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Pakistan MTBF

Quarterly Report October December 2004

QR MTBFOct_Dec04_20Oct04ver3.1.doc Page 1 of 14

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17 January 2005 PricewaterhouseCoopers LLP

Department for International

Development

Pakistan Strengthening the Medium Term Budgeting

Framework

CNTR 02 4259

Quarterly Report: October December 2004


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Contents

Section Page

Document Control ............................................................ ............................................................. ..................... 3

Abbreviations and Acronyms ....................................................... ........................................................... ........... 3

1 Summary.......................................................... ........................................................... ................................ 3

2 Project Deliverables October December 2004.............................. ........................................................... 3

3 Work Programme January March 2005..................................................................... .............................. 3

Annex 1 Work Plan ............................................................... ............................................................... ........... 3


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Document Control

Authorisation

Name Date

Prepared by: Farooq Khan 10 January 2005

Reviewed by: Stuart Tibbs 14 January 2005

Authorised by:

Change history

Version No Date Comments Summary of changes

Draft 1.0 10 January 2005

Final draft 2.0 14 January 2005 Layout changes. Minor amendments. Annex added.

Final 3.0 17 January 2005

Distribution list

This document has been distributed to:

PwC project team

MTBF Secretariat

DFID Pakistan

DFID London

CaveatNo reliance should be placed on this draft report and it does not constitute our definitive opinions and conclusions at this stage. These

will be contained solely in our final written reports or letters. Any oral comments made in discussions with you as concerns our reports

and letters are not intended to have any greater significance than explanations of matters contained in the final written reports or letters.

We shall not be held responsible for oral advice unless we confirm such advice formally in writing.

This report has been prepared for and only for the UK Department of International Development (DFID) in accordance with the terms of

our engagement letter for contractCNTR 02 4259 and for no other purpose. We do not accept or assume any liability or duty of care for

any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by

our prior consent in writing.


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Abbreviations and Acronyms

ADB Asian Development Bank

AGPR Accountant General Pakistan Revenues

AM Aide Mmoire

BCC Budget Call Circular

CGA Controller General of Accounts

CoA Chart of Accounts

DAO District Account Office

DDO Drawing and Disbursing Officer

DFID Department for International Development

FABS Financial Accounting and Budgeting System

FAD Fiscal Affairs DepartmentFAO Financial Advisors Organisation

FAQ Frequently Asked Questions

FMU Financial Management Unit

GFS Government Financial Statistics

GoP Government of Pakistan

IMF International Monetary Fund

MoF Ministry of Finance

MoH Ministry of Health

MoPD Ministry of Planning and Development

MoPW Ministry of Population Welfare

MTEF Medium Term Expenditure FrameworkMTBF Medium Term Budgetary Framework

NHF National Health and Population Welfare Facility

NFC National Finance Committee

PandD Planning and Development

PAO Principal Accounting Officer

PEMD Planning and Economic Management Department

PIFRA Pakistan Improvement to Financial Reporting and Audit

PRMP Punjab Resource Management Programme

PSDP Public Sector Development Programme

PwC PricewaterhouseCoopers

SAP Enterprise resource planning model implemented under PIFRATAMA Technical Assistance Management Agency

TN Technical Note


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1 Summary1.1 The MTBF Budget Call Circular (MTBF BCC) was issued by the Budget Wing

(Ministry of Finance) to the Ministries of Health and Population Welfare (MoPW)

on 12 November 2004. The BCC included guidelines, instructions and forms to be

filled by the Drawing and Disbursing Officers (DDO) and other officials involved in

budget preparation.

1.2 A four-day MTBF workshop was held for all the DDOs and budget preparingofficers for Ministry of Health. This workshop helped in building capacity relating

to MTBF over one hundred DDOs and budget preparing officers. The feedback has

been very positive. TAMA provided logistical support in holding these workshops.

1.3 The sector review process began in December with the assistance of TechnicalAssistance Management Agency (TAMA). The first draft of the Sector Review for

MoPW has been received. The progress on the Sector Review for Ministry of Health

has been slower.

