Quarterly Report 01 October 2013 - 31 December 2013

The project focused on expanding the Performance Program Budgeting (PPB) method to all local budgets in Ukraine. Key activities included training specialists from the State Treasury Service and local government officials in PPB methodology, as well as updating the PPB handbook to reflect changes in legislation. Regional PPB trainings were conducted in various oblasts, including Crimea, Kyiv, and Sevastopol. The trainings were attended by heads of budgetary organizations and institutions, and a training-of-trainers approach was used to build the capacity of local PPB specialists. The Interbudgetary Relations Reform Task Force, comprising specialists from the Ministry of Finance, State Treasury Service, line ministries, and MFSI-II experts, supported proposals for improving the standard lists of budget programs. The National Advisory Board approved MFSI-II experts' suggestions on improving the PPB methodology and legislative basis. The changes will aid in settling problems that may arise when forming local budgets based on PPB. The task force also discussed and approved steps to improve PPB software developed by the Ministry of Finance of Ukraine for local level government. Seven cities were selected to participate in Year Three of the project, with IBSER agreeing to help increase the local government's energy efficiency by introducing energy expenditure monitoring in the local budget and identifying and using the actual economy of budget resources generated through energy-saving activities. MFSI-II experts completed performance indicators for the Education and Culture sectors, amendments to the Standard Lists of Budget Programs, and amendments to the typical list of Environment and population health performance indicators for local budget programs under their expenditures. The proposed amendments and indicators were forwarded to the Ministry of Finance for review and approval, with the goal of reducing the number of budget programs, optimizing local government performance indicators, fostering improved transparency of the budget process, and reducing the administrative burden on local government employees. MFSI-II experts also finalized and forwarded "Letter No.267 of 4 December 2013" to the Ministry of Finance, which includes a new recommendation on how to calculate expenditures and credit provision for planning the next two budget periods by key spending units of local budgets. The methodology also includes a system for monitoring and evaluating budget energy expenditures based on PPB. MFSI-II experts updated recommendations on financial incentives to promote the establishment of an effective energy savings system in the public sector and presented them at a session of the National Advisory Board. If adopted, these incentives will fulfill the terms and conditions of the loan for implementing energy-effective projects and improve the solvency of local governments' energy budgets. Key milestones and major deliverables for the next quarter include preparing three monthly monitoring reports on the implementation of the State and local budgets, analyzing the current energy budget expenditures of the seven selected cities, and preparing the Budget Monitoring for January-December 2013. MFSI-II experts will also conduct a training on budget issues for NGOs and provide organizational support to the Ministry of Finance Intergovernmental Working Group.