PEMPAL BCOP Budget Transparency and Literacy Working Group
Study Visit to Croatia
STUDY VISIT REPORT
Distribution: PEMPAL website, to PEMPAL Steering Committee, possible presentation
to be delivered at next BCOP plenary meeting, report to be distributed within
participants' governments/institutions by participants.
Process: Each participating country (eleven countries in total) provided inputs for the
Report, which was collated and consolidated into one Draft Report by the BCoP Resource
Team (Ms. Naida Čaršimamović).
1. Background
Event Objectives and Participants
On December 1-4, 2015, the Budget Community of Practice (BCOP) undertook a learning
visit to Zagreb and Rijeka, Croatia. The meeting was organized under BCOP’s Working
Group on Budget Transparency and Literacy and was attended by eleven representatives
from ten PEMPAL countries – Armenia, Belarus, Bosnia and Herzegovina, Kyrgyz
Republic, Moldova, Romania, Russia, Tajikistan, Uzbekistan, and Ukraine.
The core Bank’s Resource Team, organizing the event, was comprised of Naida
Čaršimamović who accompanied PEMPAL participants during the visit, Maya Gusarova,
Public Sector Specialist and coordinator of the BCOP Resource Team and Deanna Aubrey,
PEMPAL Strategic Advisor and BCOP Resource Team member who provided virtual
support. The visit was co-organized in cooperation with Croatia Ministry of Finance, with
extensive support from the BCoP Executive Committee members Ms. Mladenka Karačić,
head of Head of the Service for State Accounting and Non-Profit Organizations'
Accounting within the State Budget Excution Sector of Croatian Treasury Administrative
support was provided by the PEMPAL Secretariat (Ksenia Galantsova). Nina Duduchava,
Consultant, also provided support to the post-event online feedback survey.
The objectives of the visit were:
i)
ii)
to explore Croatian experience in implementing reforms on budget
transparency and participatory budgeting, at both State and local government,
and
to hold face-to face meeting of the BCOP Working Group on Budget
Transparency and Literacy, including a working session to prepare Group's
next meeting and discuss potential knowledge products.
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In 2014, the BCOP launched a Working Group on Budget Literacy and Transparency, with
the objective to learn from international experience and exchange lessons PEMPAL
countries learnt on enhancing budget transparency and accessibility and promoting
budget literacy among citizens. This Working Group aims to develop recommendations
for PEMPAL countries and other knowledge products enabling dissemination of such
practice across the ECA region. Croatia was identified as a host country for this peerlearning visit by the leadership of this Working Group, given its recent progress in
improving budget transparency, as well as efforts on enhancing citizens’ participation in
budget decisions at the local government level.
Agenda Overview1
The agenda of the meeting focused on lessons learnt from Croatia’s efforts in improving
budget transparency at the national level, as well as experience in budget transparency
and engaging citizens’ in budgetary processes at the local government level in Croatia.
The participants visited a local government unit in Rijeka, Croatia, to review the
approaches to promoting citizens' participation in budgeting process by this local
government unit, as well as the two additional local government units (Pazin and
Crikvenica). In total, ten presentations were held during this Study Visit. Additional
materials (guidelines, tools, templates, legislation) will also be provided to the
participants.
2. Overview of Presentations of Croatian Practices in Budget
Transparency and Participatory Budgeting
The first day of the visit was dedicated to overview of the national PFM system and
progress in budget transparency at the national level. The following presentations were
delivered:
1. Overview of the Croatian economy, macro-fiscal trends, and the State
Treasury System in Croatia (which is a unique organization structure in
comparison to other PEMPAL countries, since budget planning functions are also
included within the overall Treasury System). This presentation served as a great
scene-setter for the remaining presentations and it resulted in very active
discussion between the presenters and the PEMPAL participants.
