1. All presentations are available on the PPF5 website: www.ppf5.rs
Budget
Planning
Aleksandra Branković
Andrija Pejović
All presentations are available on the PPF5 website:
14 February 2014

2. Hierarchy of Strategic Documents
Enlargement Package
(EU Enlargement Strategy, EC Progress Report /SAA/ European Partnership)
IPA II Regulation / Rules of Application
Country /Multi-Country Strategy Paper
National Sector Programme or (IPA-specific) Sector Planning Document -SPD)
Action Documents (ADs)
Annexed: SPDs
(Draft) Action Programme (AP)
Financing Proposal
Annexed: ADs
Commission Implementing Decision
Annexed: AP
Financing Agreement

3. Sector Planning Document
SPD Template
Purpose
Section 1: Sector Description
To systematically address the EC criteria for Sector Approach and show that the sector in question is sufficiently mature to adopt a Sector Approach. Also the steps being undertaken to increase sector maturity.
1.4 Mid-term perspectives on national budget and development assitance
Section 2: Sector Programme Rationale
To provide justification for the proposed programme to explain the focus of IPA assistance within the whole scope of the sector An overall picture of the problems to be solved with the support of IPA funded sector support.
Section 3: Sector Programme Description
To describe in detail the proposed programme covering: overall /specific objectives; impact indicators; results; measures & operations; institutional arrangements for implementation.
Section 4: Budget
To provide an indicative 3-year sector budget based on all sources
Section 5: Annexes
Log Frame
Institutional Arrangements
Implementation Schedule
To provide inputs for the associated Action Documents

4. Section 4 Sector Support Programme Budget
SECTOR TITLE
SOURCES OF FUNDING
TOTAL EXPENDITURE
TOTAL PUBLIC EXPENDITURE
IPA CONTRIBUTION
NATIONAL PUBLIC CONTRIBUTION
PRIVATE CONTRIBUTION
IB (1)
INV (1)
EUR (a)=(b)+(e)
EUR (b)=(c)+(d)
EUR (c)
% (2)
Total EUR (d)=(x)+(y)+(z)
% (2)
Central EUR (x)
Regional/Local EUR (y)
IFIs EUR (z)
EUR (e)
% (3)
Priority 1
Measure 1.1.
Operation ….
Priority 2
Measure 2.1
Operation
TOTAL  IB
TOTAL  INV
TOTAL SSP

5. Section 4 Sector Support Programme Budget
Similar to IPA I, budget template for Sector fiche
Standard approach to preparation of budget
Dismantle Measures and Operations to Contracts
Preparing Section 4 and ‘Annex 3: Indicative Implementation Schedule’ in parallel

6. Exercise for today’s session
Competitiveness Sector Planning Document (DRAFT!)
Specific objective 3: The implementation of the EU-harmonised policies to create a well functioning market economy improved
Measure 3.1: Improving the policy, regulatory and institutional framework and implementation capacities of economic operators

7. Keep in mind the following:
PRAG rules/types of contracts
Co-financing requirements
N+ rules
Linkages with national budget planning process

8. Indicative determination of contract value
Three approaches
Bottom up
Top down
Mixed
Sectoral and priority allocation predefined?

9. How to determine value
Service Contract
The budget includes expert fees (which includes the margin or profit for the consulting
company) which are calculated in relation to type and number of experts (see table).
Maximum duration of such project is two years (sometimes three).

10. How to determine value
Expert fees

11. How to determine value Other costs:
Incidental expenditure (between 2 & 5, sometimes 10% of budget):
Bank charges
Per diems for experts working outside project base of operations (e.g. Belgrade)
Visibility events, translation etc.
Verification (e.g. around 2% of budget for external auditor fees)

