INDEPENDENT EVALUATION FY 2017/18 PROGRAMME-BASED BUDGETING Evaluation REpoRt: SEptEmbER - october 2017

Transcription

1 INDEPENDENT EVALUATION FY 2017/18 PROGRAMME-BASED BUDGETING Evaluation REpoRt: SEptEmbER - october 2017 Connecting the dots in public expenditure and transformed citizens lives. An Evaluation of the Governed of Uganda Program Based Budgeting 1

2 The Evaluation of the Governed of Uganda Program Based Budgeting was produced by the CSOs under their umbrella Civil Society Budget Advocacy Group (CSBAG) in close collaboration with the Ministry of Finance, Planning and Ecnomic Developemnt s Diectorate fo Budget with support from Democratic Governance Facility,. The contents of this publication are the responsibility of CSBAG and not of our development partners. November 2017 Civil Society Budget Advocacy Group (CSBAG) P.O. Box 660, Ntinda Plot 11 Vubyabireng Close, Ntinda Nakawa Rd Fixed Line: csbag@csbag.org Web CSBAG/Facebook.com All rights reserved. No part of this publication may be reproduced, or reprinted in any form by any means without the prior permission of the copyright holder. CSBAG encourages its use and will be happy if excerpts are copied and used. When doing so, however please acknowledge CSBAG 2

3 CONTENTS Foreword...v ABBREVIATIONS... vi EXECUTIVE SUMMARY... ix 1: INTRODUCTION Background 1 1.2: Rationale for the Evaluation : Methodology of the Evaluation...2 2: PERCEPTIONS ON MIGRATION FROM OOB TO PBB : Conceptual Framework for PBB : Lack of Shared Understanding of PBB : Low Level of Preparedness for FY 2017/18 PBB : Global Experience and Implication for the Second PBB Pilot...9 3: A REVIEW OF THE 2017/18 PROGRAMME-BASED BUDGET : Programme-Based Budget Structure : Alignment of PBB Structure with Organizational Structure : Alignment of Programmes to NDP II Priorities : Compliance with the PBB Steps in the 2017/18 Budget process : Costing of Outcomes and Outputs : Quality and Relevance of Performance Information : Access and Use of Programme Budgeting System : Overall Assessment : Current Status and Emerging Issues Assessment by Functionality of the System : Support the Work Flow and Decision-making : Simplicity and Ease of Use : System Performance and Reliability : Information Quality and Use : Recommendations : STRENGTHENING THE ENABLING ENVIRONMENT : Scope of Enabling Environment : Credibility of the Annual Budget and MTEF : Performance Enhancement Practices : Performance Monitoring and Reporting : Recommendations : PRIORITY ACTIONS FOR SECOND-YEAR IMPLEMENTATION AND BEYOND : REFERENCES : ANNEXES Annex 8.1: List of Officials Interviewed Annex 8.2: Differences between the conceptual framework for OOB and PBB

4 LIST OF TABLES Table 3.1: Definition of Strategic Objectives within 2017/18 PBB Structure Table 3.2: Select Key Planning and Budgeting Instruments by October Table 3.3: Quality and Relevance of Performance Information (based on sampled programmes) Table 5. 1: A Comparative overview of performance agreement and annual budget performance contract Table 5.2: A Comparative Overview of Performance Agreement and Annual Budget Performance Contract FY 2015/ LIST OF FIGURES Figure 3. 1: The PBB framework...10 Figure 3. 2: Alignment of PBB Structure and Organizational Structure: A Case of MAAIF...12 Figure 3. 3: Misalignment of PBB Structure and Organizational Structure: A Case of UNRA...13 Figure 3. 4: An Overview of Existing Performance Indicator Frameworks...18 Figure 4. 1: Perception on access and use of PBS in selected MDAs...20 Figure 4. 2: Respondents Views on Support to Key PBB Functions...21 Figure 4. 3: Respondents views on support to decision making Figure 4. 4: Respondents views on simplicity and ease of use Figure 4. 5: Respondents views on system performance and reliability Figure 4. 6: Respondents views on the information quality and use Figure 5. 1: Deviations between GoU Budget Estimates and Outturns over 2006/7-2016/ Figure 5. 2: Deviations between GoU Expenditure Ceilings, Final Budget Estimates and Outturns...30 LIST OF BOXES Box 1. 1: Design of the Criteria for Sampling of MDAs... 4 Box 2. 1: Conceptual Framework for PBB... 7 Box 2. 2: Preparation for Launch of the 1st PBB Pilot-for FY 2017/ Box 2. 3: Global Lessons for Low Capacity Countries on Adoption of PBB... 9 Box3. 1: PBB Steps in the Annual Budget process

5 ABBREVIATIONS AFE AFRITAC East APA Annual Performance Agreement APBC Annual Budget Performance Contract BFP Budget Framework Paper BMAU Budget Monitoring and Accountability Unit BPED Budget Policy and Evaluation Department CSBAG Civil Society Budget Advocacy Group EFMP Economic and Financial Management Programme FINMAP Financial Management Programme GoU Government of Uganda IFMS Integrated Financial Management System IT Information Technology KPIs Key Performance Indicators LGs Local Governments MAAIF Ministry of Agriculture, Animal Industry and Fisheries MDA Ministries, Departments and Agencies MFPED Ministry of Finance, Planning and Economic Development MOES Ministry of Education and Sports MOH Ministry of Health MPS Ministry of Public Service MPS Ministerial Policy Statement MTEF Medium-Term Expenditure Framework MTFF Medium-Term macro-fiscal Framework NBFP National Budget Framework Paper NDP National Development Plan NITAU National Information Technology Authority of Uganda NPA National Planning Authority NSIs National Standards Indicators OBB Output-Based Budgeting OBT Output Budgeting Tool OOB Output-Oriented Budgeting OPM Office of the Prime Minister PBB Programme-Based Budgeting PBO Parliamentary Budget Office PBS Programme Budgeting System PEFA Public Expenditure and Financial Accountability PEMCOM Public Expenditure Management Committee PI Performance Indicators PFM Public Financial Management PFMA Public Financial Management Act PPDA Public Procurement and Disposal of Public Assets Authority SST System Support Team SWG Sector Working Group UBOS Uganda Bureau of Statistics UNRA Uganda National Roads Authority 5

6 Foreword In an effort to achieve prudent Public Financial Management (PFM), the Government of Uganda through the Ministry of Finance, Planning and Economic Development (MFPED) has had strategic reforms both in its policy and administrative operations to improve the planning and budgeting process for development. These reforms have ranged from the formulation and enactment of the Public Finance Management Act, 2015 to the 2017 PFM reform strategy and simplification of reporting channels for accounting officers to the Ministry. As part of the reforms, MFPED switched from the use of Output Based Budgeting (OBB) to Performance Based Budgeting (PBB) in FY 2016/17. This switch was launched among central government Ministries, Departments and Agencies (MDAs) in FY 2016/17 and later rolled out to local governments in FY 2017/18. The switch from OBB to PBB was majorly to provide a systematic mechanism of using performance information to; link spending to programmed outcomes and the Second National Development Plan (NDP II) priorities; influence budget execution or spending decisions; and, support monitoring and evaluation of budget performance on targeted NDPII outcomes. In order to ensure a smooth transition from OBB to PBB, the MFPED undertook a training of all MDA heads and accounting officers to familiarize them with the programme and how it will be used. However, since its launch, a number of challenges have been unfolding as expressed by the users, regarding the technicality of the system. The Civil Society Budget Advocacy Group (CSBAG) has had a positive relationship with MFPED, advising on the budgeting and planning processes. Based on this, CSBAG partnered with the Ministry to undertake an evaluation of PBB, based on its first year of roll-out. A sample was done in four MDAs; Ministry of Health, Ministry of Agriculture, Animal Industry and Fisheries, Uganda National Roads Authority and Ministry of Education and Sports. The results are hereby presented in this evaluation report. I implore you all to appreciate government s effort of switching from OBB to PBB to increase adherence to PFM norms and practices for development, but also appreciate that this is a lifelong process with endless lessons to learn. Let us embrace it and address the challenges as they unfold until PBB becomes a smooth operation for all MDAs at the national and local level. Julius Mukunda Executive Director 6

7 EXECUTIVE SUMMARY To prepare for the second pilot of PBB, MFPED commissioned an Independent Evaluation of the 2017/18 annual budget process and budget estimates to advise on measures required to foster smooth implementation of PBB within Central Government. The Evaluation was funded and coordinated by the Civil Society Budget Advocacy Group (CSBAG) in close collaboration with MFPED. It was conducted in four sampled votes: Uganda National Roads Authority (UNRA) and Ministries of Education and Sports, Agriculture, Animal Industry and Fisheries as well as Health. It adopted criteria to guide the assessment of the adoption of PBB and, in particular, identify the key prerequisites for successful implementation of the second pilot. The criteria focused on four main areas: Level of understanding and adoption of the PBB Approach; Access and Use of the Programme Budgeting System (PBS); Level of compliance of annual budget process and budget documentation with the acceptable PBB guidelines; and Status of prerequisites for successful implementation of PBB. The first year of adoption of PBB in the four Votes registered satisfactory progress with specific achievements. There was a successful launch of the PBS supported by an adequate System Support Team in MFPED. Planners and budget focal point officers were trained to generate and publish PBB estimates and relevant documentation namely, Budget Framework Paper, Ministerial Policy Statements and Annual Budget Estimates for FY 2017/ 18. Notwithstanding, there were typical challenges, normally expected in a reform in its infancy. The major challenges included, but were not limited to: Limited understanding of the scope and objective of reform with the appreciation skewed towards PBS (on-line computerized application); Low level of preparedness for the second pilot demonstrated by limited capacity within MFPED to spearhead the reform and inadequate capacity within the Votes to adopt the new budgeting approach; Limited access and use of PBS by Heads of Department who are supposed to be programme managers responsible for management and accounting for programme outcomes; Inadequate access to quality performance information and limited use of PI to influence prioritization and spending decisions; 7