2. Budget System in Croatia, with the focus on budget transparency and
participatory budgeting issues. The first part of the presentation was on the
legislative framework, explaining the reforms that started in 2003 (to strengthen
the fiscal discipline), through the 2007/2008 Strategy for the Improvement and
Modernization of the Treasury Processes and the State Administration Reform
Strategy (to strengthened the medium term planning, improve connection
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Agenda is included in Attachment A. All Power Point presentations from this Study Visit are available at
http://www.pempal.org/event/read/153, so this Report just gives a short overview of main elements in the
section of the Overview of the Presentations of Croatian Practices in Budget Transparency and Participatory
Budgeting.
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between strategic planning and budgeting, and introduce the principles of
program budgeting), the legislative and institutional changes resulting from the
EU integrations, and finally the most recent improvements in terms of tightening
further the connection between the strategic planning and budgeting using topdown approach and adopting EU fiscal guidelines (including National Reform
Programs and the Convergence Program, fiscal risk and sensitivity analyses, the
Fiscal Council etc.). During this presentation, special attention was given to the
explanation of actual ways in which strategic plans are connected to financial
plans, including examples and templates of actual strategic plans and program
budgets with performance indicators, monitoring and reporting forms,
development program plan, as well as fiscal responsibility questionnaire template.
The presenters also gave an overview of the content of budget documentation.
The second part of the presentation focused on historical developments in terms
of transparency and participatory budgeting, starting with the 2003 Budget Act
that induced the principle of transparency in budgetary planning and executing,
through elaborating more in the 2008 Budget Act, and the latest amendments to
the 2015 Budget Act that legislates that all government levels in Croatia need to
publish financial reports on websites, as well as the semi-annual and annual
budget execution reports with all of the supporting materials and reports. The
2010 Fiscal Responsibility Act also strengthens transparency, as the questionnaire
(which the head official of each budget user at state and local government units
and chairpersons of companies with public ownerships must fill out and sign on
annual basis) includes specific questions related to transparency, such as
publishing of the strategic documents, annual work plans, adopted budgets, and
execution reports on the websites and specific provisions related to transparency
of public procurements.
3. Trends in Budget Transparency in Croatia, the presentation delivered by a
representative from the Institute for Public Finance, a scientific research institute
that studies economics of public sector. The Institute was created by the
University of Zagreb and was invited by the Ministry of Finance to present an
independent analyses of budget transparency trends in Croatia to PEMPAL
visitors. The presentation outlined the 2006-2015 results of OBI for the State level
in Croatia as well as research on the openess of budgets of local level government
units in Croatia (counties, cities, and municipalities), which is undertaken on an
annual basis by the Institute for Public Finance.
Croatian OBI scores improved significantly since 2006, as the result of the efforts
undertaken by the Ministry of Finance. However, there has been recent worsening
of the score of Croatia (from 61 in 2012 to 53 in 2015). This presentation outlined
the areas in which Croatia scored low in 2015, noting that one of the reasons for
the significant decline in the score was mostly due to the fact that the data on
execution of the budget for the previous two fiscal years was not included in the
current year budget. The reason for this exclusion of this information by the
Ministry of Finance was simple lack of space in the presentation of the budget,
which prompted the Ministry to try to provide more legible information within
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the budget documentation, with no real cost to the transparency, given that the
Ministry of Finance websites has all of the information on previous budget
execution publically available as well. This prompted interesting discussion
among the participants about importance of the Ministry of Finance
understanding how OBI scoring are formed, since in many cases, significant
improvement of the scores can be made by simple reshuffling of the information
already published by the Ministry of Finance in different formats.
Other areas in which Croatia needs to improve according to OBI scores include
sensitivity analysis of macroeconomic forecasts, analyses of expenditure by
functional categories, information on interest rates on public debt, information on
arrears, guarantees, tax expenditures, and financial and non-financial assets.
Ministry of Finance is already planning to include some of these in the next years’
budgets.