12. Types of Contract and Associated Documents
IPA Action Document
SERVICES
Terms of Reference
Procurement
SUPPLIES
Technical Specifications
WORKS
Bills of Quantity
Services
Studies - identification and preparation of projects, feasibility studies, economic and marketing studies, technical studies, evaluations and audits (Global price)
Technical assistance - the service provider has an advisory role, directs or supervises a project, or providing expert services defined in the contract (fee-based)
The combination - defined as resources and product
Supplies
Purchase, lease or rental of assets (equipment).
During the delivery of the equipment may be required installation and maintenance products
Works
Performance, or design and construction that result in the building or work of civil engineers who themselves are sufficient to meet the economic or technical function.
Twinning (Twinning: 1-2 MEUR and Twinning light: up to EUR)
Cooperation tool between a Public Administration in a Partner/ Beneficiary country and the equivalent institution in an EU Member State
It consists of sending to Serbia at least one resident adviser ( months)- RTA- and a number of medium and short-term missions, all to be carried out by public officials of the EU Member State institution
Key features is the concept of mandatory results: both the Serbian and the EU partner commit themselves to work towards a commonly agreed result, which should be measurable and precise.
Includes at least some elements of approximation to the EU acquis
Grants
Direct payments of non-commercial nature
Grants contract is used for the grant scheme as direct donation for local and regional authorities and civil society organizations
Direct Agreements
For particular tasks with specific organizations like UNHCR etc.
GRANTS
Guidelines for Applicants

13. Service contract-Budget planning-fee based
First payment:
for projects up to 12 months: 40%
for projects between 12 and 24 months: 30%
for 24 months projects or longer: 20%
Payments during project implementation:
every 6 months in equal amounts.
Final payment: 10%

14. Service contract-Budget planning-Global price
First payment : 60%
Payments during project implementation: no payments in most cases, but it depend on the project. If there are payments: 10% every 6 months.
Final payment: 40%.

15. Service contract-Budget planning-Global price
First payment : 60%
Payments during project implementation: no payments in most cases, but it depend on the project. If there are payments: 10% every 6 months.
Final payment: 40%.

16. Supply contract-Budget planning
First payment : 60%
Payments during project implementation: in most of the cases there are no payments.
Final payment: 40%

17. Works contract-Budget planning
First payment: 10%
Payments during project implementation: every month in equal amounts
Final payment: 10%

18. Twinning-Budget planning
First payment: 20%
Payments during project implementation: instalment every three months
Final payment: 5%

19. Grant-Budget planning
First payment: 80% Payments during project implementation: 0 if project lasts for 1 year; if project lasts for more than 1 year additional 10% can be added to pre-financing later on during project mplementation. It can be a single payment or 10% can be split up into 5+5% depending on the project duration. Final payment: 20% if project lasts for 1 year; could be 10% if project lasts for longer than 1 year

20. Exercise-
Table 1-Operation Budget
Table 2-SPD Section 4
Table 3-Disbursement

21. EU co-financing framework National co-financing framework

22. Outline of IPA RAP
IPA RAP not adopted yet
Financial management
a. Eligibility of expenditure; as regards specificity of the policy areas, specific provision may be foreseen in the Financing Agreements.
b. The co-financing concept in principle to be maintained. Specific criteria to modulate the co-financing rate set in the IPA Common Strategic Framework. (to be developed)
Detailed level of the EU contribution laid down in the respective Financing Agreements.

23. Outline of IPA RAP Aid intensity and rate of IPA assistance
The Commission decision adopting a cooperation programme shall fix the co-financing rate and the maximum amount of IPA assistance, based either on:
a) total eligible expenditure, including public and private expenditure; or
b) public eligible expenditure.
2. The co-financing rate at the level of each [priority axis] shall not be less than [20 %] and not higher than [85 %] of the eligible expenditure of a cooperation programme.

24. OLD IPA IR Co-financing requirements
Institution building activities: require a degree of co-financing by the final beneficiary and/or public funds. Exceptionally and in dully justified cases, activities may be funded 100% by Community funds Administrative co-operation (twinning and TAIEX type of activities) may be funded 100% by Community funds. If twinning is involved, clearly state the expected co-financing budget of the twinning contract. To note that contributions in kind are not eligible. Grants: the final beneficiaries may be required to contribute to the operation’s eligible costs. In general, final beneficiaries must contribute a minimum of 10 percent of the project, both for investment and institution building projects.

