GIRoA Budget Brief Overview 12-21-11

Report
Overview:
GIRoA Budget Processes
US Treasury – Office of Technical Assistance
1
Overview
•
•
•
•
•
•
•
•
Local Governance and GIRoA Budget Basics
Planning and Budget Formulation
Show Me The Numbers: 1390 Budget
Budget Trends
Sustainment
Provincial “Budgeting”
How PRT’s Can Help
Resources and Contacts
– Provincial Budget and Development Website
– Advisor’s Toolbox
– Provincial Financial Overview
• Additional Lessons Learned
2
GIRoA Budget and
Local Governance
Local Governance
and
Basics
GIRoA Budget
Basics
GIRoA Budget and Local Governance Basics
3
Budget at a Glance
In Afghanistan, programs are funded through the:
–
–
Core or On-Budget, which consists of operating and development funds.
Transactions are recorded in AFMIS and reported.
External funds or Off-Budget, which are administered directly by the donor and
the funds are not in the custody of the Ministry of Finance (MoF). The World
Bank estimates the unknown external budget in 1389 was between $6 - $16
billion USD.
Allocations assign budget limits by program and province. Before 1390,
line ministries (LM) did not publish the provincial allocations. In 1390, LM’s
provinces will inform their directorates of their annual development
allocation.
Allotments provide authority to incur commitments, or spending authority.
–
–
–
Allotment is distributed at the Major Object Class level (21, 22, 22.1, 24 and 25)
Allotments for operations (Codes 21 and 22) are made on a monthly/quarterly
cycle, depending on the primary budget unit
Allotment is normally provided 10 days prior to the end of a month/quarter and
entered into AFMIS
4
GIRoA Budget Framework
Process
Who
Authority
Action
Budget Law
MoF, CoM,
Parliament, President
• Article 75,98 Constitution
• Public Financial Management
Expenditure Law (PFEML)
Provides legal authority to spend public
funds on programs
Allocations
Line Ministries (LM)
• PFEML
• Financial Regulations
Establishes the accounting framework
to facilitate control, monitoring, and
reporting
Allotments
LM, MOF, Mustofiat
• PFEML
• Financial Regulations
• Budget Circulars
Gives permission to commit public
funds to purchase goods and services
to support programs
Execution
LM, Provincial
Directorates (PD)
• Procurement Law, and related guidelines
• Financial Regulations
• Treasury Circulars
Procures goods and services to support
programs
Voucher
PD, LM
• Financial Regulations
•Treasury Circulars
Prepares the documentation package to
support disbursement
Disbursement
MoF, Mustofiat
• Financial Regulations
• Treasury Circulars
Pays
Reconciliation
Mustofiat, Bank
• Financial Regulations
• Treasury Circulars
Confirms payments
Audit
LM, MoF, CAO
• PFEML
• CAO Law
Confirms processes followed
5
Provincial “Fund Flow”
Funds flow through the primary budgetary units (BU) to their subordinate units.
There is no “provincial” budget. Subnational budgets are allocated through the
relevant central line ministries to their provincial directorates, as illustrated
below:
–
–
Needs are communicated upwards, from line departments to line ministries
Line ministries determine allocations by program and province
MoF
IDLG
LM1
LM2
LM3
LM4
Provincial Development Committee
Mustofiat
Governor
LD1
LD2
LD3
LD4
District
Finance
District
Governor
D1
D2
D3
D4
6
Provincial Governance
Key Concepts
• Provinces are administrative units of government; not political units. (See
Chapter 8, Afghan Constitution)
• Provincial directorates are secondary budget units (BU) their relevant line
ministry, the primary budget unit.
• The Governor is not elected. IDLG prepares a list of nominees, vets them,
and forwards it to the President for selection. Their appointment is not
confirmed by Parliament or the Provincial Council.
• The Governor’s expenditure over line directorate budgets is unclear and
ambiguous. In general, the Governor exercises influence, but not authority.
• The Provincial Council is the only representative body at the provincial level.