In terms of openness of the budgets of the local government units in Croatia, the
Institute for Public Finance conducts research on the availability of budget
documentation on websites. In 2012, Croatia joined the Open Government
Partnership, a global initiative whose objective is to achieve progress in the area
of openness of the work of public sector, inclusions and empowerment of the
citizens and the civil society, fight against the corruption, and the use of new
technologies for improving the quality of public service for the citizens. Within the
Action Plan for the implementation of the Open Government Partnership for 20122013, the Ministry of Finance issues recommendations to local government units
to publish on their websites the proposed budget and semi-annual and annual
budget execution reports (at the moment of the submission of these documents by
the executive authority to the representative authority), as well as the adopted
budget and the guide to budget for citizens.
General findings of the research of the Institute for Public Finance is that on
average, counties publish (in a timely manner on their website) 3.9 out of 5 budget
documents, cities publish 2.7, while municipalities publish only 1.4 out of 5 budget
documents. However, overall, transparency is improving over years, while some
units of local government are excellent examples (surpassing the State level) in
not only general budget transparency, but also citizens’ budgets and participatory
budgeting. The Institute’s econometric analyses on why some units are more
transparent than other showed that transparency does not depend on the number
of inhabitants, the size of budget, or general economic performance. Thus, a
possible conclusion is that the most deciding factor is the political will and the
individual efforts of the staff working in the budget department.
4. E-Croatia/e-Citizens, the presentation delivered by the Ministry of Public
Administration. E-Croatia/e-Citizens won the award for the best e-governance
project in Europe at the 2015 global summit Open Government Partnership, held
in Mexico City. The presentation included overview of Croatian reforms which
started with the Public Sector Information Technology Coordination Commission
formed in 2012. The accomplishments include comprehensive integrations of
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basic registers of citizens, introduction of central payroll system for State
employees, as well as open data portal which provides whole set of different
information on public services open to public through personal user inboxes. Top
5 e-services (out of currently available 27 existing services, noting that the
number of services are constantly increasing) are e-Registers, e-Prescriptions, eConsultations, e-Gradebook, and e-Electoral Register. Within e-Consultations,
citizens are able to review and provide comments on legislation and other
relevant materials drafted by the Government, thus participating more directly in
decision-making processes, including for legislation/regulation in the budgetary
area.
5. Transparency of Budgets of Local Government Units in Croatia. The first day of
the Study Visit closed with the presentation of the Ministry of Finance of Croatia
on budgets of the local government units in Croatia and their transparency. This
presentation served to set the scene for the Day 2 of the Study Visit and the
presentations of the three local government units. The presentation gave
overview of political and fiscal structure of Croatia, jurisdictions of the local
government units, the associated financing of the local government units
(including structure of revenues and budget calendar and processes), the budget
processes at the local level, transparency principles as implemented by the local
level, and the local citizens’ budgets.
Within the discussion on transparency principles as implemented by the local
level, it is noted that, in line with the Open Government Partnership Action Plan,
the Ministry of Finance of Croatia issues recommendation and template for
citizens’ budget for local government units (published on the Ministry’s website).
The template prescribes:
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introduction of the key objectives to be reached by the activities and projects
financed from the budget,
general summary of the budget and its content,
short presentation of the proposed budget for the current year and the
projections for the following two years, structure of budget revenues, key
programs and projects financed from budget, and other important
information.
The presentation also gave overview of the research on budget openness at local
level done by the Institute for Public Finance (explained above), as well as online
geo-visualization tool (http://brojkemi.xyz/proracun/index.html) which shows
the main budgetary data and the findings of the Institute for Public Finance per
local government unit.
On the second day of the Study Visit, participants traveled to the city of Rijeka, where they
heard presentations of three local government units – Rijeka, Crikvenica, and Pazin:
6. Participation of Citizens in Decision-Making and Budgeting in the City of
Rijeka. The presentation explained that Rijeka introduced reforms to include
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citizens in general decision-making through e-Consultations since 2011 (7
consultative processes undertaken by now, with 1.560 citizens participated
though surveys or written comments and discussion in unrestricted format), and
through sessions of counseling with the interested public since 2013 (12
counseling processes undertaken by now, in more restricted and official ways of
commenting by the citizens, in total 36 citizens proposed specific topics by now).