25. National framework for co-financing
Budget System Law Preparation of budgets and financial plans Article 28 4) Overview of the expected funds from the financial assistance of the European Union; 5) Estimation of the necessary financial resources to fund the participation of the Republic of Serbia in implementing of the financial assistance of the European Union;

26. National framework for co-financing
Budget System Law (Article 68a)
Budget users are responsible for proper planning in accordance with agreement between RS and EU, in the proper planning of the amount of expenditure
Budget user who do not funds sufficient funds for co-financing must redirect funds form their other budget lines

27. Budget system Law-Calendar

28. Guidelines for preparation of the Budget
Co-financing can be provided from public funds (by definition EU public funds are funds of budgets, own source revenues , loans granted to the state) or grants from international institutions.
Time frame of planning and implementation of activities that are co-financed by national funds under projects financed by EU funds

29. Time frame
It is necessary to respect the following rules : • Activities that are co-financed under the project/sectoral program defines in project proposals/sectoral programs which make annual National program; • The funds for co-financing of projects/sectoral program must be planned in within the allowable budget limits for every budget users; • Bearing in mind that the implementation of the annual IPA perennial and can not coincides with the national budget year , it is the projection plan funds to finance activities that are co-financed;

30. Time frame
• Activities that are considered as co-financing must begin with the realization after the signature of the Financing Agreement. Otherwise, the funds which are financed these activities will not be recognized as part of the co-financing; • National co-financing should be planned taking into account the dynamics of implementation of project/program activities. • When planning the dynamics of negotiation, ie . Payment of those activities co-financed by public funds, or in predicting the resources that are need for co-financing the activities of the project /sectoral program should be take into account the order of activities listed in the project or in the sectoral program;

31. Time frame
Contracts for the implementation of all project/sectoral program must be concluded within two or three years from the date of signature of the Financing agreements depending on which service is provided specific financial Agreement within two years after the conclusion of individual contracts-contractual obligations to be performed, and the payment of funds for their implementation is must be completed no later than one year from the last day set for the execution particular contract, unless otherwise specified in the Financing Agreement;
EC must be aware of implementation of part of the project/program activities, are co-financed from national resources;

32. Exercise-
Table 4-Instructions for projects financed from EU funds (IPA)

33. N+ Rules OPTION 1 Annual Programme OPTION 2
OPTION 1
Annual Programme
OPTION 2
Combined annual Programme (max. 3 years)
OPTION 3
Multiannual Programme with split commitments (max. 7 years)
PROGRAMME ARCHITECTURE
Financing Decision (FD)
Financing Decision covering an allocation for one year.
Financing Decision covering an allocation for up to three years with suspension clause.
Financing Decision covering an allocation for an initial (maximum) three years with suspension clause.
Amendment of Financing Decision to add allocations for consecutive years' budget allocation at least twice.
Possibly: Commission Decisions for selection of certain infrastructure projects (major projects) per year.
Action Programme
(Annex to FD)
Action Programme covering Actions programmed for one year or Action Programme covering Actions programmed for more than one year and broken down into annual priorities (=selected Actions).
Action Programme covering Actions programmed for three or more years and broken down into priorities for a maximum of three years.
For these priorities (selected Actions), it must be clearly identified whether they are financed from year N, N+1 or N+2.
Action Programme covering Actions programmed for up to seven years without earmarking of Actions by year.
Budgetary commitment
One budgetary commitment in year N.
Annual budgetary commitments in N, N+1 and N+2 (three).
The budgetary commitment is broken down into seven instalments, one for each year (through amendments to original commitment).
Financing Agreement
One Financing Agreement.
Financing Agreements to be concluded for each year or two amendments to original Financing Agreement.
Financing Agreements to be signed covering allocations as specified in the Financing Decision (maximum initial allocation of three years) with suspension clause.
Amendments to Financing Agreement to add allocations for consecutive years' budget allocation at least twice.

34. IMPLEMENTATION TIMELINE
N+ Rules
Relevant legal framework
Article 189(2) FR
Article 2 CIR
Article 6(3) CIR
Article 189(3) FR
Article 16 IPA RAP
Possible methods of implementation
Direct and Indirect
Only Indirect
IMPLEMENTATION TIMELINE
Deadline for conclusion of Financing Agreement
N+1
N+1 counted from the year of creation of each yearly commitment
None
Deadline for conclusion of procurement contracts and grant agreements
d+3 from conclusion of Financing Agreement
“d” the date of conclusion of the Financing Agreement.
d+3 from conclusion of each Financing Agreement
Deadline for operational implementation
6 years from conclusion of Financing Agreement
6 years from conclusion of each Financing Agreement
Deadline for automatic
de-commitment
Each yearly split commitment
must be spent within five years of its validation (N+5).
The last split commitment (2020) must be spent within six years of its validation (N+6).