• The Mustafyat is the Ministry of Finance’s arm in the province. These
offices are responsible for revenue collection and treasury operations in the
province. They disburse salary and operation payments.
7
GIRoA Budget and
Local Governance
Basics
Planning and
Budget Formulation
GIRoA Budget and Local Governance Basics
8
Idea to Implementation
The complete budget cycle, through initial project identification to operation is a
multi-year process. The planning phase is an input to budget formulation, which
is an input to implementation and operations.
Provincial
Development
Plan
BY-3
BY-2
BY-1
BY
Planning
Project
Formulation
Investment
Project Template
(proposed)
Budget
Formulation
Budget
Execution
Budget circular
instructions
9
Putting a Project On-Budget
The Budget Committee has established criteria to put a project “on-budget:”
–
–
–
–
–
Completion of project preparation and documentation
Completion of procurement plan, cost, and time estimation
Completion of feasibility study (if required) and project design
Readiness of project documentation for solicitation
Donor (for non-discretionary projects) and Budget Committee agreement
Working with provincial directors to “jumpstart” project documentation, and to
obtain commitments from donors, will smooth the process.
10
Budget Formulation Process
Action
Description
Provincial Participation
Development strategy
established
• Clear understanding of baseline
spending
• Allowed assessment of any planned new
spending against development strategy
April-May: Budget unit’s
(BU) define spending
priorities (Budget Circular #1)
• Clear understanding of baseline
spending
• Allowed assessment of any planned new
spending against development strategy
• Primary BU (e.g. line ministry) prepares BC1
instructions for their provincial directorates
(or secondary BU)
• Provincial directorates submit inputs
Aug-Sep: BU’s prepare
detailed budgets (Budget
Circular #2)
• All line ministries and agencies prepare a
program, results-based budget
• Primary BU (e.g. line ministry) prepares BC2
instructions for their provincial directorates
(or secondary BU)
• Provincial directorates submit inputs
Oct-Nov: BU’s defend
budgets to Budget Committee
• Budget Committee focuses on programs
rather than line items
• BU’s must be able to justify their
requests
• Provide solid justification in their
submissions
• Be available to support BU
Dec-Jan: Cabinet approves
draft budget
Feb-Mar: Parliament
approves budget
Mar: President signs
Source: MoF brief to ISAF, 11 April 2011
11
GIRoA Budget and
Local Governance
Basics
Show Me the Numbers
GIRoA Budget and Local Governance Basics
12
GIRoA 1390 Budget
• The national budget is a
political and strategic
document
• Focuses on achieving
ANDS goals and delivering
services to the people
• Includes both core and
external budgets
• Provinces are NOT
budgetary units
• Funded through
combination of domestic
revenues and donor
contributions
1390 National Budget
Core ($5.4B USD)
External*
Operating (60%)
Development (40%)
Discretionary
(25%)
Non-Discretionary
(75%)
*External budget includes all donor funding outside of the GIRoA
budget process; Estimates of external funding are between $6 $16 Billion USD
13
1390 Budget Funding Sources
Operating budget ($3192m)
Development budget ($2154m)
$386
$280
$1,419
$1,788
$1,488
Domestic Rev
Source: MoF MTBF 11/2/2011
Donor Grants
Domestic Rev
Donor Grants
Other
14
1390 National Budget
Total Core Budget – $5.4 B
60%
40%
Development Budget – $2.2 B
Operating Budget– $3.2 B
75%
Non Discretionary – $1.7 B
Carry Forward Non
Discretionary– $538 M
Source: MoF MTBF 11/2/2011
External Budget – TBD
New Non Discretionary –
$1.1 B
25%
Discretionary – $515 M
New Discretionary –
$379 M
Carry Forward
Discretionary– $136 M
15
Core Budget – By Sector
Development spending creates future obligations to support the asset
Core Development Budget By
Sector
Core Operating Budget By
Sector
Source: 1390 budget
Source: 1390 budget
16
Operating Budget –
Driven by Salaries