In terms of specific inclusion of citizens in budget planning, Rijeka implements the
Project of Small Community Projects (landscaping and maintaining utility
infrastructure proposed by the citizens) since 2004, Rijeka Local Partnership
Program since 2005, and educational budget online game since 2011. Based on
Rijeka experience, citizens respond better and involve more when the format for
their participation is less restricted (e-Consultation had better results than more
restricted Counseling). The final part of Rijeka’s presentation was devoted to
budget game created by Rijeka, in which citizens are given choices of specific
projects that were not included in the budget. These projects can then be included
in the budget, by either raising revenue (i.e. increasing taxes) or by excluding some
other types of expenditures. The game also has alerts, explaining to the citizens
the consequences of their game decisions. All participants particularly liked the
example of budget online game developed by the City of Rijeka which serves both
for educating the citizens about budgeting process and format, as well as for
gathering citizens’ concrete inputs and priorities for financing.
7. Transparent Budgeting Process: Procedure of Budgeting in Local Government
Units, the Example of City of Crikvenica. The presentation of Crikvenica included
general explanation of budget in simple terms relatable to citizens and different
ways in which citizens are involved in budgetary processes in Crikvenica – budget
message, public hearings, surveys, talk shows, abbreviated budget presentation.
Budget hearings have been held since 2002 (through the World Bank Urban
Institute project) and citizens’ budgets (brochures called “Abbreviated Budget”)
have been published since 2003. The presenter discussed advantages and
disadvantages of public hearings from Crikvenica perspectives, noting that, if
moderated appropriately, it facilitates direct discussion of a specific problem with
possibilities of in-depth analyses. The disadvantages is that hearings are
appropriate for informing the citizens, but less so for making decisions, since it is
hard to reach a consensus.
8. Active Inclusion of Citizens in Budgeting in City of Pazin. The presentation of
Pazin included review of the budget of Pazin and the overview of the recent project
the city implemented through an EU-financed project on participatory budgeting
in 2014. The objective of this 12-month project was to increase citizens’
participation in budgeting, as well as to have citizens make decisions on small
community projects within public hearings. Through marketing campaigns and
online discussion forums, citizens were invited to propose community projects.
Total of around 130 applications were submitted. Nine public hearings were held,
with the representatives of the City explaining in the simple terms structure and
functioning of the budget and presented submitted projects proposals, while
citizens discussed and voted on submitted projects to enter the budget. In
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addition, five focused sectoral discussions were held with the citizens covering the
following sectors: social protection and health, economy and tourism, culture,
education, and sports. Within the process of budget adoption, a wide budget
hearing was held with explanation of proposed citizens’ projects included in
budget. Finally, citizens’ budget (Abbreviated Budget) was prepared with clear
visualization of the budget. As a result of these activities, relationship between the
city’s administration and citizens increased significantly, as well as citizens’ trust
in public sector. Among success factors presented are:
capacities of the city administrators,
inclusion of the CSOs and media,
well-structured and professionally moderated hearings,
adequate level of information offered to citizens in understandable format, and
total adjustments of best practices to the local conditions and context.
Future plans of the city of Pazin include increasing budget literacy in school children
within broader education on democracy and state and local administration.
The third and last day of the visit concluded with the two presentations of the Ministry of
Finance on budget transparency in budget planning and public procurement:
9. Budget Transparency in Croatia, overall perspective of the Ministry of Finance
of Croatia. The presenters gave detailed list of extensive budget-related
documentation that must be published in Official Gazettes, websites of the
Government and the Ministry of Finance, and the website of the individual budget
users. These transparency provisions are legislated, with increasing amount of
information required to be publically available in recent years (e.g. now including
all annual financial statements to be published on the websites of all budgetary
and extra-budgetary users and local government units within eight days of their
submission).
The participants also had an opportunity to see a demonstration of the Ministry of
Finance and Audit Office websites and all material available there, as explained by
the presenters. The Ministry of Finance also publishes monthly budget execution
reports in compliance with both national methodology and the GFS 2001
methodology, for the purpose of easy and transparent comparison of Croatian data
with international data.
