Republic of Kosovo
Public Financial Management Reform Action Plan (PFM RAP)
Table of Contents
1 2. 2.1 2.2 2.3 2.4 INTRODUCTION ..................................................................................................................... 5 REFORM THEMES .................................................................................................................. 6 CREDIBLE POLICY BASED BUDGET ............................................................................. 6 TAX ADMINISTRATION ................................................................................................... 9 DECENTRALISATION ..................................................................................................... 12 FISCAL RISK ..................................................................................................................... 14
2.5 BUDGET EXECUTION, ACCOUNTING AND RECORD-KEEPING AND PUBLIC INTERNAL FINANCIAL CONTROL ........................................................................................ 16 2.6 2.7 2.8 2.9 2.10 2.11 3. PUBLIC SECTOR PERSONNEL AND PAYROLL.......................................................... 19 INTERNAL AUDIT............................................................................................................ 20 PROCUREMENT ............................................................................................................... 22 EXTERNAL AUDIT........................................................................................................... 24 LEGISLATIVE SCRUTINY .......................................................................................... 27 DONOR COORDINATION ........................................................................................... 29
RESPONSIBLE IMPLEMENTING AGENTS AND REPORTING ...................................... 30
Annex 1 PFM ACTION PLAN – Platforms and Matrix .................................................................. 32
AC ACDEI AGA AMP ANP BO BDMS CEP CFA CHU CHU/FMC CIAHU COFOG DB DCFDM DIA DMU EC ECLO EPAP GDP GFS HQ IA IAU IACHU ICT IFAU IMF IPA IPSAS IRB ISPPIA KCB KDSP KEK KIPRED KFMIS KPA LLGF LPFMA LPOE Audit Committees Agency for Coordination of Development and European Integration Autonomous Government Agencies Aid Management Program International Airport of Prishtina Budget Organizations Budget Development Management System Central Public Enterprises Central Fiscal Authority Central Harmonization Unit Central Harmonization Unit for Financial Management Control Central Internal Audit Harmonization Unit Classification of the Functions of Government Database Division of Cash Flow and Debt Management Department of Internal Audit Debt Management Unit European Commission European Commission Liaison Office European Partnership Action Plan Gross Domestic Product Government Finance Statistics Headquarters Internal Audit Internal Audit Unit Internal Audit Central Harmonization Unit Information Computerized Technology Internal Financial Audit Unit International Monetary Fund Instrument of Pre-Accession International Public Sector Accounting Standards Independent Review Board International Standards for the Professional Practice of Internal Auditing Kosovo Consolidated Budget Kosovo Development Strategy and Plan Kosovo Energy Corporation Kosovo Institute for Policy Research and Development Kosovo Financial Management Information System Kosovo Privatization Agency Law on Local Government Finances Law on Public Financial Management and Accountability Local POE's
Departments and Agencies Ministry of Economy and Finance (synonymous with MFE) Ministry of Finance and Economy (synonymous with MEF) Ministry of Industry and Trade Ministry of Public Services Medium Term Expenditure Framework Ministry of Transport and Telecommunication Mid-Year Review Ministry of Environment and Spatial Planning Office of the Auditor General Office of the Prime Minister Public Enterprises Public Expenditure Review Public Expenditure and Financial Accountability Public Expenditure Management Technical Assistance Grant Prime Minister Public Internal Financial Control Public Financial Management and Accountability Public Investment Program Provisional Institutions of Self-Government Publicly Owned Enterprise Publicly Owned Enterprise Management Unit Public Procurement Agency Public Procurement Law Public Procurement Regulatory Commission Procurement Review Body Post and Telecom of Kosovo Radio and Television of Kosovo Sub National Socially Owned Enterprise Special Representative of the Secretary-General Single Treasury Account Standard Integrated Government Tax Administration System Tax Administration of Kosovo Unit for Large Taxpayers Unified Reference Payment Code United Nations Interim Mission in Kosovo Value Added Tax Government Financial Standards
.MDA MEF MFE MIT MPS MTEF MTC MYR MESP OAG OPM PE PER PEFA PEMTAG PM PIFC PFMA PIP PISG POE POEMU PPA PPL PPRC PRB PTK RTK SN SOE SRSG STA SIGTAS TAK ULT UNIREF UNMIK VAT GFS
The PEFA concluded that the strength of the existing PFM system is centred on the successful introduction and implementation of the Financial Management Information System. Existing technical assistance support under each of these themes is finally presented. Nevertheless both diagnostic exercises have identified significant and continued weaknesses across the range of the PFM cycle which requires action.
.org. As well. under a World Bank supported project Public Expenditure Management Technical Assistance Grant (PEMTAG).1
The Government of Kosovo has embarked on a wide review of Public Financial Management. Each platform establishes a clear basis for launching to the next. This paper marries the two approaches used to determine the PFM action plan.pefa. the reform goals and reform actions to be undertaken are then outlined and linked to the platforms which show their sequencing. Section 3 outlines the agencies responsible for implementation and reporting arrangement. PFM is analysed using 28 high level indicators (further subdivided into 69 dimensions) analysing Government PFM processes and 3 indicators (with 5 dimensions) focusing on donor government interaction. In each of the themes. a Public Expenditure Financial Accountability (PEFA) assessment was carried out and this updated and extended a similar analysis in 2007. A paper Kosova Public Financial Management Reform Action Plan was produced for Kosovo applying this approach. indicating under which platform they would be addressed. work was carried out to identify the direction of PFM reforms. based on the premise that a certain level of PFMA competence is required to enable further progress to take place.2 Following the PEFA.1 The PEMTAG work developed the Platform Approach which aims to implement a package of measures or activities designed to achieve increasing levels (‘platforms’) of PFMA competence over a manageable timeframe. The purpose of this paper is to present a reform programme tied into addressing theses weakness and also ensuring that the strengths are maintained and built upon. Under the PEFA methodology. There is an annex which summarises the Platform Approach and provides a PFM Action Plan matrix which details the relationship between the PEFA analysis of the PFM strengths and weaknesses and the planned action for each of the 31 indicators and the 74 dimensions. This paper is organised as follows. The next section presents in summary form the strengths and weaknesses of PFM in Kosovo using the broad themes of the PEFA approach. This exercise was also used to disseminate the draft PEFA and get feedback.
See PEFA Public Financial Management Performance Measurement Framework www. Other strengths are found in the areas of internal audit and control and external audit where the process is in place and capacity is being built up for effective implementation. In the first quarter of 2009. The Kosovo 2009 PEFA Assessment Report was published in May 2009 2 See DFID Briefing July 2005 A Platform Approach to Improving Public Financial Management on Platform Approach available from DFID website. a questionnaire was sent to each of the PFM implementers to collect information needed for the Action Plan that was not generated during the PEFA. This has ensured that commitment control is applied in budget execution and that reporting on budget execution is timely and meets the need of management for effective decision-making.
as characterised by the following: • A credible budget that is feasible to be fully executed with proper program and project management. Annual budget legislation which provides each year’s appropriations and policy guidelines.
However. • Access to performance information. and goals for sectors in the MTEF document. Revenue forecasts which are generally conservative. Annual budget process established which includes all the necessary ingredients Budget calendar is well-articulated and works on a familiar schedule. MTEF process in place. where links are not as well defined as they should be. • A capital program that maximises the net economic and social benefit for citizens based on government priorities. • Cabinet engagement in the strategic elements of the budget process. Improve linkage between Government policy.
2. description of the existing situation.2. Reform Program Kosovo seeks to attain best practice in Budget preparation. • Budget presentation that seeks to link funding for inputs to identifiable and potentially measurable program outputs.1
CREDIBLE POLICY BASED BUDGET
Existing Situation The recent 2009 PEFA assessment found certain strengths in our existing approach to Budgeting in Kosovo. Improved links between Government Policy and the Budget implies enhanced engagement by the Cabinet at key stages of the Budget process. including results of monitoring and evaluation. • Allocation of funding based on Government policy rather than simply historical funding patterns. The annual budget and the first year of the MTEF are not the same. the PEFA also identified opportunities for improvement in the following areas: • Planning and budget formulation including Budget Organisations capacity to develop strategies and integrate the planning of the investment cycle into these strategies. to assist budget decision making at all levels. • Budget calendar where slippages in recent years have impacted on the effectiveness of budget preparation. • A multi-year approach to budgeting based on the MTEF and rolling forward estimates approach. including:
• • • • • •
Legislation in place that is well understood and generally implemented. using the MTEF as the key link. including the Law on Public Financial Management and Accountability. organisational strategy and the budget. • Under-spending on the capital account which has resulted from over budgeting and inadequate planning. • MTEF and the annual budget. • Lack of uniformity in quality and clarity in the mission statements. Aggregate outturn expenditure was much lower than budgeted in the period from 2006 to 2008. • Relationship between the expenditure outturn and budget. Our goals for these reforms are to: 1. Reform Goals We will implement key reforms in seeking to address current weaknesses and move towards the more comprehensive budget where the inputs are more effectively linked to service delivery. • Stock of arrears recording and monitoring. particularly within the year requires better recording invoices in KFMIS.
g. Identify output based performance targets for these programs. e. 2. Undertake measures to enforce legal and procedural requirements for the costing of draft laws and new policy prior to consideration by Government. Re-structure the Budget Department in accordance with the LPFMA and MFE plan and formalise executive appointments. where the multiyear estimates of the 2010 budget form the starting point for the 2011 budget. In the context of the Budget. 17. 6. 8. Laws on Civil Service and civil service pay are passed and appropriate subordinate legislation developed – having regard to fiscal impact. Improve capital planning based on enhanced project planning. Commence implementation of a system of rolling forward estimates. 5. Re-design the “fiscal rule” in consultation with the IMF to act as a benchmark in establishing a credible budget. including a budget that links inputs to specific program outputs.
. 16. 4. Activate the Fiscal and Budget Committee of the Government according to previous Government decision to track MTEF and Budget development and advise government on strategic resource allocation. Requirement of enhanced analysis. 11. Introduce some elements of performance management to assist public sector management. These are specified under the platform approach. Draft and implement a Budget Circular for the preparation of the MTEF. 18. Platform 2: 7. 12. identify several programs for pilot implementation of a monitoring and evaluation framework. Implement a mechanism for improving cooperation between ministries within a sector in developing MTEF sector strategies. Develop and commence implementation of a mechanism for linking strategic planning activities in line ministries to the MTEF – with aim of having properly costed and realistic sector strategies that reflect considered policy choices. 10. 4. Design and implement a monitoring program for capital budget execution. Platform 3 13. Implement a system or rolling forward estimates using appropriate information systems. Monitoring and Evaluation Unit is established within Budget Department and commenced collection and reporting of outcomes against targets for pilot programs. 9. 15. incorporation and presentation of the recurrent costs of capital projects in the budget. Increase the capacity of all Budget Organisations to undertake analytical work required for existing and proposed planning and budget functions. Reform Actions We will take the following actions to achieve these reform goals. Capacity building program for line ministries in capital project execution. Platform 1: 1. execution and monitoring. 14. Link the preparation of the government-wide strategic planning process (led by OPM) with the MTEF process (led by MFE). 19. 1-2 initial evaluations are conducted of pilot programs. recognising the linkages and sequencing of the actions and reforms. Capacity Building for line ministries in capital project planning based on PIP. 3. Broader identification of performance targets is implemented for 2011-13 Budget. 5.2. Payroll is moved to the Treasury. 3. Functional changes are implemented in line ministries to link and improve strategic planning and budgeting (Functional Review). Finalise design requirements for Budget Development Management System that improves this tool for managing aggregate fiscal discipline – including multi-year estimates and features for enforcing multi-year ceilings. including regular monitoring meetings and reports. Revise the current set of Government “priorities” prior to the MTEF to facilitate allocation of scarce additional resources.
the structure and roles and responsibilities of budget organizations across the Government.Platform 4 20. budget management. and Component 8 .Review and documentation of the strengths and weaknesses of the Kosovo planning and budgeting system. UK DFID Functional Review and Institutional Design of Ministries (FRIDOM) project which is assessing.Introduce modern costing techniques in the core line ministries and municipalities. among other tools. inter alia. Component 5 . and review. and the Judicial Council. planning. Conduct comprehensive Public Expenditure Review (PER). Technical Assistance We are currently assisted in this field by the following technical assistance: The EC project: Improving the quality of public investments in Kosovo and preparing the grounds for EU funds supports the PFM reform programme from July 2009 to July 2012. Continue the PER process in annual ministerial reviews as part of the MTEF and budget process. Component 6 .Provide on–the–job and classroom training on the various components. Health. Component 7 . USAID project “Economic Management for Stability and Growth” provides technical assistance in this field.Further integrate the planning and budgeting systems using. being a one-off zero-based assessment of public expenditure allocation.Review of existing strategic documents in the MTC and MESP and make recommendations that will allow them to drive budgeting in those ministries. Component 4 .Provide workshops and study tours so that participants can gain experience and knowledge from EU and accession countries in policy prioritization. budgeting. Agriculture.Provide IT support to the BDMS and PIP systems to ensure ownership and sustain their use in the budget process. Justice. The ToRs specify that the assistance will be split into eight activities (components): Component 1 . The activities will be concentrated in the Budget and Finance Departments of five major budget organizations: Ministries of Education. 21. Component 2 . recommending mandatory use of.
.Introduce modern project planning and management techniques in the core ministries and municipalities. This activity will focus on building skills and capacity in line budget organizations by addressing weaknesses in budget planning. Component 3 . UK DFID project support for developing strategic planning (through Office of the Prime Minister) UK DFID Support to the PEFA Secretariat assisting in the Action Plan World Bank Public Sector Modernisation Project Component 1 includes: Improving public financial management performance in selected budget organizations and includes Capacity building for PFM. the BDMS and the PIP systems. and managing EU funds. preparation. execution.
The Tax Authorities are now implementing their own system. • Audit function is not managed effectively • Recorded arrears are high. Nevertheless there are opportunities for improvement that we are now addressing that will require time to be realised. These features are also enhanced by • A focus on tax payer services and taxpayer education. These inputs are structured in a way that contact between taxpayer and the tax authorities are minimised. • Taxpayer education documentation exists in various forms – written. While there are improvements to be made in both agencies. most of the administrative reforms fall in the area of Tax Administration Agency.
. • Computerisation. • Cumbersome appeals process provides for delays • Ineffective procedures for collecting penalties for non compliance.
The two tax collecting agencies are at different stages of development with Customs being further ahead than Tax Administration Agency. • Interpretation of the tax laws is inconsistent and low quality and reduces taxpayer confidence. including • Registration of tax payers was conducted by the Agency for Business Registration (Ministry of Trade and Industry) which did not allow the Tax authorities to maintain a master file of tax payers under their control. and • Self-assessment. and transparent processes and systems. and • Audit (based on risk assessment) which are designed to increase voluntary compliance. including3. Reform Goals The objective of our reform program is to create a modern tax administration to meet our revenue collection goals by adopting modern. However the PEFA assessment also found several weaknesses at the time of the assessment which we were addressing at the time of the assessment and are now in place. including: • Published tax laws. This purpose is to be achieved by a combination of inputs to support • Improved management structures and staff capability. which also can influence the minimisation of corrupt practises. electronic and face-to face including workshops and seminars. efficient. • No discretionary exemptions • Appeals process in place • Transfers from the tax authorities to the treasury account are timely • Reconciliation of accounts and payments is timely.2
ADMINISTRATION of TAXES
Existing Situation The recent 2009 PEFA assessment found certain strengths in our existing approach to tax administration as applied by Customs Kosovo and Tax Administration Agency in Kosovo.2. lowering cost of compliance for tax payers and achieving a high level of voluntary compliance. which can be downloaded from the Government website.
and procedures by 30 June 2010. Reform actions Platforms 1 and 2 All reform actions are articulated in the overall strategic plans of TAK. 20. 22.Payment of assessed tax is though the banking system. 24. sub-legal acts. to ensure that laws are applied uniformly in all regions and with respect to all taxpayers. 23. 1. Activate the Enforced Collection module in SIGTAS. 17. 11. 9. Modify the organizational structure of headquarters to introduce an interpretation division 7. Update audit risk system (audit tool) to include individuals and partnerships. Establish a taxpayer registration function at TAK which would: a) receive registration applications b) conduct validation and risk assessments c) issue taxpayer identification numbers and registration certificates and d) maintain a proper up-to-date taxpayer register. Revise and update “Handbook on Taxes in Kosovo” to reflect new laws. 3. establish specific expectations for learning and development. 19. 16. 2. Provide refresher training in tax laws to Appeals officials and train them in application of new laws as they are published. Continue monitoring of payments made to commercial banks to ensure that revenue is timely transferred to the Central Bank and errors in transmitting payment data are minimized. Finalize and implement taxpayer registration procedures and sub-legal act. 10. Train enforced collection officers in new procedures provided in the sub-legal act related to enforced collection. 4. including to. 14. Train enforced collection officers and taxpayer education inspectors in new penalty regime. Continue timely reconciliation of revenues with Treasury. Explore capability of electronic transfer of funds to facilitate the use of electronic filing of tax declarations. which also removes face-to face contact between the Kosovo tax authorities and taxpayer. rulings. at the time of audit. 13. Finalize Penalty Handbook and sub-legal act (one document). Update audit tool for use in reviewing VAT refund cases 18. 21. 25. Provide refresher training in tax laws to all taxpayer education personnel and train them in application of new laws as they are published 5. 12. Finalize rollout of audit tool and training staff in its use 15. Train tax inspectors in application of penalties during audit so that penalties are imposed. Provide Team Leader of Rulings function training in all aspects of all tax laws. Ensure that all tax laws are further supplemented by sub-legal acts which provide clear explanations of the way in which TAK will implement specific provisions. Modify the organizational structure of headquarters to introduce an audit quality review function and audit risk and analysis unit.
