BUDGET FACTS & TRENDS Ministry of Defence of the Czech Republic
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1 BUDGET FACTS & TRENDS 2017 Ministry of Defence of the Czech Republic
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3 INTRODUCTION The Ministry of Defence of the Czech Republic, in compliance with Act No. 106/1999 Coll., on Freedom of Information, issued this publication in order to inform the general public and partner nations about the basic data in the State Budget Chapter 307 Ministry of Defence (MoD budget chapter) for the year 2017, including trends, structure, main expenditure categories and their proportions. Summary of the main documents used for 2017 MoD Budget Draft preparation: Act No. 457/2016 Coll., on the Czech Republic State Budget for the year 2017, dated 7th December 2016; The Government Resolution No. 831 dated 21st September 2016, on the Czech Republic State Budget Draft for the year 2017 including the Mid-term State Budget Outlook for the years and the Mid-term State Budget Frameworks for the years ; The 2016 Draft State Final Account Chapter 307 Ministry of Defence; The Government Resolution No. 563 dated 22nd June 2016 for the preparation of the 2017 State Budget Draft and the Mid-term State Budget Outlook for the years ; Ministry of Finance s Instruction for the preparation of the 2017 Czech Republic State Budget and the Mid-term Outlook for the years 2018 and 2019 Budget Chapter 307 Ministry of Defence (reference number MoF-23035/2016/ dated 28th June 2016); The Government Resolution No. 339 dated 18th April 2016 concerning the Plan of MoD Forces and Assets Deployment in Foreign Operations in with the Outlook for 2019; The Government Resolution No. 276 dated 30th March 2016 concerning the Plan of the Air Advisory 1
4 Team Deployment to the Republic of Iraq; The Government Resolution No. 877 dated 5th October 2016 concerning the Plan of MoD Forces and Assets Deployment to the Republic of Iraq within the support of fight against so-called Islamic State. The basic budgetary limits for the Ministry of Defence for the year 2017 were set by the Government Resolution No. 563/2016 as follows: total revenues in the amount of CZK 4, million; total expenditures in the amount of CZK 52, million. These limits were clarified during the preparation of the 2017 State Budget Act and set in force by the Government Resolution No. 831 dated 21st September 2016 on the draft Czech Republic State Budget for the year 2017 and the Mid-term State Budget Outlook for the years and the Mid-term expenditure frameworks as follows: total revenues in the amount of CZK 4, million; total expenditures in the amount of CZK 52, million. The Draft 2017 State Budget - Ministry of Defence Chapter was prepared in accordance with Act No. 218/2000 Coll., Budgetary Rules. It was based on the budgetary limits for the year 2017, regulation No. 133/2013 Coll., which determines scope and structure of the data needed for preparation of the Draft State Budget and Draft Mid-term Outlook and deadlines for their presentation, in accordance with objectives set in the Government Resolution No. 831 dated 21st September The 2017 MoD Budget was prepared also with regard to increased transparency of public spending providing clear answers to the questions to which objectives are public funds spent. Objective-based budgeting and the criteria determined for valuation of their fulfilment are a basic instrument for the increased economy, efficiency and effectiveness of public spending. In accordance with Act No. 218/2000 Coll., as 2
5 amended by Act No. 501/2012 Coll. and the Government Resolution No. 563 dated 22nd June 2016, the 2017 Budget Draft and Mid-term Outlook was prepared in the Integrated State Treasury Information System Budget Preparation subsystem (IISSP-RISPR). Revenues and expenditures are presented in accordance with MoF regulation No. 323/2002 Coll., on the Budget Structure. The approved 2017 MoD Budget ensures essential resource framework for implementation of The Concept of the Build-up of the Armed Forces of the Czech Republic 2025, agreed and ratified by the Czech Government on 21th December This key strategic defence document outlines the scope and achievability of the identified capabilities vital to