8 An enabling environment in form of budget credibility and a prudent results management culture -- is missing; which provided a weak foundation for successful implementation of the reform. PBB is a fundamental change in the way public administration is planned, budgeted, managed and controlled; and hence would, by necessity, affect virtually all aspects of public financial management administration. Many countries have had a reform agenda of over 15 or so years before mastering the use of performance information in budgeting. Therefore, the introduction of programme budgeting has to be accepted as a long-term initiative that requires a well-structured and sequenced reform strategy, including putting in place the key prerequisites. Moving forward, there is urgent need to put in the necessary preconditions to allow a smooth transition from the previous Output-Oriented Budgeting (OOB) to PBB. The preconditions include: (i) shared understanding of the reform including its objectives among policy makers and technocrats; (ii) capacity built within MFPED to spearhead the reform and MDAs to adopt PBB; (iii) enhanced budget credibility to support formulation and execution of reliable programme estimates; and (iv) an enhanced performance management culture within the public service to anchor the responsibility and accountability for PBB. Global lessons caution that the challenges and risks associated with implementing programme-based budgeting can only be mitigated by adopting a progressive approach to PBB that could be undertaken as follows: The first phase should seek to strengthen the basic public finance management performance within Uganda focusing on development of quality performance information; enhancing the basic and credibility of budgeting; and institutional capacity building for PBB. The second phase should prioritize an enabling context with incentives for the introduction of the core PBB functions and enhancing results-oriented management within the public service. The third phase introduces the core PBB functions, such as direct link between resource allocation and results as well as appropriation by programmes over a medium term. MFPED has to commit to enhance budget credibility and funding predictability required for sustained delivery of programme outcomes for the annual and medium-term horizon. MFPED is cognizant of the issues and should take requisite measures to increase the legitimacy of expenditure allocations; ensure that once the allocations are decided upon, they can be executed effectively; and, demonstrate that the government is meeting its previously stated commitments; and if not, state reasons for any deviations. The Programme Budgeting System (PBS) should not be perceived as a mere simple automation of budget preparation and execution. There are many challenges and risks involved that go far beyond mere technological risk of failure and functionality. In order to address the identified issues and potential challenges, MFPED would have to undertake three major interventions in a systematic manner. The first is to design and implement a clear change management and capacity building agenda. The second is to formulate and implement a structured and inclusive support programme to facilitate both introduction of major design changes and dealing with existing and potential issues. The third is to provide better management of system maintenance to ensure greater accountability for downtime periods and minimize the challenges for the end-users. The deepening of the PBB reform will put considerable demand on the MFPED, Cabinet, oversight agencies and MDAs. As a priority, the evaluation recommends building capacity of: (i) Budget Directorate in MFPED to coordinate the reform which involves sensitization on the reform agenda, training and mentoring MDAs; (ii) oversight agencies including Ministry of Public Service, Offices of the Prime Minister and the Auditor General, and Parliament to enhance results-oriented management within public service; as well as performance accountability and oversight; and (iii) MDAs to rejuvenate the sector working groups required to generate reliable sector and programme outcomes; improve the costing methodologies for the construction of affordable multiyear expenditure estimates constrained with agreed fiscal and expenditure framework; and improve performance monitoring and reporting. A successful PPB reform is dependent on availability and use of reliable, relevant and consistent performance information in the formulation of sector and programme outcomes and monitoring the progress towards the attainment of NDP II targets. Accordingly, concerted effort is required to harmonize the performance reporting frameworks, focusing on concepts and terminologies, baseline indicators and performance information. The evaluation team also underscores the need to promote an effective results-oriented management culture at central government level to anchor the responsibility and accountability for PBB. 8

9 1. INTRODUCTION 1.1 Background In the last two decades, Uganda has been actively pursuing reforms to enhance the credibility of its annual and multi-year budgeting systems. In mid-1990s, the Ministry of Finance, Planning and Economic Development (MFPED) embarked on an ambitious public expenditure management programme reform agenda. The budget reform component aimed at introducing the following, among others: (i) a medium-term macro-fiscal framework (MTFF) in 1992/93 to promote macroeconomic stability and fiscal discipline; (ii) medium-term expenditure framework (MTEF) in 1998/1999 to facilitate funding predictability aligned to national priorities and limited with agreed medium-term fiscal framework; (iii) a phased approach to adoption of Output-Based Budgeting (OOB) since early 2000s which was later supported by an Output Budgeting Tool (OBT) during the FY 2008/09 to FY 2016/17 period. 9

10 However, the implementation of the OOB reform registered limited traction. The positive developments included: (i) concerted effort to identify and align priority outputs with national priorities; (ii) improved alignment of resource allocation for purpose of spending and expected outputs; (iii) transparency in the use of annual budget; and (iv) potential basis for budget performance monitoring, reporting and accountability. Notwithstanding the developments, the adoption of OOB/OBT did not deliver on its intended objectives as illustrated by the recent 2016 PEFA score and study on PFM system in Uganda. The major weaknesses included: PEFA score of a D on the credibility of the budget; Weak link between expected outputs and resource allocations in most votes or sector; Overwhelming performance information which would not always influence the budgetary decisions; Lack of systematic monitoring of the impact of public expenditure on targeted annual outputs; and Inability to support oversight and accountability of public expenditure and its impact on public service delivery and development outcomes. In FY 2017/18, GoU introduced a new reform: Programme-Based Budgeting (PBB) and produced the first set of programme-based budget estimates for central government in June The main thrust of the reform is to address the weaknesses in OOB and provide a systematic mechanism of using performance information to link spending to programme outcomes aligned with NDP11; influence budget execution or spending decisions; and, support monitoring and evaluation of budget performance. 1.2: Rationale for the Evaluation Reflection on the first PBB pilot demonstrated a number of challenges which are, ideally, expected of any reform in its infancy. A snapshot analysis of the budget process and review of selected MDA Ministerial Policy Statements and Budgets for FY 2017/8 illustrated several weaknesses including inability to formulate reliable performance indicators and targets. Accordingly, the Public Expenditure Management Committee (PEMCOM), chaired by MFPED, commissioned an independent study to examine the first pilot of PBB to identify the success stories and challenges or gaps that needed to be addressed to allow smooth implementation of PBB within Central Government, including the roll-out to Local Governments. The Independent Evaluation was funded and coordinated by Civil Society Budget Advocacy Group (CSBAG) and executed by a team of three experts. The major tasks of the Independent Study included the following: determining critical preconditions required to ensure a smooth transition from OBB to a credible PBB; assessing the functionality and configuration of the PBS and the extent to which it supported the formulation of an annual and medium-term budget for 2017/ /20; advising on the budget reporting capabilities required to enhance monitoring and accountability of both financial and non-financial performance; and identifying areas of improvement in the budgeting process required to support a smooth and gradual implementation of PBB. 1.3: Methodology of the Evaluation In order to undertake the specific tasks, the evaluation team designed and submitted the scope of work in an Inception Report. The scope of work included the following: development of evaluation criteria for assessing the extent to which the PBB was adopted in developing the FY 2017/18 budget; formulation of criteria of the sampling of four sectors or ministries that would be consulted during this exercise (Box 1.1); assessment of the adoption of PBB in four Central Government MDAs for FY 2017/18; and drafting an Evaluation Report to illustrate experiences in adoption of the PBB focusing on the developing Ministerial Policy Statements and the FY 2017/18 Budget Estimates. Design of the Criteria for the Evaluation of the PBB Adoption and Sampling of MDAs The Evaluation Team defined the criteria to guide the assessment of the first pilot of the adoption of PBB as follows: Criterion 1: Understanding and Adoption of the PBB Approach to seek views and experiences of the Ministries in adopting the PBB; document the challenges encountered in the preparation of the FY 2017/18 Budget Estimates and Ministerial Policy Statements; and secure recommendations to support the gradual implementation of the PBB. 10

