1. 1 Linking Provincial Priorities with National Programs: 1391 Provincial Budget Unit Ministry of Finance Government of Afghanistan Islamic Republic of Afghanistan Ministry of Finance Budget Department

2. 216-17 March 2010 Overview Introduction Extending Reform to Provincial Directorates AFMIS: Improved Reporting Program Budgeting 1391 Budget Formulation Proposed Implementation Next Steps Key Contacts Discussion

3. 316-17 March 2010 Extending Reform to Provincial Directorates A key weakness in the Afghan budget process has been the weak linkage between policy, planning, formulation, execution, and reporting. The Government has introduced a number of public financial management reforms to improve budgeting and expenditure management, specifically: Afghanistan Financial Management Information System (AFMIS) (deployment completed in 1389) Program budgeting (1389) –Provincial budgetary resource allocation through a criteria (or norms-) based approach In 1391, MoF, with IDLG, will pilot an increased role of provincial directorates in planning and implementing development projects to support national programs through local priorities.

4. 4 AFMIS Implementation of AFMIS has improved MoFs financial management reporting capabilities, especially in terms of accuracy and timeliness of financial reporting. –AFMIS has been implemented in all central ministries –Provincial mustafyats access AFMIS for data entry and reporting –Provincial directorates can obtain reports on allotment releases and provincial expenditures from the mustafyat –Currently, the system covers the ordinary budget.

5. 516-17 March 2010 Program Budgeting Key Objectives of program budgeting are to: –Implement ANDS through linking ministerial strategic objectives and the budget –Integrate the ordinary and development budgets to align development and operating expenditures towards achieving a common goal. Once implemented, program budgeting will: –Enable effective prioritization/budget allocation decision-making process –Help line ministries better justify their budgets to the Budget Committee –Provide adequate reports to the Parliament, Cabinet, the public, and international donor community about performance in meeting ANDS (development) objectives –Reduce, if not eliminate, the number of duplicate projects Status: –In 1390 (i.e. March 2011), replaced traditional budgeting across all ministries

6. 616-17 March 2010 Budget Formulation Process Budget formulation is a process of coordination, communication, and compromise as shown in the following graphic. The result is a national budget, reflecting: –National development priorities in ANDS –Fiscal discipline from the medium term fiscal framework –Donors prioritization and commitment –For 1391, clear linkage between national programs and local priorities –Improved communication between central ministries and their provincial directorates Budget Circular #1 for 1391 has laid out specific guidance to the pilot central ministries and their provincial directorates.

7. 716-17 March 2010 Linking with Local Priorities The graphic below illustrates the process of linking local priorities with national priorities:

8. 8 Proposed Implementation In formulating the 1391 budget, MoF and IDLG will pilot the integration of provincial priorities into pilot ministry budget submissions. To do this, MoF will: Revise budget calendar for sufficient time for communication between the line ministry and its provincial directorates Revise BC1 and BC2 instructions and forms to incorporate provincial inputs –Pilot line ministries should be required to communicate BC1 requirements, deadlines and the ceilings to their provincial departments. –Pilot ministries should submit their budget request, integrating specific provincial priorities, to the Ministry of Finance. –BC1 submissions will form basis for securing donor funding –Upon securing commitment from the donors, MoF will issue budget ceilings, containing funds for new priorities at the provincial level (within selected programs). –Upon issuing ceilings with BC2, the pilot ministries should work with provincial departments on developing detailed project documents. –Integrated BC2 submissions will form basis for project approval

9. 9 Support to pilot ministries Technical support to pilot line ministries and provincial directorates provided by Ministry of Finance, pilot ministries and donors: –educate the provincial departments about the existing Government policies and programs defined at the central ministry/agency level, –provide technical support to the central ministries and provincial departments through centralized capacity building activities by the Ministry of Finance in basic PFM, –ensure direct on the job support to individual provincial departments by the donors located in the specific province. Ensure additional funding by donors for the key programs delivering services at the province level, In a case of national programs, donors will work more closely with ministries to ensure funds are allocated to the provinces as requested. 16-17 March 2010

