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Approaches, Challenges, and Recommendations A Knowledge Product prepared by the Program and Performance Budgeting Working Group (PPBWG) of the PEMPAL Budget Community of Practice (BCOP) January 2021 1 Copyright © 2020 PEMPAL BCOP All rights reserved. No part of this publication may be reproduced, transmitted, or distributed in any form without prior written permission from PEMPAL BCOP except for noncommercial uses permitted by copyright law. Any modification to the guidance provided on cooperation agreements in this publication requires a citation to the effect that this publication was used and that it was modified. Contact: [email protected] Budget Community of Practice (BCOP) T: +7 495 745 70 00 ext. 2038 or +7 499 921 20 38 E: [email protected] W: www.pempal.org 2 Acknowledgements This knowledge product (KP) was prepared under the Program and Performance Budgeting Working Group (PPBWG) of the Budget Community of Practice (BCOP) within the Public Expenditure Management Peer Assisted Learning (PEMPAL) network. PPBWG Lead and Co-leads Nikolay Begchin and Ivan Rakovskiy from the Ministry of Finance of the Russian Federation and Emil Nurgaliev from the Ministry of Finance of Bulgaria led the development of this knowledge product. Members from 15 BCOP countries contributed to the product: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Kazakhstan, Kosovo, Moldova, Russian Federation, Serbia, Ukraine, and Uzbekistan. The BCOP Resource Team that supported the PPBWG consisted of Iryna Shcherbyna, BCOP Resource Team Coordinator; Nina Hajoyan, BCOP Consultant; and Naida Carsimamovic, BCOP Resource Team member. Ksenia Malafeeva, PEMPAL Secretariat, provided logistic and administrative support. William Gallagher (Consultant) conducted professional editorial review of the report. The KP greatly benefited from the comments provided by Ivor Beazley, World Bank Senior Public Sector Specialist and Axel Mathot, Senior Policy Advisor of the Public Management and Budgeting Division of the Organization for Economic Cooperation and Development (OECD). 3 Foreword As the leaders of the Program and Performance Budgeting Working Group (PPBWG), we are pleased to present this report, which is a result of collaboration among 15 Ministries of Finance (MFs) across the Europe and Central Asia (ECA) region, all members of the Budget Community of Practice (BCOP) under the Public Expenditure Management Peer Assisted Learning (PEMPAL) network. The PPBWG, formed in 2016, focuses on the design and implementation of program and performance budgeting and spending reviews with the aim of improving spending effectiveness. Reforms in this area have been continuously reported as priority areas by most of our members. The PPBWG works in close partnership with the World Bank, and Organization for Economic Cooperation and Development (OECD) Public Management and Budgeting Division. We are indebted to these partnerships and value the opportunity for knowledge exchange. We would like to take this opportunity to thank all of our 15 member countries for their contributions, including participation in our internal online survey, providing feedback and inputs in the virtual workshop held in November 2020, as well as in providing comments on the draft version of this report. The development of this knowledge product was motivated by the global budgetary pressure stemming from both reduced revenues and increased expenditure needs resulting from COVID-19 pandemic. We believe that this report provides some valuable and innovative options for our countries to consider in conducting rapid spending reviews with a goal of identifying budget balancing measures. We wish our member Ministries of Finance all the best in their ongoing reforms in program and performance budgeting and we look forward to our future collaboration. Nikolay Begchin PEMPAL BCOP PPBWG Lead and BCOP Deputy Chair Head of the Department of Program Planning and Effectiveness of Budget Expenditures, Ministry of Finance of the Russian Federation Ivan Rakovskiy PEMPAL BCOP PPBWG Co-lead and BCOP Executive Committee members Deputy Unit Head in the Department of Program Planning and Effectiveness of Budget Expenditures, Ministry of Finance of the Russian Federation Emil Nurgaliev PEMPAL BCOP PPBWG Co-lead and BCOP Executive Committee members Chief Expert in Budget Methodology Division of Budget Directorate, Ministry of Finance of Bulgaria 4 CONTENTS: EXECUTIVE SUMMARY .....................................................................................................8 OBJECTIVES AND METHODOLOGY ............................................................................11 PART 1. SPENDING REVIEWS: CHARACTERISTICS, TYPES, AND SUCCESS CRITERIA..............................................................................................................................15 1.1. A brief history of spending reviews ......................................................................................... 