1. 1 BUDGET PREPARATION AND PROCESSES: Budget Division Ministry of Finance

2. 2 ABOUT THE PRESENTATION This Presentation Outlines the key legal instruments & main stages of the Budget process performed by Central Government and Local Government Authorities (LGAs) Outlines the key legal instruments & main stages of the Budget process performed by Central Government and Local Government Authorities (LGAs) Provides highlights on plan and budget reform initiatives Provides highlights on plan and budget reform initiatives Discusses some areas that need to be addressed in order to have improved MDAs. Regional Secretariats’ (RS) and LGAs’ budget submissions Discusses some areas that need to be addressed in order to have improved MDAs. Regional Secretariats’ (RS) and LGAs’ budget submissions

3. 3 1. INTRODUCTION Government Budget: Government Budget: Tool for implementing policy decisions to achieve social, economic & political objectives Tool for implementing policy decisions to achieve social, economic & political objectives Process of determining resources and their use for the purpose of attaining the set goals Process of determining resources and their use for the purpose of attaining the set goals Involves interventions by key actors and stakeholders and a series of activities Involves interventions by key actors and stakeholders and a series of activities Public instrument based on a legal framework, which gives it the necessary mandate Public instrument based on a legal framework, which gives it the necessary mandate

4. 4 Government Budget: Tool for implementing policy decisions to achieve social, economic & political objectives Tool for implementing policy decisions to achieve social, economic & political objectives Process of determining resources and their use for the purpose of attaining the set goals Process of determining resources and their use for the purpose of attaining the set goals Involves interventions by key actors and stakeholders and a series of activities Involves interventions by key actors and stakeholders and a series of activities Public instrument based on a legal framework, which gives it the necessary mandate Public instrument based on a legal framework, which gives it the necessary mandate

5. 5 2. LEGAL BASE OF BUDGET The preparation and implementation of the Government budget is based on legal requirements and set up The preparation and implementation of the Government budget is based on legal requirements and set up The legal base is the body of laws & administrative regulations that regulate the budget format, timing and procedures & the allocation of formal powers and responsibilities and rights in the budget cycle or process The legal base is the body of laws & administrative regulations that regulate the budget format, timing and procedures & the allocation of formal powers and responsibilities and rights in the budget cycle or process

6. 6 Instruments Providing Legality of the Budget The Constitution of Tanzania (Chapter 7) The Constitution of Tanzania (Chapter 7) The Public Finance Act 2001 The Public Finance Act 2001 The Public Procurement Act No. 21 of 2004 (which repealed the Public Procurement Act 2001) The Public Procurement Act No. 21 of 2004 (which repealed the Public Procurement Act 2001) The Annual Appropriation Act The Annual Appropriation Act The Annual Finance Act The Annual Finance Act Local Government Finance Act No.9 of 1982 (As amended by Miscellaneous Act No. 6 of 1999) Local Government Finance Act No.9 of 1982 (As amended by Miscellaneous Act No. 6 of 1999)

7. 7 3. BUDGET PROCESS (i) Preparation of Plan and Budget Guidelines  Budget formulation begins with establishment of national budget policy objectives and priorities and resource envelop Consistent with MKUKUTA and Tanzania Development Vision 2025; and informed by the macroeconomic review and analysis Consistent with MKUKUTA and Tanzania Development Vision 2025; and informed by the macroeconomic review and analysis Macroeconomic review is facilitated by the Plan and Budget Guidelines Committee (PBGC) - responsible for preparing annual Plan and Budget Guidelines Macroeconomic review is facilitated by the Plan and Budget Guidelines Committee (PBGC) - responsible for preparing annual Plan and Budget Guidelines

