Component 1: Budget Process Modernisation

Component 1 “Budget process modernisation, improved control and accountability” is to support relevant national institutions in the improvement of budget preparation, implementation and control.

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Overall Objective

Support relevant national institutions in the improvement of budget preparation, implementation and control

Specific objectives

Strengthening capacities in the MoF and KSUs in medium-term budgetary planning;

Implementation of capacity building tools in the PIFC area;

Improvement of the Ukrainian public sector accounting regulatory framework in line with international standards

Key Directions

Budget planning

Public internal financial control

Public sector accounting

01 Strengthen capacities in MoF and other key spending units for the implementation of medium-term budgetary planning

Review and update the procedure for defining medium-term policy priorities and respective
distribution of resources (policy discussions at various stages of the budget cycle).
Review and update the procedure for the distribution of medium-term expenditure ceilings.
Develop the instructions from MoF to the KSUs for the preparation of the Budget
Declaration.
Review and update the instructions for preparation of budget requests by KSUs for the
implementation of the medium-term budget planning.
Develop proposals on reflecting long-term commitments of KSUs within the medium-term
budget preparation process.
Develop proposals on the possibility of introducing and using a budget margin as a planning
reserve.
Provide support (advisory, on-the-job consultations) to KSUs on the practical application of
the above tasks.
Design and deliver a training programme for the MoF and KSUs on improvement of
medium-term budget planning.

02 Strengthen capacities in MoF and other KSU’s regarding programme-based budgeting and execution of spending reviews.

Develop proposals for improvements in programme-based budgeting according to the international best practices.
Develop proposals for the improvement of the methodology for establishing performance indicators of budget programmes.
Review and update the methodology for conducting spending reviews.
Review KSU budget expenditure and develop proposals for undertaking spending reviews.
Provide support (advisory, on-the-job consultations) to KSUs on the practical application of the above tasks.
Design and deliver a training programme for the MoF and KSUs on improvement of programme-based budgeting and spending reviews.
Develop relevant business processes and preparation of functional requirements linked to expert recommendations and subsequent reforms in the budget process;
Design a system roll-out plan and delivering training and change management program.

03 Strengthen capacities in the State Treasury Service of Ukraine and MoF regarding budget execution function and liquidity management.

Develop proposals for improved methodology and analytical tools for projecting cash flows;
Improved information flows related to cash, liquidity and debt management, including through expert support to automation of relevant information exchanges between MoF, State Treasury, KSUs and other agencies;
Develop proposals on effective tools for liquidity management, including placements of spare Treasury Single Account balances, repo transactions;
Design and deliver a training programme for the MoF, Debt Management Agency and State Treasury on cash and liquidity management.

04 Strengthen capacities with regards to the further alignment of the Ukrainian accounting system with international standards

Translate the latest version of the International Public Sector Accounting Standards (IPSAS) and amendments to IPSAS to Ukrainian;
Develop new and propose improvements to the existing national public sector accounting standards to cover the identified gaps and ensure alignment with IPSAS;
Develop recommendations and guidelines for application of certain national accounting standards in the public sector;
Develop proposals for improved methodology for preparation of consolidated financial statements based on the European best practices;
Analyze compatibility between the Chart of Accounts and the budget classification in terms of classification and management of assets;
Analyse goals, objectives and results of accounting and reporting of budget execution transactions based on accruals, adjusted to specific features of Ukraine’s economy;
Deliver trainings on the revised national public sector accounting standards to MoF, State Treasury and KSUs;
Analyse the existing organizational framework for delivery of accounting services and qualification requirements to accountants in the public sector; prepare proposals for their improvements based on the European best practices;
Prepare proposals for modifications to assessment of chief accountants based on the European best practices.

05 Strengthen capacities for internal control and internal audit in state institutions

Develop and implement appropriate capacity building tools in the field of public internal financial control, including: a platform for distance learning in internal control and internal audit, a module for assessing the professional level of internal auditors in the public sector, automation of processes for generating and summarizing reporting on performance of internal audit units, risk analysis for selection of objects for internal audits and the formation of plans, selection of objects for external quality assessments.