1.4 During the last meeting of the MTBF Ceiling Committee held on 23 December2004 discussion was held on providing indicative budget ceilings to MoPW.

1.5 The MTBF Project Team has been further strengthened with two full time financialanalysts working in Ministry of Health where an MTBF Cell has been created. The

objective of the cell is to provide comprehensive implementation support to the

MTBF process. MoPW has also been strengthened with an additional financialanalyst.

1.6 An MTBF Coordination Committee in the Ministry of Health (MoH) has beenformed headed by the Joint Secretary Administration. This committee meets on a

regular basis to monitor MTBF progress in MoH.

1.7 The Financial Management Application (FMA) is currently being piloted atPakistan Institute of Management Sciences (PIMS). The application is being tested

and refined to meet the user requirements. It is expected that the application will be

ready to accept live data in the third week of January 2004.

1.8 Paul Harnett visited the Project in November for ten days. During his visit hereviewed the preliminary results of the planning exercise carried out in MoPW and

also finalised the Terms of Reference for the Sector Reviews.

1.9 A DFID mission took place in the third week of November 2004 to look at futuredirection and requirements of the Project.

1.10 MoF has given official approval for hosting the MTBF website(www.mtbfpakistan.gov.pk) which is now live and running. It is being updated on a

regular basis.


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2 Project Deliverables October December 2004MTBF Budget Call Circular

2.1 The MTBF BCC was finalised in November after wide ranging discussions andvarious iterations held in the Budget Wing, Planning and Development Division,

Ministry of Health and Ministry of Population Welfare.

2.2 The MTBF BCC explains the linkages between budget reforms, good governanceand Pakistans Poverty Reduction Strategy Paper.

2.3 The calendar in the MTBF BCC shows the schedule of activities for preparing theMTBF. This dovetails with the regular budget process although there are additional

steps specifically relating to establishing ceilings and undertaking Sector Reviews

ahead of detailed budget preparation.

2.4 Extensive guidelines have been provided for the DDOs and the budget-preparingofficers. Besides increasing the budget dimension from single year to multi year, the

focus of the budget preparation under MTBF is also to move away from incremental

line item budgeting and increase the output-orientation for both current and

development budgets.

2.5 Separate forms have been prepared for the current and development budgets. Softcopies of the MTBF BCC and forms are also available on MTBF website.

2.6 In the future, the MTBF BCC could be used as the basis of developing acomprehensive manual.MTBF BCC implementation activities

2.7 MoPW stands well sensitised about the MTBF reforms as a result of the budgetingand planning exercise (involving all Provinces) that took place in September and

October 2004.

2.8 The initial MTBF estimates in MoPW have been prepared. Once refined they wouldform good basis for holding negotiations for the budget ceilings.

2.9 With the issuance of the MTBF BCC, implementation activities under the Project inthe two pilot ministries are in an intensive phase.

2.10 Activities in MoH were instigated by holding an initial briefing including apresentation by the Project Coordinator on MTBF reforms. This was held on 2 and 4

December 2004 and was attended by most of the senior staff in the Ministry of

Health. Joint Secretary Administration and Deputy Director General (Planning and

Development) chaired the meeting. The latter person has been nominated as the

Focal Person for MTBF in Ministry of Health.


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2.11 This briefing was followed by a detailed 4 day MTBF training workshop for all thebudget preparing officers and DDOs in the Ministry of Health from all over

Pakistan. This focused on operational aspects of MTBF. During the workshops the

participants were informed about the MTBF concepts, MTBF BCC, steps involvedin preparation of MTBF and what is expected of them in coming months. This was

followed by a practical exercise that helped them in putting theory into practice.

More than 100 participants attended the workshop. The workshop has been well

received and the feedback is positive (Annex 1).

2.12 Following the workshops, the MTBF forms for the current budget included in theBCC were modified. Specific forms were developed for hospitals, MCH centres,

dispensaries, drugs control administration, establishments. These have been

communicated to all the spending units.