. 6. as appropriate. Conduct a writing workshop for Appeals officials so that their Appeals decisions are in a standard format and provide clear explanations of the appeals decisions and the basis for those decisions. Require that all written advisory opinions on matters of interpretation of law or technical issues be approved by Managers and distributed to field components only by managerial staff. Finalize and implement enforced collection sub-legal act. Utilize audit tool for centralized case selection for 50% of all cases to be audited in the first half of 2010 and 100% of all cases to be audited by the end of 2010. 8. Activate the SIGTAS audit module so that management control over audit cases is improved.
scheduled to end 30 June 2010. Establish the legal framework for the implementation of simplified procedure and customs warehouse procedures. The two tax administration experts are expected to remain until the end of the current USAID contract (30 June 2010) and the IT expert is expected to remain until 31 December 2009. with specific expectations of finalizing and implementing an audit risk selection system and increasing the effectiveness of the tax administration. 2. For Customs EC TA to 1. Improve quality of intelligence produced by the Sector Establish and develop sustainable cooperation with other law enforcement agencies Produce guidelines for Intelligence Sector IMF Fiscal Affairs Department will field a technical assistance mission to review progress in implementation of our Strategic Reform Plan and to outline for us an IT reform strategy
. The primary goal of the project is to assist the tax administration achieve its strategic plan goals. Description and Timetable: The current USAID project began on 1 July 2007 and is a three-year commitment. which includes two tax administration experts and one IT expert.Technical Assistance Support USAID has an assistance program in place in TAK. Define specific additional Customs Laboratory equipment Draft manuals and guidelines on safety for customs laboratory Train Customs Laboratory Chemist on use of customs laboratory equipment 3.
g. including: • Transparent rules for transfers determination and allocation ensured in the legislation and generally applied during budget process. • Timely reporting of municipal fiscal information consolidated into quarterly budget execution reports and annual financial statements. delays in the determination of final grants disrupted the 2009 Municipal Budget. 6. Grants Commission to ensure that the LLGF rules are applied transparently and in their entirety 4. including linkage with respective sector strategies. • Secured funding for the delivery of minimum standard services by local governments in the education and health sectors. Grants Commission Secretariat to assume its role in technical and analytical support to the Grants Commission. Reform Actions In seeking to attain these reform goals we plan to take the following actions: Platforms 1 and 2 ongoing: 1. the Auditor General should issue unqualified audits of financial reports for two consecutive years. Reform Goals We are now seeking to speed up and strengthen the Municipal budget formulation process by introducing greater capacity building and process. e. Nevertheless.. Grants Commission Secretariat to be staffed with competent and capable professionals 3.
8. 7.g. Strengthen the role. capacity. Decisions on government transfers. Before authority to borrow is granted to a municipality. including provision to the Grants Commission the assessment of compliance with rules based system established in the LLGF before municipal budget development cycle is finalized 2. • Clarification.. e. Grants Commission Secretariat to maintain regular publication of decisions made by the Grants Commission 5. and accountability of the Grants Commission Secretariat. and application of standards in the education and health sectors. including: • Timeliness of the information on the allocation of final grants. • Reliability and availability of necessary statistical information underpinning determination of grants. Intergovernmental transfers accounted for in the medium term macro-fiscal framework and MTEF processes (i. introduce mandatory quarterly reporting of the Secretariat to the Minister and Grants Commission. Looking forward. a certification mechanism of municipalities’ financial management capacity should
Current Situation The recent 2009 PEFA assessment found certain strengths in our existing approach to decentralisation in Kosovo. certain opportunities for improvement were also noted. determination. ceilings and other MTEF related issues to be made and disseminated more promptly in accordance with timeliness foreseen in the LPFMA so that follow-on actions and decisions can be made with sufficient time for implementation. Government to refrain from ad hoc policy decisions affecting distribution or allocation of transfers)
IMF Fiscal Affairs Department mission to review LLGF and implementation of existing provisions
. Technical Assistance USAID Economic Management for Stability and Growth: advisors provide technical assistance to Municipal Budget Department/MFE in municipal budget process and policies. Maintain application of rules and procedures governing Kosovo Financial Information Management System to municipalities 12. provisions specifying timetable for dissemination of reliable and binding information on allocation of intergovernmental transfers to the units of local government 10. They also provide support and capacity building to the Grants Commission Secretariat in the implementation of intergovernmental transfers system established in the LLGF. MFE. such as LPFMA. Ensure that periodical financial and budget reports issued by the Treasury Department account for consolidated municipal fiscal data. It is also essential for Municipal Assemblies to be able to review and approve the proposed municipal budgets within the timeframe defined by law (including citizen participation) 11. to adhere to and respect all aspects of the municipal budget calendar to ensure that municipal officials are able to start the budget process in time and will have sufficient time and information to perform all necessary internal procedures throughout budget development process. Introduce in the applicable legislation. World Bank: advisor who provides his support in preparing documents all the while the government grants are appropriated and Grants Commission performance. in its internal activities and processes.9.
collate and publish information regarding the financial position of the POE sector.4
Existing Situation The recent 2009 PEFA assessment found certain strengths in our existing approach to fiscal risk in Kosovo. The current legal framework prohibits local governments to enter into any borrowing arrangement. • POEs are not reporting routinely to the MFE. We have commenced capacity building in this field. Reform Actions SOEs and POEs The POE Monitoring Unit is only newly established and we are in the process of implementing new corporate governance arrangements for POEs. We will start with training as well as issuing sub-legal acts. In addition. or in any way establish any liability of the Government for the payment of the debt. Municipalities Platform 1
. while such approval shall not constitute a guarantee. Reform Goals Our goal is to minimise fiscal risk by timely reporting and monitoring of financial commitments of POEs. The new Debt law makes it difficult for the MFE to say no if underlying rules are met even for Municipalities with extremely low FM capacity. and limits for municipal debt. criteria. developing co-operation with all POEs and ensuring all POE Boards are functioning. Platform2: • Include POE financial outcomes in KCB financial statements – as a note. thus creating fiscal obligations for the central government. including upcoming intensive training by US Treasury experts on debt and risk management. Reporting regularly to the inter-ministerial committee on POEs. Municipal debt will not represent a direct or indirect obligation of the Government unless the MFE Minister issued a written guarantee.2. including contingent liabilities. certain opportunities for future enhancement of fiscal risk management were also noted. A USAID funded adviser has commenced in the POE Policy and Monitoring Unit to assist us in this field. it is foreseen that municipal debt shall be subject to a prior written approval of the MFE. All incoming board members for POEs have received basic training on corporate governance. SoEs and Municipalities. • No consolidated report on POE finances is produced • No report on overall fiscal risk of POEs is prepared or published. • Identify risks associated with POEs in the next MTEF. Moreover a potential emerging fiscal risk has been identified with respect to municipalities. Platform 3 • Implement risk management approach to POEs – a comprehensive system for identifying and managing POE financial risks. While the (draft) Debt Law will regulate responsibilities. • Finalize implementation of model by-laws for POEs. including: • Auditing of SOEs under direct KPA administration • Quarterly reporting of SOEs to the KPA Nevertheless. Platform 1: • Collect.
Discuss and clarify that a pre-condition to allowing municipalities to borrow is the issuance of unqualified financial audits by the Auditor General for three consecutive years. and training and consultation for POEMU. (May require a change in draft law on debt) Technical Assistance We are assisted in this field with technical assistance provided by the EU TAIEX program.
and between Treasury and Central Banks.there is a higher percentage of late payments (greater than 30 days) within a fiscal year. If liquidity issues. more frequent forecasts are needed to inform possible borrowing and issuing of debt. Monthly updates are undertaken by analyzing deviations between actual and forecasts. liabilities. Projections of revenues and expenditures are generated at the beginning of the fiscal year. revenues and expenditures to facilitate the preparation of financial statements. analyzed in the timeframe base . • Payments system is currently centralized and majority of payments are made on time. and effectively contributes to implementing internal financial control by limiting commitments to actual cash availability and approved budget allocations. government equity. The TSA consists of several sub-accounts (for revenue collection. Accounting and Record-keeping and public internal financial control. This function is managed by forecasting the cash flow by the Treasury and BOs. monthly and quarterly basis from KFMIS. Arrears are insignificant as a proportion of total expenditure. TSA is reconciled on the daily basis while sub accounts are reconciled at least monthly. The law will regulate the authority and procedures for borrowing. expenditures and trusted money). • The Debt Law (when passed) has to have in place effective debt management and monitoring procedures as well as a linkage between cash and debt management. ACCOUNTING AND RECORD‐KEEPING AND PUBLIC INTERNAL FINANCIAL CONTROL
Existing Situation The recent 2009 PEFA -assessment found certain strengths in Budget Execution. through monitoring revenues and expenditures. • Financial management information system (KFMIS) which allows electronic links to be created between BOs and Treasury. • Accurate and timely revenue identification through implementing Unified Reference Payment Code (UNIREF) • Treasury Single Account (TSA) that centralizes cash balances efficiently. • Cash flow forecasts are prepared only on a monthly basis. • Accurate daily reports are not generated through the monthly account reconciliation process. including: • Stock of arrears data are generated annually and show that in percentage terms they are very low. These strengths include: • Appropriations approval by the Parliament is provided to budget organizations without delay at the start of each quarter. However. KFMIS keeps track of commitment for planning and control purposes. Reconciliation reports are generated on a weekly. The Debt Law has been finalized and approved by the government and sent to the Assembly. and guarantees for central and local governments. The PEFA assessment also identified opportunities for improving budget execution and accounting. • Functional classification for budget formulation can only be produced manually as the coding for administration within a ministry is the same as if “administration” were a function.
. • Chart of Accounts is comprehensive and integrates accounts containing assets.2. • Adequate legal framework and system for debt management. debt management.5 BUDGET EXECUTION. annually. • Efficient financial planning.
• Strengthen the efficiency of public finance internal control system by making it more relevant (in terms of controls required for risk management).
. Reform Goals Our efforts in reform of budget execution and accounted are directed at achieving the following goals: • Improve the compliance by BOs with financial rule number two for spending public money.
5. • Gradual extension of accrual information in fiscal reports. set out by platform: Platform 1 1. 2. Increase the KFMIS capacity for keeping track on timeframe of payments. Reform Actions In seeking to attain these reform goals we will undertake the following actions. • Introduce daily reconciliation of bank accounts which allows the generation of daily managerial reports. 3. all allowances. This strengthening will improve the linkages between the cash-flow statement and balance sheet as envisaged under GFS 2001. • Develop transparent and predictable system and processes for the management of government debt.) • Strengthen the framework for recording transactions. including comprehensive information on arrears. University participations etc. (All claims that are received by the Budget Organization should be paid within the period of time as specified in the contract which is no later than 30 days after being received. • Comprehensive financial reporting system and procedures to support transparency and accountability in budget execution. Development of Central Unit for Internal Financial Control within Treasury. and accounting events. and comprehensive in the public finance internal control area.Lack of managerial reports for higher management which contain budget comparison analysis with previous years and between different categories. Treasury review of existing guidelines and rules for asset management. Amendment of Article 44 of Treasury Financial Rule 02-Spending of Public Money. including some "accrual" information (such as obligations. • Complete implementation of modules for Kosovo Financial Management Information System. Ideal Situation The ideal situation at the end of the reform program would be the achievement of: • Public Internal Financial Control (PIFC) policy and practice in accordance with European standards. including a fully functioning Central Harmonisation Unit for Financial Management Control (CHU/FMC). Include in the payroll system (Ministry of Public Administration) all payments to individuals
(payments for participation in sessions of the Assembly. 4. • Fully-integrated electronic revenue and expenditures systems which supports electronic reconciliation. • Strengthen financial planning to include daily cash flow forecasts (which are consolidated into weekly forecasts). and provide additional training for budget organizations. • Fully functioning debt and cash management function. meaningful to the finance officers. change in assets and liabilities etc) to enhance the cash based accounts. supported by modern debt management computer software and cash forecasting tools.) except for staff of donor projects.
6. Implement automatic accounts reconciliation. 8. Upgrade financial reporting. Standardise terminology used in reports. in order to generate specific reports based on requests from specific users. Ensure that budget organisations submit their financial statements within the deadlines.
. including asset management. Implement the software for debt management and staff training. 7. Increase the frequency of cash flow forecasts on daily and weekly basis as well as the coordination and exchange of reports with the BOs for revenues and expenditures. 9. Platform 2 (continuation of Platform 1 no 4) 1. Increase the frequency of cash flow forecasts on daily and weekly basis as well as the coordination and exchange of reports with the BOs for revenues and expenditures. As part of the delegation of expenditures. a team will work with budget organizations to provide assistance to improve a range of criteria relating to financial management. Implement the software for debt management and staff training. 10. 11. 12. reporting and internal control. Training of financial officers in Budget Organisations on public sector accounting.
certain opportunities for us to improve the management of personnel and the payroll. recruitment. Upgrading human resources management information systems. (c) Linkage of the HR and payroll systems with the Treasury system (Free Balance). on performance appraisal). and (b) Upgrading of ICT systems for human resource management (HRMIS and payroll). 2. promotions. Payroll administration and laying the foundations for a professional civil service (a) Human resource management in the civil service.6
PUBLIC SECTOR PERSONNEL AND PAYROLL
Existing Situation The recent 2009 PEFA assessment found certain strengths in our existing approach to Public Sector Personnel and Payroll . guidelines and manuals. Reform Actions Platform 1 1. including pay and grading reform. Improving human resource management in the core civil service 3. Technical Assistance Technical assistance is to be provided through specific components in the World Bank supported Public Sector Modernisation Project which includes: • Technical assistance and training for the implementation of the pay and grading reform in the core civil service. prior to the execution of the payroll. (a) Development of a strategic plan for human resource information management and reorganization of HR-related management processes. Nevertheless. • Technical assistance to build capacity for the implementation of key human resource management functions (staff planning. as well as training modules for human resource management functions
. (b) Modifying the current information systems and implementing the upgraded systems.2. and performance appraisal). recognising that payments regularly held back by Treasury due to overspending related to the lack of consideration of appropriations and allocations. which do exist for changes to the payroll but which often fail to ensure that budget allocations or staff limits are not exceeded • Developing a linkage between personnel data base and payroll which can form the basis for audit. Reform Goals Our intention is to implement a personnel and payroll system linked together and maintained centrally with software that is manageable and effective. This activity is to include development of secondary legislation (e. • Rarely made retroactive adjustments to the payroll. including • Improved expenditure control. • Improving Internal Controls. including: • Timely updating of the payroll monthly.g.