11 Criterion 2: Access and Use of the Programme Budgeting System to seek views and experience in the functionality and utilization of the PBS during preparation of the FY 2017/18 Budget Estimates and Budget documentation and secure recommendations for a smooth adoption of the Programme Budgeting System (PBS). Criterion 3: Checklist to help assess/review the extent to which performance information (PI), published in Government Budget documents, complied with the acceptable PBB standards. Specifically, the criterion helped to assess the following: (i) availability of performance information as required of PBB; and (ii) the usefulness of the PI in budget decision-making process. Criterion 4: Enabling environment and Oversight framework to seek views and experiences of the oversight bodies regarding the role of PBB within the existing performance management framework, state of readiness to foster PBB reform as well as solicit suggestions on the prerequisites for a successful implementation of PBB within the within the central government. Consultations on 2017/18 PBB experience within the Ministries The consultancy team visited the four ministries categorized as spending agencies and administered the guidelines in criteria 1 and 2 to planning officers, budget focal point officers and heads of department, who would be mobilized either in one meeting and/or individually subject to their availability. The team also consulted relevant staff in the oversight agencies. The list of the officers consulted is attached as Annex 1. The consultations were conducted under a tight schedule (five days) and so the team was not able to administer the questionnaires in a systematic manner as had been envisaged. Furthermore, many senior officials were not readily available because they had to attend local government budget consultations, held in the districts, which overlapped with the timing of the PBB consultations. Report Writing and Validation of Findings The Evaluation Team undertook four main tasks: data and information gathering and analysis; presentation and dissemination of preliminary findings and recommendations; a validation meeting within MFPED; and, incorporation of comments from the validation meeting into the final draft Evaluation Report. Outline of the Report This report is designed to assist the MFPED to appreciate the weaknesses exhibited during the first pilot of PBB and submit recommendations to support a smooth implementation of PBB. Therefore, the Report is laid out as follows. Chapter 2 captures the respondents views on the migration from OOB to PBB, focusing on the level of understanding of the PBB concept as well as level of preparedness to adopt the new reform. Chapter 3 examines the annual budget process and budget documents to assess the extent to which they complied with accepted PBB standards. Chapter 4 examines the access and use of PBS during the annual budget process and submits suggested improvements on areas to enhance its role in the budgetary decision-making process. Chapter 5 examines the status of critical preconditions for smooth implementation of PBB and advises on the required supportive public service reforms. Chapter 6 provides a prioritization and sequencing of action to support smooth implementation over the next three years. 11

12 The sampling of the central government institutions was classified into two categories: Box 1. 1: Design of the Criteria for Sampling of MDAs Oversight agencies with a significant role in providing strategic guidance for Government budgeting, planning, performance management and accountability were subjected to Criteria 4. The agencies included: Office of the Prime Minister (OPM), Parliamentary Budget Office (PBO), Office of the Auditor General (OAG), National Planning Authority (NPA), Uganda Bureau of Statistics (UBOS) and the Ministry of Finance, Planning and Economic Development (MFPED). Four spending institutions were subjected to Criteria 1 and 2 and sampled as follows: Uganda National Roads Authority (UNRA) - as a high spending institution in the priority area of infrastructure development. Ministry of Health (MOH)- has significant share of external funding of up to 15% of total Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) as a low spending priority ministry with expenditures that would have a direct impact on the livelihood of the majority of the citizens within any fiscal year; Ministry of Education and Sports (MOES) - as a high spending priority ministry, tasked with coordination of many programs that are executed by many agencies including Local Governments (LGs). 12

13 2. PERCEPTIONS ON MIGRATION FROM OOB TO PBB The chapter shares the respondents views on the PPB reform agenda and the state of readiness for the migration within the consulted spending and oversight agencies 13

14 2.1: Conceptual Framework for PBB In fiscal year 2016/17, the GoU, through MFPED, embarked on the migration from OOB to programme budgeting to deal with problems inherent in implementing OOB which have been documented in the global experience. The challenges included the following: Budgets focusing on outputs tend to divert attention away from the attainment of national policy objectives and outcomes, whereby measurement of societal impact of public expenditure will always be neglected. Generation of insurmountable information which would not only be incomprehensible but also would hardly influence spending decisions. Limited rigour in the definition, choice and measurement of policy outcomes. Inadequate performance measurement systems that hardly provide feedback about the impact of public expenditure on desired national or sector-specific outcomes. By adopting PBB as stipulated in Box 2.1, Uganda is expected to provide a more systematic use of performance information to inform budgetary priorities and spending decisions between competing programmes based on programme classification of expenditure. Therefore, the migration to the programme budgeting system would introduce new practices and responsibilities within public expenditure management in Uganda. The new initiatives would include the following: More devolved budgetary responsibilities, transparency and accountability at the level of line ministries. MFPED would progressively grant more budgetary autonomy to line ministries while maintaining aggregate control over spending; enforce regulations toward improved expenditure control; and limit inyear budgetary adjustments to genuinely unforeseen items of expenditure. A firm mechanism for prioritization of expenditures constrained with a predictable MTEF to allow alignment of national and strategic planning and programme budgeting. Greater engagement of policy makers in the budget preparation process to promote adherence to annual budgetary appropriations; progressively diminish in-year extra-budgetary requests, and thereby create the much-needed additional fiscal space for planned but unfunded government priorities. Ministries would periodically report progress against their programme objectives and outcomes through a programme budget hierarchy. 2.2: Lack of Shared Understanding of PBB The respondents were requested to share their views on the level of understanding of the new reform including whether they were able to demonstrate a difference between OOB and PBB and the state of preparedness to embark on the 2018/19 PBB process. The Evaluation Team deduced the following from the discussions: Difference between OBB and PBB was not well understood: The majority of respondents argued that in practice, PBB is not different from OOB which has always involved identification of outputs required to meet national and sectoral policy objectives and outcomes. Therefore, they contended that PBB was an upgrade of OOB with an additional segment for outcomes in the PBS. The respondents were not articulate on the conceptual difference as articulated in Annex 2 which attempts to highlight the major conceptual differences focusing on expected benefits of PBB as picked from the global experiences. Budget reform fatigue among the MDAs: Many respondents described PBB as yet another ambush from MFPED. They argued that before the OOB was fully understood by MDAs, a new reform PBB - was introduced without a clear reform strategy or capacity-building agenda. Understanding of PBB seems to be skewed towards access and use of the Programme Budgeting System (PBS). In all the four Votes, the experience sharing of the first PPB pilot focused on the functionality of the PBS and not the comprehensive approach to PBB. The respondents argued that at the launch of the reform, MFPED focused on the understanding and use of PBS to facilitate the preparation of the 2017/18 Budget Estimates. The skewed tendency is a replica of the OOB reform that focused on the OBT and consequently, neglected the prerequisites for a successful budget reform. The Evaluation Team underscores the need to address this apparent shortcoming to promote the realization of the other potential benefits from PBB outlined in Annex 2 Understanding of PBB is restricted to few staff in MDAs: Whilst the concept was introduced across all Central Government agencies, it is not yet popular or fully understood among the entire staff of the MDAs 14

15 visited. The knowledge seems to be restricted to officers who are responsible for planning and budgeting, the same officials who attended the PBB training organized by MFPED in Heads of department were not targeted as key stakeholders during the training, and thus have limited knowledge about PBB. What is Programme Based Budgeting? Program based budgeting refers to a systematic use of performance information to inform decisions about budgetary priorities and spending plans based on the program classification of expenditure between competing programs and sectors. A budgeting structure where resources are allocated by program or functional area and based on the nature of the objectives and activities performed by the program, and allows assessment of the results of programs in relation to objectives. Principal elements of programme budgeting: Box 2. 1: Conceptual Framework for PBB Decisions about funding levels, including appropriation, are primarily guided by the program objectives for a given sector; and Performance information guides the funding decisions of competing programs within and across sectors. Objectives of Programme Based Budgeting: The main objective of PBB is to improve the effectiveness and efficiency of public expenditure by linking the funding of public sector organisations to the results they deliver. The specific objectives are: Alignment of spending with program objectives Provision of a stronger framework for technocrats and policy-makers to come to agreement on expenditure priorities and budgets. Provision of a framework for monitoring the results, and impact of public expenditure. Programme budget structure. There are four levels: a) Program structure: Vote Programs Sub-Programs Projects b) Objectives: Strategic Objective Program Objective Operational Objective c) Performance Indicators: Outcome Outputs Efficiency d) Expenditures: Summary Costs Expense Summary and Line Item Expenses 15

16 2.3: Low Level of Preparedness for FY 2017/18 PBB Since fiscal year 2015/16, MFPED has undertaken several activities to prepare for the launch of PBB. Box 2.2 spells out the activities. However, the Evaluation established that the preparations for the launch have not yet had a significant impact on the respondents readiness to adopt the reform. The interviewees, while appreciative of MFPED initiatives, cited a number of constraints that limited the MDAs ability to deliver quality PBB estimates and underscored that they should be addressed to enhance the level of preparedness for the next budget process for FY 2018/19. The major constraints included the following: The training did not provide sufficient timing for a comprehensive explanation of the concept, including its objectives, deliverables and prerequisites. The respondents reported that training was delivered late in the budget process, and involved short presentations on the concept with a particular bias towards the PBS. By the end of the training, participants had not acquired sufficient skills required to generate the 2017/18 PBB Estimates. This was further aggravated by inability to circulate draft PBB Reference Manuals to the staff in the MDAs. Heads of technical department missed the training offered by MFPED and hence are not capacitated to serve as effective managers for either programmes or sub-programmes, Worse still, the officials in planning units admitted that they neither had sufficient understanding of the concept nor did they have adequate resources to conduct in-house training for knowledge and skills transfer to other technical staff. The mentoring and technical support by the System Support Unit in MFPED, though highly regarded, was not sufficient to deal with overwhelming demand from all Votes in a timely manner. Details are discussed in Chapter 4. Furthermore, MFPED, especially the Budget Directorate, also lacked sufficient exposure to PBB to help MDAs deal with the conceptual challenges. The main undertakings included: 1. Establishment of institutional coordination arrangements to provide policy guidance and technical oversight to the implementation of PBB. The arrangements included: a. A high-level Steering Committee responsible for establishing the PBB implementation plan and providing guidance and oversight to the PBB Sector Working Group. Box 2. 2: Preparation for Launch of the 1st PBB Pilot-for FY 2017/18 b. PBB Sector Working Group with representatives from key stakeholders from MOPS, OPM, PPDA, NPA, PBO, NITAU and MFPED. 2. Development of program budgeting system as on-line web-based application/system to support the budget-decision making process. 3. Production of a draft PBB Reference Manual and PBB User Operational Manuals. 4. A participatory process aimed at formulating and building consensus of the program structure aligned with NDPII and performance indicators for affordable program outcomes and sub-program outputs. 5. Capacity building of MDAs and other stakeholders with specific objectives, namely to: a. enhance their understanding of the PBB Concept, b. equip selected staff from MDAs with requisite skills and techniques to generate the appropriate program structures and use the PBS to formulate program budget estimates for FY 2017/18, c. sensitised Parliament to use the budget performance information to inform the budget debate and foster accountability, and d. mentor and guide on how to link vote functions to Programs, program objectives, outcomes, indicators and output indicators and ensure full alignment with NDPII. 16