2.13 The MTBF Project Team is now carrying out follow-up (visits and phone calls) withall of the spending units in MoH and providing hands on support to the budget

preparing officers and DDOs involved in preparation of MTBF estimates.

Establishment of ceilings

2.14 The MTBF Project Team is actively providing support to the Budget CeilingCommittee. The fourth meeting of the Budget Ceiling Committee was held on 23

December 2004 under the chairmanship of Joint Secretary, Budget Wing. Various

options and scenarios were discussed. During this meeting MoF also provided

MoPW with preliminary indicative MTBF ceilings for 2005-08 to which they

reacted positively. However, these will need to be firmed up once the baselines

estimates are available and Sector Review exercise is complete.

2.15 MoH has been invited for the fifth meeting of the Budget Ceiling Committee, whichhas been fixed for 12 January 2004. It is estimated that indicative ceilings will be

finalised and communicated in January 2005.

Financial Management capacity in line ministries

2.16 An oracle-based application called FMA has been developed primarily for MoHwhich will address the financial management needs of the spending units.

2.17 The FMA implementation plan is firstly to refine and test the application and then toreplicate. It is currently being refined based on live experiences from PakistanInstitute of Management Sciences (PIMS) which is a large health facility. It is

expected that refinements will end in the second week of January 2005. After that

live data will be fed into the system.

2.18 The MTBF training workshops held in MoH (14-16 December 2004) helped inbuilding capacity of the budget preparing officers and the DDOs. The MTBF

Project Team is now actively providing hands on support to the spending units.


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Logistics and coordination

2.19 An MTBF Cell has been created in Ministry of Health, furnished the by MTBFProject. Two full time financial analysts (Azfar Shahzad and Dawood Ahmed)

stationed in the MTBF Cell are providing support. Anam Hussein has also joinedShezad Sarfraz providing support to MoPW.

2.20 In MoPW, the Director Planning and Director Financial Management have beentransferred. This has resulted in certain delays in refining the planning exercise that

was carried out in September and October 2004.

2.21 Initial procurement of hardware for Pilot Ministries is complete.2.22 An interactive website (www.mtbfpakistan.gov.pk) has been developed. It has been

hosted by Ministry of Finance and has linkages with Ministry of Finance official

website (www.finance.gov.pk).

2.23 MTBF Project Team and MoF have maintained close coordination with TAMA whoprovided logistical support to MTBF in holding the MoH MTBF workshops (14-17

December 2004).

2.24 Besides the above, four different technical assistance requests have been submittedto TAMA through Ministry of Finance. MTBF Project Team provided support in

preparing the Terms of Reference. The four technical assistance request are:

Sector Reviews for MoH and MoPW; Comprehensive Training Strategy for Financial Management; Funds and expenditure tracking study Budget Execution Training

2.25 The frequently asked questions (FAQs) have been drafted. They are presently withthe MTBF Secretariat for final review and publication. The Strategy Paper, the

output from the Study Tour, will be published along with the FAQs.

Sector Reviews

2.26 Sector Reviews are an important part of the MTBF, providing the opportunity tomove away from incremental budgeting and to ensure that budgets are effective in

implementing policy. Paul Harnett (international expert on PEM and Sector

Reviews) visited the project in November 2004. He reviewed the preliminary results

of the medium term planning and budgeting exercise in MoPW and also assisted in

finalising the ToR for the Sector Reviews.

2.27 Keeping in view time constraints, the Sector Review has been divided into twostages a rapid review and a detailed review. The plan is to feed the results of the


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rapid review into the budgeting process for 2005-06. The detailed review will be

completed by May 2004.

2.28 TAMA is providing consultancy support in carrying out the Sector Review for MoHand MoPW. First draft of the MoPW review has been received.2.29 The estimates of the medium term planning and budgeting exercise in MoPW have

been consolidated. These need refining.

