BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS This interactive document has been optimised for use on computers and tablets in portrait orientation. Click on this square to return to the contents page SECTION NAME Click on this section to return to the beginning of the section Cover images: Upper © Dusit/Adobe Stock Lower © Andrey Popov/Adobe Stock Budget execution in health: from bottlenecks to solutions © World Health Organization and the International Bank for Reconstruction and Development / The World Bank, 2025 Some rights reserved. This work is available under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 IGO licence (CC BY-NC-SA 3.0 IGO; https://creativecommons.org/licenses/by-nc-sa/3.0/igo). Under the terms of this licence, you may copy, redistribute and adapt the work for non-commercial purposes, provided the work is appropriately cited, as indicated below. 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Errors and omissions excepted, the names of proprietary products are distinguished by initial capital letters. All reasonable precautions have been taken by WHO and The World Bank, to verify the information contained in this publication. However, the published material is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretation and use of the material lies with the reader. In no event shall WHO or The World Bank, be liable for damages arising from its use. The findings, interpretations and conclusions expressed in this publication do not necessarily reflect the views of WHO or The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank and WHO do not guarantee the accuracy, completeness, or currency of the data included in this work and do not assume responsibility for any errors, omissions,or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. Graphic design. David Lloyd Design (DLD). Unless otherwise credited, all images used in this report were created in part with Midjourney AI and overlayed with graphics created by DLD. Any resemblence to a real individual is accidental. CONTENTS CONTENTS EXECUTIVE SUMMARY IV ABBREVIATIONSVII NAVIGATING THE REPORT VIII FOREWORDIX ACKNOWLEDGEMENTSX 1. INTRODUCTION 01 2. WHAT IS BUDGET EXECUTION? 03 2.1 Definitions and concepts 03 2.2 Health budget execution in countries with different purchasing arrangements 06 2.3 Decentralization and health budget execution 08 2.4 Donor financing and health budget execution 09 3. TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES 13 3.1 Health budget under-execution in the 19 low-income countries represented an annual loss of about Intl US$ 4 per capita 13 3.2  Health budget execution rates deteriorated over time in low-income countries especially across the Africa region 14 3.3  Overspending of health budgets is of concern, particularly for UMICs16 3.4  Health budget execution rates in LICs were characterized by high year-on-year volatility 17  In the low-income and lower-middle-income countries, health budget execution 3.5  rates were lower and had greater variability than in the education sector 19 3.6 All income groups underspent on goods and services in the health budget 20 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS i CONTENTS  OMMON CHALLENGES IN HEALTH BUDGET EXECUTION 4. C IN LOW-AND MIDDLE-INCOME COUNTRIES 23 4.1 Budget formulation 23 4.2 Budget execution 27 4.3 Budget oversight 31 5. OPTIONS FOR POLICY ACTIONS AND DIALOGUE35 5.1 Strengthening health budget credibility 35 5.2  More appropriate budget structure and improved rules for budget allocation 38 5.3 Regularity and predictability of fund flows 40 5.4 Appropriateness and effectiveness of spending controls 43 5.5 Strengthening procurement and contract management 46 5.6 Strengthening monitoring systems and accountability 48 6. DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION 51 6.1 Overview of the analytical approach 51 6.2  Mapping health budget execution funding flows and PFM rules (Step 1) 52 6.3 Assessing health budget execution performance (Step 2) 52 6.4 Identifying root causes of health budget execution issues (Step 3) 54 6.5  Identifying improvement measures to address causes of poor health budget execution (Step 4) 56 CONCLUSION 58 ii BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS CONTENTS REFERENCES 59 APPENDICIES65 APPENDIX 1: WHO and World Bank initiative on health budget execution 66 APPENDIX 2: Data collection and analysis 67 APPENDIX 3: Country case studies 68 Burkina Faso 68 Cameroon71 Democratic Republic of Congo 74 Ethiopia78 Kyrgyzstan82 Lao PDR 85 Pakistan89 Senegal92 Solomon Islands 94 Timor Leste 98 Uganda103 Ukraine107 APPENDIX 4: Mapping sub-causes of poor budget execution in health – an illustration from Uganda 111 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS iii EXECUTIVE SUMMARY EXECUTIVE SUMMARY Budget execution is essential for achieving in budget execution data; (iii) identifying root Universal Health Coverage. Poor budget causes of problems and policy options for execution undermines a health system’s ability reform; and (iv) offering a diagnostic approach to deliver timely, effective, and equitable care. that supports operational engagement. Health budgets are designed to finance the procurement of drugs and supplies, pay for The report situates budget execution health workers’ wages and salaries, and cover within the public finance and health operational and maintenance expenditures. financing literature. It defines budget Delays and lapses in executing these budgets execution in health as “the degree to which can therefore leave a health system vulnerable money has been spent in line with agreed to stock outs, a disengaged workforce and priorities and in support of effective health deteriorating infrastructure. It also makes service delivery”, thereby emphasizing the it difficult to advocate for increases in importance that a budget be fully implemented health budget allocations going forward. and - equally importantly - that resources are From a health service delivery perspective, well spent. Health sector financing priorities when service providers cannot fully access and generic public finance objectives should and use public funds in a timely manner, align and be mutually supportive. For example, their ability to deliver health services effective budget execution protocols in health according to needs is jeopardized. should enable a public finance system that supports expenditure control and health Significant efforts have been made to financing principles such as output-based understand and advocate for greater payments and provider autonomy. budget allocations in health, the execution of these budgets often remains overlooked. The report presents budget execution This joint report by the World Health data trends and patterns from 91 countries Organization and the World Bank aims to across various income groups and regions. address this gap by (i) providing conceptual Analysis of this data identifies the following clarity on how budget execution relates to six challenges: health; (ii) presenting trends and patterns iv BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS EXECUTIVE SUMMARY 1. Underspending: There is significant 6. Under-execution of the goods and services underspending in low- and middle-income budget: Countries are under-executing the countries (LMICs). On average, LMICs goods and services budget, leaving staff underspend their health budgets by 13 percent, without necessary supplies to deliver representing an average loss of about $4 per services. Wage and salary payments are capita annually. This is equivalent to what typically close to fully executed in all countries. many countries spend on primary care and In contrast, in low- and lower-middle-income translates into a missed opportunity to achieve countries, spending on the goods and services key health outcomes. budget that covers medical supplies is about 15 percentage points below that, compromising 2. Declining execution rates: Budget execution the delivery of quality services. rates have been falling in low-income countries (LICs), especially in Africa. What drives poor budget execution On average, LIC budget execution rates in health, and how can these issues declined by 1.6 percentage points annually be effectively tackled? The report between 2010 and 2020. systematically maps out the underlying factors that lead to poor budget execution by 3. Overspending: There is evidence of budget cycle stage and responsible agency. overspending, primarily in high-income Reasons for poor budget execution relate to: countries (HICs). This suggests different public financial management (PFM) shortcomings ■ Budget credibility; than those found in budget under-execution, ■ Budget structure and reallocation rules; often related to the strength of and compliance with controls and oversight mechanisms. ■ Fund flow regularity and predictability; 4. Execution variability: There is considerable ■ Spending controls; variability in budget execution rates over time. Execution rates in many countries vary ■ Procurement and contract management; significantly, sometimes by as much as 15-20 ■ Budget monitoring system and percentage points year on year. Variation is accountability mechanisms. greater in LICs with poor PFM capacity, undermining their ability to pursue strategic Under each of these headline categories the policy priorities. report offers a detailed analysis with concrete examples of how budget execution problems 5. Poor execution compared to other sectors: may come to be and how these relate to Execution rates are worse in health than various agencies in government. Identifying in the education sector. This difference is what role ministries of finance, health and most pronounced in LICs, averaging 7 local government can play allows the report percentage points. to offer pragmatic guidance on what action can be taken to address specific problems in budget implementation. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS v EXECUTIVE SUMMARY The report also presents a practical and access to quality healthcare for all. Simply user-friendly diagnostic tool to help countries advocating for good expenditure management identify budget execution challenges and is insufficient. Improving health budget engage in a reform agenda. The four-step execution requires a holistic approach, diagnostic approach guides countries to: including the strengthening of budget formulation and oversight functions, as 1. Map current funding flows and well as implementing a more agile and understand their regulatory responsive PFM system. PFM landscape; To enable this, proactive dialogue and 2. Estimate aggregated and collaboration are needed among finance disaggregated budget execution rates and health authorities, as well as with local to provide a quantitative understanding governments in decentralized contexts. of current performance; Countries that execute their health budgets well may be better positioned to advocate 3. Systematically identify the underlying for increased budget allocations going factors contributing to budget forward. Countries are encouraged to execution challenges; and generate and publicize increasingly granular expenditure data to enhance the visibility 4. Develop tailored policy actions to of this agenda and enable more systematic address the identified root causes and analysis. It is time for LMICs to move beyond sub-causes of inadequate execution. the status quo and embrace a more strategic and collaborative approach to health budget Finally, this report serves as a call to action, execution. By implementing the approach as its findings have far-reaching implications outlined in this report, governments can for achieving Universal Health Coverage. unlock the full potential of their health Effective and efficient health budget execution budgets, ensuring that every dollar invested is not merely a technical issue; it is a translates into tangible improvements in the fundamental pillar for ensuring equitable health and well-being of their populations. vi BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS ABBREVIATIONS ABBREVIATIONS AFR African Region NHI National Health Insurance AMR Region of the Americas OTIM Online Treasury and Investment Management System EGP Electronic Government Procurement PBB Program-Based Budgeting EMR Eastern Mediterranean Region PBS Public Budget System EUR European Region PEFA Public Expenditure and Financial Accountability HCOs Health Care Organizations PERs Public Expenditure Reviews IFMIS Integrated Financial Information System PFM Public Financial Management IMF International Monetary Fund PMG Programme of Medical Guarantees LG Local Government RMNCAH Reproductive, Maternal, Newborn, Child and Adolescent Health LIC Low Income Country SEAR South-East Region LMIC Lower Middle-Income Country TSA Treasury Single Account MDA Ministries, Departments and Agencies UHC  Universal Health Coverage MHIF Mandatory Health Insurance Fund UMIC Upper Middle-Income Country MOF Ministry of Finance WHO World Health Organization MOH Ministry of Health WPR Western Pacific Region BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS vii NAVIGATING THE REPORT NAVIGATING THE REPORT This report builds on a joint WHO-World Bank Section 6 offers an engagement approach to initiative on budget execution challenges address budget execution challenges. A four- (described in more detail in Appendix 1). step diagnostic-to-solution model is proposed that guides an analyst through the process of Following the introduction, section 2 provides an identifying the right questions, data, and policy overview of core concepts from both a public options in a structured manner. financial management perspective and a health financing perspective and discusses how budget Section 7 concludes with a call to action for execution challenges can differ in countries with countries to embrace a more purposeful and a separate