15 1.2. The concept, objectives, and types of spending reviews ................................................. 16 1.3. An overview of methodologies, processes, and tools used in SRs ............................... 17 1.4. Key success criteria and enablers ............................................................................................. 19 PART 2. RAPID SPENDING REVIEWS: CONCEPT AND SCOPE .............................23 2.1. The concept, purpose and uses of rapid spending reviews ............................................ 23 2.2. The scope and focus of rapid spending reviews ................................................................. 26 PART 3. IMPLEMENTATION OF RAPID SPENDING REVIEWS ..............................28 3.1. Approaches and challenges in PEMPAL countries in budget balancing in 2020 ... 28 3.2. Proposed process and tools of RSR .......................................................................................... 29 3.2.1. The RSR process ............................................................................................................................... 29 3.2.2. The RSR tools ..................................................................................................................................... 35 3.3. Areas of expenditure to review ................................................................................................. 42 3.3.1. Public service remuneration ...................................................................................................... 42 3.3.2. Line Ministry / State Agency administration costs ........................................................... 43 3.3.3. Investment projects ....................................................................................................................... 44 3.3.4. Other expenditures ........................................................................................................................ 46 PART 4. RECOMMENDATIONS .......................................................................................48 4.1. Recommendations on the RSR process and tools .............................................................. 48 4.2. Recommendations on RSR key focus areas .......................................................................... 49 PART 5. A WIDER PERSPECTIVE TO CRISIS RESPONSE: MEASURES TO MAINTAIN AGGREGATE FISCAL CONTROL AND RESILIENCE .........................51 5.1. Complementary measures to rapid spending reviews ..................................................... 51 5.2. Non-budgetary fiscal measures ................................................................................................. 53 5.3. Strengthening resilience to shocks .......................................................................................... 55 ANNEX 1. A BRIEF DESCRIPTION OF ANALYTICAL TOOLS USED IN POLICY EVALUATION ......................................................................................................................56 ANNEX 2. UK: PRIORITIES AND TARGETS GUIDING THE COMPREHENSIVE SPENDING REVIEW (CSR) 2007.......................................................................................58 ANNEX 3. NEW ZEALAND BUDGET 2010 TEMPLATE FOR BASELINE ALIGNMENT PROPOSALS ...............................................................................................59 ANNEX 4. TEMPLATE FOR RAPID SPENDING REVIEW REPORT .......................61 ANNEX 5. TERMS OF REFERENCE OF BASELINE REVIEW OF THE MINISTRY OF SOCIAL DEVELOPMENT, NEW ZEALAND ...........................................................63 ANNEX 6. ANALYSIS OF PROPOSED SAVINGS / EXPENDITURE CUTS .............68 ANNEX 7. LIST OF PERSONS CONSULTED ................................................................70 5 ACRONYMS AND ABBREVIATIONS BCOP Budget Community of Practice B/C Benefit / Cost CBA Central Budgeting Authority CCEC Cabinet Committee on Expenditure Control CEA Cost Effectiveness Analysis CER Comprehensive Expenditure Review COP Community of Practice CPC Cabinet Policy Committee CRRF Covid-19 Response and Recovery Fund CSR Comprehensive Spending Review CT Coordination Team CUA Cost Utility Analysis DM Deputy Minister DP Development Partner EC Expenditure Committee EECCA Eastern Europe, Caucasus, and Central Asia EU European Union FC Fiscal Committee GDP Gross Domestic Product GFC Global Financial Crisis ICT Information and Communications Technology IMF International Monetary Fund IT Information Technology KP Knowledge Product KP knowledge
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