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European CommissionThe Second Economic Adjustment Programme for Greece. Fourth Reviewparticularly where GDFS were created through transferring existing financial units from varioussecretariats to the accounting officer or where changes to the competences of Ministries have occurred.53. Improvements in the area of budget preparation should be a priority for 2014. Since November2012, Greece has introduced corrective mechanisms to control the budget execution for annual targetsin three subsectors: State Owned Enterprises (SOEs), Extra Budgetary Funds (EBFs) and LocalGovernments (LGs). However, such mechanisms can be useful to the full extent only if ceilings areused in the budgetary process over time. Following a first attempt to introduce multi-annual bindingceilings for SOEs and LGs in the updated MTFS in February 2013, the 2014 MTFS should respect thepreviously set binding ceilings projected for next year. In 2013, LG budgets were not fully consistentwith the MTFS projections for the sector as a whole. The budget preparation for LGs has improved,following the reform introduced last year which became fully operational in the context of thepreparation of their 2014 budgets. Consistency between the MTFS projections and the LGs' budgets hasnow become effective and it is fully reflected in the budget approved in 2014 for the revenue and for allexpenditures (with the exception of expenditures financed through structural funds). This goal has beenachieved through a newly established cooperation between the Observatory for Local Governmentsfrom one side and municipalities and Regional Authorities from the other side. To improve budgetpreparation, competences must be built up both in GAO and in GDFS, paving the way for the upcomingoverhaul of the organic budget law.54. Two out of three end-December 2013 Key Performance Indicators (KPIs) targets were met.Discrepancy between the total arrears (to third parties of non-state general government entities) reportedunder the E-portal of GAO using data from commitment registers and the total arrears reported throughmonthly surveys resulted to be 2% against a target of 1%. Despite this shortfall, improvements in publicfinance management continue to ensure tighter control on state expenditures, as demonstrated by thefact that in 2013 the State budget was under-executed. The control on expenses helped accommodateshortfalls in other sectors, notably social security contributions.Box 9. Achievements in Public Finance Management and in the fiscal institutional framework since thebeginning of the programmePFM has proven to be one of the area where reforms were successfully implemented. The list below shows actionsimplemented and results achieved:• 97% of public entities have commitment registries in place and functional and are reporting on the e-portal.• Improvements in monitoring budget execution allowed the government to under-execute expenses to secure theachievement of the fiscal targets according to the evolution of spending in other sub-sectors.• Two-years binding ceilings for SOEs, LGs and some larger EBFs were introduced for the first time for the budget 2013empowering the Ministry of Finance to impose corrections to each sub-sector for any slippage projected in 2014according to no policy scenario. This resulted in an increased ownership of line ministries in controlling their ownbudgets.• Corrective mechanisms for SOEs, LGs and some larger EBFs were introduced in 2013. Ex-post results show that for thefirst time since the inception of the programme no slippages in 2013 stemmed from these sub-sectors and currentprojections for 2014 are on track.• An Observatory for LGs was created to coordinate the oversight role of Ministry of Interior over LGs and agree ontargets and secure budget execution accordingly.• A new budget process was designed to integrate LGs within the framework of the MTFS: budgets of LGs were assessedand adjusted before their adoptions in order to be realistic and consistent with MTFS projections.• The upcoming overhaul of the organic budget law will introduce a budget balance rule for the first time in Greeceaccording to the Fiscal Compact. The budget process will be fully harmonized among different levels of government(EBFs, SOEs, LGs).• Overrun of expenses in health sector were timely detected due to the introduction of e-prescription and addressed throughclaw backs.55. One important area where significant progress must be made is ensuring timely payments and inpreventing the build-up of arrears, both on the tax and expenditure sides. Full compliance with theLate Payment Directive (LPD) remains very challenging and a priority for 2014. The transposition ofLPD has been formally completed, only after two further legislative changes made in April 2014.Moreover its implementation requires proceeding urgently towards streamlining the payment process,36