Budget Integration, Program Budgeting

and

Reengineering of Business Processes

in

Line Ministries

Jean-Marc LEPAIN Budget Adviser Public Finance Specialist Ministry of Finance, Kabul jlepain@yahoo.fr

Budget Integration

Budget Integration has two aspects:

Integration of two documents: Ordinary and Development Budget;

The creation of a fully integrated organization through the integration of two processes.

New Budgeting Concepts

Program based budgeting

Performance based budgeting (through performance based indicators and output and outcome tracking)

Provincial budgeting

A complex consultative Process

Budgeting becomes multi-organizational: ANDS

CGs

MoF

Line Ministries

MoEco

Provincial Development Committees

Provincial council

Parliament

Organizational Issues

Consultation and cooperation with many organizations, stakeholders and decision makers becomes essential.

All line-ministries must have a common organization. It means that the integration process must be controlled by MoF and validated by the Steering Committee.

Culture change is a major challenge.

Organizational Changes

Organizational Changes have two aspects:

Organizational changes resulting from budget integration;

Organizational changes resulting from the introduction of program budgeting.

Strategy toward Program Budgeting

Each Ministry will have to develop a three year strategy toward program budgeting.

Implementation will be gradual.

Modification of the new budget classification will come first

Merging of administrative department into a support program covering finance, human resources, IT, procurement, etc., will be gradual.

Program Structure

Programs must cover the Ministry’s mission statement;

Programs must be limited in number (5 to 7);

Programs must have a relative managerial autonomy;

Programs must have independent resources (finance, human resources, assets);

Programs must be integrated in the overall ministry strategy;

Programs must not overlap.

Process Mapping

Programs are made of sub-programs, activities and projects. A seminar on program designing will be organized within a month;

Program designing might beneficiate from modern Business Process Reengineering such as process maping and wotkflow analysis. MoF will provide assistance in such areas.

Line-Ministries Management Structure

An Administration Program will provide support to all other programs and will cover, planning (mostly consolidation of program planning activities), Finance (including budgeting, payment processing, accounting and reporting), Procurement, Human Resources, IT, etc.

The integration of asset management (mostly buildings and vehicules) is still under discussion;

The Planning Department can integrated into a Policy and Coordination Department under the Administration Program, but must planning activities will be decentralized and the responsibility of programs;

A Finance Department supervising and controlling all financial affairs must be created, including budgeting, grant management, budget execution, accounting and reporting

Provincial budgeting will require a dedicate unit

Other issues: HR and payroll

Policy and Coordination

Updating of sector strategy

Definition of program and sub-program

Project structure

Definition of targets and performance indicators

Coordination with other ministries

Technical assistance to provinces

Monitoring of provincial implementation plan

Tashkil

Finance Department

Aid Coordination

Budget Unit

Budget Execution Unit

Procurement (To be discussed)

Accounting

Reporting

Program Structure

Decentralized model (MRRD / Project Implementation Units) versus centralized model

Level of integration with the Policy and Coordination

Department

Level of integration with the Finance Department

Level of integration with the HR Department

Human Resources

Recruitment

Career path

Training

Payroll management

Administration

Logistic

Legal Affairs

Public relations

Small procurement

IT

Change Management

Change Management requires a Change Strategy.

Change is not just about organization, it is about people and mind set.

Change Management requires unity of vision.

Change Management requires a strong leadership.

Key Strategic Issue

Gradual approach

Big Bang approach

Change Strategy

A written change strategy must be prepared. The Change Strategy must cover:

Implementation Team

Communication Plan

Capacity Building Plan

Training Plan

Consultation seminars

Work Plan

Reporting

Communication Policy

Communication is an important element of Change Management. Communication must be:

Planned in advance

Controlled and authorized

Timely

Targeted

Work Plan

Three phases:

(1) Analysis

(2) Design and Planning

(3) Physical restructuring

Analysis

Clear definition of the objectives (project mission statement)

Process Mapping and workflows

Identification of new requirements and of their organizational impact

Identification of all unit affected

Assessment of the existing capacity and of new capacity need

Change Management structure

Identification of HR issues (recruitment, pay scale, etc.)

Design and Planning

New process map

New organization chart

ToR of business unit

Job Descriptions

Training plan

Define outputs and design reports

Revised Work Plan

Physical Integration

Define time horizon

Manage the project by phases

Act quickly on HR issues

Bring all people in one physical location

Provide regular on the job training

Budget Circular

Should make reference to the Public Finance Management Law

Outline the implementation team mission

Define the responsibility of the Finance Department

Define expected results at the end of the Fiscal Year