the politico-military ambitions and all the tasks and commitments of the Armed Forces up to 2025 in the context of collective defence. The implemented priorities are defined in the Minister s Guideline for planning the MoD operation and development in with specification for The 2017 MoD Budget will cover primarily: non-discretionary expenditures related to personnel with the anticipated personnel number growth; strategic projects expenditures; expenditures related to the fulfilment of commitments towards NATO, represented by the adopted capability targets (CT 2013) implementation, in the area of defence planning; commitments resulting from the membership of the Czech Republic in international organizations; ACR troops deployment abroad expenditures. MoD budgetary limit for 2017 is higher by CZK 4, million compared to the year The Mid-term outlook framework for the year 2018 is set in the amount of CZK 57, mil. and CZK 62, mil. for the year Act. No 457/2016 Coll., on the Czech Republic State Budget for the year 2017, set the MoD expenditure 3
6 limit in the amount of CZK 52, mil. The predicted approved MoD budget share on GDP is 1,08 %, compared to 1,01 % in 2016 (source: Ministry of Finance - Macroeconomic Forecast, January 2017). The total 2017 MoD revenues set in the amount of CZK 4, mil. are CZK mil. lower compared to the previous year. Tax revenues, in the amount of CZK 3, million, is revenue from pension and health insurance and from employment policy contributions for professional soldiers. Other tax revenues amounting CZK million are revenues proceeded from the selected activities and services (e.g. waste storing fees). Non-tax and capital revenues in the amount of CZK million include non-tax revenues amounting CZK million (from own performance, rent of lands and immovable and movable assets, stateowned enterprises funds transfers into the state budget, property sales and other non-tax revenues), capital revenues amounting CZK million (lands and other immovables sales and other long-term tangible assets sales) and transfers received from EU funds in the amount CZK million. The amount of CZK 8, million (including EU funds in the amount of CZK 32 million) is allocated for the property reproduction programmes (programme financing), which represents an increase of CZK 3, million compared to the year 2016 ( index 2017/2016 is 1.65). Operating expenditures (including related operating expenditures of programme financing and defence research, development and innovation operating expenditures) are approved in the amount of CZK 45, million (i.e. 87,3 % of total MoD budget expenditures). There is an increase of CZK 1, million compared to 2016 (index 2017/2016 is 1.04). Defence research, development and innovation expenditures have not been part of programme financing since CZK million is allocated for defence research, development and innovation programmes. There is an increase of CZK million in comparison to the previous year (index 2017/2016 is 1.01). 4
7 In accordance with the Government Resolution No. 339 dated 18 th October 2016 concerning the Plan of MoD Forces and Assets Deployment in Foreign Operations in with the outlook for 2019, total expenditure of CZK 1, mil. are expected for ACR participation in foreign operations in Furthermore, the approved MoD Budget includes funds for fulfilment of commitments resulting from international defence documents, activities carried out in cooperation with NATO, EU and UN bodies and appropriate authorities of the Czech Republic, joint exercises, events and engagements arising from the North Atlantic Treaty and international treaty obligations. The MoD also participates in the projects under the EU Operational Programmes. The amount of CZK million is allocated for these projects, out of which CZK million are EU funds and CZK million are the State Budget funds. The number of personnel used for the MoD budget preparation for the year 2017 is (except 905 personnel of On-Vote organizations under the MoF regulation). There is an increase of compared to The number of systemised posts was increased in particular in the context of the Czech Armed Forces Development Concept 2025, the organizational provision and development of cyber security and protection (Government Resolution No. 642 dated 29 July 2015 on Resourcing of the Military Intelligence Capabilities for ) and new Act on the Service of Reserve Soldiers (Act No. 45/2016 Coll.). Furthermore, the increase is consistent with the post systemisation of the Czech Armed Forces General Staff, and the Government Resolution No. 928 dated 9 November 2015 (on amendment of the Government Resolution No. 800 dated 12 October 2015 on the Government Decree on the Brdy Protected Landscape Area) and the draft systemization of the MoD service posts and posts falling under the Labour Code at 1 January