Up over 30% from 1389 to
1390
250000
Majority of all growth in the
operating budget is from
employee compensation
(primarily teachers, ANA/ANP
and pay and grade reform)
Maintenance costs are
insufficiently covered in the
budget
Operating Budget by Expenditure
Code
Code 21
(Salaries)
Employee compensation
accounts for over 70% of the
operating budget
200000
Code 22
(Goods &
Services)
Million AFS

150000
Code 25
(Captital Exp)
100000
Contingency
Fund
Total Operating
Budget
50000
0
1
2
3
4
5
Source: MTBF 11/2/2011
17
GIRoA Budget and
Local Governance
Basics
Budget Trends
GIRoA Budget and Local Governance Basics
18
Budget Summary 1388-1390

Operating Budget


Salaries

Operating Expenses

Disbursed through quarterly allotments to
provincial Mustafiats from Line Ministries
Core Budget Distribution
$6,000
$5,346
Development Budget

Donor funding through the Afghanistan
Reconstruction Trust Fund

Disbursed through MOF central treasury to
central line ministries (portion spent in
provinces)

Discretionary projects identified through
consultative process

Non-Discretionary projects are earmarked by
donors

1390 includes carry forwards
$4,778
$5,000
Million USD
$4,038
$4,000
$3,000
$2,000
$1,000
$0
1388
Operating
1389
Development
1390
Total
19
19
Historical Budget Execution
1385 - 1390 Development Budget
2500
• Delays in budget
approval
by Parliament
• Communication
problems between
Kabul and the
Provinces
• Lack of qualified
contractors and other
supply chain
issues
60.0%
53.6%
2308
2240
2170
2154
50.0%
2000
40.2%
1790
42.9%
40.6%
39.3%
40.0%
Million USD
• Poor procurement
planning
55.3%
1500
1320
30.0%
960
1000
900
880
923
907
20.0%
730
500
10.0%
0
0.0%
1385
Source: MoF
1386
Allocation
1387
Expenditure
1388
1389
Execution Percentage
1390*
* As of 11/26/2011
20
Domestic Revenues
• Taxes account for the
majority of domestic
revenue
• In 1390 domestic
revenue contributes to
62% of the core
operating budget and
43% of the total core
(operating and
development) budget
250,000
200,000
Million AFS
• Domestic revenues
have been growing
around 20 billion Afs
($400 million) per year
Fiscal Sustainability
80%
73%
65%
73%
73%
62%
60%
70%
60%
62%
50%
150,000
40%
100,000
30%
20%
50,000
10%
0
0%
1387
1388
1389
Domestic Revenues
1390
1391
Operating Budget
1390 Domestic Revenue
1392
1393
Fiscal Sustainability
Million AFS
Million USD
Income, Property, Capital Gain Taxes
24,193
515
International Trade Tax
32,543
692
Domestic Goods and Services Tax
18,996
404
Other Taxes
3,006
64
Non Tax Revenue
14,927
318
93,665
1,993
Total Domestic Revenue (1390 Projection)
21
Provincial Expenditures
1388-1389
22
GIRoA Budget and
Local Governance
Basics
Sustainment
GIRoA Budget and Local Governance Basics
23
Sustainment Impacts
The ability of GIRoA to sustain projects is based upon timely information
to estimate the fiscal requirements to support programs
On-budget development projects:
– Conforms with ANDS, sectoral, and ministerial objectives
– Generally aligns with Constitutional obligation to assure balanced development
and equitable distribution of resources
– Three year window: budget year, plus two
– Identifies fiscal impact of staffing and operational support
Off-budget:
–
–
–
–
Supports donor’s policy objectives, not necessarily GIRoA’s
Increases risk of duplication of projects at the local level
Does not conform with GIRoA standards for projecting support requirements
Delays funding for sustainment
24
Recent Case Studies