Working group staff in line ministries

2.30 In MoPW there have been some changes to the Sector Review Team. Abdul Ghaffar(Director Planning) has been replaced by Malik Qasim Khan. Iqbal Ahmed

(Director Financial Management) has been posted as Director General Monitoring

and Statistics. The post of Director (Financial Management) is currently vacant.

2.31 Keeping in view the complexity and number of the spending units, MoH has taken amore proactive approach by establishing an MTBF Coordination Committee under

the chairmanship of Joint Secretary (Administration). Other members include

Deputy Director General (Planning and Development), Deputy Secretary (Budget),

Section Officer (Budget), Section Officer (Planning and Development) and the

MTBF Project Coordinator. The group meets on regular basis to monitor progress.

Deputy Director General (Planning and Development has been nominated as the

Focal Person).

Other activities

2.32 During the month of December 2004, the project team was invited to participate inthe PRSP costing workshop organised by TAMA. The objective of the workshop

was to discuss the results of the initial findings of the study.

2.33 Mehmood Akhtar visited London in November 2004. The objective of the visit wasfor Mehmood Akhtar to learn about how multiyear budgeting works in the UK and

how spending reviews have been conducted. He was accompanied by the Project

Coordinator. As an introduction, Mehmood Akhtar met with PwC experts on UK

government structures and recent financial management reforms. Meetings were

then held with the Department of Health and the Department of Education and

Skills with staff centrally involved in the two yearly spending review processes. Ingovernment, Mehmood Akhtar also met with Peter McDermott in Her Majesty's

Treasury.

2.34 Other meetings were held with consultants (Andrew Bird and Carolyn Stanforth)who had wide ranging experience of public expenditure management reforms and

MTEF development in other countries including Uganda, Newly Independent

States, Sri Lanka and Bangladesh. Mehmood Akhtar also met with John Roberts,

ODI, to discuss international country experience with output-oriented budgeting.


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2.35 An MTBF Forum was held on 22 and 23 October 2004 in Lahore by PunjabResource Management Programme (PRMP) sponsored by ADB. On PRMPs

invitation, the Project Coordinator delivered presentation on the international

experiences on MTBF and the progress of the MTBF project at the federal level;

2.36 The MTBF Project Team is also providing guidance and support to the TAMAConsultants in the funds tracking and expenditure study being led by the Budget

Wing.

2.37 In order to enhance overall support to the spending units, a mechanism for postingquestions has been created on the MTBF website. All questions and queries can now

be posted on the website. Once posted they will be forwarded to all the MTBF

Project Team members for reply. The target reply time is twenty four hours.

3 Work Programme January March 20053.1 The Work Plan at Annex 2 sets out progress to date and the expected timing of

activities during the next period.

MTBF BCC Implementation

3.2 The MTBF Project Teams work during the next quarter will focus on implementingthe activities set out in the MTBF BCC. This will include the work of the MTBF

cell providing ongoing support to DDOs and budget preparing officers.

Sector Reviews3.3 The MTBF Project Team will be actively involved in assisting the TAMA

consultants for the Sector Review process. Initial draft for MoPW has already been

received where as work on the MoH Sector Review still needs to be done.

Logistics and coordination

3.4 MTBF Project Team will remain in close contact with the TAMA team for overallcoordination.

3.5 The website will be updated as and when new developments take place.Establishment of ceilings

3.6 The MTBF Project Team will continue providing assistance and support to theBudget Wing (MoF) and Pilot Ministries in finalising the budget ceilings. It is

hoped that the budget ceilings will be finalised in January 2005.

Financial management capacity in line ministries

3.7 The FMA is initially being piloted in the Pakistan Institute of Medical Sciences.Once that is complete and successful it will be rolled out to other spending units in

MoH. A detailed plan will be prepared for roll-out.


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3.8 Holding of MTBF workshops have resulted in building capacity of DDOs andbudget preparing officers in the Ministry of Health. This is being followed by visits

to the spending units and providing on-job support.


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Annex 1 Work Plan


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Annex 2 Feedback - MTBF Workshop (MoH), December 2004


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2004 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers to the

PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, other

member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal

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