purchasing agency, varying degrees collaborative budget implementation approach of decentralization and significant donor funding. that involves finance, health and local government stakeholders. The trends and patterns in health budget execution data are analyzed and discussed The compiled dataset used for the analysis in section 3. The analytical approach is is being released jointly with this report to detailed in Appendix 2. support complementary analytical efforts. Section 4 identifies challenges that hinder good budget execution in health. These are drawn from an extensive literature review and a set of case studies. A summary of the case studies is provided in Appendix 3. Policy responses to these challenges are offered in section 5. This section lays out a pragmatic approach that Ministries of Finance, Ministries of Health and local governments can take to address six of the most frequently encountered budget execution challenges and points to examples from cases studies. viii BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS FOREWORD FOREWORD Expediting progress toward universal health management arrangements, and the need coverage requires commensurate resources. for improved communication and coordination Resources need to be raised and budgets among ministries of finance, health and local allocated to meet the growing challenges government agencies. in the health sector. However, budgets are only as useful as they also are implemented. This report is a valuable resource for This report “ Budget Execution in Health: From policymakers, health finance practitioners, Bottlenecks to Solutions ” assesses budget and development partners. It can be used as execution performance in low and middle- an evidence base to benchmark performance income countries. It demonstrates that and help identify challenges. It can also serve under-execution is widespread and examines as the foundation for a reform program that where key challenges lie and what drives them. ensures public finance mechanisms are in place It also proposes practical solutions to that facilitate access to quality services for all. strengthen implementation. We call on governments to prioritize this The study is timely and relevant given the agenda. Governments can carry out a thorough growing competition on public resources and diagnostic using the approach proposed recognition that progress towards UHC will here to identify actions that health, finance, require more and better utilized public financing. and local government authorities can take. Fully- and appropriately executed health Timely, granular and high-quality budget budgets strengthen the case for greater execution data are critical to this process; allocations in the future. Conversely, a poorly we therefore advocate that data is shared implemented budget will be the first stumbling to strengthen transparency and guide action. block in advocacy for dedicating more resources The problem will be better tackled once it to health. This report highlights the importance becomes more visible. The WHO and of aligning budget structures with service World Bank are fully committed to support delivery needs, strengthening financial countries’ efforts. Agnés Couffinhal Kalipso Chalkidou Global Program Lead, Health Financing Director, Health Financing & Economics World Bank World Health Organization BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS ix Acknowledgements ACKNOWLEDGEMENTS This document is the result of a collaboration Financing Forum benefited tremendously between the World Health Organization (WHO; from feedback. The contributors would like Department of Health Financing and to thank the peer reviewers: Nang Mo Kham Economics) and the World Bank Group (Health, (Senior Health Economist, World Bank), Nutrition, and Population Global Practice and Jiwanka B. Wickramasinghe (Lead Public Governance Global Practice). The co-leads of Finance Specialist, World Bank), Sarah this initiative were Hélène Barroy (Senior Public Alkenbrack (Senior Health Economist, World Finance Expert, WHO) and Moritz Piatti- Bank) and Cheryl Cashin (Managing Director, Fünfkirchen (Senior Economist, World Bank). R4D) for their helpful comments on an earlier The paper was codeveloped by a joint working version. In addition, the team would like to group established for the purpose of this work, thank Inke Mathauer (Senior Economist, WHO), which included, in alphabetical order: Hélène and Joe Kutzin (Senior Consultant, formerly Barroy (WHO); Hamish Colquhoun (World WHO) for their technical inputs and guidance. Bank), Justine Hsu (WHO), Moritz Piatti (World Management oversight was provided by Bank), Amna Silim (WHO), Richard Sutherland Kalipso Chalkidou (Director Health Financing (Public Expenditure and Financial and Economics, WHO) as well as Agnès Accountability [PEFA] program, World Bank), Couffinhal (Global Program Lead, Health and Bryn Welham (World Bank; now with Financing, World Bank). The team is also International Monetary Fund [IMF]). Funding grateful to the country teams who led country support was received from Gavi, the Vaccine case studies which provided invaluable input Alliance, and the European Commission and the African Health Economics and Policy through the Universal Health Coverage Association which supported the study Partnership. Preliminary findings were process in Burkina Faso, Cameroon, Senegal presented at the WHO Montreux Collaborative and Uganda. Excellent research support was Meeting on fiscal space, public financial provided by Marie-Renée Lajoie and Gergely management and health financing in 2023 and Marton (McKinsey & Company). Alix Beith, the World Bank Annual Health Financing Forum Daniel Cohn, and Zac Mills provided excellent in 2024 and the World Bank Annual Health editing services. x BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 1.0 INTRODUCTION INTRODUCTION Making progress towards universal health (LMICs). LMIC government officials generally coverage (UHC) requires that budgets be have paid more attention to mobilizing and executed effectively and efficiently. Budget allocating health-related revenues than to execution is the phase of the budget cycle in health budget execution. This is partly due which the budget is implemented. This phase to challenges in compiling and publicizing consists of authorizing and transmitting funds health budget execution data and the health to budget holders who in turn manage and community’s limited understanding of budget account for expenditures. Budget execution execution-related processes, which together is critical to enabling effective purchasing have resulted in health budget execution’s of health services: when service providers are low visibility both within LMICs and globally. not able to fully access and use public funds in a timely manner, it jeopardizes their ability This report aims to deepen understanding to deliver health services in line with health of common challenges in health budget needs. Even when a separate purchasing execution, identify reform options and agency is responsible for purchasing health facilitate mutual appreciation and services, budget execution processes remain collaboration amongst finance, health and crucial to ensure timely budget transfers to local government authorities. The health purchasing agents, to subsidize priority sector’s budget execution data have population groups or services, and to provide not yet been widely analyzed in the literature, supply-side support to service providers. nor have findings been leveraged to inform policy actions. The report also aims to provide Despite its crucial role in health spending an analytical framework to support future and service delivery, assessing and assessments of health budget execution addressing shortcomings in budget challenges in countries. It was produced execution have typically not been priorities through a joint WHO-World Bank initiative in low- and middle-income countries that is presented in more detail in Appendix 1. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 01 2.0 WHAT IS BUDGET EXECUTION? WHAT IS BUDGET EXECUTION? This section aims to clarify the definition operationalize the use of public resources of budget execution, as well as how budget in a way that should be efficient, effective execution relates to the health sector. It first and enable aggregate expenditure control. discusses the budget execution process from The payment cycle is the process that a generic public financial management (PFM) operationalizes budget execution. Budget perspective. It then reflects on how that execution includes several sub-steps, from how process relates to the health sector, and the funds are authorized and how they flow to budget additional factors that should be considered holders, to how expenditure is managed and to ensure the process supports health financing accounted for. In most LMICs the budget and health care service delivery effectively. execution process includes stages for Lastly, the section addresses how to think authorization (ministries are authorized to spend about the relationship between health budget money in a manner consistent with the legal execution challenges and different purchasing appropriations for each line item), commitment arrangements, degrees of decentralization, (where a future obligation to pay is incurred), and donor financing modalities. verification (verification that goods have been delivered or the service has been rendered), payment authorization (where a payment order is issued), payment (where the payment 2.1 Definitions happens), and accounting (where transactions and concepts are recorded, allowing for reconciliation). If designed and implemented well, these stages As a key part of the budget cycle, budget collectively facilitate the joint objectives of execution is the phase where resources are used expenditure control and effective and efficient to implement the policies that are expressed in use of resources (Potter and Diamond 1999). the budget (Allen and Tommasi 2001). In its most simplified form, a budget needs to be sequentially Budget execution performance is generally (i) formulated and approved; (ii) executed; and assessed through budget implementation (iii) evaluated, to inform the next budget cycle. rates. The PEFA Framework for Assessing Public During the first phase, the line Ministry (e.g., a Financial Management (PEFA 2019) provides Ministry of Health) develops a budget proposal, guidance on how to assess the extent to which the executive negotiates the budget proposal a budget has been executed (called internally, and the executive submits its agreed “expenditure outturn”) relative to the originally budget to the legislature for approval. The approved amount (Table 1.1). Using PEFA’s government expresses its policy priorities within the four-letter scoring scale, a country which budget, which then becomes the executive’s legally deviates from its original budget by a maximum binding spending plan for the coming year. The next of 5 percent in terms of aggregate expenditure phase, budget execution, is when the budget is and budget composition outturns, is consider implemented and funds are spent, allowing a top performer (“A”). Executing the budget health service providers to deliver services. with a deviation beyond 15 percent of the original budget is considered poor performance In the literature on PFM, budget execution (“D”). The aggregate budget execution rate can covers a sequence of activities which be broken down by economic category, BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 03 WHAT IS BUDGET EXECUTION? functional classification, or program Spending may be compared against the original classification to offer insight into the extent to budget (as recommended in the PEFA which approved budgets have been implemented Framework), the revised budget, an adjusted relative to the intended spending categories. budget, or any subsequent iterations thereof. Table 2.1 Main PEFA indicators for budget execution Score Minimum requirements for scores Aggregate expenditure outtrun Aggregate expenditure outturn was between 95% and 105% of the approved A aggregate budgeted expenditure in at least two of the last three years Aggregate expenditure outturn was between 90% and 110% of the approved B aggregate budgeted expenditure in at least two of the last three years Aggregate expenditure outturn was between 85% and 115% of the approved C aggregate budgeted expenditure in at least two of the last three years D Performance is less than required for a C score Expenditure composition outtrun by function Variance in expenditure composition by program, administration or functional A classification was less than 5% in at least two of the last three years Variance in expenditure composition by program, administration or functional B classification was less than 10% in at least two of the last three years Variance in expenditure composition by program, administration or functional C classification was less than 15% in at least two of the last three years D Performance is less than required for a C score Expenditure compostion outturn by economic type Variance in expenditure composition by economic classification was less than 5% in A at least two of the last three years Variance in expenditure composition by economic classification was less than 10% in B at least two of the last three years Variance in expenditure composition by economic classification was less than 15% in C at least two of the last three years D Performance is less than required for a C score Source: PEFA 2019. 