8. 8 PBGC composed of officers from central ministries PBGC composed of officers from central ministries Ministry of Finance (MOF) Ministry of Finance (MOF) Ministry of Planning, Economy and Empowerment (MPEE) Ministry of Planning, Economy and Empowerment (MPEE) President’s Office-Public Service Management (PO-PSM) President’s Office-Public Service Management (PO-PSM) Prime Minister’s Office-Regional Administration and Local Government (PMO-PORALG) Prime Minister’s Office-Regional Administration and Local Government (PMO-PORALG)

9. 9 Review of macroeconomic performance starts with assessment of performance of the previous budget assumptions and targets Review of macroeconomic performance starts with assessment of performance of the previous budget assumptions and targets Other variables reviewed include economic growth rate, inflation and government finance Other variables reviewed include economic growth rate, inflation and government finance Review of past and current performance is basis for future projections Review of past and current performance is basis for future projections Public Expenditure Review (PER) process provides important support to the Budget Process Public Expenditure Review (PER) process provides important support to the Budget Process updated sector MTEFs updated sector MTEFs sector resource requirements sector resource requirements macroeconomic issues macroeconomic issues donor financial commitments etc donor financial commitments etc

10. 10 Based on the macroeconomic review and other developments as indicated in the economic performance review, the overall macroeconomic and fiscal framework for the future is then established Based on the macroeconomic review and other developments as indicated in the economic performance review, the overall macroeconomic and fiscal framework for the future is then established The framework generally covers the The framework generally covers the Projected economic growth (GDP) Projected economic growth (GDP) Level of inflation Level of inflation External sector performance External sector performance Budget Frame Budget Frame Financing Financing

11. 11 Government then identifies policy objectives and budget priorities, which should be achieved in the annual and next two years of the MTEF Government then identifies policy objectives and budget priorities, which should be achieved in the annual and next two years of the MTEF The framework forms the basis for preparing the Plan & Budget Guidelines which set ceilings of expenditure in the coming three years for MDAs, Regions & LGAs The framework forms the basis for preparing the Plan & Budget Guidelines which set ceilings of expenditure in the coming three years for MDAs, Regions & LGAs Setting of ceilings is facilitated by software called Strategic Budget Allocation System (SBAS) Setting of ceilings is facilitated by software called Strategic Budget Allocation System (SBAS) Two versions: Two versions: SBAS Micro for inputting Institutional requests SBAS Micro for inputting Institutional requests SBAS Macro for consolidation of inputs, analysis and allocating resources up to target level SBAS Macro for consolidation of inputs, analysis and allocating resources up to target level

12. 12 (ii) Revenue and Expenditure Estimates Preparation Budget estimates preparation consists of estimates of revenue, recurrent and development expenditures by MDAs, Regions and LGAs Budget estimates preparation consists of estimates of revenue, recurrent and development expenditures by MDAs, Regions and LGAs Budgeting at MDAs, RS and LGAs levels is facilitated by Plan and Budget Guidelines Budgeting at MDAs, RS and LGAs levels is facilitated by Plan and Budget Guidelines PMO-RALG is responsible for clarifying the issues that are relevant to Regions and LGAs and provide guidance on how to treat them in their plans and budgets PMO-RALG is responsible for clarifying the issues that are relevant to Regions and LGAs and provide guidance on how to treat them in their plans and budgets

13. 13 Institutions follow the laid down steps in the preparation of the MTEF based Budgets for quality submissions Institutions follow the laid down steps in the preparation of the MTEF based Budgets for quality submissions Step 1: Conduct situational analysis or environment scan (SWOT & Stakeholder Analysis) Step 2: Review or define the MDAs, Regions, LGAs vision, mission, objectives and targets ( Steps 1&2 are carried out during the preparation of Institutional Strategic plans) Step 3: Prioritization of targets and development of activities Step 4: Costing of activities Step 5: Preparation of action and cash flow plans

14. 14 The preparation of MTEF budget at Institutional level is coordinated by the Budget Committees The preparation of MTEF budget at Institutional level is coordinated by the Budget Committees Departmental budgets are to be consistent with the Institutional priorities and within the given vote ceilings Departmental budgets are to be consistent with the Institutional priorities and within the given vote ceilings