Following the withdrawal or
significant reduction in troop
levels, Iraq, Kosovo, Haiti,
and Bosnia saw significant
decreases in development
assistance levels
Before Troop
Reduction
(2003)
When troops transition out,
the government must be able
to stand up
Technical and professional
competency must be built
so the local government
can operate (using their
own systems and
procedures) when PRTs
and the international
community transition
Kosovo
Iraq
2,000
1,500
1,000
500
-
After Troop
Reduction
(2009)
200
150
100
50
0
Before Troop
After Troop
Reduction ( 2000) Reduction (2003)
Haiti
Bosnia
300
200
100
0
300
200
100
0
Before Troop
Reduction
(1998)
After Troop
Reduction
(2002)
Before Troop
Reduction
(1996)
After Troop
Reduction
(2001)
Source: USAID
25
Provincial CERP Spending
26
GIRoA Budget and
Local Governance
Basics
Provincial “Budgeting”
GIRoA Budget and Local Governance Basics
27
Why is a Pilot Program Necessary?
• Years of limited discretionary funding at the center and seemingly
unlimited donor funding at the provincial level has distorted the
budget formulation process and rendered the PDP’s and DDP’s
irrelevant
• External funding is beginning to decline; Some of it is moving on
budget and some is disappearing, without linking the provinces to
the center in the budget formulation process, Afghanistan’s budget
formulation will continue to be highly centralized without the external
resources available for the provinces
• In most provinces, reviving the provincial development plan process
that feeds from districts to provinces to Kabul with projects that are
fully planned, vetted, and in line with national priorities is a multiyear
process
28
1390 Pilot Program
Achievements
• Five ministerial participants in the pilot program: MAIL, MRRD,
MoPH, MoED, & IDLG
– Program was implemented country wide
– Budget Symposium in May brought 8 representatives from each
province to Kabul to meet with central ministry officials and learn about
the pilot program
– 10 Regional training conducted Afghan to Afghan by the MoF and
Central Ministries going out to the provinces to train on submissions for
Budget Circular’s #1 and #2
– Out of 170 total possible submissions, 168 of the provincial line
directorates completed their project submissions for inclusion into the
1391 budget
– Increased communication between Kabul and the provinces as a result
of the trainings and outreach
– Several other ministries requesting to be included in the 2nd year
expansion of the pilot program
29
Ideal Budget Formulation
Process (Bottom Up)
•
•
•
•
The budget is developed to implement
the Afghan National Development
IDLG
Strategy (ANDS) and National Priority
Programs (NPP) are the main vehicles
to implement the ANDS
April – May: BC 1 is issued providing
instruction to Ministries on how to
support the ANDS; Ministries have
informed line directorates on NPP
strategy and how to identify projects
that support both the NPP and local
priorities
Aug – Sept: BC 2 is issued. Line
directorates submit projects to the
central ministries within the budget
envelop.
March: The budget is passed and
contains projects the line directorates
chose which support National
priorities and local preferences.
LM1
LM2
LM3
LM4
Provincial Development Committee
LD1
LD2
LD3
LD4
D1
D2
D3
D4
30
Externally Funded Project
Coordination
• Donors should be building off the training provided during the
Provincial Budget Pilot Program
– Use forms 2A and 2B for all externally funded projects
– Line directors will continue to gain experience in project formulation and
costing
– Central Ministries and the MoF will be aware of the externally built
projects and understand what the ongoing operations costs are
• Externally funded project packets currently available
– Currently coordinating between GIRoA and Donors to make it
mandatory to use the GIRoA forms for all externally built projects
31
Linking Local Priorities to
National Strategy
Line Ministry
Line Ministry
Strategy
Line Ministry
Provincial
Directorate
Provincial
Directorate
Strategy
Source: MoF Briefing to ISAF, December 2010
Provincial
Development
Council
Provincial
Development
Plan
District
Development
Assembly
District
Development
Plan
32
Strengthening the
Provincial Role
MoF, with the Ministry of Economy, IDLG, and the line ministries are
strengthening the role of provincial directorates in the budget process,
specifically:
– Building finance capacity of mustufiats and provincial line ministry departments to
engage in planning and budgeting
– Facilitating communication between provincial departments and central line
ministries
– In the center, regular coordination with donors, UN organizations and others
– In the provinces, regular consultation and coordination with PRTs, RCs and
locally active donors
– Providing provincial allocation information by budget units to provincial officials
– Piloting norms-based allocation (15 provinces for Ministry of Education)
Source: MoF Briefing to ISAF, December 2010
33
GIRoA Budget and
Local Governance
Basics
How PRT’s Can Help
GIRoA Budget and Local Governance Basics
34
How Can PRTs Help? (General)
Activity
How Can PRTs Help?
Partner with Relevant LM and
MoF
 Create a strong relationship with relevant GIRoA officials (Governor, Provincial
Council, Mustofiat, Line Directors, District officials, etc.)
 Ensure all activities are vetted with GIRoA (LMs and MoF)
 Work more with elected officials (Provincial Council)
Operate Using GIRoA
Processes
 Ensure all funding and capacity building is in line with GIRoA processes and
procedures
 Operate within the GIRoA budget framework and ministerial programs
 Align activities with the Afghan National Development Strategy (ANDS)
 The Sub-National Governance Policy is not “law” . New sub-national financing
mechanisms are being considered, but have not yet been implemented
 When in doubt, obtain input from the Ministry of Finance; they will have good ideas
Pursue Effective Aid
 Align with the GIRoA Operational Guide for Off-Budget Financing
 All projects should be identified by GIRoA as priorities
 Obtain “sign-off” from the right individuals; Governors and Directors of Economy do
not have the authority to accept projects, although they can sign off on completion of
projects
 Only the Ministry of Finance has the authority to allow other entities to accept capital
projects
Civ-Mil Cooperation
 Ensure the RC, TF, PRT and other USG entities are implementing the same plan
 Coordinate LM and MoF agreement with plans and that they have “bought into” the
process
Prepare for Transition
 Enable GIRoA to implement budgeting polices and good governance practices in
preparation for transition
35
How Can PRTs Help? (Specific)
Activity
How Can PRTs Help?
Required Documents
Document
Familiarization
 Become familiar with primary GIRoA
budget related documents and websites








