Paulius BaniūnasMinistry of Finance of the Republic of Lithuania

EU Structural Support Management DepartmentMonitoring and Analysis Division

SYSTEM OF FINANCIAL PLANNING AND MONITORING IN LITHUANIA: LESSONS

FROM 2007–2013 PERIOD

Budapest, 2012-10-04

Levels of financial planning system

1. FINANCIAL MASTER PLAN (CERTIFIED EXPENDITURE)2. COMMITMENTS PLAN3. MEASURES IMPLEMENTATION PLAN (PREPARATION FOR CALLS FOR PROPOSALS)

4. QUATERLY PLAN OF COMMITMENTS,PAYMENTS AND CERTIFIED EXPENDITURE5. BUDGETARY APPROPRIATIONS PLANNING

6. 3 MONTHS PAYMENT PROGNOSIS7. PROJECT PAYMENTS PLAN

Strategic

Tactical

Operational

Purpose of Financial Master Plan

• Management of risk of automatic decommitment (N+2/N+3 rule)

• Management of flows of EU funds and co-financing over the 9 years period - budgetary appropriations planning

Main features of Financial Master Plan (1)

• Yearly Plan of certified eligible EU funds expenditure (2008-2015)• Sets critical and optimal financial targets

for the absorption of funds• Separate targets for each OP, Fund,

Priorities and Line Ministries (usually appropriations holders)• Prepared by MA and consulted with IB’s,

approved by the Government• Updated 2 times over programming period

Main features of Financial Master Plan (2)

OP Priority Line Ministry Total allocatio

n

Optimal level of certified eligible EU funds expenditure

2008

2009 2010 … 2015

Priority 1 Line Ministry 1 1436693 435 128924

501210

… 1436693

Priority 2 Line Ministry 2 754240 0 5355 46655 … 754240

Line Ministry 3 70183 0 2978 16535 … 70183… … … … … … … …Priority X Line Ministry

X407453 0 5640 30240 … 40745

3

Principles of determining critical and optimal levels

• Critical level (Top-down approach):

– sets higher targets than N+2/N+3 rule for safe EU Funds absorption

– on the level of OP’s and Funds part of sums (30-40%) required under the N+2/N+3 rule are transferred to the previous years

– on the level of Priorities corrections are made taking into account the specific characteristics of different Priorities

– in case of underachievement corrective actions can be taken• Optimal level (Bottom-up approach):

– optimal level can be equal or higher then critical level

– the optimal level is determined taking into consideration maximum realistic opportunities of each Priority to use EU Funds

– less funds are foreseen to be used in 2014-2015 in order to free up administrative resources for the new period

– stable amounts of EU funds expenditure and need for co-financing are planed over the programming period in order to avoid high jumps and falls in expenditure

Financial Master Plan (accumulated)

0

1000

2000

3000

4000

5000

6000

7000

8000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Allocations O ptimal Critical N+2/N+3

Time for corrective actions

Financial Master Plan (yearly)

0

500

1000

1500

2000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Optimal Critical N+3/N+2

Updating of the Master plan

Formal updates in case of reallocations of funds Substantial update including adjustments according to

the speed of implementation in all OP’s, Priorities and Funds (2011):

• Based on evaluation done by outsourced experts• Model, based on historical data, used to forecast use of

funds up to 2015• Evaluation results – basis for MA position (objective

forecast)• Consultations with IB’s (Bottom-up approach)• After update critical level very close to optimal level• Implementation of optimal plan after update – 95 %, across

Priorities 80-105 %

Yearly commitment plan • Yearly commitments (2008-2013)• All financing sources• On Priority level• Adopted by Line ministries (after agreement with

MA)Measure implementation plans

• Adoption of measures in programme complement, adoption of selection criteria, adoption of calls for proposals documents, adoption of projects lists, launching of calls for proposals (2008-2013)

• Dates and total sums of financing allocated• Adopted by Line ministries

Other long term financial plans

Quarterly plans

• Bottom-up approach• Made on measure level• Include three financial indicators:

commitments, payments, certified expenditure

• All financing sources• Made for 2 years period, updated quaterly• Provided to Managing Authority by Line

ministries• The tool for medium term financial

management:– Evaluation of deviation from long term plans– Evaluation of budgetary appropriations needs– Forecasts of payments to the EC–Quarterly monitoring of financial progress

Project Payment Claims Submission Plan

• Each final beneficiary provides Project Payments Plan for Implementing agency when signing a contract

• Includes estimated amounts of Payment claims to be submitted planned for the whole period of project implementation

• Updated regularly every quarter with each payment claim• Is used by Implementing agencies to prepare payment

forecasts on measure and priority level

Monitoring of plans implementation

Systematically done every quarter with reports to the Government

Reports include information on:• state of implementation of financial indicators;• overview of financial plans implementation;• main problems of OP’s implementation, measures already

taken and planned to be taken to solve them.• proposals to the Government:

- speed up of procedures (calls for proposals, signing contracts, etc.)

- reallocate funds between measures and (or) priorities

- other measures to speed up implementation

Use of IT system for financial monitoring

• Main features of the system:– All data on actual payments and

contracting is gathered only from IT system

–Most of the financial data is automatically imported from el. forms

– Financial forecasts submission in el. forms

–Up to date monitoring of targets achievement and lags in procedures

Use of IT system for financial monitoring

Achievement of Master plan targets (N+2/N+3, critical, optimal)

Main advantages of the system

• Clear division of responsibilities for EU funds absorption between Intermediate bodies

• Formal basis for corrective actions including reallocations of EU funds

• Enough time for corrective actions in case of deviations• The top-down and bottom-up approaches are used complementary• All stages of implementation are covered• Use of IT system – constantly updated monitoring data

Problems

• Trade off between speed of implementation and effective use of Funds – what is critical underachievement of critical Master plan target ?

• Questionable need for 2 Master plan targets – Optimal target isn't taken seriously

• Ownership of the Master plan targets• Too many plans ? – Coherency of other plans and Master plan is

not always ensured• Plans are not always updated in time – become unrealistic• The rules of application of corrective actions not formalized• No system of sanctions for lagging behind on the level of

beneficiaries

Challenges for 2014–2020

• Links of financial planning with Performance Framework

• Integrated planning of intermediate targets for financial indicators and physical indicators

• Comprehensive planning of the use of Funds must be done before the start of the period

• Accuracy of forecasts• Possible ways to lessen administrative

burden

Thank you for your attention !

p.baniunas@finmin.ltwww.esparama.lt