15. 15 (iii) Finalization of Budget Formulation Final phases of budget preparation include: Final phases of budget preparation include: Scrutiny of estimates Scrutiny of estimates Donor/Government Consultations Donor/Government Consultations Submission of estimates to Inter Ministerial Technical Committee (IMTC) Submission of estimates to Inter Ministerial Technical Committee (IMTC) Submission of the budget Cabinet Paper for approval Submission of the budget Cabinet Paper for approval Scrutiny of the draft budget proposals Scrutiny of the draft budget proposals Within the Institution - to ensure correctness and relevancy of the financial demands Within the Institution - to ensure correctness and relevancy of the financial demands At the center - ascertain adherence of the budget estimates to the Plan and Budget Guidelines, and accuracy of the numbers At the center - ascertain adherence of the budget estimates to the Plan and Budget Guidelines, and accuracy of the numbers Donor and Government consultations confirm donor financial commitment in the coming MTEF period Donor and Government consultations confirm donor financial commitment in the coming MTEF period Discussions take place between MOF, MDAs, Regions, LGAs and Development Partners (DPs) Discussions take place between MOF, MDAs, Regions, LGAs and Development Partners (DPs)

16. 16 Estimates are then submitted to the Inter – Ministerial Technical Committee (IMTC) Estimates are then submitted to the Inter – Ministerial Technical Committee (IMTC) To facilitate the discussions, the MOF prepares a draft Cabinet budget paper that covers the budget frame, the financial demands after dialogue with MDAs, the government priorities and financial implications To facilitate the discussions, the MOF prepares a draft Cabinet budget paper that covers the budget frame, the financial demands after dialogue with MDAs, the government priorities and financial implications IMTC may require MOF to make further technical improvements to the paper or put up recommendations for consideration by the Cabinet IMTC may require MOF to make further technical improvements to the paper or put up recommendations for consideration by the Cabinet A budget Cabinet paper is submitted and discussed by Cabinet and then approves government budget proposals before they are submitted to the legislature A budget Cabinet paper is submitted and discussed by Cabinet and then approves government budget proposals before they are submitted to the legislature

17. 17 (iv) Budget Authorization by Parliament Begins with discussions by Sector Parliamentary Committees Begins with discussions by Sector Parliamentary Committees The Minister for Planning, Economy and Empowerment and the Minister for Finance provide preliminary briefs on the economic outlook and National Budget respectively The Minister for Planning, Economy and Empowerment and the Minister for Finance provide preliminary briefs on the economic outlook and National Budget respectively MDA’s and Regions’ detailed budgets are then submitted to Parliamentary Committees for scrutiny MDA’s and Regions’ detailed budgets are then submitted to Parliamentary Committees for scrutiny After the sector committees of the Parliament have reviewed the Estimates, the Budget Proposals are tabled to the Parliament for debate and authorization After the sector committees of the Parliament have reviewed the Estimates, the Budget Proposals are tabled to the Parliament for debate and authorization

18. 18 (v) Budget Execution Each MDA, Region and LGA must ensure that institutional missions & objectives are achieved within the approved budget estimates; and significant deviations prevented Each MDA, Region and LGA must ensure that institutional missions & objectives are achieved within the approved budget estimates; and significant deviations prevented Institutions must plan implementation and prepare work & procurement plans including cash flow requirements Institutions must plan implementation and prepare work & procurement plans including cash flow requirements Execution takes place after release of funds by MOF Execution takes place after release of funds by MOF PMG releases funds on monthly basis and in accordance with the available resources. Main activities at this stage include: PMG releases funds on monthly basis and in accordance with the available resources. Main activities at this stage include: Collection and accounting for revenues by TRA, MDAs & Regions Collection and accounting for revenues by TRA, MDAs & Regions Delivery of services and project implementation by institutions Delivery of services and project implementation by institutions Maintenance of proper accounts for control and accountability Maintenance of proper accounts for control and accountability Reporting on budget performance (both financial and physical) Reporting on budget performance (both financial and physical)

