An MTBF process has been initiated, but crucial elements of budget integration and policy transparency have still to be put in place. The development of an MTBF was initiated in 2003, and an MTBF process involving detailed activity costing and identification of ministry objectives and output indicators applied progressively from FY 2005–06.8 In phase one of the MTBF implementation, emphasis was given to establishing better costing and budget preparation techniques in the line ministries. From December 2006, however, the strategy has been changed to give primary emphasis to top-down budget control—while continuing to build up management capacity in the line ministries. The current and development budgets continue to be prepared and presented in the budget document as separate elements. Three separate call circulars are sent to ministries (for current, development, and MTBF budgets). Costs of policy objectives are shown, but further work is needed to link output indicators and budget allocations. The technical and policy basis of out-year estimates are not yet sufficiently clear in the budget documents and, in practice, out-years are resubmitted rather than being rolled over as the base data for the following year’s budget...
A program classification, based on subdetail functions, covering all ministries should be developed as part of the full MTBF rollout. The MTBF implementation is following an ambitious rollout plan. A unified classification derived from the existing COA will build on the present system and support the top-down allocation process. FAD staff suggest that the present budget classification permits evolution to a more focused program approach which will help to address a number of critical long-term change issues. Operational “programs” so defined would incorporate both development and recurrent budgets relevant to that function element. Starting from an across-the-board classification within the existing chart of accounts would contribute to several important transparency and management objectives. It would help to:
- Unify the development and recurrent budget processes—“new proposal submissions” for programs should be evaluated in a similar way to development projects, but cover both capital and recurrent spending;
- Eliminate crossover problems when the development phase of a project is complete and recurrent costs are transferred to the revenue budget;
- Provide a framework that applies to all ministries, allowing a more phased approach to establishment of effective budget management by line ministries;
- Provide a framework that applies to all levels of government, helping to coordinate cross-government programs, particularly those included in the PRSP24; and
- Set a basis for redefinition and harmonization of the roles of the Planning and Development Division (PDD)25 and the Budget Wing of the MOF.
31. Actual outcomes as well as forward estimates should be included in the MTBF presentation. Given the expected improvement in availability of data, it should be possible in the near future to meet the fiscal transparency code requirement that the budget and MTBF estimates should (in addition to the MTBF out-years) show actual outcomes for two years previous and provisional data for one year previous to the budget year. Allied to this, the budget documents should include summary tables showing original budget versus actual outcomes over several years.
32. The methodology for preparing MTBF out-year estimates should be clearly specified. Clear technical specifications for calculation of out-years will both improve the efficiency of budget preparation and improve transparency and accountability of the budget. Specification of technical parameters (such as price) and policy for the estimates will permit an analysis of factors causing changes in the estimates in the following year— most importantly, separating price changes from introduction of new policies. In turn, this will limit the need for data entry to establish baseline ceilings for following years’ budgets, since the first out-year can be automatically entered as data for the next budget year in the roll-over process.
See also Bill Dorotinsky's comments to my comments.