• Ineffective operating of IAU in some public entities • No continuous professional development to increase the knowledge and skills of internal auditors. Audit Plans implemented to include continuing professional education of internal audit staff 9. Full management understanding of the audit role – meetings. 5. Nevertheless.2. System audits performed are comprehensive based on compliance. 7. payment and other technical conditions) 4. code of ethics) 3. Regular submission of Internal Audit reports to senior management in line with the Law 10. • Lack of certification training . 2. contacts. Operationalization of effective internal audit units in public entities 5. performance and finance 6. Reform Actions To achieve this goal we will undertake the following actions: 1. Reform Goal Our overall goal is to ensure that internal audit is implemented effectively in line with the Internal Audit Law in accordance with internationally accepted standards. • Lack of understanding by senior management of the importance of the role of Public Internal Financial Control and Internal Audit. 8. System audits linked to the Internal Control assessment process to be evaluated if these are functioning effectively.training courses on internal audit provided by international companies did not provide the certification required by the Internal Audit Law • Lack of comprehensive effective implementation Internal Audit Law and Internal Audit manual • Low quality of implementation of recommendations issued by internal auditors. 2. International standards and professional practices underpin internal audits and follow ISPPIA standards and the Code of Ethics of Institute of Internal Auditors. Internal Audit Manual ensuring harmonization with International Standards and Professional Practices of Internal Audit 3. including: 1. certain weaknesses were also noted in our existing approach. Implementation of recommendations undertaken by the Chief Administrative Officer of a BO. Certification and licensing of internal auditors (long term) and Post-certification/-licensing and continuous professional education (long term)
. Internal Audit decentralized . • No Internal Audit in 10 BO • Only one auditor in 33 BOs insufficient for efficient functioning of internal audit in terms of capability and capacity for planning and managing of effective Internal Audit. Improved implementation of IA manual (ISPPIA. trainings (short term) and Management support for audit (independence and work conditions. Quarterly and Annual reports on BOs` internal audit activities are received by the Central Harmonization Unit 11. Financial audits include examination and reporting on financial statements. Application of Law to be full.7
Existing Situation The recent 2009 PEFA assessment found certain strengths in our existing approach to Internal Audit in Kosovo. including. 4.50 BO have established Internal Audit Units (IAU) staffed by 84 Internal Auditors. Audit Committees in 24 BOs to ensure the independence and protection of IAU auditors and promote the implementation of recommendations to senior management.
Implementation of annual plan based on IA strategic plan 8. To full meet ISPPIA standards 7. Drafting Administrative Instructions for implementation of IA Law. recruitment of more than 60 IAs (within two years) 5. 6. Increase number and quality of actions undertaken by BO Senior Management on implementation of Internal Audit recommendations 2. 10. including: “Support for further improvement of IA and Public Governance” project supported by European Commission – ECLO June 2009 to June 2011. including IA’s role. Main components for IA are: • Support to IACHU on performing the responsibilities set out in Law on Internal Audit. • Design and introduction of training program for internal audit that leads to certification.Platform 1 1. Comprehensive establishment of IA Committees . Increase further the rate implementation of recommendations (above 55%) Platform 2 • Establishment of IAUs in BOs where they are not present • Continuous training for IA to increase their knowledge. by CHU.
. Capacity building. skills and competencies – (continuous professional development Post-certification/-licensing ) • Coverage of more than 80% BOs with regards to IA system issues Technical Assistance Support Our current endeavours to improve internal audit are assisted by support from donors. Certification of IA from an internationally licensed organisation (within two years) 4. Continuous contact and cooperation with sector management and other relevant parties in order to further operationalize IAUs.increasing auditor’s independence and measures for implementation of audit recommendations from management 9. • Design and implementation of first cycle of an Introduction to Financial Administration program to politicians and senior civil servants. Training for senior management to increase their awareness on the importance of Public Finance Management and Internal Control. 3.
but there are still improvements to be made. do not provide adequate skills to Procurement Officer for effective and efficient performance. transparency and effectiveness of public expenditures by improving the public procurement framework to develop a well-organised. but such powers are initially vested in three central public procurement bodies: (1) Public Procurement Regulatory Committee. The public procurement legislation has improved our position with respect to approximation with EU public procurement directives. The
.appears uncoordinated as the roles of central institutions do not seem to be clearly defined. • Hard to comprehend structure of procurement packages and time consuming to process. Overall Goal of the Reform We have a public procurement improvement initiative in place that is supported by technical assistance provided by the European Union. based on the data provided. even when achieved. The Office of the General Auditor monitors the same set of procurement but also monitors the contract implementation phase.2. Nevertheless. effective and transparent governance framework. Existing standards. The objective of the reform programme is to ensure the proper administration of public money. Planned reform activities As the PPL was found to contain translation errors capable of causing confusion and complaints by both the Contracting Authorities and Suppliers as a matter of priority any variables found will be altered in the respective languages. • Weak communication and cooperation between any central procurement institution and/or economic operators’ organisations • Uncoordinated monitoring and implementation of Law on Public Procurement . and unnecessarily confusing for both the contracting authorities and potential bidders. In addition clauses will be added to the PPL to make it more compliant with the EU Acquis and will also include corrections to some restrictive practices. and (3) Public Procurement Review Body. • Level of training does not meet Kosovo’s needs. Studies and reports on procurement indicate the following: • Market not reached by public tendering significantly • Complex and too ambitious tender dossiers and qualification requirements regarding the obligatory requirements for participation in the tender procedure. and the Office of Auditor General has the responsibility for external audit of all procurement undertaken by Budget Organisations in Kosovo. As well. This has been considered as a significant weakness of current legislation.8
Current Situation The 2009 PEFA report indicates that our public procurement institutional and legal framework has been strengthened in recent years. • No routine modalities and procedures to update existing procurement law in place. This current legislation vests procurement powers to all contracting authorities. The PEFA report also shows that more than 80% of contracts have been awarded by using open competition procedures. this outwardly impressive figure has to be judged and understood in the overall procurement environment in Kosovo. • Existing certification system is comprised of only one 10-day training course which has not changed with developments in procurement. (2) Public Procurement Agency. • Limited monitoring performed by the PPRC Monitoring and Oversight Department limited only to the ad hoc checking of contract documentation of completed procurement. the Kosovo Institute for Public Administration is responsible for the training and certification of procurement officers. Top up refresher courses are merely repetition of the basic training.
. Monitoring the implementation of Law on Public Procurement and providing for its update to reflect emerging developments. Development of certification system for public procurement officers. European Commission Liaison Office to Kosovo and Kosovo Institute for Public Administration. PPR. A detailed plan of action with expected results has been developed by PPRC. See the Inception Report Support to Public Procurement Reform Service Contract No 2008/169-890 Project period: January 19. business and civil society 7. 4. recommendations for improvement and assessing the feasibility for introduction of e-procurement. On-the-job training and coaching for all involved in the procurement process. 2009 – January 18. we intend to undertake the following activities in support of this programme: 1. Comprehensive development of the public procurement training program 8. In addition to these initial actions. Managerial and organisational review of PPRC and PRB. 6. 2011 for a comprehensive presentation of the actions to be undertaken. Their construct will be reviewed and simplified.secondary legislation forms and templates are often cumbersome and clumsy. Increasing the awareness for public procurement reforms in government. PPA. 2. The activities are foreseen to be undertaken during 2009 and 2010. Review of secondary legislation associated with procurement. Review of IT capacities in PPRC and PRB. 5. 3.
This will improve coverage based on a more risk oriented approach based on the total KCB budget and other parts of the OAG scope.2. including: • Increasing coverage of organizations audited • Internet dissemination of audit reports • Detailed recommendations included in the reports • Responses to audit included in Office of the Auditor General report. we can enhance external audit by addressing the following issues that were also identified in the report: • Delays in publishing the audit reports • Limited response to recommendations in terms of timely implementation Reform Goals The Office of the Auditor General has developed a Corporate Development Strategy guiding the development of the external audit function in an accountability context. In the short term. and
. • to ensure a continued improved audit coverage. Nevertheless. to strengthening good governance and accountability through good cooperation with the Assembly Committee for oversight of the public finances under its purview and to develop working relation between the OAG and its main stakeholders. In the longer term the goals are • to ensure sustainable national ownership of internationally recognized auditing standards and good European practices. Other audit objectives are to clarify and ensure the understanding of the role of a Supreme Audit Institution in a democratic society. The OAG has been re-organised to reflect this new focus linked to specific Financial Management and Control and related policy areas. • to build up a firm accountability relationship between the Assembly and the Auditor General. • to ensure maturity in managing the organisation on all levels. new standards and efficiency in core and support processes. An important prerequisite to accomplish these objectives is to ensure financial independence and sufficient funding in accordance with the OAG legal framework and with the agreement between Kosovo and EU allowing the OAG to deliver in accordance with expectations of the national and international community. This approach is being developed through dialogue between the auditors and the audited bodies and is introducing a preventive concept to pave the way for a more direct impact. • to ensure the independence of the Auditor General in practice. and • have greater relevance for decision makers. A new audit process is currently being introduced to include interim audits. • to ensure implementation of the Corporate Development Strategy.9
Existing Situation The recent 2009 PEFA assessment found certain strengths in our existing approach to external audit in Kosovo. • reports are of sufficient quality and presented in a more reader friendly way. the goals have been to ensure that reports are • produced in time to fit into the budget cycle and the accountability cycle.
focuses on sustainable interventions in form of coaching and mentoring to facilitate ownership of the overall strategies and standards. “owned” and implemented by staff 2. An amended Regularity Audit Manual 6. On-going strengthening of coverage. quality monitored. A Quality Management Framework 8. Leaflets on the role and mandate of public external audit At the moment no new TA is in the pipeline. 9. b. Basic Standards (all introduced in July 2009): 5. clearer and more reader friendly (June-July 2009). c. A Performance Audit Guideline 7. An Annual Audit Report on the KCB Financial Statement in time (synchronized with the overall budget process and the accountability process for the first time) and with sufficient quality and another focus than earlier (late August 2009). covering the period October 2007 – July 2009. 3. Annual Reports and opinions on budget spenders. Reform Actions Platform 1 (audit season 2009/10) 1. Ensure that the Twinning arrangement started in September 2009 a. This project has in its final stage been focused towards assisting in building an external audit platform covering the following: Operations: 1. Corporate Development Strategy and fundamental standards are adopted. builds on experiences gained so far and the approaches developed and outlined in the Corporate Development Strategy and the fundamental standards. will be flexible and linked to operational needs and eventual changes in these needs Platform 2 (audit season 2010/11) 1. 2. quality and relevance (more focus on performance indicators and performance audit) Technical Assistance External audit has benefitted from the EC funded Technical Assistance project Further Support to the OAG (06/KOSO1/06/05001). An Annual Performance Report produced in time and with sufficient quality aimed at strengthening the accountability process between the Assembly and the Auditor General and pave the way for a better budget dialogue (submitted in April 2009).to secure adequate resources over time to ensure the OAG can carry out its mandate effectively and efficiently. Corporate Development Strategy 10. 3. Ensure timeliness of reports in the context of a revised audit cycle starting with interim audits during the budget year making follow up of earlier recommendations and examination of financial management and internal control systems before the Annual Financial statements are finalized. Introduce amendments to the Law on the OAG to guarantee the financial independence of the OAG as well as ensuring consistency in relation to other laws within the PFM field. Support documents: 4. 2. An up graded Code of Conduct. Further financial support will be addressed linked to the introduction of a properly designed and locally owned facility for basic training of auditors and for
. with the first two Performance Audit Reports in June 2009. Communication Policy 11.
It is still too early to speculate in the forms this might take.
. Other more specific interventions will be designed as needs arises.financing an Advisory Board (national and international) for the Auditor General.
It will include training for members. The British Embassy is supporting the project "Oversight of Public Finances in Kosovo" in cooperation with Kosovo Institute for Policy and Research Development. and the development of administrative and analytical support. CHU/FMC. there are weaknesses in the implementation of the scrutiny function in part due to a lack of technical capacity and these weaknesses include: • Focus limited to revenue and expenditure information in the Annual Budget Law • Extensive reallocations occurred outside of the planned reallocations as provided for by the Mid-Year Review process • Limited and not close scrutiny of OAG’s reports • Occasional in-depth hearings on key findings which cover only a few audited entities. Technical Assistance GTZ has a long term project to support the Budget and Finance Committee of the Assembly through to 2018. It will also handle budget and accountability issues (appointing auditors and take standpoints on the budget) related to the AG and the OAG. 2009 a letter of understanding was signed between the Assembly of the Republic of Kosovo. • Timely review of the OAG’s reports by the Assembly and the Budget and Finance Committee within 2 months of receiving them. The 2009 PEFA assessments found both strengths and weaknesses in the way the Assembly organises itself to carry out these functions. November 2008.2. Our goal is to improve the analytical capacity of the Budget and Finance Committee of the Assembly. Nevertheless. On 2nd June.10 LEGISLATIVE SCRUTINY
Existing Situation Legislative scrutiny focuses on two areas: the annual budget law and the external audit reports. to ensure adequate consideration of the fiscal impact of new laws and to enhance accountability in public financial management. The overall strategy for the Assembly and an Action Plan are outlined in the Strategic Action Plan of the Assembly of the Republic of Kosovo. the Annual Procurement report etc) and the Annual Audit Report from the AG. • Clear rules exist for in-year budget amendments. This Committee will deal with the report on the budget execution from the Government such as KCB. • Rare actions on recommendations by the BO • Follow-up limited or nonexistent Reform Goals. • Well-established procedures for the deliberations on the budget by the Budget and Finance Committee. the Government of the United Kingdom. This project has just started and its components are being determined. • Limited recommended actions from reports regarding critical issues to areas of the most interest to the Committee. and the Kosovar Institute for Policy Research and Development (KIPRED) in order
. Reform Actions The Parliamentary Committee for Oversight of Public Finance has been established as a new committee which will have the mandate for the oversight of expenditure of public money by all public institutions which are financed from the Kosovo budget. This Committee is in the process of being made functional .
to upgrade capacities of the Parliamentary Committee for Oversight of Public Finances. KIPRED will provide technical assistance in building the capacities of the Committee.
. AMP seeks to further increase donor confidence in government systems. decentralization and public administration reform as the initial sectors.During October implementation of this system will commence. Budget estimates for disbursing project aid is not all provided by major donors provide at lead for the government’s coming FY and at least 3 months prior to the year’s start. the report will be more general. education.2.11 DONOR COORDINATION
Existing Situation The recent 2009 PEFA assessment found certain weaknesses in the existing approach to donor coordination in Kosovo.Experts forn Development Gateway Foundation during September have finished the assesment of needs that this data base platform should address for an efficient coordination. which will also enable planning for years to come. the system will be adjusted to meet requirements of the Government to offer information that will be needed for planning and adjustment in linewith the developement priorities. including: • Insufficient information on donor aid. Technical Assistance The Aid Management Program (AMP) for the Agency for Coordination of Development and European Integration (ACDEI) is to strengthen the Government’s management and reporting on donor assistance and to improve coordination among donors. water. giving sufficient details over activites of donors. work on a donor data base platform has started.After the first year.Once the implementation starts. Since he PEFA was produced the Agency for Coordination of Development and European Integration (ACDEI) has been established and it has started to coordinate with donors on a sectoral basis. and support government-led coordination. and • to support the donor coordination by Government by increasing transparency Reform Actions Platform 1 . • increase donor confidence in government systems. . As well.In the first year. Platform 2 . This is supported by USAID and the EC
. • Out of date reports on actual expenditures by donors in RIMS database. Reform Goals Develop the ACDEI into a donor coordination unit that • facilitates donors to identify sectoral priorities and financing • maintains a data base that facilitates the management and the reporting of foreign assistance by Government.. . an agreement will be signed relating to reports and their timing. The program will increase transparency and accountability by introducing a web-based repository of aid data and aid funded programs for development partners and government ministries.Incorporate estimates of all direct and indirect donor supported programs and projects in Budget documentation. the link between the foreign assistence with MTEF and EPAP. Platform 3 . after hosting the system will be tested to be started afterwards with trainings fot its use and administration. with health.
activities relevant to their respective themes. The table below sets out the agencies that are tasked with implementing the PFM Action Plan. DPMB . Department of Policy and Municipality Budgets ( DPMB ) POE Policy and Monitoring Unit.g. .
