Incorporating Budget Programs in the Government Accounting System - The case of Namibia
Posted by Dimitar Radev .
Many countries do not fully benefit from all the possibilities of program budgeting in terms of budget credibility, expenditure control and public resource allocations. One common reason is that while they prepare the budget based on programs, they do not organize their accounting and expenditure control systems on a program basis. There is little value for these countries in further developing program budgeting if spending cannot be accounted for, reported, and controlled according to programs.
Namibia presents a good example of how such an issue can be successfully addressed.
The country has made significant progress in strengthening the medium-term, program and performance-based orientation of the budget. Since 2001/02 the annual budget has been presented within a rolling three-year Medium-Term Expenditure Framework (MTEF). Constituent sectoral Medium-Term Plans (MTPs) have been prepared and published since 2004/05. The MTPs set out for each ministry the priorities for three years, objectives (outcomes), programs and activities, and allocation of funds by programs and sources of funding. Thus, the MTPs form the basis for the move towards program budgeting, as the ministries are required to prepare their budget submissions in the form of programs. The MTPs also incorporate a Performance Effectiveness Management Program (PEMP), the main purpose of which is to introduce performance-based measures in public policy implementation.
However, the disconnect between the program and performance management frameworks and the PFM infrastructure, including budget classification, chart of accounts (CoA) and the Integrated Financial Management System (IFMS), remained a major challenge. To address this challenge, the authorities adopted, with assistance of the IMF’s Fiscal Affairs Department (FAD), an approach that could be summarized as follows:
• The conditions required for fully effective program budgeting include both a fully operational program budget process and significant managerial capacities related to managing against objectives and results. The first priority for Namibia is to implement a fully operational program budget process.
• Implementation of a fully operational program budget process should be undertaken in two phases involving: (i) amendments to the budget classifications, chart of accounts and IFMS that will enable expenditures to be accounted and reported on a program and activity basis; and (ii) the development of a program-based expenditure control framework and supporting regulations; and passage of amendments to the State Finance Act giving legal authority to these measures.
The first phase in operationalizing program budgeting is presently under implementation. It includes the introduction of a program classification and amendments to the CoA by adding segments for programs and activities, and incorporating these in the IFMS. The authorities plan to introduce the changes with the 2010/11 budget and to establish a program-based expenditure control framework and supporting regulations with the 2011/12 budget. They also plan to further develop the capacity for managing against objectives and results. This will take substantially more time and sustained efforts, involving: alignment of the PEMP with the program structure; development of a performance monitoring tool; introduction of targeted program reviews; and establishment of a relevant institutional infrastructure.
The following lessons could be drawn from Namibia’s experience in advancing program budgeting that might be relevant to other countries:
• There is little value in developing program budgeting if spending cannot be accounted for, reported, and controlled according to programs;
• Operationalizing program budgeting requires relevant changes in the budget classification, CoA and IFMS;
• Developing capacity for managing against objectives and results takes more time and should come next.
 Based on recent FAD missions to Namibia, involving staff and external experts, including David Webber, Richard Hughes, Robert Clifton and the author of this note..