19. 19 (vi) Budget Monitoring & Control Close monitoring of the execution of the budget at all levels is intended to ensure efficient use of resources Close monitoring of the execution of the budget at all levels is intended to ensure efficient use of resources Monitoring and control mechanisms used: Monitoring and control mechanisms used: Internal reporting system Internal reporting system Budget adjustments Budget adjustments Internal audit Internal audit External audit External audit Parliamentary control. Parliamentary control.

20. 20 (vii) Budget Evaluation Evaluation is made as a basis for revising the policies, objectives and processes Evaluation is made as a basis for revising the policies, objectives and processes Evaluation of the MTEF preparation process is carried out annually by MOF and other evaluations are conducted as and when required by stakeholders Evaluation of the MTEF preparation process is carried out annually by MOF and other evaluations are conducted as and when required by stakeholders MDAs, RS and LGAs are also urged to carry out evaluation of their performance to assess the level of achievement in terms of outcome or impart MDAs, RS and LGAs are also urged to carry out evaluation of their performance to assess the level of achievement in terms of outcome or impart

21. 21 Timing of the Planning and Budgeting Processes ProcessTimingResponsible Revising and updating the SPs based on situational analysis and most recent performance including (MKUKUTA Inputs) Sept - Oct MDAs, Regions, LGAs Review of macro-economic and performance of Sectors as a basis for Establishing National Budget priorities and policies; and resource projection (PER Inputs) Oct - Dec PBGC Preparation of budget requests based on revised SPs using SBAS-Micro version Oct – Nov MDAs, Regions, LGAs Outlook and projection for the MTEF - the financing aspect (SBAS Macro Inputs) Oct - Dec PBGC

22. 22 Timing of the Planning and Budgeting Processes (cont.) ProcessTimingResponsible Issuance of Plan and Budget Guidelines and detailed guidelines for LGAs End Dec MPEE & MOF Preparation of Annual Budgets and MTEFs Jan – mid March MDAs, Regions, LGAs Finalization of the National Budget Estimates and approval by Cabinet, Mid March - April MOF & Cabinet Presentation of the Budget to the Parliament June - Aug Respective Ministers Budget Implementation, Monitoring, Control and Evaluation July – June following year MDAs, Regions, LGAs

23. 23 4. PLAN & BUDGET REFORM INITIATIVES The Government has taken various initiatives aimed at improving resource management and service delivery The Government has taken various initiatives aimed at improving resource management and service delivery These include Public Sector reforms such as These include Public Sector reforms such as Strategic Planning (SP) Strategic Planning (SP) PER PER Medium Term Expenditure Framework (MTEF) Medium Term Expenditure Framework (MTEF) LGRP LGRP MKUKUTA MKUKUTA These initiatives, which closely affect the planning and budgeting as well as monitoring and evaluation, are being implemented under different lead Ministries These initiatives, which closely affect the planning and budgeting as well as monitoring and evaluation, are being implemented under different lead Ministries Following slides discuss the main features of the SP, PER, MTEF, LGRP and MKUKUTA Following slides discuss the main features of the SP, PER, MTEF, LGRP and MKUKUTA

24. 24 (1) Strategic Planning Strategic Plans (SPs) were developed by Civil Service Department (CSD) now President’s Office Public Service Management (PO-PSM) Strategic Plans (SPs) were developed by Civil Service Department (CSD) now President’s Office Public Service Management (PO-PSM) Each MDA, RS and LGA is required to have a Strategic Plan covering five years Each MDA, RS and LGA is required to have a Strategic Plan covering five years SPs encompass institutions SPs encompass institutions Vision and mission statements Vision and mission statements Key result areas (MTEF Objectives) Key result areas (MTEF Objectives) Strategic objectives (MTEF targets) Strategic objectives (MTEF targets) Outcome and output performance indicators Outcome and output performance indicators The institutional perspectives in the MTEF document are essentially the vision statement, mission statement, objectives to be attained, policies and strategies The institutional perspectives in the MTEF document are essentially the vision statement, mission statement, objectives to be attained, policies and strategies