04 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS WHAT IS BUDGET EXECUTION? Budget execution is closely linked to other available resources. A budget that does not stages of the budget cycle. Budget execution reflect sectoral priorities, is not in line with needs to be treated as a dynamic process that strategic plans, or that aims to achieve unrealistic draws from, and feeds into, other stages of goals will be difficult to execute. Similarly, a the budget cycle and involves all necessary budget that is not based on realistic revenue stakeholders including ministries of finance, projections is unlikely to be implemented in full. health and local government (figure 2.1). Additionally, failure to adequately monitor a Effective budget execution requires a well- budget can distort the budget execution status, formulated budget that matches sector needs to artificially lowering or increasing execution rates. Figure 2.1 Effective budget execution in health follows good management across the budget cycle by all engaged stakeholders Stakeholders Budget cycle stages Ministry of Finance Formulation E ective Ministry of Health budget execution Execution in health Local Government Oversight Source: Authors Budget execution in health can be defined Compliance with approved budget allocations as the degree to which money has been matters in health as it does in other sectors, spent in line with agreed priorities and in with an additional need to be able to match support of effective health service delivery. resources with service needs. Given that health This definition emphasizes the importance needs commonly change within a fiscal year, of executing the budget in full and spending and the difficulty in anticipating these changes it well. While budget execution’s generic and estimating budget allocations accordingly, definition and underlying principles apply governments should design their budget equally to health as they do to other sectors execution practices to enable budget holders, and to broader government spending, there including health service providers, where remain some specificities in health. relevant, to flexibly respond to evolving BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 05 WHAT IS BUDGET EXECUTION? population needs. Sections of this report than those without. Similarly, the extent to unpack the factors that drive health budget which a country is decentralized and how this execution so as to better inform future shapes health service financing, will affect assessments and policy responses to be better how budget execution relates to the sector. tailored to the health sector’s specificities. Lastly, the presence of donor funding and the extent to which donors make (or do not make) Strategic purchasing and budget execution use of government PFM systems and are interrelated concepts, but they are not institutions may affect budget execution. the same and should not be conflated when These considerations are discussed in more discussing health spending. The purchasing detail in the following subsections. of health services aligns closely with budget execution in situations where a purchasing agency in government makes a payment to a service provider for the delivery of individual 2.2 Health budget health services. In situations where a service execution in countries provider has the status of a budget entity within the government, the relationship is less direct with different purchasing because the amount that each service provider arrangements receives is determined earlier, during the budget formulation phase, and is not linked to outputs. Health budget execution processes are Instead, in this situation, budget execution shaped by a country’s purchasing stage activities consist of service providers configuration, specifically whether there using their budget allotment to pay suppliers is a dedicated purchasing agency and how for inputs. Budget execution in health commonly that agency engages with public budgets. goes beyond making payments to service The types of budget execution challenges may providers –including spending for other differ depending on whether (i) the health ministry budgetary categories such as centrally- uses its regular budget to purchase services; managed program expenditures (for example, (ii) there is a separate purchasing agency, but its for prevention), large procurement contracts budget is part of the regular budget; (iii) there for drugs and supplies managed centrally and is an extra-budgetary entity tasked to purchase executed through large framework contracts, health services, under separate budget rules capital expenditures, and even personnel (Allen and Radev 2010). The differentiation expenditures. Therefore, while components between budget execution and service of purchasing overlap with budget execution, purchasing processes is outlined in Box 2.1. strategic purchasing cuts across all stages of the budget cycle. When services are purchased through the regular budget, regular budget execution How budget execution relates to health varies rules apply. Budget execution challenges, according to country context and types of such as budget underspending or inefficient entities involved in health financing. Countries use of budget resources by budget holders, with a separate purchasing agency may face may emerge due to generic weaknesses in a different types of budget execution challenges country’s PFM’s system, for example affecting 06 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS WHAT IS BUDGET EXECUTION? Box 2.1: Differentiating budget execution and service purchasing processes Service purchasing, which generally refers to paying service providers based on performance information, and budget execution are interrelated concepts, but they are not the same and should not be conflated when discussing health spending. The purchasing of health services aligns closely with budget execution processes in situations where a government makes a payment (otherwise considered a budget transfer in the PFM taxonomy) to a service provider for the delivery of individual health services. In situations where a service provider has the status of a budget entity within the government, the relationship is less direct because the amount that each service provider receives is determined earlier, during the budget formulation phase. Instead, in this situation, budget execution stage activities consist of service providers using their budget allotment to pay suppliers for inputs, which constitute a payment. Additionally, budget execution in health commonly goes beyond making payments to service providers –including spending for other budgetary categories such as centrally-managed program expenditures (for example, for prevention), large procurement contracts for drugs and supplies managed centrally and executed through large framework contracts, capital expenditures, and even personnel expenditures. Therefore, while components of purchasing overlap with budget execution, strategic purchasing cuts across all stages of the budget cycle. fund release timing or providing insufficient a single budget line. Delays in budget transfers flexibility in budgetary resource use. If service to the purchasing agency can hinder effective providers do not have recognized status as budget execution, and ultimately service spending units this can further complicate delivery (Schieber et al 2012). The purchasing the budget execution process and add layers agency generally can pay providers directly by to the process of disbursement, which in turn transferring funds; the latter are budgeted and can exacerbate underspending. Having treated as expenditures when disbursed and expenditure reporting as part of the health recorded accordingly. As the purchasing agency ministry’s general accounting framework helps itself provides and consolidates financial to ensure relatively comprehensive and public reporting, it may not provide disaggregated transparency on spending. information on spending by service providers. When there is a purchasing agency under the A purchasing agency which does not draw administrative structure of the ministry of on the regular budget generally follows a health, regular budget rules may apply, with separate set of processes and rules for budget some possible adaptations. The purchasing allocation and execution. For example, the agency may receive budget allocations from the purchaser may be allowed to retain revenue health ministry’s regular budget, generally as across fiscal years and follow different spending BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 07 WHAT IS BUDGET EXECUTION? Image © ipopba/Adobe Stock arrangements, often with a higher degree multiple sources of funding and the often-weak of flexibility than under general budget rules. financial management capacities at subnational The purchaser may still receive general budget levels (Ravishankar et al, 2024). Budget transfers to cover certain population groups/ execution performance can be affected by services, in which case delays in funds transfer multiple layers, authorization requirements, will affect the purchaser’s ability to spend. and accounting processes. Contracts between the purchaser and service providers, which are separate from general In devolved contexts, where administrative, budget execution, typically regulate the fiscal, and political authority are shifted from modality of how the service providers are paid the central government to a lower level and the level and type of financial autonomy of government, budget execution processes they have. In such cases, the purchasing agency are more complex than in centralized systems; generally must provide separate reports, which this complexity can contribute to poorer are then reviewed and publicized separately performance. The lower level of government from expenditures under the general budget. – for example, a province, a district, or a municipality – becomes responsible for financing and providing various public services, including healthcare. If the central-level 2.3 Decentralization and government delivers inter-governmental health budget execution transfers late or does not execute them fully, it impedes the lower-level government’s ability to Decentralization influences how budget spend in accordance with plans. The likelihood execution in health operates. In a system of such delays or partial transfers is higher when which is devolved or deconcentrated, health the central level transfers funds originating from budget execution is more complex, given the multiple grants and funding sources. 08 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS WHAT IS BUDGET EXECUTION? Subnational governments’ often weaker are recognized as “spending units” in the financial management capacities, and health government’s financial management system, facilities’ financial autonomy limitations, may then service provider spending is reported also affect the ability to fully execute the against the regular central budget; when they budget. Unfinished devolution transition may are not considered “spending units”, it has also make spending protocols and processes often been harder to match resources with more complex due to lack of clear needs and enable full execution. responsibilities. For example, subnational governments may be granted formal administrative responsibility for primary care service delivery and considered politically 2.4 Donor financing and responsible for service outcomes – however health budget execution they are not granted full fiscal control over the budget for delivering these services, making The modality, volume, and predictability budget execution fragmented and uncoordinated. of external financing for a country’s health Additionally, subnational governments tend not sector1 can impact domestic health budget to report their financial transactions as execution performance. Development frequently or as comprehensively as central-level partners commonly use a wide range of governments, and may use different financial modalities to transfer aid resources to management systems, affecting financial recipient-country governments. Each modality accountability, including for health. has implications for the execution of domestic budgets (Piatti-Fünfkirchen et al. 2021a). Deconcentration, under which local areas are vested with authority and resources External resources in the form of general while operating as branches of the central or sectoral budget support can facilitate ministry, presents specific budget good budget execution. With general budget execution challenges. The central-level support, a development partner directly ministry provides budget allocations which the transfers external funds to the consolidated lower-level entities then execute. The districts’ account of the recipient country’s treasury. often-limited flexibility over the use of those These resources are fungible and their receipt resources, combined with their limited financial is often conditional on the government’s management capacities, can lead to poor policy actions. This modality may improve budget execution levels. The central predictability of the government’s revenue government can directly fund lower-level and cash-flow position. Additionally, the healthcare facilities, either through direct policy-based conditionalities attached to transfers to the facilities’ financial management the development partner’s budget support systems or via “pass through” grants to the can enable government reforms strengthening facilities’ parent-districts. When those facilities domestic budget execution practices. If n LMICs, external sources represented 31percent of current health expenditure on average in 2021 (WHO, Global Health Expenditure 1I Database, 2023). BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 09 WHAT IS BUDGET EXECUTION? expected resources do not materialize in on top of the inflexible budget execution full, however, this can leave part of the protocols often in place in many LMICs.2 budget unfunded and make it harder to Even when funds are channeled through the completely execute. budget, this tends to be through the development budget where it is possible to Sectoral