35. Sector Budget
There needs to be a clear link between sector policy & budgeting.
Sector plans should be properly priced & prioritized within a realistic estimate of the resources available from the national budget & external donors.
IPA II Sector Support Programmes are planned to be multi-annual & should be co-financed by predictable, multi-annual national funding.
It is necessary to provide a brief description of the sector budget on an annual, & if possible, on a medium-term perspective (3-5 years). Ideally there should be a Medium Term Expenditure Framework (MTEF) for the sector.
However, development of MTEFs will be gradual, at first assessments should focus on the existence of credible annual sector budgets. At minimum, it is crucial to verify whether the sector budget can be identified in the state budget.

36. Path towards Fully-fledged Sector Support
Can the sector budget be easily identified in the state budget?
What is the nature and scope of the sector budget?
Does the budget fairly reflect the sector policies and objectives?
What type of budget classification system is in use?
What is the overall level of sector financing?
Is the share the sector within total government expenditures increasing?

37. Path towards Fully-fledged Sector Support-MTEF
If a sector MTEF is in place, key assessment questions include:
Is it consistent with declared policies and the national budget/overall MTEF of the country?
Is it approved at a political level or is it largely a technical document?
If a sector MTEF is foreseen by the government how can its elaboration be supported by means of the Sector Support Programme?

38. Path towards Fully-fledged Sector Support-MTEF
If a sector MTEF is in place, key assessment questions include:
Is it consistent with declared policies and the national budget/overall MTEF of the country?
Is it approved at a political level or is it largely a technical document?
If a sector MTEF is foreseen by the government how can its elaboration be supported by means of the Sector Support Programme?

39. Path towards Fully-fledged Sector Support-MTEF
If a sector MTEF is in place, key assessment questions include:
If an MTEF is already in preparation, has a coherent and broad sector development plan with appropriate financing framework at sector and national level been defined/decided at a political level and is it considered feasible and is it consistent with national/overall MTEF?
If a Sector MTEF is not in place, are appropriate sector allocations secured and properly stated in the general budget?
Is there an on-going process leading to the setting up of Sector MTEF?
Based on the analysis, recommendations should be made to the Government.

40. Programatic budgeting
Differences between program and line budget:
Showing:
that the purpose of money is spent;
how such consumption is linked to strategic objectives, and
what results should be achieved

41. Advantages of programme budget
Provides a single framework for prioritization of expenditures;
Improves policy coordination at the government level, which is crucial for achieving the national, social and economic objectives;
Provides financial context of strategic and operational plans for budget users;

42. Advantages of programme budget
Allows the government and local authorities to identify inefficient spending, as well as areas that do not provide adequate results and that require more resources;
Contributes to the improvement of public administration services through the evaluation of the relationship of their price and quality;
Makes budget more transparent and understandable for citizens

43. Programme budget
The introduction of program budgeting is of major importance for the improvement of public finance, as it enables continuous multi-year financing of priority policies, programs and projects.
By the end of 2013 a comprehensive preparation of institutions has been conducted for the introduction of program budgeting.
By the end of 2013, fourteen (14) Serbian intuitions have adopted program based budget, including SEIO.
During 2014, the preparation of institutions for the introduction of program budgeting will continue, as it is planned for the 2015 budget year according to the Budget System Law.

44. Mid-Term Expenditure Frameworks (MTEF)
Mid-Term Expenditure Frameworks (MTEFs) are part of the existing Fiscal Strategy. They are determined at the level of budget users and cannot directly be transformed into sector MTEFs.
Recently adopted legislation requires the merging of strategic planning of public policies with the budget process within the government and the parliament. This will include mandatory three-year budget planning and the introduction of programme budgeting by 2015.
It is planned that MTEFs for sectors will be developed alongside programme budgeting. For this to be feasible it will be necessary to ensure correspondence between the budget programmes and the NAD sectors.

45. Strategic Planning and Coordination of Public Policies
The guidelines for drafting the strategic documents were provided in the form of recommendations, and the uniform information system was introduced for the collection of data required for the government work program.
Draft Methodology for Integrated Strategic Planning was prepared, and this draft is to be adopted.
Still, upgrading of strategic planning and coordination of public policies within the Government should be considered the priority task in the forthcoming public administration reform process.

46. Thank you for your attention
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