending adjustments on programs or actions depending on their performance evaluation.

5. Working Group Objectives: Identify key trends in: а) program budgeting implementation; б) spending revisions; Learn from specific PEMPAL country examples in these areas; + participate in an OECD survey of performance budgeting practices in 2016.

6. Action Plan: 1. Participating in the OECD performance budgeting survey March 2016 – February 2017 2. Working Group Meeting in the context of the XIIth CESEE SBO meeting in Slovenia June, 2016 3. Russia’s experience in implementing program budgeting (VC)April/ May, 2016 4. Presentation of the findings of the World Bank survey of countries implementing program budgeting (VC) September-October, 2016 5. Workshop on trends and challenges of performance budgeting across PEMPAL countries identified in the course of the OECD survey February, 2017 (during the BOP plenary) 6. Selected country cases -- to be confirmed (study tour)Fall 2016 /Spring, 2017

7. Core Team: Nikolay Begchin (Nikolay.Begchin@minfin.ru)Nikolay.Begchin@minfin.ru Maya Gusarova (MGusarova@worldbank.org)MGusarova@worldbank.org Deanna Aubrey (Deanna_Aubrey@hotmail.com)Deanna_Aubrey@hotmail.com Naida Čaršimamović Vukotić (naidacar@gmail.com)naidacar@gmail.com Ksenia Galantsova (KGalantsova@worldbank.org)KGalantsova@worldbank.org Participants: Countries represented in the BCOP Executive Committee (Albania, Russia, Armenia, Kyrgyz Republic, Croatia, Turkey, Belarus, Bosnia and Herzegovina) Countries which will participate in the OECD survey in the spring of 2016