8 Development of the MoD Budget in CZK mil Budget preparation limits and the Mid term outlook *) Approved MoD Budgets and Mid-term expenditure frameworks **) Budget preparation limits and the Mid-term outlook ***) year CZK million Budget preparation limits and the Mid-term outlook *) Approved MoD Budgets and Mid-term expenditure frameworks **) Budget preparation limits and the Mid-term outlook ***) *) The Government Resolution No. 484 dated 24th June 2015 on preparation of the Czech Republic State Budget for the year 2016 and the Mid-term State Budget Outlook for the years **) Act No. 457/2016 Coll., on the Czech Republic State Budget for the year 2017, dated 7th December 2016 and the Mid-term State Outlook Frameworks for approved by the Government Resolution No. 831 dated 21st Septemeber 2016 ***) The Government Resolution No. 563 dated 22th June 2016 on the Czech Republic State Budget for the year 2017 and the Mid-term State Budget Outlook for the years preparation 6
9 Comparison of basic Macroeconomic Indicators Index 2017/2016 Gross domestic product (in CZK billion) 4 719,00 *) 4 885,00 *) 1,05 Expenditures of the State Budget (in CZK billion) 1 219, ,27 1,05 Inflation rate (in %) 0,7 % *) 1,2 % *) 4,00 MoD expenditures as a % share on GDP 1,01 % 1,08 % 1,05 MoD expenditures as a % share on the State Budget expenditures 3,92 % 4,01 % 1,05 *) source: Macroeconomic prediction of the Czech Republic issued by the MoF (January 2017) 7
10 Basic Data on the State Budget MoD Budget Chapter Expenditures (in CZK million) Approved budget Index 2017/2016 I. Total capital expenditures 3 587, ,9 1,87 II. Total operating expenditures , ,1 1,04 II.1. Employee's salaries and other payments for contract work , ,5 1,13 II.2. Retirement pensions and other social benefits 6 991, ,0 0,99 II.3. Non-discretionary employer-paid insurance and allocation to CSNF 4 942, ,5 1,13 II.4. Non-investment subsidies to on-vote MoD organizations 1 690, ,7 0,92 II.5. Non-investment subsidies to enterprises 222,9 377,9 1,70 II.6. Other material non-investment expenditures , ,5 0,97 III. Total MoD expenditures (I. + II.) , ,0 1,10 MoD expenditures (based on constant prices of the year 2011) , ,1 1,11 Revenues (in CZK million) IV.1. Insurance revenues and other tax revenues 3 761, ,1 1,06 IV.2. Non-tax revenues, capital revenues and transfers received 1 366,1 875,0 0,64 IV. Total MoD revenues (IV ) 5 127, ,1 0,95 RESULTING BUDGET BALANCE , ,9 1,12 Year 2016 Year
11 Comparison of Expenditures Based on the UN Methodology in 2016 and 2017 UN Code Expenditures (in CZK million) Approved budget Year 2016 Year 2017 Difference ( ) Index 2017/ Personnel , , ,5 1,09 2. Operation and maintenance , ,4-897,1 0,93 3. Procurement and construction 6 479, , ,2 1, Procurement 5 093, , ,5 1, Construction 1 386, ,3 547,8 1,40 4. Research and development 430,8 434,7 3,8 1,01 5. T O T A L ( ) , , ,5 1,10 6. Non-military expenditures * 23,0 81,4 58,4 3,54 7. TOTAL MoD Expenditures (5+6) , , ,9 1,10 * expenditures out of UN definition 9
12 MoD 2017 Expenditures Based on the UN Methodology (divided by Forces) UN Code Expenditures (in CZK million) Land Forces Air Forces Other Forces Central Support, Administration and Command Not distributed TOTAL 1. Personnel 9 039, ,1 454, , , ,7 2. Operation and maintenance 1 066, ,3 28, ,7 0, ,4 3. Procurement and construction 1 643, ,9 0, ,6 0, , Procurement 694, ,7 0, ,2 0, , Construction 948,8 313,2 0,0 672,3 0, ,3 4. Research and development 0,0 0,0 434,7 0,0 434,7 5. T O T A L ( ) , ,3 482, , , ,6 6. Non-military expenditures 0,0 0,0 0,0 81,4 0,0 81,4 7. TOTAL MoD Expenditures (5+6) , ,3 482, , , ,0 10