budget support in health limits have separate accounts, rules, and processes the government to using those resources in place, which can lead to complications. for the health sector, and can enable better Donors may insist on dedicated financial practices in the sector. This support may have reporting on their expenditure items, which specific reporting requirements or be linked may require the recipient government to to certain policy conditions or results, and the provide more detailed and frequent reporting, greater scrutiny that this entails is likely to have potentially involving the development of a positive effect on how the government customized reports within its financial executes its health budget. As these funds management information system. are typically channeled through the government Earmarking resources for specific purposes treasury and follow standard government (for example, mosquito net provision, drug PFM practices, generally no additional rules, or vaccine payments, health worker salary regulations, or procedures are needed. contributions, or capital investments) may However, providing the required reports help to ensure that these objectives are necessitates a greater level of administrative financed and implemented. In practice, effort. As with general budget support, identifying, tracking, and reporting on if anticipated sectoral budget support earmarked spending requires significant effort3 does not fully materialize, the government and can draw scarce capacity away from other may face an unexpected financing gap. tasks that are important in regular budget funding management. Nonetheless, while External financing that is earmarked to greater budget execution oversight increases specific interventions or budget lines can the government’s immediate administrative make domestic budget execution more burden, it can potentially support higher complex. This modality comes with specific standards of financial management in the financial management rules and conditions long term. and requirements for spending controls, which together can create additional rigidities  onors may require that certain conditions be applied to transactions funded by their resources. These can include regulations such 2D as more stringent rules for procurement; a “no objection” approval system for large-value transactions; lower limits on delegated expenditure resulting in more frequent need for senior-level approval of spending; or positive confirmation that each expenditure transaction is being used to finance only eligible expenditures. Donors may also require governments to manage day-to-day expenditure using dedicated accounting systems even when the spending is on budget, an obligation which adds cost and time to budget execution.  onors are concerned that the resources they provide be used prudently and efficiently. Consequently, donors often establish extra 3D regulations for monitoring and auditing the specific spending areas they fund, such as additional financial audits, no-notice audits of specific institutions, forensic audits of high-value transactions, and performance audits for specific areas of the relevant sector (in this case, health). 10 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS WHAT IS BUDGET EXECUTION? Image © Riccardo Mayer/Adobe Stock BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 11 3.0 TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE- INCOME COUNTRIES TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES In this section, we report key findings from an analysis of Ministry of Health (hereafter referred to as health) budget execution rates 3.1 Health budget under- across a sample of 91 low- and middle- execution in the 19 low- income countries over the period 2010-2020. The analysis shows key trends in health budget income countries repre- execution over time across the three country- sented an annual loss of income groupings and within individual about Intl US$4 per capita countries, important distributional patterns by budget component, and compares health Health budget execution rates were poor budget execution levels with the countries’ in the sampled low-income countries. general government and education budgets. Average (mean) health budget execution rates The analytical approach is further detailed in ranged from 87 percent in the low-income Appendix II. The dataset is made publicly countries to 99 percent in the upper-middle- available in conjunction with this report to income countries over the time-period (Figure enable further assessments. 3.1). The low-income countries’ deviation of 13 percentage points from full budget execution (that is, 100 percent) represented significant resource loss, estimated at Int $4 per capita per year (constant 2020 international dollars). Figure 3.1 Low-income countries and those in the WHO African region and the eastern Mediterranean region underspent their health budgets (mean by group for 2010-2020) 105% Health budget exeuction rate 100% 95% 90% 85% 80% 75% LICs LMICs UMICs EMR AFR AMR SEAR WPR EUR Note: Loss of resources intended to be available for health was calculated based on WHO Global Health Expenditure Database (last accessed August 2023) by taking LICs’ average per capita expenditure in constant (2020) PPP over the 2010- 2020 time-period and dividing it by the average budget execution rate to estimate full budget execution; the difference between full and actual budget execution represented the loss. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 13 TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES Across regions, health budget execution rates upper-middle-income countries generally were lowest in the WHO African and Eastern hovered around 90 percent and 100 percent Mediterranean Region countries, with average (the latter equivalent to full execution) rates as low as 87 percent and 86 percent, respectively, over that period. respectively. These regions have the highest number of fragile, conflict-affected, and Budget execution rates declined over the vulnerable settings where health budget course of the time-period for countries in execution volatility is more marked. (Figure 3.1). the WHO African Region while generally The region with the highest budget execution fluctuating between 95 percent and 105 rates was the European Region, with an average percent in the other regions (Figure 3.2b). rate of 103 percent (a slight overspend) for the Countries in the WHO Eastern Mediterranean time-period. There, sustainability of health Region (solid green line) were an exception – spending was the greater concern (OECD 2015). their rates declined markedly between 2010 and 2012 during the Arab Spring, flatlined the following two years, then began to rise in 2014 coinciding with reforms to strengthen 3.2 Health budget the overall economy and public institutions execution rates (Fouad 2013, Charaoui 2023), subsequently deteriorated over time converging with countries of the four better- performing regions. All regions except for in low-income countries the WHO South-East Region increased their especially across the rates between 2019 and 2020, most likely associated with simplified spending Africa Region processes during COVID-19 (WHO, 2021).4 Health budget execution rates deteriorated Low-income countries were, on average, over time, particularly in the low-income challenged by both considerable under- countries (Figure 3.2a) and across the WHO execution of their health budgets and by African Region (Figure 3.2b). The low-income a general decline in execution rates over countries’ health budget execution rates time. Figure 3.3 shows individual low-income fluctuated year-over-year, with a general countries’ execution rates in a quadrant chart. downward trajectory over time. The average The vertical axis represents the average annual change of –1.6 percentage points over health budget execution rate for the study the 11-year period indicates that budget period, such that countries shown above execution was a chronic issue. By contrast, rates (below) the horizontal green line, on average, for the lower-middle-income countries and the overspent (underspent) their health budgets.  he increase in 2020 was related to spending to address the COVID-19 pandemic (Kurowski et al. 2023) – many countries 4T implemented emergency spending measures, drew on contingency funds, revised public finance laws, exercised flexibility in allocations across the budget, and streamlined their spending modalities. These measures, which contributed to higher budget execution, suggest that countries can overcome bottlenecks in their PFM systems (WHO 2022; Barroy et al. 2020; Hsu et al. 2022). 14 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES Figure 3.2a and 3.2b Health budget execution rates deteriorated in LICs and WHO African region (mean by group from 2010-2020) 105% Figure 3.2a Health budget execution rate 100% 95% 90% 85% 80% 75% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 LIC LMIC UMIC 115% Figure 3.2b Health budget execution rate 110% 105% 100% 95% 90% 85% 80% 75% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 AFR AMR EMR EUR SEAR WPR The horizontal axis represents the average underspend their health budgets while showing annual percentage point change over the time budget execution improvement. Countries in period, such that countries to the right of the the bottom-left quadrant also tended to vertical line showed positive (negative) underspend their health budgets, but with changes over the time-period. The countries worsening budget execution; in these in the bottom-right quadrant tended to countries, more focused attention is needed. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 15 TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES Figure 3.3 In many of the low-income countries budget execution rates were both low and worsening over time 140 Guinea-Bissau 130 Average health budget execution rate 120 Ethiopia 110 Democratic Republic of the Congo Mozambique 100 Sierra Leone Rwanda Burundi Burkina Faso Zambia 90 Chad Afghanistan 80 Guinea Malawi Mali Liberia Madagascar Niger 70 Togo 60 Uganda -15 -10 -5 0 5 10 15 Annual percentage point change (2010-2020) Note: Average annual percentage-point change estimated by regressing health budget execution rates by year of data. with underspending and overspending. Figure 3.4 shows the extent to which health budget 3.3 Overspending of execution rates varied, across countries by health budgets is of income group, as box plots. The central portion concern, particularly of data for low-income countries spread over 30 percentage points from 69 percent to 99 for UMICs percent, compared to 11 percentage points from 93 percent to 104 percent for upper- The distribution of health budget execution middle-income countries. The LICs’ wider rates indicates that countries across all range reflects the greater variability in strength income categories faced challenges both of their PFM arrangements; it also suggests 16 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES Figure 3.4 Health budget execution rates were spread over a wide range, indicating both under- and overspending (2010-2020) 140 Health budget execution rate 120 100 80 60 40 LIC LMC UMC Excludes outside values Note: The box plots show the distribution or spread of the data where data are first ordered in increasing value and then divided into four equal parts or quartiles. The first quartile (values up to the 25th percentile) is represented by the bottom whisker to the bottom of the box. The second quartile (values between the 25th and the 50th percentile) is represented by the bottom of the box to the red line, which is the median value (50th percentile). The interquartile range (IQR) is the difference between the value at the 75th percentile and the value at the 25th percentile and is a measure of the dispersion of those data. The bars at the end of the top and bottom whiskers indicate the values which up to are 1.5 times the IQR; outliers lie beyond these whiskers. their greater potential to improve budget Not only were LICs’ execution rates highly execution. A country can address dispersed but year-over-year rate overspending by putting in place stronger fluctuations were greater (Figure 3.2a oversight mechanisms – as compared to and 3.2b). Figure 3.5 shows health budget addressing underspending, which may execution rates for a selection of distinctive require streamlining the release of funds. low-income countries (i.e., the ones with the most fluctuation) over time, presenting a pronounced rise-and-fall pattern. For example, Afghanistan’s rates over the period 2011-2019 3.4 Health budget ranged from 65 percent to 142 percent with execution rates in high year-over-year fluctuations, such as a LICs were characterized drop from 90 percent in 2011 to 61 percent in 2012. Liberia’s rates ranged from 40 percent by high year-on-year to 112 percent over the period 2012-2021, with volatility notable fluctuations from 52 percent in 2015 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 17 TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES to 88 percent in 2016, and 71 percent in 2017.5 to plan and budget, erodes budget Year-over-year health budget execution rate predictability, and makes it difficult to ensure volatility negatively impacts the sector’s ability continuous health service delivery. Figure 3.5 Health budget execution rates in selected low-income countries Afghanistan Liberia Malawi 150% 120% 120% 100% Health budget execution 120% 100% 80% 60% 90 80% 40% 60% 20% 60% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2013 2015 2016 2017 2018 Mali Mozambique Togo 100% 200% 100% Health budget execution 80% 150% 80% 60% 100% 40% 60% 50% 20% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 n donor-dependent countries, development partners can increase the fluctuation of budget execution rates by channelling their 5I contributions through the recipient-government’s budget without also aligning their disbursements with the government’s fiscal year (Piatti-Fünfkirchen et al. 2021a). 