17 2.4: Global Experience and Implication for the Second PBB Pilot Box 2.3 presents the global lessons on the adoption of PBB and underscores the need to address emerging perception and capacity-related issues early enough in the reform process. On the basis of the lessons, the Evaluation submitted recommendations to enhance the preparedness for smooth migration. The recommendations are elaborated below: Formulation of a PBB reform agenda detailing agreed upon objectives, principles and practices that should be aligned to accepted good practices and, more important, include measures to address the lessons learnt from OOB. Filmization and circulation of PBB Manual to help articulate the following: agreed concept and design of the PBB reform; the interface with performance management initiatives; PBB s contribution to enhanced accountability and oversight as well as institutional responsibilities in consolidation of PBB. The Manual should be treated as a living document - updated every year to accommodate any emerging good practices. Organization of sensitization seminars for the policy makers including: Cabinet and the Parliamentary Budget Committee to enhance their understanding of PBB as a key tool to enhance not only the credibility of the annual budget but also accountability and oversight of fiscal and budget performance. Assessment of the capacity-building needs of key institutions to guide the design of a training programme to address the gap in required knowledge, skills and techniques for PBB. Encourage and provide technical support for in-house training workshops for the MDAs to ensure that the managers of both programmes and sub-programmes have adequate knowledge of their roles in PBB. Recent studies from countries with 30 or so years of PBB exposure, underscore the need to: i) ensure that all stakeholders to know why MFPED is reforming the process; ii) promote recognition and addressing the capacity needs; iii) foster a gradual and adaptive reform that allows dealing with emerging challenges over time. Box 2. 3: Global Lessons for Low Capacity Countries on Adoption of PBB Moving to restructuring a public budgeting and management, Australia launched its farreaching reforms pursuant to a diagnostic study of management. The study provided valuable insights into the perspectives and expectations of civil services and enabled the government to base reform on strong evidence of pathologies in the existing system. The diagnostic study also conveyed to managers the message that they would have a voice in the new systems, and, made them active participants in the reform process. The South Korean experiences underscores that PBB is the most appropriate tool to support the broader reform agenda. Hence, program based budgeting should be seen as primarily designed to act as a basis for supporting PFM reforms by enhancing performance management and accountability, enabling a stronger linkage between the annual budget and policy objectives, and improving transparency and accessibility of information. In addition, PBB should be seen as an instrument for policy analysis and planning for the mediumterm; improving managerial performance; and allocation and management of costs and expenditures. 17

18 3. A REVIEW OF THE 2017/18 PROGRAMME- BASED BUDGET This chapter reviews the extent to which the FY 2017/18 budget process and budget estimates conformed to acceptable PBB standards focusing on: (i) the design of PBB Structures in the Votes; (ii) alignment of programme structure with organizational structure and NDP II priorities; and (iii) compliance of the budget process with PBB steps stipulated in the PBB Draft Manual. Specifically, it examines the quality and relevance of performance information as well as functionality of Sector Working Groups (SWGs) and presents recommendations designed to further strengthen the 2018/19 PBB. 18

19 3.1: Programme-Based Budget Structure The programme structure adopted by the GoU is generally consistent with best practice as shown in Figure 3.1. All the visited MDAs adopted the four-tier PBB structure which seems to be aligned with the NDP II structure at all levels (Figure 3.1). However, the evaluation of the final programme structures published in the Ministerial Policy Statement (MPS) and Budget Framework Paper (BFP) revealed several issues which need to be urgently addressed to consolidate the work done so far and advance the implementation of the second pilot of PBB. Figure 3. 1: The PBB framework Source: Directorate of Budget, MFPED Specifically, the PBB structure was adopted with high variability in the quality of programmes, sub-programmes, performance measures and budget management practices from one Vote to the other. The structure seemed easier to apply in MoES and MAAIF than in UNRA and MoH. On the one hand, MoES, UNRA and MAAIF had more reliable medium-term strategic plans that helped the programme managers determine the programme outcomes and outputs. On the other hand, MoH and UNRA have robust planning and budgeting mechanisms supported by stronger skill sets that guided the construction of strategic objectives, programme outcomes, as well as sub-programme outputs. Notwithstanding, the majority of respondents admitted that given the limited time accorded to the preparation of the 2017/18 pilot, they just mapped OOB structures to PBB as guided by the PBB manual. 19

20 Clarity of Strategic Objective(s) Except for MAAIF, vote strategic objectives were generally well stated in the FY 2017/18 Ministerial Policy Statements (MPS) for MOH, MoES and UNRA (Table 3.1). The strategic objectives were largely extracted from sector-specific NDP II objectives and articulate the long-term mandate of the agency which is in conformity with the PBB Draft Reference Manual. In the case of MAAIF, its 8 strategic objectives are operational rather than strategic in nature and not fully aligned to the NDP II Agriculture Sector objectives. Neither do the objectives clearly articulate the long-term mandate of the Vote. Table 3. 1: Definition of Strategic Objectives within 2017/18 PBB Structure Vote MAAIF MoES MOH Budget Structure: Strategic Objective initiate the formulation and review of the policy and legal framework for the sector; establish and implement systems for service provision in the sector; strengthen and implement strategies, regulatory framework, standards, institutional structures and infrastructure for quality assurance and increased quantities of agricultural products to access and sustain local, regional and export markets; design and implement sustainable capacity building programmes for stakeholders in the agricultural sector through training, re-tooling, infrastructure, provision of logistics and ICT; develop strategies for sustainable food security; develop appropriate agricultural technologies for improved agricultural production, productivity and value addition through research; develop effective collaborative mechanisms with affiliated institutions; take lead and establish a system and institutional framework for agricultural data collection, analyses, storage and dissemination to stakeholders including UBOS. achieve equitable access to relevant and quality education and training; ensure delivery of relevant and quality education and training; and enhance efficiency and effectiveness of Education and Sports service delivery at all levels. provide inclusive and quality health care services through policy formulation and providing strategic direction, planning and coordination of health care provision in Uganda; address the key determinants of health through strengthening of inter-sectoral collaborations and partnerships; enhance the health sector competitiveness in the region and globally. UNRA improve motorability and the condition of the National Road Network using sustainable and costeffective means Design of Programmes and Sub-Programmes At the programme level, it appears that the programmes of the four votes were neither well defined nor structured because they proved to be just a replica of previous Vote Functions adopted under OOB but contained within a limit on the number programmes. There was no significant difference between the OOB structure and that of PBB in their budget documents. The respondents explained that they were conducting business as usual with respect to planning and budgeting but under a guise of programmes instead of Vote Functions. The changing of the Vote functions to programmes was in compliance with the guidelines stipulated by the draft PBB Manual. All respondents in MAAIF recognized that the approach denied them a systematic opportunity to construct the appropriate programmes and outcomes aligned with sector outcomes and NDP II priorities. On the contrary, during the discussion with MFPED, the Evaluation Team ascertained that MoH and other MDAs in the Justice Law and Order Sector (JLOS) had an opportunity to rationalize the programmes and their respective strategic objectives and respective outcomes. MFPED utilized the on-going strategic planning process to construct new programmes and build consensus on the realizable outcomes and outputs. 20