13 Structure of the MoD Budgetary Expenditures in CZK mil Capital expenditures Salaries and contract work payments, insurance, CSNF and social benefits Other non-investment expenditures year Expenditure category (CZK mil.) Real Expenditures Approved Expenditures Capital expenditures 4 033, , , , ,9 Salaries and contract work payments, insurance, CSNF and social benefits , , , , ,1 Other non-investment expenditures , , , , ,0 11
14 Development of the MoD Budgetary Revenues in CZK mil , , , , , Tax and non-tax revenues* Insurance revenues year Total revenues 3 162, , , , ,1 Insurance revenues 2 924, , , , ,1 Tax and non-tax revenues* 238,5 862,5 234, ,3 875,0 * excluding revenue from compulsory social security & employment policy insurance and accident insurance 12
15 Development of Proportions among Main MoD Expenditures in Real expenditures % 8% Real expenditures % 11% Approved expenditures % 11% Approved expenditures % 29% 62% 57% 56% 55% Real expenditures* Approved expenditures Property reproduction programmes 3 246, , , ,3 Salaries, insurance, allocation to CSNF and social benefits , , , ,0 Other expenditures , , , ,7 * excluding extrabudgetary resources and carry forwards 13
16 MoD 2017 approved budget structured in accordance with objective based budget structure Breakdown by 1st level objectives ( expenditure blocks ) Other social benefits 5,1 % Pensions 8,1 % Support of President acting as the Supreme Commander of the Armed Forces 1,1 % Strategic Intelligence 5,3 % Design and development of the state defence system 16,5 % Sport representation expenditures 0,5 % Defence of the Czech Republic by the Armed Forces 63,4 % CZK thousand 1st level objectives Share Approved on total amount amount Defence of the Czech Republic by the Armed Forces ,4 % Design and Development of the State Defence System ,5 % Strategic Intelligence ,3 % Support of President acting as the Supreme Commander of ,1 % the Armed Forces Pensions ,1 % Other social benefits ,1 % Sport representation expenditures ,5 % Total ,0 % 14
17 EXPENDITURES OF PROGRAMME FINANCING Based on Act No. 457/2016 Coll., on the Czech Republic State Budget for the year 2017, programme financing budgetary expenditure is approved in the amount of CZK 8, million (i.e % of total MoD expenditures), out of which CZK 6, million is dedicated for capital expenditures and CZK 1, million for related operating expenditures. Expenditure registered in the programme financing information system EDS/SMVS for the year 2017 is calculated within 18 property reproduction programmes. The amount of CZK 8.0 million is allocated for subsidy titles and CZK 8, mil. for expenditure titles. In line with the Budget Structure the expenditures registered in the programme financing IS are divided as follows: - capital expenditures CZK 6, mil. (i.e. 77,6 % of total expenditures); - operating expenditures CZK 1, mil (i.e. 22,4 % of total expenditures out of which 92% is for supersonic aircraft JAS-39 Gripen lease). The new investment activities represent 48,9 % and ongoing activities represent 51,1 % of the total programme financing limit. In the framework of armament modernisation projects, the amount of CZK 4, million is allocated for 10 main investment activities (i.e. 53,3 % of programme financing expenditures) within the following programmes: 15
18 Compatibility of mobile command and control communication systems of the Land Force; Air Force sustainability and development; Supersonic aircraft capabilities sustainability and development; Communication and information support sustainability and development; Logistics capabilities sustainability and development; Land Force sustainability and development. The total amount for the property reproduction programmes set for 2017 on 1st January 2017 is CZK 9, mil. This amount includes, besides MoD budgetary resources registered in the programme financing IS in the amount of CZK 8, mil., also NATO resources CZK mil., EU funds CZK 32.0 mil. (EU Structural Funds), extrabudgetary funds in the amount of CZK 1, mil. and programme participant s own resources (resulting from the economic entity s own performance, not included in the MoD budget) amounting to CZK mil. 16
19 Comparison of Programme Financing Expenditures in CZK mil year CZK mil. Real expenditures*) Approved expenditures Capital expenditures 3 617, , , , ,5 Operating expenditures 1 275, , , , ,8 Total 4 893, , , , ,3 * excluding extrabudgetary resources and carry forwards 17