Website
Familiarization
 Obtain logon/password access to all
relevant databases prior to arriving in
theatre
 Provincial Budgeting and Economic Development
website (including Ronna in general)
 Donor Assistance Database
Mustofiat
Interaction
 Create a strong partnership with the
Mustofiat
 Obtain detailed financial reports outlining
the allocations and spending within the
province
 DG of Treasury approval memo for provinces to release
AFMIS information to PRTs
 Helmand case study example
Improve
Provincial
Development
Plans (PDP)
 Only fund projects on the PDP
 Provide assistance on PDP updating
 Provincial development plan for province
 Afghan National Development Strategy
 Kabul Conference documents
Budget
Formulation
 Work with LDs on budget formulation
submissions (assign individuals to each
LD)
 BC1 (and related forms)
 BC2 (and related forms)
 Template/checklist being created by MoF (timing TBD)36
Public Financial Expenditure Management Law
Procurement Law and Financial Regulations
Budget and treasury circulars and other guidance
COMIJC Aid Effectiveness policy letter
Paris Declaration Assessment
MoF Guide to Off-Budget Assistance
Draft 1390 budget statement
1390 development budget (once completed)
How Can PRTs Help? (Specific)
Activity
How Can PRTs Help?
Required Documents
Consultation
and
Coordination
 Assist (when requested) with MoF
training events in provinces
 Work with MoF advisors (OTA and IJC) to
understand when PBU events will be
taking place in your province
 Create strong links with OTA and IJC
representatives
 If you are interested in an OTA visit once in theater,
Lynda Roades can work with you on developing a
concept note
 PBU1390 action plan outlining capacity building training
events and consultation and coordination workshops
1390 Budget
Execution
 Facilitate budget execution of 1390
projects and programs
 Understand projects “on-budget” and
their status per LD
 1390 development budget (once completed)
 Reports generate for province through AFMIS
Sustainment
 Ensure all projects are accompanied by
an appropriate sustainment letter
 Sustainment letters should include
related O&M costs
 Sustainment letters should be forwarded to appropriate
central ministry officials
Understand
Other Sources
of Funding
 Become familiar with other funding
sources for provinces
 Ensure alignment with all of the above
 Performance Based Governor’s Fund (IDLG website)
37
GIRoA Budget and
Local Governance
Basics
Resources and
Contacts
GIRoA Budget and Local Governance Basics
38
Start Here – PBED Website
The Afghanistan Provincial Budgeting and Economic Development website
The Afghanistan Provincial Budgeting and Economic Development (PBED) website has been set up as source of budget
information for PRT’s and Provincial Officials. It has been designed as a tool for low bandwidth users to be able to access
budget documents, laws, presentations, ask questions, and participate in discussions. The site is being managed out of the
Ministry of Finance provincial budget unit. It is currently only in English but we are developing the site to have all
information eventually in Dari and Pashtu as well. The site is for users in the provinces and any feedback and requests for
improvement are welcome.
How To Request An Account
• Go to https://ronnaafghan.harmonieweb.org/Pages/Default.aspx
• On the right hand side, click on “request a ronna account”
• It will take you to the log in screen, again click “request an
account”
• Fill out the require info: Name, Email (e-mail address you
want updates sent to), etc
• In the justification section enter “Provincial Budgeting and
Economic Development Ronna group”
• Verify the information is accurate and hit the submit
button
• You will receive an confirmation e-mail with your details
when the account is approved; follow the directions in the
email to log in. (while waiting for your account to be
approved you can view the site by following the steps
below.
39
Additional Resources and
Contacts
• Web Sites
–
–
–
–
–
–
–
–
–
–
–
Ministry of Finance: www.mof.gov.af
Donor Assistance Database: http://dadafghanistan.gov.af
Ministry of Finance (Budget): www.budgetmof.gov.af
Ministry of Finance (Treasury): www.treasury.gov.af
Procurement Policy Unit: www.ppu.gov.af
Independent Directorate of Local Governance (IDLG):
http://www.idlg.gov.af/IDLG/
CIMIC Web: https://www.cimicweb.org/Pages/PRTConference2010.aspx
Ronna: https://ronna-afghan.harmonieweb.org/Pages/Default.aspx
Peace Dividend Trust:
http://www.peacedividendtrust.org/en/index.php?sv=&category=PDT%20Afghanis
tan&title=PDT%20Afghanistan
USIP: http://www.usip.org/
Interagency Provincial Affairs (IPA) website:
http://www.intelink.gov/wiki/Portal:Afghanistan_Provincial_Reconstruction Teams
40
Provincial Budget Unit:
Afghan Support