Special attention in the presentation was devoted to discussion of Citizens’ Guides
on Budget, published by the Ministry of Finance. These Guides include simplified
brochures for each of the most important budget materials – annual adopted
budgets with projections for two forward years (these are presented as 8-page
brochures, including macroeconomic trends), reports on annual and semi-annual
budget execution (presented as 4 -page brochures), and decisions on temporary
financing (presented as 6 -page brochure), as well as simplified information on
budget of the Ministry of Finance. In additional efforts to increase transparency
and citizens’ access to budget-related information, Ministry of Finance also started
publishing calendar of main payments to the citizens out of the general
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government budget (e.g. pensions, social transfers, unemployment benefits,
maternity allowance, child allowance, and agricultural subsidies) and also created
an online searchable database of all suppliers which are paid from the budget.
10. Transparency in Public Procurement and Projects of Public Interest. The first
part of the presentation on public procurement included overview of the
application of the legislative framework and the principles of the EU and overview
of the online public procurement classifieds (e-Procurement). The objectives of
this reform (as per the E-procurement Strategy) was to enable contracting
authorities/entities to electronically draft public procurement notices on
standard forms, to electronically publish public procurement notices on standard
forms with access to accompanying documents, to enable free public review and
downloading of published public procurement notices and accompanying
documents, and to provide a comprehensive electronic database of all public
procurement data and enable their aggregate analyses. In addition to contributing
to openness of public finances, e-Procurement also has a good potential for
savings - it is estimated that e-Procurement may result in 6 to 13.5% savings of
the total spending on public procurement.
The second part of this presentation discussed programs and projects of public
interest implemented by different associations and other NGOs (those projects
and programs whose implementation provides for visible added social value,
improvement in the quality of life of individuals, and enhanced development of a
wider social community). Adoption of the Regulation on the Criteria, Standards
and Procedures for Financing and Contracting Programs and Projects of Public
Interest Implemented by Associations increases the transparency and
responsibility in spending. Transparency in allocation and implementation of
funds for these purposes is increased by online publication of clear criteria for
applications and criteria for awarding these funds, as well as for complaints.
On the last day, a roundtable session to prepare for the Working Group's next meeting
and knowledge products was held. The minutes to this meeting can be found (insert link).
3. Lessons Learned
The participants of the visit identified the following lessons and useful experiences from
this Study Visit2:
1.
2.
Croatia case demonstrated that adopting legislation with concrete minimum
standards and practices of budget transparency is essential for making
progress in improving budget transparency.
Applying the same standards and rules for all general government levels to the
maximum extent possible (as was done in Croatia, despite complex fiscal
structure and multiple levels) is also seen as important in progressing the
transparency reforms forward. In most of the other PEMPAL countries, it is
2
Note: This represent a list of separate points provided by each participating country, so not all points are
necessarily interesting/useful for all participants. Several listed points were identified by multiple participants.
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3.
4.
5.
6.
7.
8.
9.
State level that pioneers reforms in these areas, while local units are reluctant,
which is not the case in Croatia.
Close coordination among different Ministries with the goal of embedding the
budget transparency and participatory budgeting reforms within overall
government transparency and participatory governance reforms, e.g. through
e-Croatia/e-Citizens, is also essential for improving budget transparency. Such
comprehensive efforts are useful as the reform momentum is used to increase
general citizens’ trust in governance in general.
In addition to standard measure to increase budget transparency (publishing
of the key budget documents), Croatian Ministry of Finance also introduced
some innovative measures, such as publishing calendar of main payments to
the citizens out of the general government budget and online searchable
database of all budget suppliers which are paid from the budget. These simple
measures proved to be very successful in increasing the trust of citizens in the
work of the Ministry of Finance. Other PEMPAL countries are willing to
consider implementation of similar measures.
Participants noted simplicity of Citizens’ Guides published in Croatia, as well
as the fact that Croatia publishes separate Guides for budget plans and for
budget execution reports.
Non-government organizations (which are active especially at local
government level in Croatia in the field of budget transparency and
participatory budgeting), as well as public or private research institutes (e.g.