Budget Organizations. The Action Plan is their. It is divided into primary and secondary responsibility. However. PM Cabinet .g. promoting changes from the centre A report on progress against actions would be submitted to the Deputy Minister of Finance. MFE. PM Cabinet.Kosovo Privatization Unit Treasury Department. Each theme is under the responsibility of a specific Department/Agency or Division within the Government and the Heads of these Departments are responsible for implementation and reporting of reform progress. RESPONSIBLE IMPLEMENTING AGENTS AND REPORTING
This PFM Action Plan has been put together from discussions with and information from all relevant stakeholders. the overall coordinator of the PFM Action Plan) by each of the primary implementing agents on a six monthly basis. Central Unit for Internal Financial Control
MFE. ACCOUNTING AND RECORD-KEEPING AND PUBLIC INTERNAL FINANCIAL CONTROL PUBLIC SECTOR PERSONNEL AND PAYROLL INTERNAL AUDIT PROCUREMENT-
Department of Civil Service Administration. Grants Commission MFE
CREDIBLE POLICY BASED BUDGET TAX ADMINISTRATION
MFE .Line Ministries
Tax Administration of Kosovo and Customs. the stakeholders. PM Cabinet MFE. save for the OAG and Assembly. MLGA. Procurement Review Body. we envisage the management and implementation of the Action Plan to be organic in the sense that it will be a living document that will change over time as implementation takes place and responsibilities evolve. PM Cabinet. MFE legal changes. The role of the Deputy Minister is a coordinating/supervisory one rather than an implementing role. The primary responsible agents are the drivers of and managers of change within a thematic area (MFE Budget Department in Credible Policy Based Budget) while the secondary responsible agents are facilitating the changes either by implementing (e. Line Ministries) or facilitating (e. Public Procurement Agency
. Ministry of Public Administration Central Harmonization Unit of IA Independent Public Procurement Commission.3.
.EXTERNAL AUDIT LEGISLATIVE SCRUTINY DONOR COORDINATION
Office of Auditor General Assembly of Kosovo Agency for Coordination for Development and European Integration
Assembly of Kosovo PM Cabinet MFE.
and • give specific direction to the MFE regarding the development and implementation of a PFM reform action planning process.4 Through the Action Plan. The 2009 PEFA process resulted in a report which contained specific recommendations. • The results of focused discussions with ministries concerning their own perspectives of PFM. • The results of 2007 and 2009 Public Expenditure and Financial Accountability (PEFA) assessments. and commitment to addressing. the Government. ministry-specific. which have identified the policy. Component 3 – Increasing the security and efficiency of government information systems
. especially regarding the ways in which Kosovo’s PFM processes impact on their activities. Especially important to the development of this PFMRAP was each ministry’s identification of. The Government passed in 2008 two Government Resolutions which: • endorse the concept of PFM reform • require the Government’s budget organizations (including ministries and municipalities) to participate actively in the process of public financial management reform. international financial institutions and bilateral donors have been addressing the provision of joint budget support to the Kosovo Consolidated Budget (KCB). combined PFM issues. which will ensure integration and reduce overlapping activities within technical assistance. In 2009 these Government Resolutions were advanced by the endorsement of the PEFA process and of the Plan developed by the MFE. This document describes a process for planning and implementing those reforms and new initiatives. and they are found throughout this PFMRAP document. The Action Plan has been constructed in 2 dimensions: the “Horizontal” government-wide dimension which is based on implementing PEFA recommendations which cut across all of Kosovo’s Budget Organizations. In addition. in order to have the maximum positive effect. The forthcoming World Bank supported Public Sector Modernization Plan is a clear example of support consistent with the Action Plan covering various related activities. including e-procurement. The Plan has been developed in the basis of these main sources of input: • Cumulative and ongoing discussions within the MFE.
Component 1: Improving public financial management performance in selected budget organizations. Kosovo is about to engage in a series of reforms and new initiatives which are intended to lead to strengthened financial and program management practices and activities. and ministries and municipalities. and the “Vertical” dimension which is based on priority ministry-specific actions. and with donors. and municipality activities of the potential next phases of reform (or “Platforms”). indicative Government-wide.Annex 1 PFM ACTION PLAN – Platforms and Matrix
SUMMARY OF THE PLATFORM APPROACH Introduction This Public Financial Management Reform Action Plan (PFMRAP) addresses the current issues of Public Financial Management reform in Kosovo. and it provides information regarding the purposes.Improving payroll administration and laying the foundations for a professional civil service. Actions on these dimensions will occur in parallel with each other and in phased-in “platforms”.and technical-level PFM issues which must be addressed. This Plan has been developed by and for the Government and is to be implemented through Government functions and donor-provided technical assistance. Component 2 .
ministry. Although the full accomplishment of each Platform is not necessary in order for the next one to begin – the Platforms are inter-related – it is clear that the increasing capacity which is attained through successful performance of each Platform will strengthen the Kosovo’s ability to take on the next Platform’s set of challenges. the PFM activities which are conducted within the Platforms should focus on areas which: • Are focused on programs and functions which are priority to the Government. the first such document that has been produced in Kosovo. • The Treasury system in Kosovo is consistently described in highly positive terms by donors and other observers. and municipality • Are conducted on a Vertical basis (within specific ministries and municipalities) or on a Horizontal basis (Government-wide) • Are attainable in view of resource constraints • Are appropriate to Kosovo’s needs • Are sustainable in the future • Support Kosovo’s moves toward European integration • Support the concepts of Budget Support • Are linked to agreed-upon and recognized tools (PEFA. this same concept has been used in Kosovo. • The Medium Term Expenditure Framework (MTEF). and budgets • Improved controls and accountability • Integration of accountability and financial/performance information Further. The Platforms serve as both a collection of inter-related activities and – when significant recognized progress has been made – as levels of achievement for Kosovo to attain along its path toward reaching national goals (such as European integration and other key accomplishments).
. etc) Plan Components and Strategies Basis of the PFM Environment in Kosovo The PFM environment within which the Plan is being designed and implemented is based in Kosovo law as well as on several years of PFM activities within the MFE. and then monitoring the phasing-in and progress of such reforms and new initiatives. • The ongoing budget process is such a basic part of the PFM fabric that it permeates every part of this Action Plan. program planning/implementation/results.that has been developed and used to focus and implement necessary and phased-in PFM and public administration reforms and new initiatives in other transitioning countries. which is intended to provide for a rolling 3year budget planning process. the Platforms seek to provide for: • A credible budget delivering reliable and predictable levels of resources • Improved linkages between policies. and it is sustained through the Treasury manual. • The MFE Guide to Kosovo’s Planning and Budget Process. assembling and coordinating. • The 2007 and the new 2009 PEFA process and report (and recommendations) provide for a comprehensive and objective assessment of the PFM strengths and weaknesses. Statement of Government Priorities. MTEF. This environment consists of: • The Law on Public Financial Management and Accountability (LPFMA) • The Annual Budget Laws and the Annual Budget publication provide for the year’s appropriations and operational framework for the budget. and which provides for a comprehensive view of the entire PFM system. line ministries.Following an approach – Platform Approach . as a framework for identifying. and municipalities. Collectively.
regarding PFM and program management.•
Audit policies and procedures (both internal and external) and their results are key parts of PFM and are a day-to-day management responsibility.e. INCLUDING INTERNAL CONTROLS AND ACCOUNTABILITY Proposed Purposes and Objectives of this Platform • To clearly establish the importance of effective budget control as an extension of policy and as a method of emphasizing effective PFM and program management • To clearly establish the linkages between effective internal control and accountability. the concepts that PFM and the attainment of national. and the linkage between PFM and the pursuit of national/ministry/municipality goals • To begin the implementation of PFM and program management activities Strategies • Establish and reinforce..e. within specific ministries and municipalities) and Horizontal activities (i. and effective program policy setting and decision-making • To provide for permanent implementation of the results-oriented management policies and procedures cutting across all Platforms Strategies
. and municipal goals are mutually dependent • Actively engage the Cabinet in the work of this Platform and subsequent Platforms. and retain a consistent focus on Government priorities.
Indicative Platforms for Action Plan Implementation
PLATFORM 1: A CREDIBLE AND SUSTAINABLE PFM POLICY-SETTING PROCESS Proposed Purposes and Objectives of this Platform • To produce an agreed-upon and consensus conceptual framework and then the functional framework for the overall PFMRAP initiative • To re-affirm the Government’s focus/determination of what it sees for itself and for the future of Kosovo. managers. in formulating Kosovo’s annual and operating budgets • To focus specifically on the results of budget diagnostic assessments and to both address the shortcomings and ensure continued effectiveness of successful activities • To ensure that the budget process is used effectively and with discipline in supporting Kosovo’s policy and priority setting processes and for the attainment of goals Strategies • • • Developing clear and valid expectations of the planning and budget process among executives. ministry. and on feasibility and sustainability • Actively keep donors aware of PFMRAP activities and to use this awareness to facilitate donor coordination • Plan and begin implementation of Vertical activities (i.. and staff Conduct a realistic assessment of the shortcomings of the policy-setting and budget processes regarding the goal of delivering reliable and predictable resources Establish a balance between expectations and the system’s capacities (following a series of feasible enhancements)
PLATFORM 3: IMPROVED BUDGET EXECUTION AND CONTROLS. Government-wide) PLATFORM 2: A CREDIBLE BUDGET DEVELOPMENT PROCESS WHICH DELIVERS RELIABLE AND PREDICTABLE RESOURCES Proposed Purposes and Objectives of this Platform • To solidify and extend the improvements made to date. which are shared by the Executive and Legislative branches of government. throughout the PFMRAP initiative.
and relevant Technical Assistance projects • To provide for the feasible and sustainable integration of separate elements of government-wide capacity-building • To construct a consensus view for Government and donor aspirations regarding Kosovo’s government-wide functioning in the PFMRAP areas Strategies • Engage the Government (including ministries and municipalities). and identify areas of strength as well as areas to be reformed through PFMRAP PLATFORM 5: INTEGRATION OF ACCOUNTABILITY. and program management. MANAGING FOR PROGRAM RESULTS. and municipal levels. and evaluating program results. other public administration reform initiatives.
. and using them in program planning processes. monitoring. etc) • Ensure that reforms and the capacities to implement them are developed consistently • Ensure support for development/utilization of program-related information systems • Focusing on current processes for conducting and linking policy-setting. AND POLICYSETTING PROCESSES.• • •
Reinforce budget management. REVIEW. and internal control and accountability concepts as routine aspects of the ministry. outside organizations. ministry. pay systems. program. and the next year’s processes of program planning and development Build the capacities of KIPA and related organizations to support the concepts and integration of internal controls and accountability
PLATFORM 4: IMPROVED LINKAGES BETWEEN POLICY AND PRIORITY SETTING. priority-setting. REGARDING BOTH FINANCIAL AND PROGRAM PERFORMANCE MANAGEMENT Proposed Purposes and Objectives of this Platform • To provide for a coalescing of the work and results of the previous Platforms. and determining and allocating resources in rational and transparent ways. measuring. and donors in realistic appraisal of progress to date • Emphasize the usefulness of interim/periodic adjustments of overall expectations of the PFMRAP initiative over time • Strongly emphasize realistic expectations and measurements of progress at the Government. and design corrective actions accordingly • Establish and reinforce the fact that the coalescing process which is addressed in this Platform is necessary in order to implement internationally-recognized methods of effective organizational (and government-wide) management The details and components of each Platform are outlined in the Action Plan matrix that follows. budget control. and municipality management process Clarify the linkages between one year’s program monitoring and evaluation. for attaining those results • To provide an opportunity for the technical re-design of the fundamental policy/ financial management functions necessary for any modern government Strategies • Ensure integration with related Public Administration reforms (especially related to organizational reform. AND BUDGET PLANNING AND IMPLEMENTATION Proposed Purposes and Objectives of this Platform • To focus Government-level and government-wide executive attention and support Governmentled actions on the critical linkages between: establishing policy and priority-setting processes.
Compositio n of
Score maybe result of good luck rather than
Within 1 to 2 years and at the same time the expenditure deviation variances to not exceed
2 part approach: develop closer link between budget and planning. Further limitations could be put on cash advances for capital projects. and strengthen the
High. During last quarter of 2009 agreement on actions to be implemented in 2010 and onwards.. Effective use of KCB funds is essential to economic 36
. Effective use of KCB funds is essential to economic development and greater credibility by donors and investors.2% to 17.
High. Such actions to be considered to include. with Ministry of Finance’s authorization.
Poor procurement (capital)
Strengthen and make effective the monitoring mechanism in the capital spending program and lower capital expenditure allocations in case of significant under execution. PM. except under well-specified exceptional circumstances. and strengthen the capacity for project planning and management. such as earthquakes and financial crisis.2009 SCORE CAUSE OF WEAKNESS Score REASON & Link to other PIs SECTION A: CREDIBILITY OF THE BUDGET PI-1 Deviation of actual over budget ranged from -10. MFE. inter alia: The MYBR should have no impact on the overall balance.2% Over budgeting Lack of multi-year approach to planning
ACTIONS & RESPONSIBILITIES
Budgets that reflect capability and capacity to be implemented linked to achievable service delivery.
Two part approach: develop closer link between budget and planning.
PM. in order to prepare for/minimize impacts on Kosovo’s resources and thus its capacity to provide public programs.
PI-1 and associate d links
Stock of arrears low
Treasury objective is to establish control points in BOs for more effective and efficient execution of KCB. This will allow a better allocation of resources at the planning stage rather than increasing allocations during the budget execution stage.A
expenditures deviation less than 5%
judgement (see PI-1)
the overall primary expenditure deviation (defined in PI-2). The target should be to forecast revenue as accurately as possible while erring slightly on the downside so as dampen expenditure expectations. PI-1 and associate d links PI-3 Aggregate revenue outturn greater than budget between 5 and 33% The challenge will be to better forecast revenue while still maintaining the more cautious stance which is necessary given the nature of revenue sources.
capacity for management. Reflecting better revenue forecasts at the budget planning stage will allow better planning of inputs needed to achieve better and more efficient service delivery. Impact of the weak world economy upon Kosovo over the next 1-5 years can be severe.
MFE . This will increase the financial discipline and the internal control efficiency in BOs. MFE Medium. Maintain or increase surveillance of world and Kosovo’s economy. if not prepared for. it will not be easy to achieve such forecast level taking into account different macroeconomic factors in Kosovo that affect these issues and the current volatile economic environment.
development and greater credibility by donors and investors. However. Cabinet. The desired level of performance is that all BOs to pay their obligations according to the contract terms. by more than 3%.
000 euro threshold).PI-16-17 PI-4(ii) Reliable and complete data on the stock of arrears is generated through routine procedures at least at the end of each fiscal year.12. the process between the submission of the invoice by the supplier and execution of the payment by KCB is longer than 30 days as foreseen in the regulation. • Treasury has requested from KFMIS company (FreeBalance) to make the invoice date as a mandatory field in the system. • Enforce the Budget Process (circulars etc) requiring detailed analysis and submissions (PIP) for every proposed new capital project in Line with PI-12 (iv) below. Request KFMIS company (FreeBalance) to make the invoice date as a mandatory field in the system in order to keep track in the timeframe of each payment. This undermines the effectiveness of the KFMIS as a tool for monitoring and measuring arrears. A part of these arrears is for long term projects (capital projects) for which the payments are made in instalments during stages of project implementation and appear as arrears at the end of the year. identifying progress in capital execution (comparing actual expenditure and obligations compared to appropriations and cash plans).
Treasury Department -MFE
ACTION Platform 1: Action by 31. • Activate the Fiscal and Budget Committee of the Government according to previous Government decision to track MTEF and Budget development and advise government on strategic resource allocation. This is not to take away responsibility from the Minister of Finance for budgeting. • MFE prepares for Minister and Government an internal report. such as: BO’s CFO is responsible to create mechanisms that enable recording of invoices upon receipt and to follow the payments for these invoices (Section 44 of Financial Rule 02 – Spending of Public Money). • Re-structure the Budget Department in accordance with the LPFMA and MFE plan and formalise executive appointments. but to ensure sectoral priorities are addressed in the context of overall budget formulation. • With decentralisation of expenditures. • Organise quarterly capital spending program monitoring meetings in BOs to review progress on capital projects and identify necessary follow up actions to ensure timely implementation. • Undertake measures to enforce legal and procedural requirements for the costing of draft laws and new policy prior to consideration by Government. The other part is related to goods & services and utilities.2009 • Amendment of Article 44 of Treasury Financial Rule 02 – Spending of Public Money. Review 38
. which based on the KFMIS report. MFE should be represented at these review meetings. budget organisations will be required to enter the date of invoice in the system. Instances of inconsistencies between what is reported by BOs and the KFMIS. • Finalise design requirements for Budget Development Management System that improves this tool for managing aggregate fiscal discipline – including multi-year estimates and features for enforcing multi-year ceilings. • Agreement on actions required to improve capital budgeting. Implementation of this is expected by the end of this year. • Develop and commence implementation of a mechanism for linking strategic planning activities in line ministries to the MTEF – with aim of having properly costed and realistic sector strategies that reflect considered policy choices in Line with PI-12 (iii) below. • Re-design the “fiscal rule” in consultation with the IMF to act a benchmark in establishing a credible budget. • MFE prepares and published a capital execution report. Not all BOs enter invoice dates in KFMIS when the invoice is received but are rather waiting until the payment is processed. identifying actual progress (financial and practical) on all major projects (above a 50.