Dr. Najimullah Qasimi, Manager, Provincial Budget Unit, [email protected]

The PBU coordinates all Capacity Building Training (CBT) and Consultation and
Coordination (C&C) events in each province

Attendees include representatives from the Governor’s Office, Provincial Council, Line
Directors, District officials and others as necessary

Provincial officials should coordinate these events without assistance from the PRT
(expect for very specific requests); PRT officials can potentially observe sessions

Composed of Afghan nationals funded through GIRoA, UNDP, and USAID
41
Provincial Budget Unit
International Support

Advisors from the US Treasury’s Office of Technical Assistance (OTA) and IJC focus
on explaining the Afghan system to the PRTs and working with them to improve their
ability to support or mentor their Afghan counterparts

On-site consultation and coordination with PRTs, Human Terrain Teams, military civil
affairs teams, Afghan officials

Provincial Financial Overview template (in-progress)

On-line reference material

Advisor’s Toolbox (1 June release)
42
Additional Resources and
Contacts
• USG and ISAF Contacts
– Primary Contact
• Ms. Lynda Roades
• MoF PBU Advisor, [email protected]
• Cell: (0) 796-146-157
– Mr. Kirk Schmidt, MoF PBU Advisor, [email protected], cell: (0) 702-591-559
– Ms. Rhonda Reinke, MoF Treasury Advisor, [email protected], cell: 706-797-200
–
Ms. Najla Farzana, IJC Provincial Budgeting Advisor, [email protected]
43
Additional Lessons
Learned
44
Additional Lessons Learned
•
Afghans must take the lead; at this point we cannot do it for them
•
Legitimacy is the key to local governance
•
Structural problems must be solved before human capital can have an
impact
•
Economic development is imperative if GIRoA is to be able to fund their
long-term budget needs; ensure it is a priority
•
Parallel structures can destroy value if not transparently implemented with
GIRoA approval and buy-in
•
Civ-Mil cooperation on all fronts is necessary to create a consistent and
predictable message
•
What we fund, and how we fund it, will have a long-lasting impact (positive
or negative) and we must think through unintended consequences
45

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