Important Notice:

The implementation of the activities of the Component 1 are in the planning process. The updated information will be introduced after the launch of Component 1.

Component 1: Support relevant national institutions in the improvement of budget preparation, implementation and control

Component 1: Support relevant national institutions in the improvement of budget preparation, implementation and control
Public finance management (PFM) is a priority area for the EU – Ukraine relations. Strong PFM systems are essential for sound management of taxpayers’ money and to promote effective and sustainable economic development, trade and business climate, and public service delivery. Good PFM systems are also indispensable in ensuring that EU and other donor assistance is used effectively to achieve reform goals. PFM is covered in the EU-Ukraine Association Agreement, is necessary for Macro-Financial Assistance and a general condition for budget support. The reform of public finances is also part of the current IMF programme with Ukraine.

The proposed EU assistance programme on PFM will provide a major impetus to the implementation of the Government PFM Strategy. In line with the PFM strategy, Ukraine’s commitments under the Association Agreement and the International Monetary Fund (IMF) programme, the Component: 1 Budget Process Modernization will be implemented.

1. Strengthen capacities in macroeconomic forecasting through support to improving macroeconomic forecast models and underlying assumptions.

2. Strengthen capacities for the introduction and implementation of medium-term budget planning through support to:
  • introduction of medium-term budget declaration as a means of matching national strategic priorities with budget resources;
  • establishment of credible medium-term fiscal framework;
  • strengthening the role of key spending units in the budget process.
3. Strengthen capacities regarding programme-based budgeting through support to:
  • improvement of budget programs to closely link with strategic goals;
  • increasing the effectiveness of performance monitoring of budget programs.
4. Strengthen capacities linked to organization of spending reviews in MOF and other ministries through support to:
  • creating a framework for organization of regular spending reviews to ensure savings and freeing up of resources for new priorities;
  • execution of spending reviews in selected ministries.
5. Strengthen capacities  linked to improved fiscal soundness of legislative initiatives through support to:
  • improvement of methodology for fiscal impact assessment and promotion of its use in the government and the legislative, including respective trainings.
6. Support to an increased level of automation of budget planning process through support to:
  • analysis of relevant business processes and preparation of functional requirements linked to expert recommendations and subsequent reforms in the budget process
  • quality assurance of budget planning information system procurement
  • designing a system roll-out plan and delivering training and change management program in cooperation with system developer.

7. Strengthen capacities for fiscal risks monitoring, reporting and managing in the MOF and other ministries through support to:
  • introduction of comprehensive fiscal risk assessment framework, including methodologies for assessing risks related to macroeconomic situation, SOEs, extra-budgetary funds, state guarantees, PPPs, etc.
  • strengthening of safeguards for state guarantees issuance, including improved assessment of borrower’s creditworthiness and introduction of fee for provision of guarantees.
8. Support to an increased level of automation of fiscal risks monitoring, reporting and managing through support to:
  • analysis of relevant business processes, preparation of functional requirements and quality assurance of procurement of development of fiscal risks information and analytical system.
9. Strengthen capacities in the MOF, SFS and State Treasury Service of Ukraine regarding liquidity management and budget execution servicing through support to:
  • improving cash forecasting;
  • developing effective mechanisms for cash management in coordination with debt management function;
  • further modernization of State Treasury Service of Ukraine servicing of budget execution.
10. Strengthen capacities with regards to the further alignment of the Ukrainian public sector accounting system with international standards through support to implementation of the Strategy for modernization of the system of accounting and financial reporting in the public sector until 2025, in particular as related but not limited to:
  • development of national public sector accounting standards based on IPSAS;
  • analysis of possibility for accrual accounting of budget implementation transactions;
  • identification of structure of consolidation of financial reporting;
  • development and implementation of new model of accounting service, assessment of chief accountants’ performance;
  • development of training program, creation and functioning of e-learning platform for public sector accountants.
11. Support to an increased level of automation of public sector accounting and financial reporting:
  • analysis of relevant business processes, preparation of functional requirements and quality assurance of development of integrated IT platform for public sector accounting and financial reporting.
12. Strengthen capacities for public internal financial control through support to:
  • development and implementation of appropriate capacity building tools and increased automation in PIFC, including  analysis of relevant business processes, preparation of functional requirements and quality assurance of IT procurement and development of interactive portal dedicated to PIFC.
13. Strengthen capacities for state financial control through support to:
  • improvement of institutional framework of state financial control,
  • improvement of methodology of existing types of state financial audit and introduction of new ones.
14. Support to an increased level of automation of risk-based selection of control through support to:
  • analysis of relevant business processes, preparation of functional requirements and quality assurance of procurement of development of information and analytical system for risk-based selection for state financial control.
15. Strengthen capacities in external audit in line with international standards through support to:
  • adaptation of legislation in external audit in compliance with INTOSAI standards (levels I-III) and improving ACU internal regulatory acts;
  • development and implementation of ACU institutional development strategy;
  • improved approaches and increased use of performance audits and further improvement of financial audits
  • strengthening follow-up mechanism on audit reports of the ACU.