Addressing the problem now will simplify and facilitate later technical reforms
Treasury and Budget Department. • Implement a mechanism for improving cooperation between ministries within a sector in developing MTEF sector strategies. Identify output based performance targets for these programs. • Revise the current set of Government “priorities” prior to the MTEF to facilitate allocation of scarce additional resources. Budget planning in BDMS is carried out only at programme level. Platform 4 • Conduct comprehensive Public Expenditure Review. • Capacity building program for line ministries for capital project analysis. identify several programs for pilot implementation of a monitoring and evaluation framework.MFE
PI-1618 PI-22 PI-24-
. planning and implementation. Broader identification of performance targets is implemented for 2011-13 Budget.threshold in light of experience. Platform 3: • In the context of the Budget. • Payroll is moved to the Treasury. • Fully integrate PIP processes with MTEF. • Laws on Civil Service and civil service pay and passed and appropriate subordinate legislation developed – having regard to fiscal impact.
SECTION B. • Functional changes are implemented in line ministries to link and improve strategic planning and budgeting. • Implement a mechanism for improving cooperation between ministries within a sector in developing MTEF sector strategies. Identify performance targets for these programs. • In the context of the 2011 Budget. Resolution of coding issue can be carried out through changing the Codes High. program and organisational classification. Platform 2: • Revise the current set of Government “priorities” prior to the MTEF to facilitate allocation of scarce additional resources. being a one-off zero-based assessment of public expenditure allocation. KEY CROSS-CUTTING ISSUES: COMPREHENSIVENESS AND TRANSPARENCY
PI-5 Chart of Accounts and budget classificatio n compliant with COFOG and GFS2001 has been introduced and implemente d in all dimensions – economic Functional classification for budget formulation can only be produced manually. Changes to the chart of Budget and expenditure reports to be generated/produced from KFMIS by functional. as the coding for “administration” within a ministry is the same as if “administration” was a function at the budget formulation stage. • Functional changes are implemented in line ministries to link and improve strategic planning and budgeting (Functional Review). identify several programs for pilot implementation of a monitoring and evaluation framework. • MTEF includes aggregate fiscal target consistent with the revised “fiscal rule” • Pay and Grading review is conducted – have fiscal resources as a key constraint in its design and implementation. All central and local BOs are aware of their resources but not at the lowest primary service levels. • Monitoring and Evaluation Unit is established within Budget Department. • Continue the PER process in annual ministerial reviews as part of the MTEF and budget process.
mid-year budget and the outcome for the past year. but are as yet to be used. and iii) showing consolidated projections. 6 of the 9 Missing documents Some of the elements of PI-6 may be improved Develop PI-6 Medium. • Bring all central level own-source revenues into the budget planning process and tables. required format. it should distinguish between budget projections based on i) keeping the existing policies ii) adopting new policies. This should be presented to the Government and Assembly and published as soon as possible afterwards. Addressing the problem now will simplify and benchmark particularly related to prior within 1 to 3 years in order to upgrade this additional facilitate later technical reforms documentati years outturns and indicator to a higher quality level of capacity to on is financial assets presentation of budget documentation. Explanation of new initiatives or of organising data 13 programs may be enriched with throughout that exists in the analysis of the budget implications. The Working Group to review the Chart of Accounts structure. 40
. and in particular the structure of economic codes. be extracted from the Annual Financial Meeting this Statement and attached to MTEF and Budget dimension is one PI-12Documents. the actual budget may be presented in and provide basic a same format as with the proposed budget.
ACTION by the end of 4th quarter of 2009 Measures should be undertaken to improve the coding quality of functional and economic codes to fully comply with COFOG and GFS. and function (10) and subfunctions.25 PI-23
categories. and to present the schedule of chart of accounts review by 30 November 2009. administrati ve. PI-22-24 The budget document should have a summary table outlining expenditures comparing the approved budget. For next year’s budget. macroeconomic B whereas the Statement of Financial Assets could and budget data. generate/gather provided However.
accounts in KFMIS were made in 2008 to facilitate budget planning at primary service units. Budget tables should reflect greater transparency MFE and BOs • •
Platform 1: • Prepare and publish a full set of budget documents for the 2011-13 budget in accordance with the LPFMA.
• Provide to Government and Assembly the results of pilot monitoring and evaluation reports. MFE and BOs
PI8 (i) and (iii): Current level of performance continues. any new legislation should be reviewed carefully to ensure compliance. Low. including monthly reports and capital expenditure reports are published. funds problem. • Include POE financial outcomes in KCB financial statements – as a note.
. so PI-7(i) extra budgetary funds will prevent this from becoming a just maintain current policy. The Grants Commission Secretariat to be hold accountable for professional. Platform 3: • Prepare comprehensive budget documentation and financial statements that include the full POE and donor sector data – in addition to the General Government sector.• Include COFOG classification in budget documents and KFMIS. Problem is not present. Both dimensions relate to the legislative framework governing municipal finances. • Include estimates of POE financial outcomes as an information item in Treasury financial statements. • Ensure all Treasury reports. persistent. so just maintain current policy. Platform 4 • Publish an annual performance document outlining the performance of government programs on an output/outcomes basis. There are no No extra budgetary funds Avoiding the use of extra-budgetary Low. Platform 2: • Include estimates of donor funding in budget documentation. In this regard. A MFE and BOs PI-17 PI-7(ii) A PI-17 D1 PI-8(i) All donor funds channelled through Government are recorded in fiscal reports The LLGF introduced transparent rules and secured funding for the delivery of minimum standard services by local governments and have been Continue the successful implementation of Treasury Single Account in collection and spending of public money. technical. • Review the list of information provided in the LPFMA for the budget book to take account of the inclusion of the MTEF in the budget planning process and implement accordingly. Government to ensure availability and
The Grants Commission to assume responsibility for ensuring objective and transparent application of the LLGF principles. Problem is not present. MFE should aim at ensuring full implementation of legal provisions throughout the budget process – starting from the allocation of intergovernmental grants to reporting on local government fiscal position. and analytical support in the implementation of grants system.
including grants system and municipal budget processes. Problem is under control. Such practice would ensure compliance with the score B requirements. PI-8(ii): As a minimum. is deemed feasible. Government must make decisions regarding ceilings and other MTEF issues more promptly.applied in the 2009 Municipal Budget. Long term achievement of score A is advisable and feasible. and municipalities PI-8(ii) The 2009 Municipal Budget process demonstrated weakness in the central budget authorities’ dissemination of reliable and timely information on municipal financing which impacted on the municipal budget process. so that follow-on actions and decisions by municipal authorities can be made with sufficient time for implementation. MLGA. A certification process of municipalities’ financial management capacity needs to be introduced before the devolution of some additional responsibilities.
reliability of necessary Information Management Systems.
Low. High. which underpin or secure input for the determination of grants. and municipalities
. through the use of current policies and procedures. desirable level of performance should ensure that municipalities are provided with reliable information on the allocation from government transfers before the start of their detailed budgeting process.
Maintain current policies and procedures. MLGA.
MFE. Municipalities’ capacities cannot grow without supportive decisions of this type. municipalities High level of MFE performance in the management of municipal finances. Municipal fiscal information is consolidated into quarterly budget execution reports and annual financial Determination of final transfers was affected by ad hoc last minute policy decisions.
including provision to the Grants Commission of assessment of grants allocation compliance with rules based system established in the LLGF before municipal budget development cycle if finalized . but it should be SOEs report The PI-9(i) There are two categories of Public Enterprises 1. Water. to adhere to and respect all aspects of the municipal budget calendar to ensure that municipal officials are able to start the budget process in time and will have sufficient time and information to perform all necessary internal procedures throughout budget development process.Strengthen the role.Grants Commission Secretariat to maintain regular publication of decisions made by the Grants Commission . the Auditor General should issue unqualified audits of municipalities financial reports for two consecutive years. Post and Telecommunications.Ensure that periodical financial and budget reports issued by the Treasury Department account for consolidated municipal fiscal data. introduce mandatory quarterly reporting for the Secretariat to the Minister). Government to refrain from ad hoc policy decisions affecting distribution or allocation of transfers) . in its internal activities and processes. and produced and there is POEs/SOEs no report on overall fiscal risk. POE Support the Medium. etc. a the process of being Finance and Economy.Before the authority to borrow is granted to municipalities. a certification mechanism of municipalities’ financial management capacity should be developed. PI-8(ii) – ongoing: . to the KPA Monitoring Unit is further monitored to prevent deterioration Central Public Enterprises (CEPs) whose stakeholder is quarterly only newly the Kosovo Government and 2 Local Publicly-Owned development and those established and new Enterprises whose stakeholders are the Municipalities of actions SOEs under C (LPOEs). Problem is currently contained.Grants Commission Secretariat to assume its role in technical and analytical support to the Grants Commission.Looking forward. capacity. corporate underway. provisions specifying timetable for dissemination of reliable and binding information on allocation of intergovernmental transfers to the units of local government.Maintain application of rules and procedures governing Kosovo Financial Information Management System to municipalities . report is not POEs. .e. with potential revisions or adjustments occurring during and incorporated within the MTEF process (i. Central Heating and Water and Irrigation.Grants Commission to ensure that the LLGF rules apply in their entirety and with full transparency.
Recommended action steps (short-term and long-term) PI-8 (i) . .g. within the timeframe defined by law (including citizen participation) PI-8(iii) – ongoing: .Introduce in the applicable legislation. KPA. on are arrangements are in Monitoring Unit (POEPMU). . POEs are not currently in the practice 43
. It is also essential for Municipal Assemblies to be able to review and approve the proposed municipal budgets.PI-23-25
statements. and accountability of the Grants Commission Secretariat to the Minister of Finance and Grants Commission (e.Airport. . MFE. POEs include utility-like consolidated implemented for enterprises .Intergovernmental transfers accounted for in the medium term macro-fiscal framework. such as LPFMA.MFE.ongoing: . and direct KPA administrati governance CEPs report to the newly created POE Policy and of the OAG. within the Ministry of audited.
of the Debt limits for municipal debt framework thus creating fiscal obligations for the central Law does not and government. Platform2: • Include POE financial outcomes in KCB financial statements – as a note. s to enter criteria. and issued a written guarantee. Four of the Two PI-10 sets of Changes in information policies and High. (However. public confidence can increase. and limits for municipal debt. General Audit Office. (It is very important to have the best possible cooperation with all POEs and ensuring that POE Boards are functional). constitute a guarantee. obligation of the Government unless the MFE Minister MLGA. Platform 1: • Collect. while such approval shall not obligations. draft of a debt law has been approved by the government and is currently in the Assembly for discussion and approval. collate and publish information regarding the financial position of the POE sector. • Looking forward. and The current legal framework prohibits local Development Legal PI-9(ii) governments to enter into any borrowing arrangement. A relatively simple six pieces of documents are not procedures can be done without great change in information B information supplied in 2009 – problems. Debt Law will regulate responsibilities. regulations. High. and when additional information availability will increase public supplied to annual budget law is available. • Implement risk management approach top POE’s – a comprehensive system for identifying and managing POE financial risks. municipalities Platform 1 • Discuss and clarify that a pre-condition to allowing municipalities to borrow is the issuance of unqualified financial audits by the Auditor General for two consecutive years.of reporting to the MFE. Reporting regularly to the inter-ministerial committee on POEs. • Identify risks associated with POEs in the next MTEF. and information to 12 primary units PI-23 MFE. a certification mechanism of municipalities’ financial management capacity should be developed. Municipal debt will not represent a direct or indirect MFE. criteria. Public Procurement Regulatory Commission
. allow Local implementing Government A The (draft) Debt Law will regulate responsibilities. confidence in the Government. • The new Unit will start with training as well as issuing sub-legal acts. It is foreseen into any that municipal debt shall be subject to a prior written debt approval of the MFE. PI-11public. or in any way establish any liability of the Government for the payment of the debt.
BOs. . .
A budget calendar that would provide at least 4 week time to BOs for submission of their budget proposals/request to MEF to become a rule.Year-end statements. and donors is essential. Cabinet.
SECTION C. A detailed and timely
Emphasize the need to increase timeliness of decisions regarding the MTEF. Credibility of the budget process by the public. such as: preparation and presentation of annual budget documentation within the deadlines – certain budget categories to contain more detailed information – whereas bulletins containing such information to be produced to inform relevant stakeholders. MFE and BOs
. ceilings. Platform 2: • Make available information of funding provided to primary service unit. review) it is necessary for the process to start as early as possible in the year in order to provide information regarding priority directions and macroeconomic data.
High. .in-year budget execution reports. considering that the budget process requires from BO to submit other documents (such as MTEF. There were further problems with time for municipaliti es. and .
PM. However. BUDGET CYCLE C(i): POLICY-BASED BUDGETING
PI-11(i) BOs had 4 rather than the ideal 6 weeks for budget preparation.Contract awards. Long term capacity building efforts are needed to create special purpose complex information and dedicated to different research groups. and donors is essential.annual budget documentation (2010 Budget). BOs. but cabinet involvement While budget calendar is established which provides for timely budget formulation. Platform 1: • Publish for following during the course of 2009-2010: . etc. and to adhere to concepts of budget discipline. There were 3 budget circulars for central government and 2 for municipaliti es.External Audit reports.Some elements improved within 1 year. the issuance of budget circulars did not conform to calendar.
The guidelines were not followed and cabinet involvement was suboptimal. Credibility of the budget process by the public. High.
Credibility of the budget process by the public. The 2009 2011 MTEF document presents a 3 year (on an annual basis) forecast of domestic revenue and expenditures . High. BOs. The ceilings presented in the second budget circular were multi-year in nature and the PIP system was set-up to accept multi-year projects and multi-year ceilings.
B PI-12 and PI27 PI-12(i)
The 2008 budget was approved 2 months late due the request from new government for review. which has not always been the case as in 2008. PI-12 PI-11(iii)
deliberation of the Cabinet is a key factor in complying with agreed budget calendar. and donors is essential. but not as yet on a rolling basis. and donors is essential. and Minister of MFE
. The budget document submitted to the Assembly contained forward estimates of the capital projects funded in 2009. BOs. The Legislative approves the budget before the beginning of fiscal year as in 2009. Cabinet. It presents projected
PI-11 PI-23 PI-27
The MTEF document (June) is an input to the setting of the ministerial ceilings and differs from budget figures in December which are not explained. the forward estimates of recurrent programmes and funding of new capital projects planned for future years were not presented
Include forward estimates for recurrent expenditures in budget documents
High.was timely. Credibility of the budget process by the public. However. Late approval of budget in 2008.
PM. It provides an overview of expenditures by function but does not project this into the future.
Development of the Law and implementing regulations.annual sectoral expenditure by operational and capital with the latter further broken down by projects that need to be funded by donors as either priority or other. in order to prevent subsequent problems. Work has been carried out in the MFE to develop the capacity for a debt
in the Budget documents. PI-12(ii) Kosovo does not contract debt but does however make a forecast of potential debt liability under the settlement with Serbia.
High. The situation must be observed from the starting date of the Law.
Emphasize the need to increase timeliness of decisions regarding the MTEF. PM. PI-12(iii) The MTEF document presents a mission statement and description of the existing situation. and goals for the sector. and reflect the much stronger analytical capability in the KDS unit which has consultancy support. These strategies are followed by concrete action plans within each budget unit. Need to emphasize the link between the MTEF.
. Credibility of the budget process by the public.strategy and debt sustainabilit y analysis. BOs. Cabinet High. A debt analysis was carried out in 2008 and debt analysis software has been installed and is operated by the Cash Flow and Debt Managemen t Department. in a timeframe of 3 to 5 years. ceilings. and within strategic planning unit. ministry/agency. and to adhere to concepts of budget discipline. The sector ministries would not be able to produce such a sector strategy independently which reflects a weakness in the sector ministries in planning and budget The major part of sectors to have strategies that contain multiyear cost of recurrent and capital expenditure. the sector strategies at ministerial level and the budget process MFE. etc. but these are not uniform in quality or Sector strategies are driven by the technical unit supporting the EC contract for the KDS with sector ministry input. and donors is essential.
etc. projects and spending levels proposed in previously submitted capital budget documents in order to provide a reliable longrange planning mechanism for the Assembly and budget organisations. b) a statement of the purpose of each project.clarity. and donors is essential. Deviations from such priorities should be identified and explained. • The Budget Department/MEF immediately streamlines its departmental structure. the recurrent cost implications are not factored into subsequent budgets and the lack of a coherent sector strategy means that projects are developed in isolation. the capital program shall reflect the priorities. ceilings. objectives and goals and linking policy statements to plans and budgets. size and estimated life of the project. • Separate the planning and execution phases of public investment proposals to prevent the commencement of implementation of un-executable. It is necessary to have a better link between strategic.