18 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES red) was 7 percentage points lower than for 3.5 In the low-income their education budgets (in cyan) (84 percent versus 91 percent). Differences are more and lower-middle- pronounced in low-income countries. In low- income countries, health income countries, rates for the health sector were also more dispersed, ranging from 40 budget execution rates percent to 139 percent compared to 56 percent were lower and had to 119 percent in the education sector.6 In the greater variability than upper-middle-income countries, by contrast, median budget execution for health was in the education sector 2 percentage-points higher than for education (99 percent versus 97 percent), with a similar spread in the range of budget execution rates When compared to the education sector, for both social sectors. The low-income health budget execution rates tended to countries’ median health budget execution be lower and more highly dispersed for rates (84 percent) were similar to those for low-income and lower-middle-income the government’s general budget (85 percent). countries. Figure 3.6 shows that over the The upper-middle-income countries’ median 2010-2020 period, the low-income countries’ rates for health (99 percent) were also similar to median execution of their health budgets (in those for the general government (97 percent). Figure 3.6 Health budget execution was lower and more variable than education budget execution (2010-2020) 140 120 Execution rate 100 80 60 40 LICs LMICs UMICs l General government l Health l Education  6 Excluding outliers. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 19 TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES Figure 3.7 Health and education budget execution rates in select low-income countries Togo Uganda 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Niger Mali 100% 100% 90% 80% 80% 70% 60% 60% 50% 40% 40% 30% 20% 20% 10% 0% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017 2018 l Health l Education and services. Execution rates for health goods 3.6 All income groups and services were also highly dispersed in all three country-income groups as shown by underspent on goods longer length of the mid-spread box (IQR); and services in the in the low-income countries, the difference was 33 percentage points, between full health budget execution, to execution of around just two- thirds of the approved budget (67 percent). Wages were often nearly fully executed Variation in spending on wages was also less while the portion of the health budget in all country income groups; the largest of allocated to goods and services was these was in the LICs’ with a difference of much more likely to be underspent, in all 12 percentage points from 103 percent to three country income groups (Figure 3.8). 91 percent. The health sector’s weaker budget LIC median wage execution rates were 97 execution for goods and services is a critical percent compared to 84 percent for goods issue as service delivery requires not only 20 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS TRENDS IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES Figure 3.8 Health goods and services were underspent 140 120 Health budget execution rate 100 80 60 40 LICs LMICs UMICs l Good and Services l Wages  Excludes outside values effective implementation of budgets for wages of identifying common root causes of but also for goods, such as drugs, masks, sub-optimal health budget execution and gloves, or other supplies. key drivers of better performance across stages of the budget cycle. Such information ‘This section has shown trends and can help to identify potential solutions to distributional patterns in health budget unblock and fully use all available funds for execution rates across time and country the health sector. income groupings. Findings highlight that closer analysis of specific countries’ challenges can provide further insight into root causes of suboptimal health budget execution performance and inform identification of potential solutions. The next section examines underlying health budget execution performance in 12 countries with the aim BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 21 4.0 COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW- AND MIDDLE-INCOME COUNTRIES COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES This section identifies common health budget aims to assist health and finance authorities in execution challenges in low- and middle-income LMICs in their reform-making processes. countries, drawing from a scholarly literature Literature review and case study findings are review conducted from 2019-2020 and from presented together, following the budget cycle, 12 country case studies carried out jointly by with the assumption that each stage impacts WHO and the World Bank during 2021-2022.7 budget execution performance. A distinction is The purpose of utilizing these two sources was to made between factors related to finance (or the gain a comprehensive understanding of the most Ministry of Finance) and those related to health common issues in health budget execution and the (or the Ministry of Health). Country case study factors contributing to poor execution. This insight summaries are provided in Appendix 3. 4.1 Budget formulation Figure 4.1 How problems in budget formulation can lead to challenges in budget execution in health Credibility of budget Budget structure and rules Challenge for budget allocation Inaccurate revenue projections Slow transition to flexible budget structure Short timeframe to develop budget Inadequate guidance Ministry of Limited communication of budget Finance ceilings to health Limitations on budget re-allocations Overuse of historical budgeting Continued use of input-based budgeting Input-based planning Inappropriate application of Ministry of Inaccurate cost estimation MOF guidance Health Poor priority setting No alignment between allocation and implementation responsibility  he country case studies conducted by the WHO and the World Bank in 2021-22 analyzed budget execution rates quantitatively, 7T and used a consistent approach to explore key drivers both of positive and negative performance informed by the findings from the literature review. The 12 countries, selected to represent a diverse mix of geography, income level, population size, and institutional structures, were Burkina Faso, Cameroon, Democratic Republic of Congo, Ethiopia, Kyrgyz Republic, Lao People’s Democratic Republic, Pakistan, Senegal, Solomon Islands, Timor-Leste, Uganda, and Ukraine. The case studies found that almost all countries (10/12) had aggregate health budget execution rates above 85percent, which on the surface suggested fairly good performance, but that the countries’ disaggregated health budget execution rates and qualitative responses showed underlying issues impeding effective and efficient budget implementation. The case studies were specific to the countries featured and cannot be considered representative of all LICs’ and LMICs’ situations. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 23 COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES Budget credibility exceed appropriated allocations. Input-based planning that does not align with current needs Budgets often lack credibility, which creates can hinder health program implementation. challenges for execution. A credible budget is These factors can be compounded by a lack one that is prepared with realistic and of technical capacity in budget development achievable revenue projections and budget within the health sector and by allocating estimates. These characteristics increase the insufficient time for budget preparation (Barroy likelihood that the government will be able to et al. 2019). raise revenues and to spend funds in line with the allocated budget (Allen and Tommasi 2001, Credibility also refers to the alignment Barroy et al. 2019, IBP 2019). Weak credibility of budget allocations with stated priorities of health-sector budgets can stem both from and objectives. Budget credibility suffers general government finance-related issues when finance and health authorities fail to align and from issues specific to the health sector. budget with health needs during the budget- formulation process. From the health sector’s General finance-related factors which perspective, such a lack of alignment can result can compromise budget credibility include in a mismatch between the allocated resources inaccurate revenue projections, compressed and the sector’s financing needs during the budget timetables, and inadequate budget execution stage (Barroy et al. 2019). communication regarding budget ceilings. These factors often result in unrealistic or In most case study countries8 the health error-prone budget estimates and revenue sector’s budget was not considered credible, projections, making it challenging for the creating budget execution issues government to raise sufficient funds or to downstream. Poor quality cost estimates led execute the budget as planned. The government to overruns or underruns in health expenditure may then be required to make in-year (for example, in Pakistan), and challenges in adjustments, such as virements or delivering health services when the allocated supplementary estimates (Cashin et al. 2017, amount was insufficient for operational needs Grinyer 2019, Ally and Piatti-Fünfkirchen 2021, (for example, in the Kyrgyz Republic). In other Schiavo-Campo 2017, Pattanayak 2016). instances, inaccurate revenue projections often led to incomplete or delayed fund releases, Health-sector-specific factors, such as sometimes resulting in unpredictable funding unrealistic cost estimates, the persistence for budget implementation (for example, in the of historical budgeting practices, and reliance Lao People’s Democratic Republic). on input-based planning, can also weaken budget credibility. When health authorities’ Strategic planning was generally focused on cost estimates are unrealistic, this can give rise longer-term sector plans, which in turn was to substantial gaps in financing, with costs that not well integrated into the budgeting 8 In the rest of this section, “countries” refers to the 12 countries reviewed. 24 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES processes. While governments invested estimates that were unrealistic, as was the significant time in developing cost estimates case in Pakistan, Timor-Leste, and Uganda. for these long-term plans, those estimates did The extent of centralization was affected by not always align with the budget allocation the balance between a country’s Ministry of process and timeline, and therefore considered Finance and its Ministry of Health, as well as a binding constraint of projected resources. between the central government and provincial Many of the countries prepared strategic plans or regional entities. A lack of input from health that had large financing gaps between estimated service providers sometimes contributed to costs and expected resources, such as Senegal’s a mismatch between what was allocated and gap of around 70-90 percent. Several of the what was needed for service delivery. countries, including Burkina Faso, Cameroon, Mismatches also resulted at times when and the Kyrgyz Republic, were not using their governments cut budget lines to fit within Medium-Term Expenditure Frameworks (MTEFs), tighter fiscal constraints. an approach to budgeting which can address annual budgeting shortcomings (World Bank Robust revenue estimates were complicated 2013), to inform their annual budget allocations. by unpredictable fiscal contexts and uncertainties regarding donor funding. Annual budgeting processes tended to rely Fiscal challenges in many of the case-study more on historical estimates rather than countries contributed to shortfalls in funding on costing estimates to determine budget compared to original budget allocations (for allocations. The reasons given were example, in the Kyrgyz Republic, Pakistan, insufficient time and capacity (for example, and Uganda). Countries where the health sector in Burkina Faso, the Kyrgyz Republic, Pakistan, is reliant on external donor support sometimes the Solomon Islands, and Timor-Leste). This experienced challenges receiving accurate tendency persisted despite the knowledge that estimates in the right format, for the right inaccuracies in estimates had previously led to time-period, and in time to inform their budget budget execution challenges. In the Democratic process (for example, in the Democratic Republic of Congo, for example, there were Republic of Congo and the Solomon Islands). many instances where the same line-item budget allocations were given year after year even though most of these allocations did Budget structure and rules not end up being executed, even as other line for budget allocation items were consistently over-executed. Further, unit costs need to be updated to reflect actual costs of line items. If unit costs Spending on health, more so than spending are inadequate in the budget, audit irregularities in most other areas, requires flexibility to may arise. It may then be safer not to spend to adjust allocations to evolving needs in order avoid being held accountable. to enable full budget execution (Barroy et al. 2019, Piatti-Fünfkirchen, Barroy et al. 2021b). Budget preparation processes were often However, such flexibility is often lacking or centralized and excluded lower-level health underutilized in LICs and LMICs. PFM-related facilities, sometimes contributing to cost regulations and rigid budget structures such as BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 25 COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES line-item budgeting can reduce the ability ministry to rapidly reallocate resources to reallocate funds across budget lines (Barroy contributed to both lower budget execution et al. 2018). Even in countries which have put rates and operational inefficiency. Although in place more flexible approaches, such as controls are foundationally important, program-based budgeting (PBB), the desired countries must identify when to allow greater flexibility may not always be available in flexibility when reallocations are required. practice. Regarding PBB specifically, Allowing some flexibility to reallocate budget impediments to the necessary flexibility may allocations in response to changing needs is include incomplete adoption of PBB or a lack considered essential to support effective of guidelines to facilitate health sector PBB budget execution in health. implementation. Even when PBB is in place, many LICs and LMICs continue to use input- Program-based budgeting has the potential based or line-item budget structures when to aid budget execution by increasing developing health budgets, increasing the flexibility but was only partially applied likelihood of budget under-execution. (Barroy in most of the case-study countries. et al. 2018, Piatti-Fünfkirchen, Hashim, and Even countries such as Burkina Faso, the Farooq 2019, Barroy, Blecher, and Lakin 2022). Kyrgyz Republic, and Uganda - which had introduced program-based budget structures Most of the case-study countries had - continued to use input-based budgeting significant budget rigidities. Budget flexibility principles to manage execution processes. was identified as particularly critical in the In Ukraine, by contrast, managers of each health sector, given that health service needs budgetary program had the autonomy to were often demand-led and influenced by reallocate resources within the fiscal year, external factors that cannot be known in with a view to delivering the outputs identified advance, and therefore were difficult to in the original budget. In general, there was predict in the budget preparation process. little evidence showing better budget Most countries relied on input-based execution after program-based budgeting budgeting processes, which prioritize control reform introduction. over flexible resource use. In certain countries such as the Democratic Republic of Congo and Uganda, public finance laws required parliamentary approval for relatively minor readjustments. In countries such as Ethiopia and the Solomon Islands which had lower legal requirements, time-consuming and challenging bureaucratic processes were sometimes still required. In Burkina Faso, for example, reallocating resources during budget execution meant following cumbersome steps. In the Kyrgyz Republic, the inability for the health 26 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES 4.2 Budget execution Figure 4.2 Key challenges during budget execution phase Budget execution Regularity and Appropriateness, Effectiveness predictability and effectiveness of and efficiency of of funding flows spending protocols procurement and Challenge capital investment operations Delays and incomplete Cumbersome Multi-layered and over- budget releases authorization and centralized procurement spending procedures rules Cash rationing Ministry of Excessive centralized Lack of appropriate Finance Health budget control (no delegation of procurement protocols deprioritised in-year authority) Delays in cash requests Lack of autonomy for Constrained ability to from health service providers develop and implement procurement plans Fragmented health Fragmented spending Ministry of financing flows rules by financing source Inefficient Health operationalisation of Limited financial capital investment management capacity Regularity and predictability effective cash management practices such of funding flows as revenue collection in line with estimates, careful cash flow monitoring, and proper Weak cash management practices are management of commitments and payments common in LMICs, making funding availability (Schiavo-Campo 2017, Ally and Piatti- unpredictable (Simson and Welham 2014, Ally Fünfkirchen 2021, Barroy et al. 2019). and Piatti-Fünfkirchen 2021). Regular and predictable fund release enables timely In the absence of strong cash management payments, timely implementation, and close practices, countries often experience adherence to budgetary allocations. Key factors downstream execution challenges such that contribute to effective fund release are as incomplete disbursements, missed or BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 27 COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES delayed payments, build-up of arrears, Unpredictable fund release further and end-of-year expenditure sprees complicated budget execution. In many (Pattanayak 2016, Potter and Diamond case-study countries, fund transfers were often 1999). Due to revenue shortfalls, many delayed, incomplete, or didn’t occur altogether. countries have resorted to cash rationing In Pakistan, for example, facilities reported that practices, where spending is based on cash the unpredictable release of funds had harmed availability rather than on adhering to the service quality and compromised their ability to budget (Schick 1998; Schiavo-Campo 2017). meet critical operational costs such as utility Such rationing practices compromise the bills. In Ethiopia, by contrast, the finance predictability of funding and the capacity ministry adhered to the budget calendar, and to fully implement the budget. communicated the budgets for upcoming fiscal years, including details of transfers to The release of funds can also be compromised subnational levels, to regions and woredas9 in due to mid-year deprioritization, where time. These good practices helped the regions funding, particularly if constrained, is and woredas with their planning and allocated elsewhere as priorities shift over commitment processes and supported high- the course of the year. This can often stem quality budget execution. from poor health sector involvement during the in-year budgetary negotiation process, Weak cashflow management was another changes in political incentives, emergencies, impediment to effective budget execution. and/or funding shortfalls (Barroy et al. 2019, Effective cash management requires accurate PEFA 2016, PEFA 2020). revenue forecasts, oversight of commitments, knowledge of upcoming payments, and robust While the finance ministry is broadly cash plans to ensure cash availability at payment responsible for the government’s cash due dates. Cash management can be management, health-sector-related factors particularly complex in the health sector, also contribute to challenges in the release especially when financing sources are highly of funds to the health sector. Health-sector fragmented, as was the case in Ethiopia, the actors can be delayed in submitting cash Solomon Islands, and Uganda. In addition, as requests and expenditure plans, leading to was the case of Pakistan, poor-quality revenue irregular or incomplete fund release for health forecasts contributed to challenges in managing service delivery. Additionally, the health sector’s cashflow which sometimes resulted in the often complex and fragmented financing budget being under-executed. landscape can make it challenging to manage and disburse funds on time and in full, given that Several case studies reported the use of each individual funding flow may have different cash rationing to manage funding flows. requirements for its release (Barroy et al. 2019, When limited cash is available, countries may Rajan, Barroy, and Stenberg 2016). resort to cash rationing, making decisions  oredas are the third level of administrative divisions, after zones and regional states (equivalent to districts in many 9W other countries). 28 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES based on cash availability rather than on Health sector factors that impede effective budget plans. This type of system is health budget execution include limited unpredictable and makes smooth budget financial management capacity and implementation difficult. Timor-Leste, for constraints on service-provider autonomy example, systematically delayed its budget within a complex and fragmented financing transfers during the first part of the fiscal year. landscape. The health sector’s complex and In the Kyrgyz Republic, cash rationing practices fragmented financing ecosystem results in an led to withholding 30 percent of the budget for array of spending rules and controls which vary the first ten months of the budget year for by funding source, which can lead to non-protected items, including capital and inefficiencies and errors when executing the non-salary expenditures. Based on cash budget (Barroy 2019; McIntyre et al. 2008). availability, the government released the In addition, financial management capacity is remaining budget allocations in the final often at its weakest in first-contact health two months of the year, creating a surge in facilities, often resulting in inefficiencies and funding with limited time to implement the errors in executing controls. Often, given their budget as planned. lack of autonomy, these facilities do not manage their allocated resources directly. In turn, the remote management of those resources by Appropriateness and effectiveness districts/regions contributes to drag and inefficiencies in managing transactions (Barroy, of spending controls Blecher, and Lakin 2022, Piatti-Fünfkirchen and Schneider 2018; WHO 2022). Effective spending controls are essential for ensuring compliance, timely payments, In most of the case study countries, spending and successful activity implementation. controls tended to be inefficient, overly Striking a balance between control and flexibility bureaucratic, and time-consuming. Excessive is essential, however. An excessive number controls can result in weak execution rates, of ex-ante controls can create implementation payment processing delays, and activity bottlenecks without necessarily improving implementation interruptions. Respondents compliance. In many LMICs, the spending highlighted that the approval and authorization controls set by finance authorities have been of transactions tended to be multilayered criticized for being cumbersome and too and excessive, and that the processes to release centralized, contributing to reduce the ability cash and payments could be equally extensive to fully and effectively spend (Cashin et al. and require complex payment systems. 2017; Barroy et al. 2019, Pattanayak 2016). In Timor-Leste, for example, health facilities Procurement-related controls tend to be had to secure approval at multiple levels before particularly cumbersome and are often conducting transactions. As part of the process, referenced as one of the main causes of they were required to input commitments in two poor health budget execution (UNICEF 2020, systems with different procedures and Pattanayak 2016). requirements. The operational inefficiencies that resulted impeded budget execution. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 29 COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES Several case studies noted the use of within their budgets. By contrast, countries stringent procedures even for payments where health facilities had autonomy, such of low value. In Pakistan a bill of 200 rupees as Lao PDR and Ukraine, recorded execution was subject to the same rigorous controls as rates of close to 100 percent. Ukraine’s flexible one worth over a million rupees. The payment direct transfers to facilities improved process system also had duplicate internal controls, execution efficiency, admittedly with a loss requiring authorization and approval from of transparency in resource utilization. several officers from different entities and making the process cumbersome and Payroll control weaknesses caused serious bureaucratic. problems in budget execution in certain countries, even where execution rates were An over-centralization of controls sometimes high. While most of the countries recorded high created execution inefficiencies. In countries rates of execution for salaries and wages, these such as Burkina Faso, Pakistan, Senegal, and were not without problems. The Democratic Timor-Leste, health systems often relied on Republic of Congo and the Kyrgyz Republic had higher levels of government to execute cases of ghost workers (that is, payments going authorizations, commitments, and payments. to individuals who did not work for any health While this centralized approach occasionally facility), linked to weaknesses in payroll controls. fostered effective aggregate control and By contrast, Ethiopia’s payroll controls included compliance with the approved budget, it also nearly real-time updating of the payroll for units sometimes made day-to-day operations within the IFMIS, and within weeks for units difficult for health facilities, and created outside the IFMIS; and Uganda’s automated mismatches between approved transactions payroll system contributed to more reliable and needs. In the Solomon Islands, the central- wage-bill estimates and better execution. level Ministry of Health was responsible for managing most transactions such as processing payments even though it was the provinces Procurement effectiveness and which implemented most health activities. efficiency and capital investment Stakeholders commented that this centralized operations system to authorize transactions led to budget execution delays. Many LMICs struggle with inadequate public Health facility lack of autonomy to manage procurement systems characterized by their resources was a major cause of budget excessive centralized administrative controls, execution inefficiencies. This challenge was and cumbersome procedures that are not noted in most case study countries (for specifically tailored to health sector needs. example, Pakistan, the Solomon Islands, and Additionally, the health sector’s weak technical Timor-Leste). Certain countries granted capacity impedes its ability to take steps such autonomy to their health facilities while still as realistic operational plan formulation, tenders, constraining them, such as the Kyrgyz Republic and contracts). Given that governments channel which required facilities to obtain approvals a significant proportion of their health expenditure from higher levels before reallocating resources through the public procurement system, these 30 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES procurement inefficiencies are widely recognized it was reported that payments made through as one of the main causes of poor budget the procurement process could take several execution in health. Capital projects within the months to be released due to the number of health sector commonly experience similar approvals required. In Burkina Faso and Senegal, challenges, with inadequate technical capacity procurement plans were late and incomplete, and limited expertise in project management and only a limited range of suppliers could meet resulting in delays or suboptimal utilization of the specific standards set under the centralized allocated funds (UNICEF 2020, Pattanayak 2016). procurement process. In the Kyrgyz Republic, a lack of capacity among procurement staff to Procurement processes were often complex, produce technical specifications and tender lengthy, and bureaucratic, especially for health documents led to procurement rules not being products. For example, in Ethiopia, drug and followed, incorrect documentation being medical commodity procurement was found to submitted for approval, submissions being made require a year on average to receive the internal with errors, and suppliers submitting supporting and external approvals. Similarly, in Timor-Leste, documents late and of low quality. 