Institute for Public Finance in Croatia) can be important allies to the Ministry
of Finance in reaching out the citizens.
Media must be a crucial partner of the Ministry of Finance in improving budget
transparency and participation. Best cases (e.g. some local government level
units as is the case in Croatia) can be used through media to encourage the
demand of the citizens for similar reform in other local government level
units/government levels.
Ranking of local government units by transparency (done by the Institute for
Public Finance in Croatian case) is a useful tool to promote healthy competition
among different units.
PEMPAL participants were especially impressed by the innovative approaches
used by the local government level representatives, most notably the example
of online budget game developed by the City of Rijeka which serves both for
educating the citizens about budgeting process and format, as well as for
gathering citizens’ concrete inputs and priorities for financing. In addition,
plans for budget literacy reforms in the City of Pazin (for school children,
within broader education on democracy and state and local administration),
as well as lessons learnt and recommendations of both City of Pazin and City
of Crikvenica in terms of budget hearings were also very useful for the
participants (e.g. the importance of good moderator and the importance of
providing the citizens follow up information on which of their suggestions
were included in budget in the previous year and why other suggestions had
to be turned down). A clear lesson from the experiences of the best practices
at the local government level in Croatia shows that more creative and less
restricted ways of including citizens generate best results.
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10.
11.
12.
13.
14.
15.
PEMPAL participants and Croatian hosts had particularly interesting
discussions on the extent to which participatory budgeting is applicable to
higher versus lower government levels. The local government levels offer
more immediate services to citizens which make them more suitable for higher
level of citizens’ involvement. However, even though the State level usually has
very large share of the budget which is non-discretionary, this should not
prevent the national level of the government to implement these reforms, in
order to contribute to improving general understanding and citizens’ trust.
Moreover, based on Croatian experience with e-Consultations, there were
some good ideas for the state budget allocations identified by the citizens.
Timeliness of publishing information is important. It is essential to give
citizens a chance to participate in the budgeting process early enough at the
drafting stages of the budget in order to increase the chances that citizens’
suggestion are actually included in the budget. Publishing information at a
later stages and organizing budget hearings at the last moment before budget
adoption can even be counterproductive as the citizens may feel that the
Ministry of Finance is only doing lip service to budget transparency and
participatory budgeting rather than being truly open for the dialogue with the
citizens.
Several participating countries noted that the overview of information
available on Croatian websites will be particularly useful for them in the efforts
of their countries to introduce/improve their own open data portals.
The participants noted strong political will and support for improving budget
transparency both political leadership and administrative management.
Importance of ICT use was also highlighted by the Ministry of Finance and the
local government unit representatives
Several participating countries noted that it was useful for them to see how
transparency aspects are addressed in the Croatian Law on Fiscal
Responsibility.
Last but not least, participants noted that Croatian experience showed that
data geo-visualization can be very powerful to convey information to citizens
in e understandable and user friendly format.
In terms of format of this visit, participants appreciated good introductory overview of
the broader macro-fiscal context in which the Ministry of Finance of Croatia is operating,
as well as a broader overview of the internal organization of the Ministry of Finance. This
was useful to set the scene for the entire program of this Study Visit and participants
recommend that similar presentations are given in all Study Visits under PEMPAL
program. The key reason for the successful event in Croatia were highly qualified
presenters who are aware of both the big picture as well as operational details of their
work. This contributed greatly to excellent discussions held between the hosts and the
participants.
Overall the participants concluded that the Study Visit was very useful in offering a range
of different approaches and some approaches can be easily implemented in other
PEMPAL countries fairly quickly. Thanks to this Study Visit, participating countries which
are moving forward with budget transparency and participatory budgeting reforms will
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be able to take into account Croatian experiences in designing the reforms and will
contact the Croatian authorities (including at the local government level) if further advice
is needed. It was agreed that additional materials from the Croatian authorities would be
collected and shared with the Study Visit participants. It is suggested that this Study Visit
Report and all of the materials form the Croatian Study Visit are shared with the wider
BCoP community at the web-site www.pempal.org.
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