PI-11 PI-23 PI-27
Need to separate planning and execution phases of capital budget approval process to prevent capital projects being commenced without proper costing or funding in place
Annual budgets need to specify both the current and capital spending related to individual projects. The budget preparation information system to be reviewed and further development of BDMS to be undertaken to meet emerging needs (such as the development of the budget system). and g) estimated on-going operating budget costs and/or savings resulting from the project. 49
. medium-term and annual planning.
preparation. PI-12(iv) The PIP assesses projects as to potential viability. BOs. especially in development of Public Investment project proposals. The PIP is not integrated into the MTEF and is in effect a centrally driven list of project. and recognising emergent needs. c) a statement about the proposed site. • There is a need to strengthen capacities to estimate budgetary implications of proposed initiatives. • Planning/budget/execution units within ministries or agencies should establish active communication/cooperation means in internal budget process and then with MEF/Government and other parties. the procedures and systems should become stable to enforce formal processes and the follow the budget planning and preparation timetable. etc. Article 22. PM. A strong information technology and systems development unit could significantly contribute in the budget process and in linking with other systems in MEF/MPS. In practise. High. e) the source and type of funds proposed. d) estimated total project cost and the cost for each year during which the project is implemented.
MFE.i of the LPFMA should be modified to request supporting documentation for capital spending in the annual budget [to be reported in Schedule IV on capital projects]. As a result. roles and responsibilities. The function of coordinating the activities with budget process should be undertaken by the MEF budget department. • Budgeting should gradually (as capacity and capability is developed) move from input based budgeting to output based budgeting to be achieved over a realistic time period by incorporating initially mission statements. The following language could be introduced: a) the capital program should consist of proposed capital projects for the upcoming year and the two succeeding fiscal years. including Emphasize the need to increase timeliness of decisions regarding the MTEF. under-funded or improperly costed projects. Only grant allocation for project execution after project planning and preparation is completed. unfunded. Cabinet
ACTION • Further intensification of capacity building for planning is required. There are cases of projects in health that have been implemented being closed down because the budget was unable to support the subsequent operating costs. laws or programmes particularly if there is increasing need for harmonisation of laws. Insomuch as it is practicable. and to adhere to concepts of budget discipline. Credibility of the budget process by the public.
rather than creating new units for this purpose. TAK would like to achieve a score of ‘A’ in all areas. medium-term priorities. and donor and taxpayer confidence. There is no provision for discretionary Over time. • Review KFMIS facilities for multi-year commitments and obligations and undertake training of line ministries to enhance transparency and facilitate project planning. • Publish circular outlining steps for line ministries linking government-wide strategic planning exercises with the MTEF due April 2010. Platform 2: Policy Based Budgeting: (in addition to action items listed above for “credibility of the Budget) • Collect. detailed review of annual budget law from relevant committee. Human capacities should be developed in ministries/budget agencies. • Implement a system of “rolling forward estimates”. MTEF preparation process to be linked with budget process as a routine annual process. • Strategic planning functions should be established within budget units. In the short term.MFE Implementation of key actions in the Tax Administration’s Strategic Plan requires training. • Modify BDMS as the tool for managing multi-year rolling forward estimates – including enforceable ceilings. but they should also develop technical capacities to review the proposed legislation with budget implications. it is feasible to maintain the ‘A’ in 13(i). the establishment of Public Investment Committee should take place as soon as possible More specific recommendations regarding this issue were provided during the second phase of Public Investment Program The Cabinet. BUDGET CYCLE C(ii): PREDICTABILITY AND CONTROL IN BUDGET EXECUTION
PI-13(i) The various tax laws are published and can be downloaded from the Government website. High.
. and revenue and expenditure details Platform 1: Policy Based Budgeting: (in addition to action items listed above for “credibility of the Budget) • Activate the Fiscal and Budget Committee of the Government according to previous Government decision to track MTEF and Budget development and advise government on strategic resource allocation.Government Cabinet should seek and support the enforcement of formal budget processes. Ministry of Economy and Finance and Budget Organisations are main responsible organisations for implementation of these recommendations. • Undertake training and on-the-job coaching of key line ministries regarding multi-year budget planning and execution.
SECTION C. Scrutiny by legislative should cover in more meaningful way the fiscal policies. MTEF. • With regards to decision-making and recommendation process for public investment. The Assembly and relevant committees should enforce the application of actions agreed with Government and contained in the Public Management Reform Action Plan. analyse and publish data regarding the ongoing recurrent costs of capital projects. This will also increase revenues. Tax Administration . • Require submission of data regarding the ongoing recurrent costs of new capital projects funded in the 2010 Budget.
and donor and taxpayer confidence. Tax Administration.
Consideration could be given to requiring the taxpayer to pay a proportion of the tax under dispute. and finally to Courts. MFE. Tax Administration. The determination of the validity of TAK Appeals decisions cannot be made simply by examining a rate of sustention without determining whether those were valid.
Appeals process is three stage – internal. This will also increase revenues. and (c) staff are said to lack the skills to interpret the law Concern that the TAK internal appeals process lacked integrity in that very few decisions were made in the taxpayer’s favour. or not. Achievement of an ‘A’ in 13(ii) is not possible in the short term. Development of a specialized headquarters interpretation unit. and donor and taxpayer confidence. Appeals do act in an independent manner.
High. This will also increase revenues. (b) taxpayers advise that staff are reluctant to provide written rulings. Customs
Recommended Actions to Be Taken (Short-term and long-term) Platforms 1 P-13(i) – 1) Ensure that all tax laws are further supplemented by sub-legal acts which provide clear explanations of the way in which TAK will implement specific provisions. Implementation requires training. independent.
For 13(iii). it may be difficult to achieve anything higher than a ‘B’ as the majority of appeals decisions will continue to be in favour of TAK since many taxpayers submit claims simply to extend the period of time before they have to pay their tax debt. P-13(ii) – 1) Require that all written advisory opinions on matters of interpretation of law or technical issues be approved by Managers and distributed to field components only by 51
.exemptions. but TAK staff need better training in order to analyse cases and write better opinions. under the scoring system of PEFA. Customs High. MFE.
Implementation requires training. but a ‘B’ should be achievable in 1 years and an ‘A’ achievable in 1 – 2 additional years. PI-13(ii) Both tax agencies have a tax payer education programme which produces documentation of rights and obligations. (a) there is no dedicated unit in headquarters for the provision of public and binding rulings and advanced interpretations of the law.
TAK would like to achieve a score Unique TIN to be established controlled by High. to ensure that laws are applied uniformly in all regions and with respect to all taxpayers. with the result that individual taxpayers often had multiple numbers. This will also increase process wholly generous. (c) lack scheduled to begin on 1 July 2009. registration obligations. D registration. sub-legal acts.
. P-13(ii) – 3) Provide refresher training in tax laws to all taxpayer education personnel and train them in application of new laws as they are published P-13 (iii)-5) Modify the organizational structure of headquarters to introduce an interpretation division P-13(iii) – 1) Provide refresher training in tax laws to Appeals officials and train them in application of new laws as they are published. and donor and dependent on integrity of MTI data. rulings. Platform 2 P-13(ii) – 2) Provide Team Leader of Rulings function training in all aspects of all tax laws. establish specific expectations for learning and development. subjected to a Feasible Level of Performance (Short-term and sufficiently rigorous long-term): verification process. and other information such as bank taxpayer confidence. and (d) allocation of business registration numbers for each business activity.4) Revise and update “Handbook on Taxes in Kosovo” to reflect new laws. High. Customs at the TAK. and procedures by 30 June 2010. P-13(iii) – 2) Conduct a writing workshop for Appeals officials so that their Appeals decisions are in a standard format and provide clear explanations of the appeals decisions and the basis for those decisions. Registration PI-14(i) PEFA 2009 scoring Over time. (b) lack of systematic Achievement of a ‘B’ in 14(i) is possible within updating of MTI data a year as registration of taxpayers by TAK is Tax Administration. MTI business which was not accounts. That can Court system to be made effective with respect to collection of outstanding liabilities as last resort. This will also increase revenues. Tax authorities with cross check with MTI revenues. and donor and taxpayer confidence. (a) poor of ‘A’ in all areas. If that is of compliance successfully implemented. MFE.managerial staff. an ‘A’ should be measures to ensure achievable by July 2011. Importers Achievement of a ‘B’ in 14(ii) in a year is possible as TAK implements the revised penalty structure authorized by the amended Law on Tax Administration and Procedures. PI-14(ii) Within current laws and tax relating to TAK procedures there There are delays from courts in executing decisions on collection. P-13(ii) . when TAK will have businesses actually an effective registration system which allows fulfilled their TAK to have control over its taxpayer base.
Some of the staff lack the skills and training to conduct more advanced audits.
High. annual audit plans will ensure adequate coverage of the population (within staffing constraints). and donor and taxpayer confidence. Customs
ACTION Platforms 1 P-14(i) – 1) Finalize and implement taxpayer registration procedures and sub-legal act. MFE. An ‘A’ is achievable in this aspect in three years. Customs uses software with risk analysis for physical inspection and post clearance audit. Customs
Tax Administration compiles an audit plan with the number of tax audits for the year. This will also increase revenues.C
are sanctions for not declaring and not paying taxes on time. new VAT certificates (from TAK) and new export-import certificates.
Training of auditors and the improvement of audit methods
Tax Administration. P-14 (i) -2) Establish a taxpayer registration function at TAK which would: a) receive registration applications b) conduct validation and risk assessments c) issue taxpayer identification numbers and registration certificates and d) maintain a proper up-to-date taxpayer register.
Audit selection needs to better reflect risk analysis and role of headquarters and regional offices needs to better reflect audit plans. 53
Achievement of a ‘B’ in 14(iii) is possible in a year as TAK will have an audit risk selection system in place. Audit function is not actively managed from Tax Admin headquarters and inadequate attention is given to research and risk analysis.
Tax Administration. P-14(ii) – 1) Finalize Penalty Handbook and sub-legal act (one document).
avoid payment of custom liabilities by continuing their business through newly registered companies legitimately registered by other persons that are equipped with new business number (from MTI).
be upgraded to an ‘A’ as TAK gains further experience in taxpayer registration and application of the penalty structure. As they develop expertise in using the system and identifying more risky segments of the taxpayer population and understanding the overall taxpayer population.
TAK would like to achieve a score Maintain up-to-date register with age profile High. Platform 2 P-14(iii) – 3) Update audit risk system (audit tool) to include individuals and partnerships. This will also increase PI-15(i) high addressing arrears. and donor and taxpayer confidence. of ‘A’ in all areas.
. it is possible that the rating could become an ‘A’ in the following year. P-14(iii) – 1) Finalize rollout of audit tool and training staff in its use P-14(iii) . As the data in the TAK instructions system becomes more reliable and further improvements are made in the performance of Tax Administration. Customs collection officers. P-14 (iii) .P-14(ii) – 2) Train enforced collection officers and taxpayer education inspectors in new penalty regime. Tax arrears are No systematic way of Over time. as appropriate.6) Modify the organizational structure of headquarters to introduce an audit quality review function and audit risk and analysis unit. taxpayer confidence. Ineffective collection Achievement of a ‘C’ in 15(i) is possible within Need to write off uncollectible debts and D due to Courts a year as the provisions of the amended Law on resort to firm action where debts could be Tax Administration and procedures and collected but unwillingness to pay exhibited. and donor and of arrears. P-14(ii) – 3) Train tax inspectors in application of penalties during audit so that penalties are imposed. As Implement a comprehensive arrears enforcement strategy collectors become more experienced and better collection strategy and require regional trained the ‘C’ can become a ‘B’ in the offices to comply with headquarters subsequent year.
High. This will also increase revenues. P-14(iii) – 4) Update audit tool for use in reviewing VAT refund cases P-14 (iii) – 5) Utilize audit tool for centralized case selection for 50% of all cases to be audited in the first half of 2010 and 100% of all cases to be audited by the end of 2010. Need to write off uncollectible debts and resort to firm action where debts could be collected but unwillingness to pay exhibited.2) Activate the SIGTAS audit module so that management control over audit cases is improved. are
Maintain up-to-date register with age profile of arrears. revenues. There is no complementary sub-legal act take effect on the comprehensive collection practices. in addition to the activation PI-14 compliance of the Collection Module in SIGTAS. MFE.
Payment transfers timely
The ‘A’ in 15(ii) can be maintained. at the time of audit.
Need to write off uncollectible debts and resort to firm action where debts could be collected but unwillingness to pay exhibited. Customs PI-17 PI-22 PI-15(iii) Reconciliation is timely The ‘A’ in 15(iii) can also be maintained. through the use of current policies and procedures.
ACTIONS Platform 1 P-15(i) – 1) Finalize and implement enforced collection sub-legal act. P-15(ii) – 1) Continue monitoring of payments made to commercial banks to ensure that revenue is timely transferred to the Central Bank and errors minimized. and donor and taxpayer confidence. Maintain up-to-date register with age profile of arrears.2) Explore capability of electronic transfer of funds to facilitate the use of electronic filing of tax declarations. likely in the future--it is important to further forecast cash A develop capacity in cash flow forecasting flow. Tax Administration. MFE.Tax Administration. Administrative PI-11-12 Directive to guide BOs in
in transmitting payment data are
Low. P-15(i) – 3) Train enforced collection officers in new procedures provided in the sub-legal act related to enforced collection. Customs High. The objective of the Treasury projections of is to improve the predictability of availability revenues and of funds and cash flow in order to prevent any If cash shortages are envisaged--as highly expenditures to liquidity crisis. Problem is under control. P-15(i) – 2) Activate the Enforced Collection module in SIGTAS. P-15(iii) – 1) Continue timely reconciliation of revenues with Treasury as in PI-14. MFE.
. PI-16(i) generates monthly basis. P-15 (ii) . DCF&DM Currently the cash flow forecast is done on Maintain current policies and procedures. Treasury and to update the forecasts more regularly issues an than is currently the case. This will also increase revenues.
MFE PI-16(iii) LPFMA provides clear direction as to approval mechanisms for such adjustments of expenditures as well as their prioritisation. MFE
PI-11-12 ACTIONS 56
. Current position Maintain current policies and procedures. which sets a deadline for the submission of cash plans to the Treasury.
Treasury Department. This has not been a problem to date due to cash surpluses but may require greater fine tuning in cash plans going forward. PI-16(ii) In accordance with cash flow plans submitted. BOs are able to commit expenditure for at least 6 (and possibly even up to 12 months) in advance within appropriation limits. Problem is under control.
Treasury Department.preparing their cash flow plan. through the use of current policies and procedures.
Low. Current position
Treasury Department -MFE
Maintain current policies but with the tendency to strengthen procedures to ensure that negotiations between MFE and BOs on cash allocations are more closely tied to revenue forecasts if cash or reduced cash balances become an issue. Low.
Regular update of forecasts in a period of high revenue uncertainty. Problem is under control. through the use of current policies and procedures.
Current position Maintain current policies and procedures. better coordination and exchange of reports with budget organisations.
MFE and Cabinet
PI-16 PI-17(iii) A PI-12 ACTION Start on Platform 1 and continue Platform 2 57 Treasury Department. In 2010. include some paragraphs. Low. In the Instruction for Start of New Fiscal Year 2010. Problem is under control. both for revenues and expenditures. Focus on making forecasts of cash flow in daily and weekly basis and update regularly.Platform 1 1. Review percentage of annual cash appropriations that can be committed on a monthly basis to prevent possible over-commitment in periods of extreme revenue volatility or liquidity constraint. Low. which would put an obligation to budget organisations for more accurate forecast of large expenditures. MFE Procedures place in Current position Maintain current policies and procedures. authorities DRMS) was purchased in December necessary steps have been taken undertook 2008 and by the end of 2009 will for the implementation of debt necessary steps start the training of staff. 2. Problem is under control. Strengthen procedures to ensure that agreement on cash plans between MFE and BOs are more tightly aligned to revenue projections Platform 2 1. through the use of current policies and procedures. Kosovo Debt management software (CSPI-17(i) High. (Introduce a period for budget organisation to provide notice to Treasury Department prior to executing expenditure). adequate legal frameworks and needed system PI-12 for debt management PI-17(ii) Government created a STA to manage all Government transactions and these are consolidated daily. Issue is under control. 2. through the use of current policies and procedures. law after it is passed by the A Treasury Department -MFE to establish parliament.
etc. and Cabinet
No effective linkage between personnel data base and payroll
Personnel and payroll system linked together and maintained centrally with software that is manageable and effective. and must be D personnel against this in the specification. The Government has drafted the law on borrowing. Personnel and payroll controls are one of Kosovo’s main Public Administration weaknesses.