25. 25 (2) Public Expenditure Review The underlying objective of PER is to evaluate budget performance against approved targets and procedures or processes and identify shortcomings and corrective measures The underlying objective of PER is to evaluate budget performance against approved targets and procedures or processes and identify shortcomings and corrective measures Since 1998, Public Expenditure Reviews in Tanzania has been conducted on an annual basis, closely aligned with Governments budget cycle Since 1998, Public Expenditure Reviews in Tanzania has been conducted on an annual basis, closely aligned with Governments budget cycle It is carried out under the direction of the Public Expenditure Review Working Groups, chaired by the Ministry of Finance It is carried out under the direction of the Public Expenditure Review Working Groups, chaired by the Ministry of Finance Membership includes a wide range of stakeholders from Government, Development Partners and Tanzania Civil Society - consistent with the open process of formulation of policy and budget strategy in Tanzania Membership includes a wide range of stakeholders from Government, Development Partners and Tanzania Civil Society - consistent with the open process of formulation of policy and budget strategy in Tanzania

26. 26 The PER process provides a streamlined approach towards firming up commitments and projections of the resource envelope and subsequent strategic resource allocation to the spending agencies The PER process provides a streamlined approach towards firming up commitments and projections of the resource envelope and subsequent strategic resource allocation to the spending agencies The overarching thrust remains ensuring that adequate resources are provided for the implementation of MKUKUTA The overarching thrust remains ensuring that adequate resources are provided for the implementation of MKUKUTA The focus has now shifted from the sectors to clusters, where resource allocation not only focuses on key areas of intervention but also addresses the cross sectoral collaboration and linkages The focus has now shifted from the sectors to clusters, where resource allocation not only focuses on key areas of intervention but also addresses the cross sectoral collaboration and linkages

27. 27 (3) Medium Term Expenditure Framework (MTEF) MTEF is built on the past reform initiatives Rolling Plan and Forward Budget - focused on policy and strategic review and three year ceilings Rolling Plan and Forward Budget - focused on policy and strategic review and three year ceilings Performance Budgeting - emphasized output or result oriented budgeting approach Performance Budgeting - emphasized output or result oriented budgeting approach Strategic Plans - developed with support from the then Civil Service Department Strategic Plans - developed with support from the then Civil Service Department

28. 28 Reviews budget performance and evaluates available resources and establishes the cost of implementing the activities to attain the set targets Reviews budget performance and evaluates available resources and establishes the cost of implementing the activities to attain the set targets Deals with prioritization of targets and formulation of three-year integrated performance based estimates given the resource envelope Deals with prioritization of targets and formulation of three-year integrated performance based estimates given the resource envelope This approach enables the linking of resources to the attainment of specified objectives This approach enables the linking of resources to the attainment of specified objectives It emphasizes more on service delivery and meeting the needs of priority stakeholders It emphasizes more on service delivery and meeting the needs of priority stakeholders Takes the objectives and targets developed in the SP and prepares activities and budgets Takes the objectives and targets developed in the SP and prepares activities and budgets

29. 29 (4) LGRP LGRP was launched in 1997 to guide the attainment of improving the quality of and access to public services provided by LGAs LGRP was launched in 1997 to guide the attainment of improving the quality of and access to public services provided by LGAs The reform programme is implemented under PMO–RALG and is comprised of six components The reform programme is implemented under PMO–RALG and is comprised of six components Governance, Local Government Restructuring, Finance, Human Resource Development, Institutional and Legal Framework and Programme Management Governance, Local Government Restructuring, Finance, Human Resource Development, Institutional and Legal Framework and Programme Management Transfers duties and financial resources from the central to local government levels Transfers duties and financial resources from the central to local government levels