21 An in-depth review of the 2017/18 MPS documentation for each of the four votes revealed the additional shortcomings in the design which included the following: Scanty information of programme and subprogramme outcomes and outputs including indicators for MAAIF; Missing operational objectives for a few programmes and sub-programmes in MoES, MoH and UNRA; In the case of MOES, it was difficult to align some departments or functions to programmes within the Ministry. For instance, Teacher, Tutor, Instructor Education and Training (TIET) in MoES is not captured in any of their programmes or subprogrammes; Weak link between sector and programme outcomes and sub-programme outputs with cases of potential confusion between sub-programmes, departments and sub-agencies - given that sub-agencies are an entirely separate accounting entity. 3.2: Alignment of PBB Structure with Organizational Structure The alignment of a budget structure with the administrative arrangements is critical in fostering better responsibility, accountability and reporting on programme budgets. The evaluation of the alignment within the four Votes revealed a varied configuration: MAAIF and MOH had a fair alignment while, on the contrary, the structures for UNRA and MOES had a misalignment. Figures 3.2 and 3.3 show the case of better alignment with MAAIF and misalignment for UNRA respectively. Discussing the status of the existing alignment and potential challenges with the respondents, the Evaluation Team noted their perceptions as follows: The UNRA respondents recognized the misalignment as an imposition from MFPED. However, they argued that it should not be perceived as a challenge. They stated that PBB should be used to mobilize and prioritize resources that should be easily managed by the existing administrative arrangements to deliver programme outcomes. The MOES respondents acknowledged that alignment was still blurred and requested a further review to promote better construction of programme budget structures, outcomes and respective subprogramme outputs. Figure 3. 2: Alignment of PBB Structure and Organizational Structure: A Case of MAAIF PBB Structure (Programmes) Organizational Structure (Directorates/Departments/Units) Crop Resources Animal Resources Animal Extension and Skills Development Fisheries Resources Agriculture Infrastructure, mechanization and Water for Production Policy, Planning and Support Services Crop Resources Animal Resources Animal Extension and Skills Development Fisheries Resources Agriculture Infrastructure, Mechanization and Water for Production F&A, HR, Internal Audit and Procurement Source: MAAIF (2017) 21

22 Figure 3. 2: Alignment of PBB Structure and Organizational Structure: A Case of MAAIF PBB Structure (Programmes) Organizational Structure (Directorates/Departments/Units) Programme: National Road Maintenance and Construction Sub-programmes: National Roads Maintenance National Roads Construction Finance an Administration Source: MAAIF (2017) Network Planning & Engineering Roads & Bridges Development Road Maintenance Road Infrastructure Protection Procurement Legal Services Human Resources Corporate Services Internal Audit Moving forward, the alignment of programme budget structures with the organizational structure needs to be strengthened. Some ministries may require organizational restructuring, which is a prerogative of Ministry of Public Service (MPS), and which may not be executed as quickly as expected. Hence, the alignment should be seen as a medium-to-long-term initiative. Therefore, ministries may need assistance to refine their internal management processes to allow clear responsibility and accountability for programme budgets. Accordingly, the Evaluation Team recommended that MFPED should provide a practical guide to help design responsibility and accountability arrangements in cases where the existing administrative arrangements cannot allow a clear link with programme structures. However, the Evaluation Team could not undertake a systematic assessment of the impact of the first PBB pilot on the policy prioritization or the strategic allocation of resources and alignment with NDP II priorities. Instead, the Evaluation Team requested the respondents to identify the factors that would foster better alignment of programme outcomes with national goals and strategic objectives. The respondents underscored the need: (i) to harmonize the existing parallel planning frameworks for implementing NDP II; and (ii) build consensus on the programme outcomes and indicators over the medium term. 3.3: Alignment of Programmes to NDP II Priorities The GoU has set up an integrated planning framework with the current Second National Development Plan 2015/ /20 (NDP II) as a starting point as detailed in Table 3.2. The current NDP II provides a results framework with indicators at five levels: overall national goals; strategic objectives; key result areas; sector results and annualized targets and outputs levels. The framework is expected to guide the construction of programme outcomes within the available resource envelope stipulated in the medium-term fiscal and expenditure framework. The introduction of PBB in fiscal year 2017/18 provides a base for strengthening the expenditure prioritization and ensuring better alignment of resource allocation to NDP II priorities. The planned Mid-term Review of NDP II provides a window for the review and development of reliable baseline indicators, as well as affordable and reliable sector and programme outcomes and associated outputs for the remaining period of the Plan. 22

23 Table 3. 2 Select Key Planning and Budgeting Instruments by October 2017 Instrument Objective Details Planning Horizon NDP II 2015/ /20 The national priorities for Uganda to become a middle-income country by 2020 and to achieve sustainable development goals. 5 years 2015/ /20 Medium-term Sector Guide the implementation of NDPII sector specific 5 years Plans priorities under clear prioritization and resource allocation constrained within MTEF. MoH- 2015/ /20 MoES (draft under review) MTEF Programme Budget Estimates Source: MFPED Provides the multi-year fiscal targets and expenditure projects disaggregated by sector, votes and economic categories. Details the annual estimates and medium-term projects geared to deliver programme outcome and subprogramme outputs within specified timing. MAAIF -2012/ /17 Five year rolling plan 2015/ / / /20 Alignment of the program budget with MTEF, Sector Plans and NDP II Table 3.2 shows the key features of the existing planning instruments. The current planning framework is fragmented, and does not easily influence the expenditure prioritization, as well as preparation of the annual budget and medium-term expenditure projections. A review of the design and implementation of the existing planning frameworks revealed challenges that could deter the construction of reliable and quality sector policy and programme outcomes. These include the following: Varied planning and funding period of the frameworks: (i) MTEF is a rolling five-year framework without a clear target, (ii) PBB - a rolling three-year framework and (iii) NDP II with fixed period. As a consequence, the differing planning horizons have generated varied performance information in terms of baseline indicators, desired outcomes and outputs targets, as well as funding predictability. Moreover, the credibility of a five-year MTEF was challenged to what extent does it provide reliable and predictable budgetary implications for attaining policy and programme outcomes for the outer years as explained in Chapter 5. Lack of effective monitoring and accounting for progress in attainment of sector, institutional and NDP policy objectives, as discussed in Chapter 5, has continued to undermine the essence of the planning instruments. Impose unnecessary burden on limited planning and management capacities within MFPED and MDAs. The consultation meeting with MFPED prioritized the need to synchronize existing planning frameworks to harmonize the baseline indicators and performance targets, enhance the importance of performance information, and, promote budget transparency and accountability. Mid-term Review of Second NDP is a Window for Better Alignment The planned Mid-term Review of NDP II provides a window for the review and development of reliable baseline indicators, as well as affordable and reliable sector and programme outcomes and associated outputs for the remaining period of the Plan. The NPA should seize this opportunity to undertake strategic expenditure reviews for the key sectors and seek consensus on the high-level policy goals against which expenditure plans are structured in programme budgets, alongside a set of outcome and output indicators and targets. The main thrust of such reviews should be to ensure that expenditure plans are consistent with overall fiscal objectives; shift expenditure from low priority to high priority areas; enhance efficiency and effectiveness in the use of resources; and ultimately derive value for money in public expenditure. This can be a resource-intensive exercise, so it is important that a review process is targeted to priority and high-spending areas. 23

24 3.4: Compliance with the PBB Steps in the 2017/18 Budget process The adoption of the PBB steps varied among the Votes. The respondents admitted that they were not able to establish a new Programme Budget Implementation Team or undertake the FY 2017/18 budget process as guided by the PBB steps (Box 3.1). The experience is summarized in box 31. Box 3.1: PBB Steps in the Annual Budget process (a) Establishment of a Programme Budget Implementation Team for the Vote; (b) Definition of the Strategic Objective for the Vote; (c) Designing of Main Programme Structure and Definition of Respective Programme Objectives; (d) Appointment of a Programme Manager (or responsible person) for each Programme; (e) Designing of Sub-Programmes and Definitions of their Operational Objectives; (f) Identification of Activities (Recurrent Activities and Development Projects) under each Sub-Programme; (g) Provision of Performance Indicators and Targets for each (Sub-Programme); and (h) Budget Allocation (recurrent and development). Source: Draft Reference Manual for PBB, 2016 MoH and UNRA used their existing planning and budgeting mechanisms to coordinate the process as elaborated: The PBB process in MoH was coordinated by the sector budget working group and supervised by the senior management committees under the chair of the permanent secretary and minister as deemed appropriate. The working group constituted representatives of the ministry senior staff, development partners, CSOs and MFPED. With respect to UNRA, the production of PBB estimates was coordinated by the Directorate of Corporate Services, supervised by the senior management committee under the leadership of the Executive Director. In MoES and MAAIF, the revised annual budget process was coordinated by the planning units or budget focal persons in the respective departments. MoES respondents explained that the budget process virtually involved soliciting information on work plans (activities) and budgetary implication by the planning unit, which was later consolidated and entered into the PBS. As a consequence, the heads of department/ programme managers in MAAIF and MoES, were not given an opportunity to contribute to the determination of the programme outcomes nor guide resource allocation in a coordinated manner. Furthermore, sector agencies missed the opportunity to conduct systematic construction of programme outcomes and their respective outcomes and outputs. Role and Functionality of SWGs SWGs are designed to provide effective coordination and consultative arrangements bringing together all stakeholders - to undertake joint expenditure review, planning and prioritization, resource allocations as well as results-based monitoring and reporting. The respondents noted that sector working groups (SWGs) would be instrumental in executing the steps in Box 3.1, but were either absent or of limited influence in the budget processes in the visited MDAs. Discussing the functionality of the SWGs, the Evaluation Team noted the following challenges and weaknesses that need to be addressed: Fully functional SWGs exist in a few sectors like Education, Health, and Energy with significant share of external funding as assistance to their activities. Lack of sector-wide approach in the bilateral budget discussion between MFPED and sectors, and the role of SWGs in setting policy and programme outcomes 24