1. Personnel and payroll controls are one of Kosovo’s main Public Administration weaknesses. Need to guard against this in the specification High. Treasury has regularly held back payment due to overspending related to the lack of consideration of appropriations and allocations in the internal controls for payroll adjustment. 2. corrected. Treasury Department will implement the software for debt management and train the staff. Personnel and payroll PI-18(i) has a payroll personnel data base and payroll together and maintained centrally ambitious integrated personnel and payroll controls are one of Kosovo’s system but no with software that is manageable software systems that have been overly main Public Administration integrated and effective. database. MFE and MPA. and Cabinet
. which is expected to be passed by the parliament for debt and guarantee management. PI-12 PI-18(ii) BOs update the payroll monthly. Medium term objective is to create a regional market to invest in periods such as overnight. prior to the execution of the payroll. ambitious in design and scope. and Cabinet There have been many failed attempts at ambitious integrated personnel and payroll software systems that have been overly ambitious in design and scope.
There have been many failed attempts at ambitious integrated personnel and payroll software systems that have been overly ambitious in design and scope.
MFE and MPA. Need to guard against this in the specification
High. Kosovo currently No effective linkage between Personnel and payroll system linked There have been many failed attempts at High. Need to guard weaknesses. the changes are made in a timely basis and retroactive adjustments to the payroll are rare. No effective linkage between personnel data base and payroll Personnel and payroll system linked together and maintained centrally with software that is manageable and effective.
MFE and MPA. and must be corrected. and must be corrected.The management of cash balance has started to be carried out on daily basis and surplus funds invested in securities and deposits.
Modifying the current information systems and implementing the upgraded systems. 2. Development of a strategic plan for human resource information management and re-organization of HR-related management processes. these do not ensure that budget allocations or staff limits are not exceeded.
MFE and MPA.Upgrading human resources management information systems. The last audit was conducted in 2007.PI-20-21 PI-26
While internal controls exist for changes to the payroll. and OAG
Actions Platform 1 1. a. Personnel and payroll controls are one of Kosovo’s main Public Administration weaknesses. At the end of 2006 the Payments Division initiated a cleanup of the database to ensure that every person has an ID card number within the database. Need to guard against this in the specification High. No effective linkage between personnel data base and payroll which can form the basis for audit Systemic audits of payroll and personnel systems.Payroll administration and laying the foundations for a professional civil service a. b . 59
. Cabinet. Human resource management in the civil service. There have been many failed attempts at ambitious integrated personnel and payroll software systems that have been overly ambitious in design and scope. including pay and grading reform. and must be corrected. and b Upgrading of ICT systems for human resource management (HRMIS and payroll). The OAG conducts yearly audits of the payroll system.Improving human resource management in the core civil service 3.
monitoring and competition. Improvements awarded on legal requirement. There has been no improvement over the recent years.
PPRC. and OAG Platforms 1 and 2 The activities to be carried out under this programme include: • Monitoring the implementation of Law on Public Procurement and providing for its update to reflect emerging developments. While 80% of Though process and Target of A score. Procurement Review Board Established and operating Experience application in ”B” on short term.PI-19(i)
PI-1 PI-21 PI-24
c . but existing and planned reforms should be given time to work. Political influence on procurements is also believed to be a widespread problem. but educational and mental changes take time.
PPRC. Problem is important to address.
Medium. MFE. and OAG
The infrastructure is in place – training in application and the creation of procurement specialists to implement law. Application of less competitive procedures is considered to be used only in specific cases. Cabinet. but existing and planned reforms should be given time to work. MFE. • Review of secondary legislation associated with procurement. MFE. application expressed. Cabinet. partly due to lacking qualifications of procurement officers making them unable to implement the PPL as it should be used.
Medium. responsibilities so that it will be clear that the CEO is responsible for the PP-decision. but just maintaining the B in contracts procedures good based the short term seems difficult. but existing and planned reforms should be given time to work. and OAG
The infrastructure is in place – training in application and the creation of procurement specialists to implement law. Problem is important to address. Problem is important to address.Linkage of the HR and payroll systems with the Treasury system (Free Balance). quality of Amendments to PPL will include a change in data. auditing. 60
. It is also believed that introducing econcern about auction could improve the situation.
The infrastructure is in place – training in application and the creation of procurement specialists to implement law. need intensive investments regarding education though open concern about of procurement officers.
PPRC. Cabinet. Possible A on long term. Staying at B score likely.
but existing and planned reforms should be given time to work. meaningful for are in place in small as a percentage financial officials and comprehensive in the PI-4 both indicates not fully field of internal control of public finances. 2011 for a comprehensive presentation of the actions to be undertaken. A detailed plan of action with expected results has been developed by PPRC. Medium. Cabinet. PI-20(ii) Process for controlling public finances is comprehensiv e and meaningful. European Commission Liaison Office to Kosovo and Kosovo Institute for Public Administration. required for managing the risks). and OAG
. Medium. The activities are foreseen to be undertaken during 2009 and 2010. 2009 – January 18. B expenditures of the year. recommendations for improvement and assessing the feasibility for introduction of e-procurement. Further training in application needed. Control is through the various assigned responsibilitie s throughout different phases within BOs themselves with a final control provided by Treasury. but existing control for obligations at the end financial control system towards making public Further training in and planned reforms should be given time to work. Problem is important to address. PPA. See the INCEPTION REPORT Support to Public Procurement Reform Service Contract No 2008/169-890 Project period: January 19.• Managerial and organisational review of PPRC and PRB.
MFE. procedural following procedures PI-16 MFE. System in place. nature of capital projects. • Increasing the awareness for public procurement reforms in government. Commitment PI-20(i) Existing outstanding To underpin the effectiveness of internal System in place. PPR. although finances more relevant (in terms of controls application needed. • On-the-job training and coaching for all involved in the procurement process. and and technical and the multi-year OAG aspects. • Review of IT capacities in PPRC and PRB. There is no written regulation for simplified or emergent procedures regarding the processing of expenditures and financial transactions. business and civil society • Comprehensive development of the public procurement training program • Development of certification system for public procurement officers. Problem is important to address. Cabinet.
1Administrative Instruction (already issued by the Treasury) no. 1.2 These rules will present in detail the required procedures that must be respected by all users of the Kosovo Budget.3 CHU for FMC (Central Harmonization Unit for Financial Management Control) will develop the network for exchange of information between parties always with the tendency of creating a continuous professional collaboration on Public Financial Management and Control. and ensuring continuous professional development of civil servants with regards to MKF. 5. 5. 1. 02/2009 on Delegation of Expenditure Management to the Budget Organisations. 2. MEF. 4.2 Issuing an Administrative Instruction setting the procedures on the use of Credit Cards by Credit Card Holders and other responsible persons in BO for this program. the OB shall reduce the same amount for the salary. To increase the control over the execution of expenditures for travel abroad.1 Setting the timeframe in Administrative Instruction for 2010 Fiscal Year. Platform 2: • Payroll is moved to the Treasury. 2. which obligates the OBs to inform the Treasure for any execution of any contract with suppliers. public procurement law and all other relevant laws. BOs will be obliged to generate more accurate forecasting for large amounts of expenditures (PI-16). but preparatory time 62
. • All mass-payments transmitted using electronic transfer via Treasury and Inter-bank Clearing System (ICS) – including social welfare and payroll. Problem is important have improvements in HR and response through to address.1Establishment of Central Harmonisation Unit for Financial Management and Control (CHU/FMC) within Treasury. Problem is important to address. As noted in PI-4. Strengthen procedures to ensure that all commitments entered into KFMIS as they are incurred 4.2.
MFE.2Providing training to BO officers for KFMIS Expenditure Processing function and certification based on their achievements. 3. the process of delegation of expenditures will include the instruction to record the invoice receipt date in the system. .Supplying BOs with hardware to use the KFMIS and maintenance by Central Treasury.3. 5. but existing and planned reforms should be given time to work.1 Preparation of Rules for the Financial Management Control in accordance with international public accounting standards.PI-20(iii) B PI-4 PI-16
Compliance with financial regulation is very high and there were no exception in these regulations in regard to specific cases.
ACTIONS Platform 1 1.Increase of accountability level in financial management by delegation of tasks and accountability 2.1 Supplying government leaders with Credit Cards for spending abroad. and as well as in accordance with the principles of internal control of public finances by the European Commission. Further training in application needed.3 Signing a compliance form by the Credit Card Holder and BO. in order to have a more accurate payment processing time. which specifies that CC holder should reimburse the BO for any unauthorized use of credit card. 1.
System in place.
Medium. and if not. Promotion of internal control in compliance with internationally recognised standards and development of information exchange network between stakeholders. 5.
The financial rules not being followed for the recording of invoices in KFMIS when they are received. PI-21(i) In 2008 IAUs Some BOs have only Increase of quality level and effectiveness of IA Legal basis in place and being implemented – Medium.1.
compiled strategic and annual plans for year 2009 which were approved by senior management. MFE. The number of audits held -further increase of recommendation
Legal basis in place and being implemented – improvements in HR and response through training and qualifications. but preparatory time for reforms will require time to work.Management understanding of the audit role – meetings. contacts. MFE.
Medium.Certification and licensing of internal auditors (long term) Post-certification/-licensing continuous professional education (long term) -
training and qualifications.
CHUIA. and support for Internal Audit. Problem is important to address.
one Internal Auditor
function within IAU at Kosovo level -2 IA within each IAU . as well as the importance of underlining managerial understanding of the role of.Audit Committees (short term) . Attention is being paid to auditor training. to eliminate a risk that audit would not function according to international standards.Law application . Problem is important to address. Audits are performed based on IA international standards and professional practices.Issuing IA implementing IAL . code of ethics) – long term .
for reforms will require time to work. Cabinet
Legal basis in place and being implemented – improvements in HR and response through
PI-20 PI-26 PI-21(iii)
Internal Audit Reports compiled by the auditor are submitted regularly to senior management in line with the Law. but preparatory time 63
.Implementation of IA manual (ISPPIA. CHUIA.
The need for the FMC environment to develop concurrently with the development of Internal Audit. trainings (short term) -Management support for audit (independence and work conditions (payment and other technical conditions) (short term) Operationalisation of effective internal audit units in public entities (long term) .Issuance of IAL . Importance of adopting the proposed Internal Audit law.
some are in the process of being implemented and others are planned to take place in 2009 in line with the Action Plans.4% have been implemented. code of ethics) 3.9% recommendati ons that have yet to be implemented.
Reform Actions To achieve this goal we will undertake the following actions: 1. of which 53. Full management understanding of the audit role – meetings. CHUIA. with a further 24.
implementation rate (above 55%) (short term)
training and qualifications.937. Cabinet
for reforms will require time to work. Application of Law to be full. contacts. With respect to the 21. 2. Improved implementation of IA manual (ISPPIA.B
so far is 292 and the number of recommendati ons made is 1. payment and other technical conditions) 64
. trainings (short term) and Management support for audit (independence and work conditions.8% in the process of being implemented. MFE.
Operationalization of effective internal audit units in public entities Certification and licensing of internal auditors (long term) and Post-certification/-licensing and continuous professional education (long term)
Platform 1 • Increase number and quality of actions undertaken by BO Senior Management on implementation of Internal Audit recommendations • Continuous contact and cooperation with sector management and other relevant parties in order to further operationalize IAUs. • Certification of IA from an internationally licensed organisation (within two years) • Capacity building, recruitment of more than 60 IAs (within two years) • Training for senior management to increase their awareness on the importance of Public Finance Management and Internal Control, including IA’s role. • To full meet ISPPIA standards • Implementation of annual plan based on IA strategic plan • Comprehensive establishment of IA Committees - increasing auditor’s independence and measures for implementation of audit recommendations from management • Drafting AI for implementation of IA Law, by CHU. • Increase further the rate implementation of recommendations (above 55%) Platform 2 • Establishment of IAUs in BOs where they are not present • Continuous training for IA to increase their knowledge, skills and competencies – (continuous professional development Post-certification/-licensing ) • Coverage of more than 80% BOs with regards to IA system issues.
SECTION C. BUDGET CYCLE C(iii): ACCOUNTING, RECORDING, AND REPORTING
PI-22(i) Treasury submits all accounts reports electronically on daily basis to the revenue collecting budget organizations (both, central and local level). These bank account reports allow BOs to record daily collected revenues into KFMIS. To increase the speed and efficiency of accounts reconciliation by performing reconciliation on daily basis. Existing system in place and can be improved with training and HR development Low. Problem is under control, through the use of current policies and procedures.
Treasury Department, MFE
Treasury does not maintain any suspense account. All the payments and outflows from Kosovo Consolidated Budget are made from the STA.
Although not numerous, there are some problems in relation to daily basis STA reconciliation. In some instances there is a lack of data to identify certain amounts such as the return of salaries, social payments, pensions etc.
Existing system applied fully
Existing system in place and can be improved with training and HR development Treasury Department, MFE
Low. Problem is mostly under control, through the use of current policies and procedures.
ACTION Platform 1 • The Working Group for automatic reconciliation of accounts has been authorised. • The implementation of automatic accounts reconciliation will start with the introduction of new KFMIS version, which will increase the reconciliation speed. No data on System not applied Municipalities are responsible for provision of The KFMIS has the capacity to produce data PI-23 primary services, their financing, budgeting and but there are issues with bulk supplies. expenditure reporting. A joint World Bank, MEST and MEF Need to supplement data from KFMIS with project has started designed to improve the PETS type surveys on information not D No Public implementation of services locally. During covered by KFMIS. Expenditure 2009 this project has focused on the education Tracking sector in three municipalities with the allocation Surveys of the resources to spending units at lower level PI-8 Department of Municipal Budgets, MFE - in schools - where they will also keep records and Cabinet PI-10 on the distribution of the budget for the spending unit and these reports will be provided systematically to the spending units in SIMFK specific programs, where they will be published in accordance with LPFMA. Primary and secondary education is under the jurisdiction of local governments. Since the Accounting Plan and the Treasury Procedures are designed in such a manner to allow the registration and monitoring of budget execution to the lowest level of spending and implementation of the WB supported Education 66
Project, the level of implementation performance is considered achievable. ACTION In the future, it is important to advance the processes of budget planning and registration, in order to fully exploit the facilitations created by the Treasury system. The World Bank with its pilot-project has started to allocate the budget according to the individual schools in three municipalities. In addition, this project will be advanced with ten other municipalities next year pending full implementation and there also some ideas to start with the primary health. The Investigation Survey of Public Expenditures is also being implemented which will provide information that provide a check and assurance. Education Pilot-Project Informing all the finance officials of the Education Program and organizing training for these officials on best possible management of budget at the School level. Reports are by PI-24(i) Low. Problem is under control, More quality reports, as well as more relevant and structure of the through the use of current useful for users. A Treasury Department, MFE budget and policies and procedures. present fund PI-1-3, balance PI-10 commitment for each economic PI-12 category and BO. All reports PI-16-17 are presented in compliance with IPSAS. PI-24(ii) A PI-1-3 PI-10 PI-12 PI-16-17 PI-24(iii) The reports reliable present fiscal are and all Existing system applied Ensure existing Human Resource capability, processes and systems remain in place Treasury Department, MFE 67 Low. Problem is under control, through the use of current policies and procedures. Monthly and quarterly reports are submitted on time. Existing system applied Ensure existing Human Resource capability, processes and systems remain in place Treasury Department, MFE Low. Problem is under control, through the use of current policies and procedures.
