Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

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56 Chapter 3: Public Administration Reform only be enhanced by shifting resources (human and financial) away from the lower priority functions and inefficient functions. 3.48 In summary, key areas of priorities over the next two to three years should be to: • Develop a medium term civil service pay strategy that will lead to decompression of the salary structure for positions that are most difficult to recruit and retain and that can be implemented within a fiscally sustainable resource envelope. • Reduce the impact of seniority-based allowances on total civil servant pay and restructure the collective bargaining process to facilitate future policy reforms. • Enhance the capacity of the CSA (e.g., through staffing, technical assistance, etc.) to implement a credible performance appraisal system and to follow-through on other outstanding civil service reforms within a realistic timetable. • Strengthen the institutional arrangements for overseeing and managing PAR implementation, including development of a sequenced action plan and resource implications. • Develop a consolidated human resource data base for planning and managing the composition of the public service • Plan and undertake a horizontal review of government functions and activities with the aim to abolish “left-over” structures from the previous system and to strengthen capacities in the functions and activities most needed to support effective EU integration. Integrate the horizontal reviews into the ongoing budget reforms lead by Ministry of Finance. • Plan vertical functional reviews of three to four major sectors or functions in order to reduce inefficiencies and identify potential savings • Carry out a comparative assessment of how the EU integration process has been managed in countries of similar size (e.g. Lithuania or Estonia).
4. PUBLIC FINANCIAL MANAGEMENT AND PROCUREMENT A. INTRODUCTION 4.1 While reforming public administration, Montenegro would also need to strengthen its budgetary processes and institutions to ensure transparency, accountability and better public sector governance. Effective budget management, including medium-term sectoral plans tied to the budget, is central to maximizing the impact of current public expenditure on service delivery. 4.2 Montenegro has made a significant progress in public financial management reforms in recent years. The MOF has developed clear and comprehensive budget documentation that provides the appropriate context and assumptions for budget policy. Budget execution has been aided by a fully functioning Treasury system, which is linked to all of the major budget users. Forecasts of revenues and expenditures seem within a reasonable margin and the MOF has been able to execute the budgets with modest variation at an aggregate level. Although some modest shifts in composition of spending as well as arrears are noticeable, these could be addressed through better planning in the future. 4.3 While some of the basic features of good budget preparation and budget execution are in place, several challenges remain. One challenge relates to the implementation of program budgeting. Introduced as a pilot program in a couple of ministries in 2004, program budgeting seems to have suffered from a lack of clarity over what fundamentally is expected to change about the budget process or in the relationship between MOF and the line ministries. Although the number of ministries with “program budgets” has expanded over the past three years, and a comprehensive extension of program budgets to all ministries is planned in 2007, the depth of change induced by such budgets remains shallow. As a result, the process is yet to have a substantial impact on policy planning and prioritization across government. 4.4 A second important challenge relates to the development of a medium term budget framework to strengthen the linkages between policy, planning, and budgeting. Effective planning of capital investments would especially benefit from having such a budget framework. While the current medium term fiscal framework is a good foundation on which to build, the MOF would need to extend the medium term budgeting framework to all budget users, including the extra-budgetary social funds. Ministries and budget users will need to develop indicative levels of spending by sector or consolidated programs. Capacity constraints within the MOF and other line ministries are likely to be daunting challenges both to do the program budgeting well and to move towards a medium term expenditure framework. 4.5 A third challenge is to ensure that resources devoted to oversight and accountability institutions are significantly expanded. Although internal audit, external audit, and public procurement commission have been established and are functioning, their longer term effectiveness will require better staffing, training, and infrastructure. With regard to internal
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Report No. 36533 Republic of Monten
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CONTENTS ACKNOWLEDGMENTS ..........
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TABLES Table 1.1. Montenegro’s Gr
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ACKNOWLEDGMENTS This is the first v
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ii Executive Summary and procuremen
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x Executive Summary 27. The impleme
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2 Chapter 1: The Economic and Insti
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Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

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