4.3 Budget oversight Figure 4.3 How budget oversight challenges contribute to suboptimal budget execution in health Budget oversight Relevance and quality Inability to inform sector Challenge of monitoring and performance accountability systems Limited capacity to produce Limited usefulness for health of comprehensive execution reports execution reports Limited availability and accessibility Insufficient emphasis on sector Ministry of of FMIS performance Finance Cumbersome financial monitoring Inability to triangulate expenditure and reporting requirements with outcome data Lack of data consolidation Ministry of Health BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 31 COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES Relevance and quality delays, particularly from decentralized of monitoring, and authorities and facilities. In the Kyrgyz Republic, accountability systems capacity issues at lower levels sometimes led to inaccuracies in data. Certain countries Many countries fail to collect adequate such as Ethiopia relied on multiple systems data to effectively inform quality budget to monitor execution performance given their oversight. Budget oversight involves collecting multiple financing mechanisms. The Kyrgyz information to monitor and control spending, Republic fostered better monitoring of its to ensure funds are used according to their formerly fragmented resource flows by intended purpose, and to assess how well introducing reforms in 2018 to ensure that the government has executed the budget financing for contracted health care (Dorotinsky and Watkins 2013). organizations (HCOs) was transmitted through a single channel, a change that LMICs’ limited capacity to produce improved oversight. comprehensive execution reports commonly constrains effective budget oversight. Audit processes sometimes influenced The combination of inadequate financial budget execution effectiveness. External management information systems (FMIS) audits tend to be conducted after the execution and limited capacity in financial management process, but their nature also influences actions capacity compromises governments’ ability during spending processes. In Ethiopia, for to ensure quality budget oversight. Budget example, fear of punishment by auditors oversight in the health sector is made more prevented budget owners from fully complex by fragmented funding flows, which implementing their budgets. In Ukraine, audits require multiple reporting mechanisms, had become increasingly punitive, with the including some that operate outside the FMIS result that they “demotivate[d] providers to framework. This specificity makes it harder exercise their new managerial flexibility and to develop a comprehensive and consolidated increase spending efficiency.” In the Kyrgyz picture of the sector’s spending (Barroy et al. Republic, managers steered away from a more 2019; Piatti-Fünfkirchen, Barroy et al. 2021b; “proactive and autonomous management” ThinkWell and WHO 2022b). of budgets due to fears of excessive and difficult audits. Given that most of the countries’ The ability to monitor budget execution budgets were effectively input-based, audits in real time depended on the quality and tended to focus on compliance rather than on timeliness of financial reporting. In Cameroon, output delivery. There was little mention of for example, there was no functional automated internal audits, which are typically conducted system for monitoring budget execution. while execution processes are ongoing and can In other countries such as Burkina Faso, help in addressing issues while there is still an Ethiopia, Pakistan, and Timor-Leste, automated opportunity to avoid delays. reporting systems were in place, but connectivity challenges led to data reporting 32 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS COMMON CHALLENGES IN HEALTH BUDGET EXECUTION IN LOW-AND MIDDLE-INCOME COUNTRIES Inability to inform sector budget execution phase), as well on how they performance allocated and formulated the budget (budget formulation stage) and how they accounted for The tendency to focus more on input-based and reported on the budget (budget oversight accountability rather than output- or stage). A key learning agenda emerging from performance-based accountability this analysis is that focusing only on expenditure perpetuates a system that prioritizes management (the execution phase) is too compliance over evaluating whether the narrow; improving the performance of health budget has effectively realized its intended budget execution involves strengthening and outcomes. The health ministry also commonly tailoring the budget formulation and oversight lacks the necessary data, and/or expertise, functions as well. to be able to triangulate spending indicators with operational outputs. This makes it Budget execution performance is the result of challenging to understand how well the money interventions by multiple government actors spent correlates with performance. Addressing – principally in finance and health, with local these challenges is crucial for improving how authorities also being crucial in decentralized governments oversee and manage their contexts. Country evidence demonstrated that budgets, and thereby to strengthen their good health budget performance was not only budget execution. the result of better absorption of budgeted resources from the health ministry; actions are The literature from LMICs and the case studies also necessary from the finance side to make of 12 LICs and LMICs both show that health PFM systems more agile and responsive to budget execution was directly influenced by health needs to enable full budget execution. the other phases of the budget cycle and by The next section examines possible policy the actions of multiple actors. How countries actions that countries might introduce or executed their health budgets depended on accelerate, to address the most commonly their spending capacities and processes (the observed health budget execution bottlenecks. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 33 5.0 OPTIONS FOR POLICY ACTIONS AND DIALOGUE OPTIONS FOR POLICY ACTIONS AND DIALOGUE This section explores what LMIC governments iv. spending control appropriateness can do to address budget execution and effectiveness; challenges in health. We identify opportunities v. procurement and contract for engagement by finance, health, and local management; and government authorities in limited-resource contexts. These opportunities are grouped in vi. monitoring and accountability systems. line with the analytical framework presented in previous sections: In each of these areas, we present the opportunities and potential reform actions i. budget credibility; by stakeholder, illustrating these with ii. budget structure and rules for examples from the twelve studied LMIC cases. budget allocation; For each of these areas, we offer options that can be tailored to individual country contexts. iii. fund flow regularity and predictability; 5.1 Strengthening health budget credibility Table 5.1 Potential actions for finance and health ministries, and local governments Ministry of finance actions Ministry of health actions Local government actions Strengthen capacity Inform MOF when budget ceilings Advocate for reliable fiscal for accurate revenue are inaccurate transfers, as relevant projections Create pressure for improved Set up a process for Protect integrity of budget ceilings by identifying links credible and reliable projections against political between revenue performance development of sectoral pressures and service delivery outputs budgets Accelerate multiyear Strengthen technical capacity Clarify roles and budgeting reforms to develop more accurate cost responsibilities for budget estimates development (for example, Allow sufficient time for between district and budget preparation Strengthen coordination between health facilities) health planning and budgeting/ Communicate budget finance division in the MoH ceilings to sectoral ministries in a timely Set up a process for within-year fashion prioritization, in case of shortfalls BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 35 OPTIONS FOR POLICY ACTIONS AND DIALOGUE What can a ministry of finance do? What can a health ministry do? Public finance theory presents numerous The MOH may not be able to affect core options, both on the revenue side and the finance rules, practices, and operations, expenditure side, to address deficiencies in but it can coordinate and communicate more the credibility of a country’s general budget. effectively with the MOF, and can advocate On the revenue side, investments in technical the MOF for improvements.11 For example, capacity, via support for financial and statistical the MOH should communicate to the MOF if data and modelling, will enable the preparation health budget execution and service delivery of more credible revenue projections. In turn, are impeded by inaccurate budget ceilings or more credible projections will foster more late and inadequate cash releases. Dialogue realistic expectations of the available resource with the MOF can also help clarify whether envelope for all sectors, including health. Equally problems in budget execution are an issue important is an enabling environment that of absorption-capacity within the MOH or protects modelling from pressures to develop related to the broader PFM environment.12 overly optimistic projections. On the The MOH can improve the credibility of its expenditure side, realistic costing and budget budget proposals by first investing in internal planning are fundamental to developing a capacity to estimate its proposed costs more budget that corresponds to actual expenditure accurately. More accurate proposals will, needs. Adopting and implementing medium- in turn, give the MOF confidence that the term fiscal and expenditure frameworks also amounts allocated will be fully executed. can contribute to more credible budgeting. Additionally, the MOH could anticipate and The ministry should communicate a realistic respond to upstream PFM issues more budget ceiling to individual sectors, including deliberately by setting up a process to identify health, and allow those sectors sufficient time any shortfalls in budget allocations or cash- to consult and prepare their budgets. In many rationing needs earlier, and, as a second-best countries, strengthening these upstream PFM option, to discuss within the sector how to processes is part of ongoing reforms, across apportion funds to priority areas during a all sectors including health (World Bank 1998, given fiscal year. IMF 2013, Schiavo-Campo 2017).10 10 In environments where upstream PFM problems repeatedly affect the credibility of health service providers’ budgets, the finance authority can take measures to allow providers to react appropriately. In some countries providers collect user-fees to protect against budget shortfalls and cover the cost of services. While the collection of user fees is not encouraged due to equity and access concerns, in instances where facilities are collecting such fees it would be advisable to allow the facilities to retain those fees to cover any cash shortfalls. Sweeping those fees back to treasury is likely to have unintended consequences such as underreporting of user fees, creating challenges for accountability.  ne such step could be working with the MOF to set up a joint platform for frequent dialogue relating to health service delivery 11 O needs and financing; this could help in anticipating financing shortfalls and meeting peak demand. 12 If it turns out that budget execution problems result from the broader PFM environment, the MOH should both document this so it does not affect the MOH’s ability to advocate for domestic budget allocations, and clearly communicate to the MOF the impacts on health service delivery and population effects, to encourage the MOF to address any shortcomings. 