PI-1-3 PI-10 PI-12 PI-16-17 ACTION 1. and biweekly and as requested. Such reports will be produced daily. statements of funds with CBAK. quarterly and annual reports and the explanations will be reviewed. Treasury Department will start the preparation of management reports by doing budget comparison analysis with previous years and between different categories. The standardisation of terminology used in reports in order make them more understandable for the users. which allows generation of specific reports based on requests from specific users. 3. The templates of existing monthly. The report includes statement of cash receipts and payments. Low.A
financial data. A financial PI-25(i) Financial statements of budget organisations to be Ensure existing Human Resource capability. funds with commercial 68
. report on the through the use of current submitted within the deadline set from central processes and systems remain in place KCB is produced policies and procedures. 2. a consolidated statement of cash assets and fund balances. Problem is under control. Treasury for the year A ending 31 Treasury Department. MFE December covering (i) all BOs and (ii) PI-24 KTA. KFMIS Reports Module will be implemented in order to upgrade financial reporting.
through the use of current 69
. for approval and submission to the Assembly. PI-25(ii) The MFE Minister prepares and submits to the Government.
Treasury Department. Problem is under control. It also includes a statement of non financial assets and an outstanding invoices report by BOs. processes and systems remain in place
Low. Problem is under control. cash in transit.banks. cash in hand (cash box) and designated donor fund. MFE
Existing system in place
Ensure existing Human Resource capability. The report for 2007 was signed and submitted on 31 March 2008 The financial statements of 2007 have been Existing system in place Ensure existing Human Resource capability. through the use of current policies and procedures. processes and systems remain in place Low. a final budget reconciliation report on the budget for the previous fiscal year and the two prior fiscal years. privatisation fund.
Short term: Reports in time to fit into the budget cycle and the accountability cycle. Problem is important to address. reports of sufficient quality and more reader friendly presented.A
prepared in accordance with the LPFMA and Cash Basis IPSAS Financial Reporting Under the Cash Basis of Accounting. BUDGET CYCLE C(iv): EXTERNAL SCRUTINY AND AUDIT
PI-26(i) 2007 audit activities of OAG were focused in 21 BOs.2010 1. A specific audit report for each BO is published on the website in which the detailed findings Coverage increased to be The Law on PFMA with respect to External Audit should be reviewed and necessary amendments should be made which ensure that the accountability chain will be closed by regulating both what the Assembly should do during the autumn and the requirement on the Government to take actions on what is decided by the Assembly and report back on this.
OAG. better relevance for decision makers. Training or information meetings will be organised as needed. quarterly and annual reports as foreseen in LPFMA
SECTION C. MFE.01. Treasury Department. but preparatory time for reforms will require time to work. Medium. Treasury continues to submit monthly. 2. Cabinet and Assembly of Republic of Kosovo
ACTION by 31. processes and systems remain in place and planned additional staff are recruited. The statements indicate that these accounting policies have been applied consistently throughout the period. with budget organisations regarding financial statements. End of year closure procedures instruction will be review to include some provision to ensure that budget organisations submit their financial statements within the deadlines. which represent 71% of expenditures and 86% of Revenues.
policies and procedures. a more materiality and risk 70 Ensure existing Human Resource capability.
to ensure resources for the OAG Long term: To secure a sustainable and national ownership of the internationally recognized auditing standards and good European practices. to secure resources over time Also for PI-28 To secure support capacities for MPs. to ensure resources in accordance with the agreement between Kosovo government and EU making the OAG able to tackle the national and international expectations will be crucial Also for PI-28 These measures will make the reports more interesting and relevant for MPs.are presented. A coordinated and consistent approach within the projects assisting the development of the assembly’s working procedures will facilitate the understanding of roles and responsibilities. to assure the functioning of a new audit cycle and efficiency in the core and support processes. to implement in practice the newly introduced regime gearing the budget not solely through input and to follow up 71
. to assure the independence of the Auditor General in practice. To clarify and ensure the understanding of the role of an Supreme Audit Institution in a democratic society.
oriented approach based on the total KCB budget. to build up a firm accountability praxis between the Assembly and the Auditor General. Better on-going dialogue and clearer accountability arrangements will clarify the respective roles in the accountability process. to secure a better audit coverage. To incorporate the support functions in the development process is one of several needed steps.
There is some evidence of follow up. This is also the case for individual BO audit reports. MFE.results variables. the Timeliness to be improved OAG.
. Secure a good professional base through strengthening university curriculum and further training of external and internal auditors in general. OAG reports that in 2006. MFE. Secure the professional development by supporting that the audit profession as such must be the driving force for its development. but preparatory time for reforms will require time to work. Cabinet and Assembly of Republic of Kosovo Medium. Problem is important to address. Problem is important to address. Cabinet and Assembly of Republic of Kosovo
PI-21 PI-27 PI-26(iii)
Follow up OAG. but preparatory time for reforms will require time to work. A formal response by the MFE is included in the OAG report with a follow up comment by the OAG. to secure resources over time PI-26(ii) Audit Report on Financial Statements of the KCB for the Year ended 31 December 2007 was published in November 2008 and is addressed to the Minister of MFE and the Assembly. to assure the independence of the Auditor General in practice.
Kosovo’s overall PFM on revenue and the same in all respects (data. Introduce amendments to the Law on the OAG to guarantee the financial independence of the OAG as well as ensuring consistency in relation to other laws within the PFM field. the later by creating a support unit The Assembly has the wherewithal to be able to 73
. Corporate Development Strategy and fundamental standards are adopted. focuses on sustainable interventions in form of coaching and mentoring to facilitate ownership of the overall strategies and standards. “owned” and implemented by staff 5. Ensure that the Twinning arrangement started in September 2009 d. policies. Until the Assembly can PI-27(i) focuses its capacity to carry out annual budget are wholly consistent where the need to train Assembly Budget and Finance fulfil its PFM responsibilities attention largely its work annual budget and the first year of the budget is Committee members and provide sufficient fully. This former can be system cannot be complete. e.) achieved by focused workshops and study information in tours.Government underwent some changes. 6. (which it listed) based on the implementation of previous audit recommendation s. High. Platform 1 (audit season 2009/10) 4. However OAG made some 971 recommendation s in 31 BOs in 2006 and 2007. Ensure timeliness of reports in the context of a revised audit cycle starting with interim audits during the budget year making follow up of earlier recommendations and examination of financial management and internal control systems before the Annual Financial statements are finalized. builds on experiences gained so far and the approaches developed and outlined in the Corporate Development Strategy and the fundamental standards. strategies and adequate back up. 3. On-going strengthening of coverage. C expenditure etc. will be flexible and linked to operational needs and eventual changes in these needs Platform 2 (audit season 2010/11) 2. quality and relevance (more focus on performance indicators and performance audit) The Committee Insufficient technical The objective is to ensure that MTEF and the In addition to action related to PI-11 and 12. 606 are still waiting implementation by the end of 2008. f.
Assembly of Republic of Kosovo
The objective is to ensure that MTEF and the annual budget are wholly consistent where the annual budget and the first year of the budget is the same in all respects (data. Clear rules exist for in-year budget amendments are usually respected.
High. ceilings. and thus Kosovo’s overall PFM system cannot be complete. the Assembly cannot fulfil its PFM responsibilities fully.
the Annual Budget Law. Assembly of Republic of Kosovo. Until the Government can act more promptly. 2007 and the 2009 budget was submitted on November 3. need to train Assembly Budget and Finance Committee members and provide sufficient and adequate back up. Kosovo’s overall PFM system cannot be complete. and thus Kosovo’s overall PFM system cannot be complete.
Insufficient technical capacity to carry out its work
In addition to action related to PI-11 and 12. Assembly of Republic of Kosovo. This former can be achieved by focused workshops and study tours.
review the budget and MTEF
with appropriate skills. Until the Government can act more promptly. 2008. the latter by creating a support unit with appropriate skills. Cabinet
Procedures for the deliberations on the budget by the Budget and Finance Committee are well established. Assembly of Republic of Kosovo. MFE. Cabinet. in
Budget submitted on time
Emphasize the need to increase timeliness of decisions regarding the MTEF. MFE. policies.
The budget should be submitted to the Assembly prior to October 31.) Sector strategies that reflect ministerial policies are produced and resources are allocated to
Strengthen the capacity for project planning and management in order to reduce the frequency and need for budget amendments and transfers. Cabinet
High. strategies etc. Until the Assembly can fulfil its PFM responsibilities fully. etc. and to adhere to concepts of budget discipline. the Assembly cannot fulfil its PFM responsibilities fully. The 2008 budget was submitted to the Assembly on November 11. Nonetheless. MFE.
which has harmed the concept of budget discipline in the BO and the Assembly. extensive reallocations occurred (outside of the planned reallocations as provided for by the Mid-Year Review process). Until the Assembly can fulfil its PFM responsibilities fully. Cabinet. The Assembly and the Budget and Finance Committee review the OAG’s reports within 2 months of receiving them. Reports are not scrutinized very closely because of a lack of capacity. This former can be achieved by focused workshops and study tours Assembly of Republic of Kosovo
The Assembly has the wherewithal to be able to review audit reports and make recommendations and follow up on them
Need to train Assembly Budget and Finance Committee members and provide sufficient and adequate back up. In-depth hearings on key findings take place occasionally. but these reports are not scrutinized very closely. but reforms will take time to work. BOs
. and cover only a few audited entities. Until the Assembly can fulfil its PFM responsibilities fully.
implement them which reflect relative priorities in line with established ceilings in the MTEF and annual budget. This former can be achieved by focused workshops and study tours. Kosovo’s overall PFM system cannot be complete.
The Assembly has the wherewithal to be able to review audit reports and make recommendations and follow up on them
Need to train Assembly Budget and Finance Committee members and provide sufficient and adequate back up. but reforms will take time to work.
Reports are not scrutinized very closely because of a lack of capacity. Kosovo’s overall PFM system cannot be complete. Assembly of Republic of Kosovo.PI-10-12
both 2007 and 2008 budget cycles.
implementation and monitoring of the foreign assistance in the sectoral level should be done by the respective sectors. It will also handle budget and accountability issues (appointing auditors and take standpoints on the budget) related to the AG and the OAG. Reports are not scrutinized very closely because of a lack of capacity. The overall strategy for the Assembly and an Action Plan are outlined in the Strategic Action Plan of the Assembly of the Republic of Kosovo. whereas ACDEI is responsible for overall donor coordination ACDEI. This Committee is in the process of being made functional This Committee will deal with the report on the budget execution from the Government such as KCB. PM. The Assembly has the wherewithal to be able to review audit reports and make recommendations and follow up on them Need to train Assembly Budget and Finance Committee members and provide sufficient and adequate back up. The Parliamentary Committee for Oversight of Public Finance has been established as a new committee which will have the mandate for the oversight of expenditure of public money by all public institutions which are financed from the Kosovo budget. to ensure adequate consideration of the fiscal impact of new laws and to enhance accountability in public financial management. SECTION D. the decision was taken to start with the donor coordination in the sectoral level. the Annual Procurement report etc) and the Annual Audit Report from the AG.PI-26-27 PI-28(iii) C Actions are recommended from reports regarding critical issues which are of the most interest to the Committee. Until the Assembly can fulfil its PFM responsibilities fully. Donor relations and the provision of Budget Support will be essential to Kosovo’s long-term development
. The main . DONOR PRACTICES
D-1(i) Donors did not provide the budget support committed at the 2008 Donors Conference There is insufficient human resource capacity in the donor coordination process for undertaking a complex level of coordination and the many functions that has to be carried out Based on main conclusions from the High Level Forum. but reforms will take time to work. but they are rarely acted upon by the BO and there is little or no follow-up.
Assembly of Republic of Kosovo
The goal is to improve the analytical capacity of the Budget and Finance Committee of the Assembly. and Cabinet High. This former can be achieved by focused workshops and study tours High. The coordination. Kosovo’s overall PFM system cannot be complete. The Kosovo Government (line ministries and government agencies) and the Development Partners agreed to closely work with ACDEI and cooperate with them in all activities related to donor coordination and involve the ACDEI in all initiatives undertaken in all sectors to ensure better streamlining and flow communication. held on 31st of March 2009 in Prishtina. CHU/FMC. November 2008.
Donor relations and the provision of Budget Support will be essential to Kosovo’s long-term development
The conditions for score C (or higher) are not met
There is insufficient human resource capacity in the donor coordination process for undertaking a complex level of coordination. Donor reports on actual expenditures in RIMS database are out of date. and support governmentled coordination.by the ACDEI. as following: in public administration reform as donor leader are DFID and EC jointly. This in turn may be a result of over-pledging as well as a limited absorptive capacity within Government. to strengthen the Government’s management and reporting on donor assistance and to improve coordination among donors. In the health sector. health is Luxembourg. by establishing offices for Coordination of Development and European Integration. Donor relations and the provision of Budget Support will be essential to Kosovo’s long
After the hosting process. The education and water sectors are being prepared for the first meeting at the end of October. PM and Cabinet High. education. water. decentralization and public administration reform. AMP seeks to further increase donor confidence in government systems. An administrative instruction will be signed by the Prime Minister before the end of October 2009 for strengthening the line ministries capacities. The donors have been organised within these five sectors.
Not all major donors provide budget estimates for disbursing project aid at lead for the government’s coming FY and at least 3 months prior to the
Donors must be made aware of the difficulties caused by their lack of timely aid estimates and disbursements. and they must act accordingly. These offices will be directly coordinating with ACDEI. have prepared the ToRs and appointed the donor leaders. It was agreed to start with the sectoral coordination in five sectors: health. while in the PAR and decentralization sectors the donors are still organizing their groups. the Development 77
responsibilities for these sectoral working groups have been prepared by ACDEI and distributed to all sectors. The program will increase transparency and accountability by introducing a web-based repository of aid data and aid funded A plan exists to increase human resources and enhance the level of coordination with donors regarding disbursement estimates of donor budget support.
High. the ACDEI will start with the implementation of the Aid Management Platform. education is SIDA and in the waters sector is Switzerland. decentralization is USAID. Beginning November 2009. The offices will be made operational by the end of December. the first coordination meeting has already taken place. ACDEI.
MTEF. strengthen the transparency of information on donor-funded activities information.
High. When the implementation of the system starts. will be transferred into the new platform while the RIMS database will cease to be used. The narrative version was not prepared so far. including enabling the Agency to produce regular. as complete data has not been received as the World Bank has not report any data and USAID did not report actual disbursements for 2008.g. and Cabinet
Donors must be made aware of the difficulties caused by their lack of timely aid estimates and disbursements. priority setting). PM. and among the donor community (e. Donor relations and the provision of Budget Support will be essential to Kosovo’s long
ACDEI. accurate reports on donor activities. all the data on donor activities in the RIMS database. on-going projects in the year 2009. and commitments for years 2010 and 2011. improve strategic planning by enabling a clearer picture of the relationships between projects and strategies (e. and they must act accordingly. since donors will report their activities themselves. project-level coordination. EPAP) as well as reduce transaction costs Donor reports on actual expenditures in RIMS database are out of date. The main goals of AMP are: to strengthen the Agency’s ability to serve as a “one-stop-shop” for basic information on donorfunded activities. This overview contains information on the amount disbursed during 2008. a general overview (in Excel format) on donor's activities has been prepared. . ACDEI.across government entities. PM and Cabinet
Donors do not provide quarterly reports within 2 months of end of quarter on the disbursement of at least 50% of externallyfinanced project estimates in the budget. on-going activities during 2009 as well as planned activities for 2010 and 2011. between the government and donors.
Gateway Foundation company will start with intensive training of donors. Information does not provide a breakdown consistent with the government’s budget classification.year’s start
programs for development partners and government ministries. provide a tool that facilitates the planning process for major stakeholders. strengthen coordination . Based on donor reports.g. The Administration and the management of this system will be done by ACDEI. RIMS currently contains up to date data over the activities of donors regarding the expenditures of the year 2008.
the report will be more general.D-3
Less than 50% of aid funds to central government are managed through national procedures. . and Cabinet
High.In the first year. which will also enable planning for years to come.Once the implementation starts. after hosting the system will be tested to be started afterwards with trainings fot its use and administration. Donor relations and the provision of Budget Support will be essential to Kosovo’s long-term development
Actions .After the first year. . PM. the system will be adjusted to meet requirements of the Government to offer information that will be needed for planning and adjustment in linewith the developement priorities. ACDEI. .
.During October implementation of this system will commence..
Donor grants are received according to procedures which are not consistent with standard government procedures. . giving sufficient details over activites of donors.Experts forn Development Gateway Foundation during September have finished the assesment of needs that this platform should address for an efficient coordination. an agreemnt will be signed relating to reports an dtheir timing. and they must act accordingly.
Donors must be made aware of the difficulties caused by their lack of timely aid estimates and disbursements. the link between the foreign assistence with MTEF and EPAP.