10. 10 Highlights of the provincial budgeting approach for BC1 Opportunity for provincial departments of the most important service delivery line ministries (Health, Education, MRRD, MAIL) to tell central line ministries what they need. Use of proven successful national programs (NSP, EQUIP,...) as the mechanism for understanding provincial needs and executing them. –This will allow us to involve provincial departments in 1391 budget preparation without establishing cumbersome new processes. –These programs are in line with national development strategy. These programs are trusted by donors. $500,000 per ministry per provincial department, which is $2m per province in total. This should be additional money on top of the existing funds (MoF to provide from donors). 16-17 March 2010

11. 11 BC1 preparation steps – guidelines for provinces - Central ministry will select one or two key national program delivering services at the provincial level – such as EQUIP in MoEd Out of five new projects in the BC1 (forms 2a and 2b), pilot ministry will have only TWO new projects – one for each selected national program MoF has developed guidelines for the provincial departments and slightly revised copy of 2a and 2b form Provinces will be required to provide district breakdown of their new activity request Pilot ministry will send out instructions to provincial departments asking them to submit up to 2 new projectsproposals under the selected national programs (one for each selected program), with the cap of USD500,000. fill in only 2 forms – 2a and 2b – for up to TWO projects only 16-17 March 2010

12. 12 BC1 preparation steps – provincial inputs - Each province will Assess their baseline for this particular program (but no need to fill any forms for the baseline) Consult PDPs/PDcs/communities to see what their priorities under the selected program are Define additional request under each of the two selected programs Fill in TWO 2a and 2b form – one for each selected program Provide justification Calculate costs Define performacne targets Make sure that any O&M cost requirements are captured Provide district breakdown 16-17 March 2010

13. 13 2a and 2B Forms REVISE 2A FORM TO PROVIDE DISTRICT BREAKDOWN AND OPEN IT AT THIS POINT OF PRESENTATION 16-17 March 2010

14. 14 BC1 preparation steps - integrated submission - Once central ministry collects all the inputs, it will Compile all the provincial inputs UNDER TWO NEW ACTIVITES (two forms 2a and 2b) – one for each selected national program Develop centrally all five new activities (3 only centrally, as last year) and 2 with provincial inputs), as well as baseline cost (form 1) calculation Submit one integrated submission to MoF, with up to 5 new activities in total, –two of the new activities will be for the selected national programs, will contain provincial inputs and will be within a cap of USD17 mil. 16-17 March 2010

15. 15 Illustrative Example of Integration - Baseline- 16-17 March 2010 Form 1 Islamic Education Form 1 Administration Form 1 Center Programs: 1.General Education 2.Vocational Education 3.Islamic Education 4.Administration Vocational Education General Education

16. 16 Illustrative Example of Integration - New Activity - 16-17 March 2010 XXX/ Vocational Education Form 2a Form 2b General Education Form 2a Form 2b Technical Education Form 2a Form 2b Administration Form 2a Form 2b EQUIP /General Education Form 2a Form 2b Center Herat Ghazni Zabul Balkh Helmand Bamyan Herat Ghazni Zabul Balkh Helmand Bamyan Programs: 1.General Education 2.Vocational Education 3.Administration National Programs (Projects): 1.EQUIP 2.XXXX Note: These national program also come under one or more of the actual PB programs

17. 17 Next Steps Organize regional workshop level for provincial directors to explain: –your 1389 budget execution –your 1390 approved budget, programs, performacne targets and provincial allocation –new provincial budget approach, requirements for the provincial departments and deadlines support provincial departments in developing their inputs Mobilize donors TA to provincial departments in developing required budget inputs Collect all the inputs from the provinces - by May 30 Integrate inputs into a single submission for MoF- by June 7

18. 1816-17 March 2010 Key Contacts Provincial Budget Unit Najimullah Qasimi, Provincial Budgeting Manager Email: najimullah@gmail.comnajimullah@gmail.com

19. 1916-17 March 2010 Discussion