25 and outputs for the respective votes. Votes submit their budget proposals including supplementary budget requests directly to MFPED without approval of SWGs. The role of SWGs has been restricted to appraisal and approval of development projects before onward submission to MFPED. The recent OBM study examined the functionality of SWGs and published the underlying issues that included: lack of clear guidelines for their operations; weak leadership at both political and technical level; inadequate incentives; lack of shared understanding of the role and concept of SWGs; and resource-constrained planning units that are not able to support the required practices. Moving forward, the Validation Meeting with MFPED underscored the need to rejuvenate the SWGs to provide a basis for effective implementation of PBB. The meeting prioritized the following undertakings: Formulation of clear guidelines, expected deliverables and operational procedures, including their roles in executing planning, budgeting and accountability mechanisms undertaken by MFPED working closely with OPM. Provision of additional budgetary allocation to the planning units to enhance their capacity to coordinate the functions of the SWGs. Sensitization meetings to promote shared understanding of the functionality and ensure political buy-in and support. 3.5: Costing of Outcomes and Outputs As already noted, the respondents were not able to construct and cost programmes and sub-programmes in a systematic manner. They reported that this problem was also inherent in OOB, which undermined not only construction of realistic sector results as well as vote outputs and but also budgetary implications for a medium-term framework. The budgetary or spending decisions for programmes and sub-programmes, to some extent, continues to be determined by accounting officers, in consultation with the planning units subject to the circulated expenditure ceiling. In order to promote better definition of affordable programme outcomes, MFPED should further strengthen the annual planning and budgeting process and provide better knowledge, skills and techniques for appraisal and costing of desired sector and policy outcomes. 3.6: Quality and Relevance of Performance Information The reliability of performance information and respective indicators are vital in the expenditure prioritization and allocation of resources for the programmes as well as monitoring the implementation of PBB. Therefore, the Evaluation Team examined a few sampled programme and sub-programme structures to assess the quality and relevance of performance information. The findings captured in Table 3.3 indicate that the 2017/18 Budget reflects satisfactory submission of performance information for the first pilot of PBB. The sub-programme outputs are well stated in MDAs that have subprogrammes (MoES, MoH and UNRA). However, there are issues with the performance specification, including weak specification of outputs (confusion with outcomes), lack of quantity indicators and outputs that are difficult to measure. The planned Mid-term Review of NDP II provides a window for the review and development of reliable baseline indicators, as well as affordable and reliable sector and programme outcomes and associated outputs for the remaining period of the Plan. 25

26 Table 3. 3: Quality and Relevance of Performance Information (based on sampled programmes) Vote MAAIF MoES MOH UNRA Programme Outcome Sub-programme outputs Programme Outcome Sub-programme outputs Programme Outcome Sub-programme outputs Programme Outcome Sub-programme outputs Assessment of the Quality and Relevance PI Generally, well stated Outputs are neither defined nor tracked. No baseline indictors to track progress. Most outcomes stated as outputs. There is no clarity and reliability of majority outcomes save for higher education, policy planning and support services. Unreliable costing for outputs. For example: Completed works at 3% of planned estimate. Stated as activities (processes) or outputs. Not reliable or useful in explaining the impact of respective programmes No expenditure against constructions done. No planned outputs against external funding. Outcomes were well stated. Alignment with resource allocations was blurred. Unplanned activities were undertaken. Meanwhile, additional outputs were achieved with expenditures lower than appropriated. On the other hand, in some cases, outputs less than planned were delivered but with more funding than had been envisaged. Moving ahead, the performance specification by ministries in the formulation of the annual programme budget needs to be strengthened. This would require additional undertakings, in addition to the practical guide mentioned in previous section, to build capacity for the development of quality performance information. The reforms should involve the following: Establishment of a formal quality assurance (QA) procedure to enable validation of the performance specification of ministries during the preparation of the plans and budget documents and providing feedback to help improve the specification before documents are finalized. Gradually increase the attention to the link between the budget and a realistic forecast of service performance. The link between the appropriations and the quantity of services to be provided is one of the most powerful relationships that can be used in PBB to assess the appropriateness of funding levels. However, global lessons underscore that this link may not be achieved in the short run of the reform and hence should be seen as a medium-to-longterm deliverable. Formulation of National Standard Indicators (NSIs) In order to improve the quality and relevance of PI, GoU constituted a taskforce to develop the national standard indicators - which should serve as uniform measures for planning, resource allocation, monitoring and reporting on the implementation of PBB aligned with NDP priorities. Draft NSIs for JLOS, Energy and Mineral Development, Health and Education sectors have been produced. Efforts are underway to validate NSIs for other sectors that should ease the construction of indicators during the annual budget process. The process should also help to harmonize the concepts and levels of performance indicators as stipulated in existing frameworks: Draft PBB Manual, Draft NSIs and NDP Results Framework summarized in Figure

27 27

28 4. Access and Use of Programme Budgeting System Chapter Four provides an account of the respondents views on the access and functionality of the PBS during the preparation of 2017/18 Budget Estimates. The evaluation focused on six elements: (i) an overall assessment of the strengths; (ii) functionality of the system; (iii) support to the work flow and budgetary decision-making; (iv) simplicity and ease of use; (v) system performance and reliability; and (vi) information quality and use. The respondents, who are the end-users of the system, were asked to rate the elements using a 5-point scale ranging from strongly agree to strongly disagree. 28

29 4.1: Overall Assessment The respondents feedback on the use of the PBS was generally positive as reflected in Figure 4.1 below which shows the average scores from the rating of the 4 Votes. The respondents viewed PBS as a big improvement on the Output Budgeting Tool (OBT). Most of the elements attained an overall average rating above 3 out of 5 (where a score of 3 is good and 4 is very good). All respondents were appreciative of a dedicated PBS support team at MFPED that endeavored to provide timely and quality assistance during the tight schedule of finalization of the budget estimates. However, slightly lower average scores were accorded to reliability, ease of use, security, performance, and integrity by the Ministry of Health because of challenges faced by hospitals spread countrywide in accessing the PBS. Figure 4. 1: Perception on access and use of PBS in selected MDAs 4.2: Current Status and Emerging Issues Assessment by Functionality of the System The consulted end-users of the system were asked to rate the functionality - the extent to which PBS supported the key functions, namely: (i) preparation of the budget; (ii) strengthening the link between financial budgets with results; (iii) preparation of budget documents; and (iv) preparation of performance reports. Figure 4.2 below shows that most of the respondents agreed that the system provides sufficient support to the key functions with a few exceptions explained below: Linking finance budgets and results as a functionality received a score of 3 from MAAIF, MOH and MoES. The variations in the scores reflected a difference in understanding of the role of the system support. The team had to clarify that the system provides a clear illustration of the link but does not necessarily facilitate the alignment of resource allocation to results which had to be done outside the system. Accordingly, one respondent underscored the need to provide a mechanism to validate the link between outcomes and respective outputs. MoES awarded a lower score rate to production of budget documents. The evaluation ascertained that MoES, like several other votes, suffered several setbacks which include: (i) missing sections or texts in their MPS, (ii) ambiguous texts attributed to the character limitation within the narrative fields, and, (iii) misalignment of the PBS-generated procurement plan with Public Procurement and Disposable of Assets (PPDA) guidelines. 29

30 4.2.2: Support the Work Flow and Decision-making Figure 4. 2: Respondents Views on Support to Key PBB Functions Key: PB - Preparation of the budget LFB - Strengthen the Link between financial budgets with results PBD - Preparation of budget documents PPR - Preparation of performance Reports Figure 4.3 shows the scores for the support to the work flow and decision-making process against the following elements: (i) consistence between the system approval hierarchy and administrative approval structure; (ii) quality of system support to the several budget stages at MFPED and MDA levels; (iii) the extent to which it allows the generation of budget estimates within Ministries or programmes; and (iv) ability to control expenditure estimates within MTEF to prevent MDAs exceeding their budget ceilings. With the exception of MoH, the respondents agreed that the PBS provided satisfactory support to the key decision-making points. However, the representatives of the planning unit in MoH rated it 3 neither agreed nor disagreed attributed the challenges encountered in receipt, consolidation, appraisal and approval of estimates and performance information from all its spending entities which are mainly hospitals located countrywide and which could not access the PBS. MAAIF with many of its agencies scattered countrywide also had similar challenges. Figure 4. 3: Respondents views on support to decision making Key: 1: SAH - The system approval hierarchy is consistent with administrative structure 2: SBS - Support several budget stages at MFPED/ MDA levels; i.e. capable of progressing budget estimates from one stage to another 3: GBS - Allow the generation of budget ceilings within Ministries or programs based on the MTEF framework 4: CLC - Ability to set up control limits to prevent MDA exceeding MDA budget ceilings 4.2.3: Simplicity and Ease of Use The respondents reported typical challenges in the use of the system, normally expected in a reform which is still in its infancy. Nonetheless, they commended the effort of the System Support Team (SST) in MFPED that provides substantial and relatively timely assistance -enabling them to finalize the budgeting process for fiscal year 2017/18. The elements with the lowest scores depicted in Figure 4.4 show the challenges that need to be addressed. These include the following: Limited appreciation of PBS among the programme and sub-programme managers imposes a heavy work load on the planning units which currently have the access to the PBS in most of the Votes; Limited capacity of the SST to provide timely support to all Votes during the peak period; Lack of an online help/guide to assist or ease the navigation issues without necessarily resorting to the SST. 30