20 Breakdown of Programme Financing Expenditures in 2017 Immovable infrastructure programmes 13,5% Armament programmes, operational capabilities increase and sustainability,etc. 86,5% CZK mil. Armament programmes, operational capabilities increase and maintenance programmes,etc ,9 86,5 % Immovable infrastructure programmes 1 127,4 13,5 % Total 8 363,3 100,0 % 18
21 OPERATING EXPENDITURES The MoD operating expenditures for the year 2017 (including related operating expenditures of programme financing and defence research, development and innovation expenditures) were approved in the amount of CZK 45, mil., which represents 87,25 % of total MoD budget expenditures. The amount of CZK 29, mil. (i.e. 63,27 % of operating expenditures) is allocated for salaries, other payments related to performed work (compulsory insurance and contribution to the Cultural and Social Needs Fund (CSNF) paid by the employer), remuneration for the use of intellectual property, salary compensations, pensions and social benefits, sickness benefits, students scholarships, service housing allowance and stabilization allowance. From this amount, CZK 12, mil. is allocated for salaries, CZK mil. for other payments related to performed work, CZK 5, mil. for compulsory insurance paid by the employer and CZK mil. to the Cultural and Social Needs Fund (CSNF). CZK 3, million is allocated for material purchase within operating expenditure. CZK 3, million is allocated for financing of services and CZK 1, million for water, fuel and energy supply. Repair and maintenance is budgeted in the amount of CZK 2, million and expenses for domestic and foreign service travel in the amount of CZK million. 19
22 Structure of 2017 MoD Budget Operating Expenditures CZK mil. Budget ,0 Capital expenditures 6 696,9 Operating expenditures* ,1 I. Non-discretionary expenditures ,0 1.Salaries, other payments related to performed work and directly related expenditures ,0 a) Salaries ,7 b) Other payments related to performed work 831,8 c) Insurance 5 354,9 d) CSNF 252,6 2.Other non-discretionary expenditures 9 936,0 a) Social benefits 6 908,0 b) Housing allowance 924,5 c) Stabilization allowance 2 066,0 d) Other (scholarship etc.) 37,5 II. Other operating expenditures ,1 1.Current life support ,0 2.Transfers and Subsidies 2 710,6 3.Other operating expenditures 404,5 * including related operating expenditures of programme financing and defence research, development and innovations expenditures 20
23 Personnel and Salaries at the MoD in (excluding On-Vote organizations) Personnel year CZK mil. Total personnel Salaries in CZK million Real Plan Professional soldiers MoD positions under the Labour Code MoD service positions under the Civil Service Act* *) Total personnel Salaries in CZK million * Service posts were filled in the middle of the year 2015, based on the Civil Service Act effective since 1st July
24 Development of MoD Personnel Number in Personnel Personnel Professional soldiers MoD positions under the Labour Code Service positions under the Civil Service Act * Total Real Plan Number of professional soldiers MoD posts under the Labour Code MoD service posts under the Civil Service Act * * Total * Service posts were filled in the middle of the year 2015, based on the Civil Service Act effective since 1st July
25 Expenditures for Pensions and Other Social Benefits as a % share of the Total MoD Operating Expenditures in (approved budgets) % CZK mil ,6% 18,4% 17,5% 15,8% 15,1% 15% 10% 5% year 0% Operating expenditures* Pensions and social benefits Pensions and social benefits as a % share of the total operating expenditures Operating expenditures* , , , , ,5 Pensions and social benefits 6 785, , , , ,0 Pensions and social benefits as a % share of the total operating 17,9% 18,6% 18,4% 17,5% 15,8% expenditures * including related operating expenditures of programme financing and defence research, development and innovations expenditures 23
26 Comparison of Main Categories of Non-investment (Operating) Expenditures in (approved budgets excluding operating expenditures of programme financing) Total , ,8 Purchase of material 3 189, ,4 Water, fuel, energy 1 129, ,9 Maintenance and repairs 2 724, , Travel expenses 571,4 462, Services 3 297, , CZK mil. 24