30. 30 The extent to which LGRP improves services depends on quality of local governance and financial management The extent to which LGRP improves services depends on quality of local governance and financial management Major changes include provision of formula based block grants to LGAs Major changes include provision of formula based block grants to LGAs allows more autonomy in planning and budgeting for service delivery allows more autonomy in planning and budgeting for service delivery in line with local needs and priorities as well as in compliance to national policy objectives in line with local needs and priorities as well as in compliance to national policy objectives

31. 31 (5) NSGRP/MKUKUTA The first Policy Reduction Strategy Paper committed itself to accord priority status in resource allocation to PRS priority sectors The first Policy Reduction Strategy Paper committed itself to accord priority status in resource allocation to PRS priority sectors Agriculture (research and extension), basic education, primary health, water, rural roads, judiciary and HIV/AIDS Agriculture (research and extension), basic education, primary health, water, rural roads, judiciary and HIV/AIDS The second PRSP, known as MKUKUTA was adopted and implemented starting 2005/06 The second PRSP, known as MKUKUTA was adopted and implemented starting 2005/06 MKUKUTA is addressing the need to become more outcome-oriented by adopting three clusters: MKUKUTA is addressing the need to become more outcome-oriented by adopting three clusters: Growth and income poverty reduction Growth and income poverty reduction Improvement of quality of life and social well being Improvement of quality of life and social well being Government and accountability Government and accountability

32. 32 5. CHALLENGES FOR IMPROVED BUDGET PERFORMANCE  Objectives and targets to be achieved and the associated activities to be implemented should be clearly articulated Targets should be SMART (Specific, Measurable, Achievable, Realistic and Time bound) Targets should be SMART (Specific, Measurable, Achievable, Realistic and Time bound)  Need to ensure quality budget information is produced for good budget management decisions Quarterly, Midyear and Annual Progress Reports should be prepared and submitted in time to MOF, MPEE and PMO-RALG Quarterly, Midyear and Annual Progress Reports should be prepared and submitted in time to MOF, MPEE and PMO-RALG

33. 33  Accounting Officers must ensure that efforts are made to attain objectives and targets indicated in the MTEF  Efforts are being made by the Government to track MKUKUTA related expenditures. Financial performance is currently sourced from the Integrated Financial Management System (IFMS) for MDAs, Regions and few councils (86). The Government is working on linking all councils to the IFMS Financial performance is currently sourced from the Integrated Financial Management System (IFMS) for MDAs, Regions and few councils (86). The Government is working on linking all councils to the IFMS

34. 34 6. CONCLUSION Quality budgets are essential for measuring performance in terms of ensuring accountability in the management of public finances. Quality budgets are essential for measuring performance in terms of ensuring accountability in the management of public finances. The Government has been concerned with the need to enhance efficiency and effectiveness in the management of public resources and thus initiated a number of public and budget reforms to that effect. The Government has been concerned with the need to enhance efficiency and effectiveness in the management of public resources and thus initiated a number of public and budget reforms to that effect. MDAs, RS and LGAs are fully responsible for managing the resources in accordance with peoples’ expectations MDAs, RS and LGAs are fully responsible for managing the resources in accordance with peoples’ expectations Monitoring and evaluation of budget performance needs to be continuously carried out Monitoring and evaluation of budget performance needs to be continuously carried out The overall challenges to the budget process are related to improving transparency and accountability at all levels and making the budget an engine of growth and development for poverty reduction The overall challenges to the budget process are related to improving transparency and accountability at all levels and making the budget an engine of growth and development for poverty reduction

35. 35 THE END THANK YOU FOR YOUR ATTENTION