1. PEFA Performance Measurement Framework A Tool For Budget Reforms THE GEORGIA EXPERIENCE

2. TOPICS OF DISCUSSION Budget Reform Objectives Process Description PEFA Criteria Findings Recommendation Actions Next Step

3. Need for Budget Reforms Improved Public access Budget and Organic law changes Improved decision-making Simplify process Increase linkages between documents

4. Main Components of Georgia Budget System Basic Data and Directions – Macro Economic Assumptions – Multi-year forecast – Government priorities – Ministry multi-year strategic plans – Initial budget ceilings Ministry Budget Requests Draft Budget Law

5. Georgia Budget (Continued) Parliament Review Approved Budget Law Budget execution Quarterly reports

6. Objectives of Project A budget circular providing clear and comprehensive guidance in developing the budget consistent with existing laws. Enhanced content for improved decision- making Strengthen interconnections between budget documents Improved strategic focus within the budget.

7. Process Two Work Groups Convened – Budget Circular – Budget Format and Content Selected PEFA Standards for Evaluation – Criteria applicable to objectives Applied standards to current budget Identified actions to improve compliance Conducted interviews and surveys with: – Budget department managers and staff – Line ministry budget staff – Parliament staff Presented findings and recommendation Implemented changes Re-evaluated Budget against PEFA Criteria

8. PEFA Performance Criteria

9. Selected PEFA Performance Indicators Comprehensiveness and Transparency – Comprehensiveness of information included in budget documentation (PI-6). Policy Based Budgeting – Orderliness and participation in annual budget process (PI-11).

10. Comprehensiveness Elements (PI-6) Budget should include: Macro-economic assumptions for three years including the prior year. Fiscal deficit Deficit financing Debt stock Financial Assets

11. Comprehensive Elements (Continued) Prior year’s outrun Current year’s budget in same format as the budget proposal Summarized budget data for both revenue and expenditures for main classifications including for current and prior year. Budget impact of new policy initiatives

12. Orderliness and Participation (PI-11) Elements Budged process should exhibit: – Existence of and adherence to a fixed budget calendar. – Political involvement in preparing the budget circular – Timely budget approval by the legislature

13. Initial PEFA Assessment of Format Scored “C+” “Document fulfills 3-4 of the 9 Benchmarks.” Identified 14 improvements: 1. Add 2007-2010 macroeconomic summary table 2. Include government priorities 3. Add summary tables by classification for expenditures 4. Add five year fiscal impact table

14. Format Improvements (continued) 5. Add grant summary table by organization 6. Add information on capital revenue sources 7. Include prior year actual in all budget tables 8. More information on deficit financing 9. Use GFS 2001 to calculate data 10. Add external debt by country table.

15. Format improvements 11. Add state financial assets table 12. Include spending institution programs and priorities. 13. Show capital projects for each spending institution 14. Create Citizens Guide to the Budget.

16. Initial PEFA Process Assessment Self-assessed “C” Identified 7 areas of improvement resulting in the following actions: – Multi-year conversion of budget to GFS standards – Additional explanatory information for: Financial condition Government priorities Basis of expenditure ceilings New programs and services

17. Process Improvements (Continued) Revised and improved all budget forms Simplified economic classifications Merged two forms. Added form to collect information on donor and grant revenues. Added form on program enhancements Added form for three year budget summary Revised capital expenditure information requirements

18. Budget Improvements Added form for ministries to provide four years of information on: – Priorities – Strategies – Actions – Programs – Budget

19. Budget Improvements Added form identifying by ministry how any excess funds will be allocated. Improved communications and coordination between ministry and central budget staff.

20. PEFA Assessment After Improvements Process:B Format:B+

21. Summary of Improvements Improved strategic connections between BDD, Ministry Budgets, and budget laws. Pre-planning for revenue surpluses. Simplified budget process Improved content Increased utility for decsion-maiking Clearer budget preparation guidelines Improved working relationships between Ministries and Central Budget Department

22. Observations on the Use of PEFA Provides useful tools for assessing the process and format of the budget. Can result in focused and meaningful changes. Promotes international standards and therefore comparability of budgets. Improves communciations

23. Next Steps Strive to reach an “A” grade for both the format and process category. Complete conversion to GFS 2001 classifications Institutionalize changes, e.g. annual publication of citizens guide. Assess budget against other PEFA elements Use elements to improve capital budget

24. Questions?