27 Comparison of Expenditures allocated for Purchase of Material in (approved budgets, excluding expenditures registered in EDS/SMVS) CZK mil , , ,7 115,3 253, ,3 400,0 517,0 451,3 44,2 19,3 114,0 302, ,2 251,8 743,5 653,6 51, Other material * Medicaments and medical supplies Material for operating, maintenance and repair Ammunition, missiles and weapons Small tangible assets Spare parts Underwear, clothing, footwear Foodstuffs * protective equipment, schoolbooks, books and school supplies provided for free year 25
28 DEFENCE RESEARCH, DEVELOPMENT AND INNOVATION EXPENDITURES For 2017 CZK million is allocated for support of defence research, experimental development and innovation, based on the Government Resolution No. 563 dated 22nd June 2016 for the preparation of the 2017 State Budget Draft and the Mid-term State Budget Outlook for the years and the Government Resolution No. 477 on the planned expenditure for research, experimental development and innovation for 2017 including the Mid-term Outlook for the years and the Long-term Outlook 2021 dated 30th May There is an increase of CZK million compared to 2016 (index 2017/2016 is 1.01). These funds will cover 3 ongoing programmes. Within a specific support, the amount of CZK 93.0 million is earmarked for the programme of defence applied research, experimental development and innovation and the amount of CZK million for the armed forces development programme (the main objective of the programme is the development of armed forces capabilites in key areas essential for a country defence and declared politico-military ambitions). Within an institutional support (CZK million) the amount of CZK million is allocated for an institutional support of research organizations, CZK mil. for defence research, experimental development and innovation and CZK mil. for the CZ participation in international projects under the umbrella of the European Defence Agency. 26
29 USED ABBREVIATIONS ACR CSNF GDP EDS/SMVS MoD NATO EU UN MoF Armed Forces of the Czech Republic Cultural and Social Needs Fund Gross domestic product Registration system of subsidies/management of state-owned property Ministry of Defence of the Czech Republic North Atlantic Treaty Organisation European Union United Nations Ministry of Finance 27
30 28 NOTES
31 29
32 CONTENT Introduction 1 Development of the MoD Budget in Comparison of Basic Macroeconomic Indicators 7 Basic Data on the State Budget MoD Budget Chapter 8 Comparison of Expenditures Based on the UN Methodology in 2016 and MoD 2017 Expenditures Based on the UN Methodology (divided by Forces) 10 Structure of MoD Budgetary Expenditures in Development of MoD Budgetary Revenues in Development of Proportions among Main Categories of MoD Expenditures in MoD 2017 approved budget structured in accordance with objective based budget structure 14 Expenditures of Programme financing registered in EDS/SMVS 15 Comparison of Programme financing expenditures registered in EDS/SMVS in Breakdown of Programme Financing expenditures registered in EDS/SMVS in Operating Expenditures 19 Structure of 2017 MoD Budget Operating Expenditures 20 Personnel and Salaries at the MoD in (excluding On-Vote organizations) 21 30
33 Development of MoD Personnel Number in Expenditures for Pensions and Other Social Benefits as a % share of the Total MoD Operating Expenditures in Comparison of Main Categories of Non-investment (Operating) Expenditures in Comparison of Expenditures allocated for Purchase of Material in Defence research, development and innovation expenditures 26 Used abbreviations 27 Notes 28 31
34 Ing. Eva Strządałová Budget Facts and Trends 2017 Published by the Ministry of Defence of the Czech Republic Military History Institute Prague (MHI) Address: U Památníku 2, Praha Copying, translating and reproduction of this publication is prohibited unless authorised by the publisher Ministry of Defence of the Czech Republic MHI Prague, 2017 ISBN ISBN (Czech version) Design: Adéla Zemanová Translation : Ing. Pavla Hořejší Dispatched to print: April 2017 Printed by: CZ MoD Communication and propagation department 1st edition
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