31 Figure 4. 4: Respondents views on simplicity and ease of use Key: CSC-Users are conversant with the all system components. Users program manager, accounting officer, sub-program managers, planning unit. IN - The user interface and navigation is easy TST - Technical support from MFPED is timely TR - Technical response from MPFED is satisfactory H - The online help/guide is good ME - The system has inbuilt mechanism to minimize errors e.g. bursting ceiling are red flagged : System Performance and Reliability Figure 4.5 shows the respondents assessment of the performance and reliability of a system which is generally satisfactory but varied. MoES and UNRA score a good rating for accessibility and performance - measured by the time it takes for the system to return results of an operation. That notwithstanding, the discussion revealed a number of contrasting views: MoH felt that accessibility and performance were significant challenges during the preparation of the 2017/18 Budget attributed to frequent downtime and inability for the hospitals to always access the PBS at their duty stations. The team ascertained that the downtime was a common problem reported across all votes attributed to network failure or PBS service outage. Meanwhile, with the exception of UNRA, the three Votes indicated that there was a common sharing of credentials. The respondents contended that without this practice it would not be possible to complete the submissions, given the tight deadlines and the frequent changes in the MTEF. This is an undesirable situation which, if not well coordinated, would undermine the security and integrity of the system as well as segregation of duty controls. Figure 4. 5: Respondents views on system performance and reliability Key: SA - The system is accessible whenever we need to use it PSC - Password Sharing is common to enhance the efficiency of work SPE - The system performance is efficient (performance is measured by the time it takes for the system to return result of an operation) 4.2.5: Information Quality and Use With the exception of MoH, the respondents were extremely satisfied with the consistence between end products from MFPED and submission or input from MDAs as indicated in Figure 4.6. MAAIF explained that the final 2017/18 Budget reflected a few adjustments in the resource allocations or estimates which had solely been effected by MFPED. It was too early to examine the use of the periodic budget performance reports denigrated from the system. This notwithstanding, MoH shared a copy of a recent quarterly report that had been submitted to their senior management meeting proving the reliability and effective usage of the reports. 31

32 Figure 4. 6: Respondents views on the information quality and use KEY IU - Internal usage of the reports other than for budget submission OC - Final output of the system at MFPED is consistent with entries by your MDA 4.3: Recommendations The Evaluation reveals that while the first pilot of the PBS seems positive, there is need to focus on the challenges witnessed in the early phases of the adoption. PBS should not be perceived as a mere automation of budget preparation and execution. There are many risks involved that go far beyond mere technological risk of failure and efficient functionality. In order to address the identified and potential issues, the Evaluation Team makes the following recommendations: Design and implement a clear change management agenda, including a capacity-building strategy aimed at achieving the following: o enhanced understanding and commitment among policy makers and technocrats of the PBS and their respective individual responsibilities to ensure proper functionality during the budget cycle; o targeting technical staff outside planning units should be prioritized to promote institutional and NOT individual capacity within Votes without compromising security of the system. Formulate and implement a structured and inclusive support programme to facilitate both introduction of major design changes and dealing with existing and potential issues. The design should ensure involvement of the major users of the outputs, for instance PBO for MPS. The elements could include, but not be limited to: o Technical efficiency-related areas, namely: reduction of excessive scrolling at item level allocation, easier rejection workflow, and enabling printouts for sub-programmes; o o o o o Installation of online guidance and support covering tool tips, context help, and other features; Joint reviews and updates of the scope and content of the reports with the producers and end-users of the reports; Consider inclusion of drop-downs that allow better alignment of agreed indicators for outcomes and outputs as a medium-to-long-term initiative; Mechanisms to ease consolidation of inputs at sectoral level, especially for BFP. Review the extent of accessing users rights to various votes that constitute a sector. Better management of the change control process to ensure greater accountability for downtime due to remedial work. This should involve the following: (i) timely communication of planned and unplanned downtime; (ii) proper scheduling of remedial services; and (iii) expediting the development of offline templates. 32

33 5. STRENGTHENING THE ENABLING ENVIRONMENT This chapter examines the prerequisites - in form of parallel supportive reforms and incentives - and submits areas of improvement to anchor a smooth migration from OOB to PBB and ensure sustained delivery of desired objectives. 33

34 5.1: Scope of Enabling Environment The respondents emphasized the need to provide for a conducive environment and incentives to motivate the central government Votes to pursue yet another budget reform with clear objectives and benefits within the public financial management. The Evaluation Team categorized the prerequisites into two: Enhancing Budget Credibility to i) improve the reliability of both the annual budget and MTEF, and (ii) ability to enforce the execution of the budget as appropriated. This would ensure that annual budgets do not suffer massive uncertainty about the funding during the budget year and outer-years; Improving institutional and individual performance management focusing on (i) performance management practices; and (ii) performance monitoring and reporting. Enhanced resultsoriented management within the public service is required to anchor accountability for impact of public expenditure on service delivery and, ultimately, NDP II priorities. 5.2: Credibility of the Annual Budget and MTEF The respondents shared budget credibility issues that have had adverse implications on the attainment of the desired OBB objectives. They cautioned that these issues, if not addressed, would also undermine PBB reform. The credibility issues are substantiated by the recent 2016 draft PEFA Report and IMF Fiscal Transparency Evaluation Report and summarized below: Persistent deviations in the annual budget have created uncertainty within MDAs and weakened the credibility of previous output orientation of budgeting. All votes under study, with the exception of UNRA, have had persistent under-performance over the last decade (see Figure 5.1 below). This has served as a disincentive to the preparation of robust outcomes and outputs as well as reliable budget estimates. The Evaluation Team documented the weaknesses in the prerequisites and suggested areas of improvement as discussed in the subsequent sections. The planned Mid-term Review of NDP II provides a window for the review and development of reliable baseline indicators, as well as affordable and reliable sector and programme outcomes and associated outputs for the remaining period of the Plan. 34

35 Figure 5. 1: Deviations between GoU Budget Estimates and Outturns over 2006/7-2016/ Ministry of Agriculture, Animal Industry and Fisheries 013 Ministry of Education and Sports 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% 10% 0% -10% -20% -30% -40% -50% 014 Ministry of Health Uganda National Roads Authority 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35%

36 Frequent reallocations that undermine the reliability of vote and programme appropriations. Over the last ten years, the PEFA scores for composition of the budget outturn have stagnated at D. The scores declined from C in 2008, to D in both 2012 and The underlying issues have to be identified and addressed to promote predictability of funding so as to deliver sub-programme outputs required to achieve the programme outcomes. Funding predictability over the annual and multiyear period is thus a significant challenge. In the previous three years, the annual budget process has not provided reliable multi-year expenditure projections to allow consistence in prioritization and predictability in funding over the medium-term period. Figure 5.2 demonstrates that expenditure projections are subject to many revisions during the annual budget cycle, which frustrates the decisionmaking process and setting of quality programme outcomes and outputs. Each budget publication marks a major stage of the annual process-(i) MTEF of previous process; (ii) BFP in January; (ii) MPS in April; and (iv) Budget Estimates in June. Figures 5.2: a(i), a(ii), a(iii) and a(iv)-show the variations in the total GoU estimates for each Vote through each stage of the budget process during period FY 2014/15 to 2017/18. There were frequent variations in MOH and MOES throughout the period and a significant variation in all Votes during FY 2016/17. Figures 5.2: b(i), b(ii), b(iii) and b(iv) -show the variations in the total GoU estimates for the broad economic categories for each Vote through each stage of the 2016/17 budget process. There were frequent adjustments in the domestic expenditure projections in all votes. However, MoH and MoES also suffered a relatively high variability in non-wage expenditure ceilings. Other budget credibility related issues: Although funds are supposed to be released at the beginning of the quarter, funds for the first quarter are normally late - for example, the 2017/18 release was effected in late August. When actual revenue shortfalls have become apparent, discretionary domestic expenditures have always suffered the cut. This affects procurement schedules and timely project implementation with adverse implication on budget absorption by the end of the financial year. However, the Evaluation noted that the MFPED is cognizant of the problem and is committed to addressing the underlying issues. Furthermore, the respondents noted that existing expenditure controls on virements under section 22 of the PFM Act, 2015 may constrain the flexibility of the programme or sub-programme manager to effectively manage the programme budget. The provision requires authority of virement sought from the Minister. Moreover, such virements are limited to only 10 per cent of the money allocated for an item or an activity. These controls, if not effectively executed, could disempower accounting officers to exercise control of the inputs required to achieve the desired programme outputs and ultimately outcomes. 36

37 Figure 5. 2: Deviations between GoU Expenditure Ceilings, Final Budget Estimates and Outturns a (i) MAAIF: Variation in total GoU exp. Projections over annual budget proccess FY 2014/ /18 in Bn UGX a (ii) MAAIF: Variations in GoU estimates over budget process FY 2016/17 in Bn UGX Amount Bn UGX Amount Bn UGX FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/ Wage Non-Wage Dom. Dev Financial Years Budget Categories MTEF NBFP MPS Budget Allocation MTEF proj in 2015/16 BFP 16'17 MPS 16'17 App. Estimates 16'17 Release 16'17 Expenditure 16'17 b (i) MoES: Variations in total GoU exp projections over annual budget process FY 2014/ /18 in Bn UGX b (ii) MoES: Variations in GoU estimates over budget process FY 2016/17 in Bn UGX Amount Bn UGX Amount Bn UGX FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 - Wage Non-Wage Dom. Dev Financial Years MTEF NBFP MPS Budget Allocation Budget Categories MTEF proj in 2015/16 BFP MPS App. Estimates 16'17 Release 16'17 Expenditure 16'17 37

