Slovak experts are remarkably involved in development activities which support public finance reforms in Eastern Europe and the Balkans. This is happening under the auspices of various projects of the Ministry of Finance of the Slovak Republic (MF SR) and the United Nations Development Program (UNDP). In one of them, Spending reviews in Moldova, together with the International Monetary Fund (IMF), they are training Moldovan experts how to handle the mechanisms for seeking financial reserves to increase the efficiency of individual sectors.
What is the core of spending reviews? In simple terms, the review assesses the efficiency and effectiveness of spending in a particular sector, and identifies measures that increase the value for money from public finances. This results in budget savings, improved public services for citizens, and the possibility of shifting savings to other priorities. For example, the funds saved in one part of the sector can be invested elsewhere.
Best Value for money means selecting an offer, which represents the most optimal combination of costs and benefits, meeting the needs of final users most effectively. In order to achieve, several factors are evaluated: quality, experience, reputation and parameters. Those factors measure how effectively an institution can best serve its social, environmental, or other strategic goals.
Pilot project in Moldova
Danka Kovaľová and Martin Valentovič are Slovak consultants that have already worked in Moldova on the joint MF SR and UNDP program-based budgeting project. The current project, Value for Money, is closely related and was established between January and February of 2018 at the Moldovan Ministry of Education.
“Two areas were selected for pilot spending reviews – higher education and secondary vocational education. Two teams of experts from the Ministries of Finance and Education aim to find savings in each area, which could be reinvested to improve the quality of the given education,” explains Martin Valentovič.
One example cited is the large number of similar universities per town. The team of experts will identify additional priorities that need to be addressed. They will set objectives and offer solutions supported by analysis. There may be more than one solution, based on the analysis of collected data, facts and information. It would then be up to politicians to select the most optimal option.
Let´s take a look at another simplistic example to further illustrate: The team of experts finds that each school buys printer toner cartridges at different prices. They compare this data, and recommend centralizing public procurement, reassessing contracts, or choosing another supplier. Lowest price is not always the deciding factor, as qualitative parameters, such as comparison of price and service life, are also taken into account.
It needs to be emphasized that the Slovak experts active in this project do not directly determine which areas of spending should be reviewed. They never offer direct terminal solutions. Instead, they offer the methodologies needed to develop analyzes, and to learn the mechanisms of data processing and utilization. Sector selections and final solutions are left up to the domestic experts who know the realm.
Simply put, many people work in public administration. The lower-level specialists know their sectors well, including their shortcomings and the possibilities of eliminating them as they experience them daily. However, their knowledge does not always improve, mainly due to poor communication, or to the fact that lower officials are not used to working beyond the existing laws and orders. Often, they do not have the right communication skills. During the project, our experts met concerns that a problem, after becoming visible, could not be addressed.
With the assistance of Slovak experts, the introduced methodologies on program budgeting and spending reviews contribute to collecting this information, analyzing the best of it, and summarizing the results into clearly formulated and justified documents. These documents are intended for ministers, deputies and the public to underlay their decisions.
A sore spot
In each sector, it is necessary to first identify problems that need to be addressed. Then, these problems are discussed, data is collected, and finally, specific areas are selected for analysis. The methodology, taught by Slovak consultants, can help to identify which data to look at and how to evaluate it. Based on this, analysis and exact calculations can be performed to find out where and what savings can be achieved, where they can be transferred and how to document and vindicate them. The analysis must also highlight possible risks.
“This has not been done in Moldova so far, they were not used to producing analytical materials,” says Danka Kovaľová.
The International Monetary Fund has come up with a framework program and methodology, general propositions and recommendations on best practices. However, knowing how to implement these is problematic. This includes how to create tables and evaluate them, and how to make analytical models and calculations.
According to Danka Kovaľová, the advantage of East European consultants is that they have recently gone through similar problems that are happening in Moldova today. Being consultants on the latter mission, they have already been dealing with tasks related to demonstrating and teaching analytical models usage, and compilation of complex material from the collected data that would quantify potential savings.
Slovak experience
Slovakia already has experience with the introduction of Value for money principles. Pilot reviews at the Financial Administration, Labor Offices, and selected areas of regional education began in 2015. In 2016, further spending reviews focused on the health sector, transport and informatization of public administration – together, those sectors account for 40% of public administration expenditures.
According to data from May 2018, nearly half of public expenditures were revised. Subsequently, we focused on large investment projects in the transport, defense, and health sectors. A central coordination unit at the Slovak Ministry of Finance – The Value for Money focused mainly on transport and motorway projects. The Slovak Republic was inspired by the United Kingdom in the establishment of the Value for Money unit.
As a reminder, not every instrument can be automatically transferred to the system of another state. Because each has its own specifics, each problem is different, and sectors in two different states do not work identically. Implementation of the project may even be better in Moldova than in Slovakia. Often, if something is introduced in one country, it can be made better and simpler in the next one, right from the beginning.
Moreover, there is a centralized coordination unit in Slovakia as mentioned above. It methodically unifies the creation of reviews in individual sectors, so there are no abysmal differences in their analytical materials and outputs, despite the differences and the specifics of each. In Moldova, there is a coordination group at the Ministry of Finance and each sector is responsible for spending reviews itself.
Break trought barriers
Both Slovak consultants agree that within a few months, they have seen a shift in Moldovan colleagues’ thoughts regarding public spending reviews. By the way, it was similar to the project aimed at creating program budgets. At first, the importance of some innovative elements may not have been understood by Moldovan partners, or communication problems may have occurred every now and then. Additionally, people at ministries are overloaded with operative work, and sometimes, they see innovative methods as something that only adds to their workload.
“Our job is also to inform them in detail, of the advantages or disadvantages of new methods,” explains Martin Valentovič.
With better understanding of the issues, interactive communication, and on-the-job trainings, Moldovan experts have finally understood and appreciated the significance of the recommended tools. They also understand that this is not a complication, as once thought, but a simplification. Based on the experience of other colleagues, they were asking for training and workshops themselves. Once alight, they were able to enlighten others.