38 c (i) MoH: Variations in total GoU exp projections over annual budget process FY 2014/ /18 c (ii) MoH: Variations in GoU estimates over budget process FY 2016/17 in Bn UGX Amount Bn UGX Amount Bn UGX FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 Financial Years MTEF NBFP MPS Budget Allocation Wage Non-Wage Dom. Dev Budget Categories MTEF proj in 2015/16 BFP MPS App. Estimates 16'17 Release 16'17 Expenditure 16'17 d (i) UNRA: Variations in Total GoU Exp. Projections over Annual Budget Process FY 14/ /18 in Bn UGX d (ii) UNRA: Variations in GoU Estimates over Budget Process FY 2016/17 in UGX.Bn 1, , Amount Bn UGX Amount Bn UGX 1, , FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 - Wage Non-Wage Dom. Dev Financial Years MTEF NBFP MPS Budget Allocation MTEF proj in 2015/16 BFP MPS App. Estimates 16'17 Release 16'17 Expenditure 16'17 38

39 5.3: Performance Enhancement Practices A successful introduction of programme-based budgeting will, ideally and over time, require that the programme managers are held accountable for financial and non-financial performance. Since the late 1990s, the Government of Uganda has introduced a performance management framework aimed at enhancing Results-Oriented Management (ROM) within the public service. The main thrust is to empower accounting officers and heads of department to make resource decisions (within limits) to achieve specified results and ensure delivery of high quality services and, ultimately, build public confidence and trust. The framework has adopted two main instruments: Annual Performance Agreement (APA) and Annual Budget Performance Contracts (ABPC), which should provide a conducive environment for enhanced responsibility and accountability for the programme budgets. The main features of the instruments are summarized in Table 5.1 below. Table 5. 1: A Comparative overview of performance agreement and annual budget performance contract Element Annual Performance Agreement (APA) Legal/Policy Backing Public Service Act 2008, Client Charters, New Performance Appraisal system Responsible Institution & Supervisor Target Objective Performance Targets and Indicators Ministry of Public Service Permanent Secretary, Immediate Supervisor, COA, TC respectively. Directors, Heads of Departments, Deputy Chief Administrators Officers (DCOA), Deputy Town Clerks(DTC) Provision of full transparency, accountability and demonstration of commitment to the achievements of NDP goals Strategic Outputs/Targets based on MPS & LGBFP: 4 key outputs 2 targets per output Means of verification Cross-cutting Initiatives & Innovation (one major initiative) Financial Outputs/Targets No specific # for outputs and targets Means of verification Human Resource Management Outputs/Targets (by MoPS) Annual Budget Performance Contract (ABPC) Public Financial Management Act of 2015, Part VI Accounting and Audit, Section 45 (3) MFPED Secretary/Treasury Accounting Officers Performance in two areas: Area #1: Budgeting, Financial Management and Accountability. Area #2: Achieving Results of 5 priority programmes and projects Compliance and assessment tools will be distributed by MFPED within 3 months of FY. Performance Area #2: Alignment of plans with Policy Achievement of planned results Timely & predictable implementation Procurement & project management Monitoring & follow-up Performance Area #1: Adherence to Budget Requirement Complete & timely submission budget document. Open and Transparent procurement Prompt processing of payments Implementing budget as planned Complete & timely submission of reports Transparency, monitoring and follow-up Internal and External Audit follow-up 39

40 However, the enforcement of the performance agreements proved difficult and thus was unable to provide an effective anchor to OBB. The discussion on the weak enforcement of the instruments highlighted critical challenges indicated below: On one hand, while the APA was administered among the senior managers, has not yet delivered the desired performance enhancement, accountability, and improvement in service delivery. The recent 2015 National Service Delivery Survey Report (NSDSR, 2015) highlighted several weaknesses that include: ineffective implementation of a number of public service reforms; corruption; poor work environment, low motivation and remuneration; and low adoption of ICT. On the other hand, the Budget Performance Contracts, albeit being issued on an annual basis since 2006, have not been enforced. The mechanism for enforcing the legal requirement is under construction. Moreover, the instruments are inconsistent albeit being based on budget performance. Their targets are ambiguous, and terminologies are not well defined, both of which undermine reporting on and accounting for performance. Moving forward, the respondents stressed the need to enhance political commitment and responsibility for results-oriented management, harmonize the instruments and put in place the requisite mechanisms for their enforcement. 5.4: Performance Monitoring and Reporting The biggest challenge faced by many countries implementing PBB is the inability to use existing performance information to inform budgetary decisionmaking. The experience is not unique the four-year OOB reform demonstrated that the quality of performance information had always remained generally poor and, in many cases, not systematically monitored, and thus had limited influence on spending decisions. The Evaluation identified the major annual performance monitoring and reporting mechanisms which included: (i) Annual Budget Performance Report by MFPED; (ii) Government Annual Performance Report by OPM; (iii) Budget Monitoring and Accountability by MFPED; and (iv) Annual National Development Report. The main features of performance reports published for 2015/16 by the respective agencies are captured in Table 5.2. The discussion with the coordinators of the reporting arrangements highlighted a few challenges which have persistently limited the relevance of performance information in the formulation of realistic sector and programme outcomes and spending decisions. The challenges are summarized below: Differences in the reporting framework tend to generate inconsistencies in the implementation progress of NDP II rendering the some reports redundant. A typical example is the interface between the Certificate of Compliance (COC), and Annual National Development Report both produced by NPA; The performance concepts are neither welldefined nor harmonized between different reporting mechanisms, resulting into varied baseline data and performance indicators; Generation of too much performance information which may not always provide useful and reliable information to planning and budgeting purposes. 40

41 Table 5. 2: A Comparative Overview of Performance Agreement and Annual Budget Performance Contract FY 2015/16 Elements Lead Institution Reporting Period Objective GAPR (2015/16) ABFR Semi - Annual 2015/16 BMAU Semi - Annual 2015/16 NDR 2015/16 NPA - COC OPM MFPED MFPED NPA NPA 2015/16 but with varied baselines. (i) Comprehensive assessment of Government s performance & the results of public spending of the Financial Year 2015/16. (i)performance of Sectors, Ministries, Departments and Agencies (MDAs) and Local Governments against outcome and output targets & NDP II outcomes and outputs - basis for accountability (iii) performance of externally funded projects in fulfilment of the directive of Cabinet. Half 2016/17 Half of / /16 (i)an analysis of Budget Execution for the half year. (ii)illustrates performance of resources & expenditures. For six months of 2015/16. (iii) Provides an overview of Sector and Vote level physical achievements across Government based on OOB. (i)reviews selected key Vote functions and programmes within the sectors, based on approved plans and significance of budget allocations to the Votes. (ii) Attention is on large expenditure programme with preference given to development expenditure, & where some recurrent costs are tracked. (i)assessment also highlights the performance of the economy against set macroeconomic framework indicator targets. (ii) Assesses the progress made against the NDP Results Framework, including the NDP Goal/Theme level indicators, Objectives level indicators. (ii) Assesses the performance against the NDP Sector/Thematic Objectives and key strategies and interventions. Assessment the annual budget (AB) against NDP II priorities at 4 levels: macroeconomic, national; Sector/ MDA and LG. (i) assesses whether the AB macroeconomic targets are geared towards attaining NDPII medium-term macroeconomic targets and outcomes. (ii) National level: assesses whether the AB strategic direction is consistent with the NDPII strategic direction. (iii) sector/mda level assesses whether the AB strategic direction is translated into sector/mda specific interventions to deliver the NDPII. (iv)lg level: assesses whether the LG interventions are focused towards delivering the NDPII targets and outcomes 41

42 A successful PPB reform will be hinged on the existence of reliable, relevant and consistent performance information to inform the formulation of sector and programme outcomes and monitor the progress towards the attainment of targets. Accordingly, concerted effort is required to harmonize the reporting framework and promote consistent and quality performance information among the several reporting mechanisms. 5.5: Recommendations The Validation Meeting, under the chairmanship of MFPED, acknowledged the weak status of the enabling environment, its potential adversarial impact on the quality of PBB estimates and thus committed to undertake the following: Budget Credibility: Promote consistence in prioritization to provide a firm base for costing the sector objectives and programme outcomes over a planning period and set reliable multi-year expenditure projection, including annual estimates; Ensure timely release of funds by the accounting officers to programme managers who are responsible for executing the programmes and accounting for the outcomes and results; Increase the legitimacy and credibility of budget appropriations with the assurance that once the appropriations are decided upon, they can be executed effectively with minimum deviations. Performance Management Practices: MFPED and MoPS should jointly review and harmonize the instruments -APA and SBPC - and put in place the requisite mechanisms for their enforcement. Performance Monitoring and Evaluation: The existing multi-institutional arrangement (NPA, MFPED OPM and UBOS) on NSI should review the performance indicators to advise on baseline data, where possible, and on measures to rationalize, including improving the quality and relevance of the reporting framework from the various agencies. 42

43 6. PRIORITY ACTIONS FOR SECOND-YEAR IMPLEMENTATION AND BEYOND 43