36 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS OPTIONS FOR POLICY ACTIONS AND DIALOGUE What can a local government do? that prioritizes these transfers and treating them as quasi-statutory payments (similar to Many of the issues raised above also hold salary payments, for example) is critical, true for local government institutions, on especially in contexts where local governments both the health and finance sides, as do the pay for the cost of local service delivery need for communication, collaboration, and directly. Local governments should also clarify prioritization. In addition, in countries where the respective roles and responsibilities of local intergovernmental transfers make up a large government and of health service providers. share of local governments’ revenue, making By establishing a dedicated budget for service these transfers reliable is important as this providers for example, the local government affects how credible local government budgets could help service providers to access the full can be and, in turn, how well they will be able allocated budget and be better equipped to to execute those budgets. Setting up a process execute it. Box 5.1: Strengthening budget credibility in Ethiopia Most countries are working on broader PFM reform that affects credibility of the general budget. Ethiopia is an example of a country which had certain components supporting budget credibility in place but needed to strengthen others. The central-level government maintained a realistic budget calendar, and clearly communicated the details of transfers to subnational levels. This approach helped local government units with their planning and budgeting processes, key factors in developing more credible budgets. Nevertheless, health facility budgets were often inflated, and, when senior officials detected this, they reduced the amounts transferred to those facilities. As a result, Ethiopia continued to struggle with producing credible estimates. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 37 OPTIONS FOR POLICY ACTIONS AND DIALOGUE 5.2 More appropriate budget structure and improved rules for budget allocation Table 5.2 Potential actions for finance and health ministries, and local governments Ministry of finance actions Ministry of health actions Local government actions Accelerate delegation of Work closely with MOF to identify Same as for central level spending authority to and challenges in the current budget Opt for consistent PBB within the MOH, where not structure and opportunities for structure at subnational yet complete reform level Provide guidance to MOH Provide sector-specific guidance Align budget structure on budget formulation on budget structure reforms with health facilities’ reform including PBB design service delivery mandate Coordinate with MOH on Avoid disease-oriented programs and arrangements design of health-specific in PBB structure Delegate spending budgetary programs, as Advocate to the MOF to authority to health service part of adoption of PBB incorporate major inputs into providers Ensure that PBB, once budgetary envelopes, to enable introduced, is adopted full execution and efficient fully spending Align disbursement rules to PBB principles What can a ministry of finance do?? budget execution in health. In addition, a finance ministry should ensure that the budget structure Addressing rigidities in “budget holding” is a is sufficiently flexible. Reforms to revise budget priority when aiming to streamline budget formulation and the related rules for budget execution. Often, health service providers allocations are complex processes that require (generally at primary care level) do not have the detailed guidance from finance authorities. In a status of spending unit and therefore cannot country which introduces a PBB structure, the define, receive, or manage budgets. Recognizing new structure can add a layer of controls and service providers in the chart of accounts or, at complicate execution of the budget if the MOF minimum, allowing them to receive budget does not take certain additional steps. The MOF resources, is a critical first step toward optimizing and sectoral ministries including the MOH should 38 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS OPTIONS FOR POLICY ACTIONS AND DIALOGUE work together to define budgetary programs separate budget lines and rules for itemized and implementation arrangements. Gradually inputs such as staff, drugs, or non-capital implementing, refining and addressing specific equipment (Barroy, Blecher, and Lakin 2022). problems associated with the budget structure Aligning the budget structure with service- is likely to help the MOH implement its budget delivery arrangements can simplify budget- well. To ensure sufficient flexibility in budget execution processes. disbursements with PBB, the MOF should remove line-item controls. This can be a What can a local government do? effective mechanism to improve budget allocation execution. (Barroy, Blecher, and Budget structures are often disparate across Lakin 2022, Brumby et al. 2022).13 subnational levels. In countries which have introduced PBB, subnational-level authorities What can a ministry of health do? should adopt a consistent PBB framework for all entities at the same level (e.g., a region, The MOH should set up a budget structure province) to streamline budget execution and that serves the health sector’s needs and enable consistent expenditure tracking. It can priority policies while following the general also facilitate budget execution by serving as a guidance provided by the MOF. If the country is “pool” of resources (combining local revenues, transitioning to PBB, the MOH should strive to transfers from the central-level government, facilitate budget execution and to avoid financial and external resources, where relevant) fragmentation, in part by avoiding defining its channeled through a consolidated stream of PBB structure by vertical disease-oriented funds to health service providers. In addition, programs. In addition, the MOH should the local government should recognize health incrementally incorporate the main inputs of its facilities in their local budget’s structure, operational programs (such as for maternal enabling those facilities to receive a budget, health, primary care, or access to care) into execute that budget, and be more directly budgetary envelopes, rather than maintaining accountable for the resulting outputs.  he MOF and the sectoral ministries, including health, can negotiate middle-ground solutions such as complementary reporting by 13 T programs and certain line items such as staff and capital, which can help balance flexibility and control. If this approach is chosen, the government would need to structure its FMIS by program and by economic items. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 39 OPTIONS FOR POLICY ACTIONS AND DIALOGUE Box 5.2: Reforming the budget structure in conjunction with streamlining spending protocols in health: the case of Burkina Faso In Burkina Faso, the institutionalization of PBB improved the execution of the health budget. MoH defined a primary care budgetary program in the MOH’s PBB structure and further amended rules for disbursements (through a MOH decree), as a means of streamlining spending. This new modality provides direct budget transfers of PBB resources to primary care providers, through district bank accounts, to cover operating costs. MOH performs ex-post controls based on outputs, to track performance and ensure transparency and accountability. The budgetary program’s execution rates were reported to be satisfactory despite budget challenges in meeting increased demand for services. Where budget structure and disbursement rules are not aligned, and supporting systems not in place, PBB can however reveal weakness in budget execution processes (as observed e.g., in Gabon (Aboubacar et al 2020)). 5.3 Regularity and predictability of fund flows Table 5.3 Potential actions for finance and health ministries, and local governments Ministry of finance actions Ministry of health actions Local government actions Strengthen general cash Strengthen the MOH’s cash Strengthen local government’s management practices management practices, cash management practices and submit credible cash Recognize shortcomings Advocate for predictable and requests on time in treasury single account adequate intergovernmental operations and allow Agree on priority budget transfers for exceptions where lines on an ex-ante basis to Coordinate funding and ensure appropriate be applied in the event of priorities and objectives are cash rationing Make provisions to allow aligned, not conflicting or health facilities to retain Invest in financial duplicated internally-generated funds management capacity Invest in local government’s across spending units financial management capacity 40 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS OPTIONS FOR POLICY ACTIONS AND DIALOGUE What can finance ministries do? internally-generated funds, with the anticipated hindrances to service delivery Improving the management of cash is a if cash rationing is put into effect (Pattanayak typical function of central-level MOFs. and Fainboim 2011).14 This activity involves strengthening capacity for adequate cash forecasting and finding ways What can a ministry of health do? to transfer funds efficiently and with certainty. Working on treasury single account (TSA) The MOH will benefit from gaining an reform can strengthen cash management, understanding of the MOF’s rationale, benefiting all sectoral ministries including priorities, and concerns related to cash health. However, many LMICs continue to management and consolidation. If the MOH experience considerable cash management then identifies a need for either of the two problems and in the absence of a fully- options (exemptions) above, it will be equipped functioning TSA it is helpful to consider to approach the MOF with a request that is temporary exemptions that can ensure the based on evidence. The MOH’s case will be MOH has timely availability of cash to conduct stronger if it can also show that it is fostering its priority activities (delivering health services). good cash-management practices, such as Specifically, MOFs have two options available: improved cash plans, making more credible expenditure forecasts, submitting timely cash i. recognizing the TSA’s shortcomings, requests, and improving the monitoring of allow small cash balances to remain commitments and of payment schedules. in dedicated accounts outside of the The MOH can also strategically review its TSA (for example in health facility budget and decide on a schedule of “priority accounts), which the account- budget lines” which are most critical to holders can then draw on as needed; ensuring continuity of service delivery. In the event of cash rationing, these budget lines ii. allow MOH entities to retain should be fully funded first. If guidelines and internally-generated funds to rules are clear (that is, cuts are distributed temporarily cover cash shortfalls according to a plan), this ensures that all of and ensure continuity of operations. the MOH’s budgetary units can effectively prepare for budget executions during shortfalls Determining which option is more instead of being reactive. advantageous (or less disadvantageous) will require weighing the cost of allowing the retention of small idle balances in MOH- associated accounts (the cost of borrowing capital) or of allowing MOH entities to retain 14 The MOF can then optimize efficiency by allowing the MOH to manage the situation through these exemptions, which may be temporary. A decision to this effect should be grounded in data and evidence. The MOF should monitor the status of the TSA and cash management at the treasury, and can discontinue the exemption once the risk to service delivery is lessened. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 41 OPTIONS FOR POLICY ACTIONS AND DIALOGUE What can a local government do? clearer and more accurate revenue position and allow that government to finance its A local government can advocate for service-delivery units in a predictable way. intergovernmental transfers of funds that The recommended practice for health are predictable and adequate. This will ministries mentioned above also applies at enable the local government to have a subnational levels. Box 5.3: Improving Regularity of Fund Flows: Illustrations of Good Practices in Several Countries The Kyrgyz Republic’s MOH ensured continued funding for priority health interventions, even during cash shortfalls, by increasing the share of the on-budget Mandatory Health Insurance Fund (MHIF)’s budget expenditures which were allocated to “protected line items.” The MHIF disburses these line items at higher rates throughout the first 10 months of the fiscal year, and the MOF prioritizes these categories of expenditure in its cash- rationing system. Additionally, the MOF permits health service providers to carry unspent balances forward from one year to the next. Lao PDR’s MOF strikes a careful balance between instructions for treasury to consolidate cash balances in the TSA, and allowing health facilities to maintain cash balances, optimizing implementation of the health budget. Ukraine’s MOF updated its PFM regulations, abolishing controls on health facility inputs and granting health service providers managerial flexibility to reallocate expenditures during the process of budget execution. The MOF shifted to releasing funds to health facilities without ringfencing certain items; in turn, facilities markedly increased the speed of their financial operations, allowing for better execution rates. However, there was no systematically available information on facilities’ actual spending compared to their planned spending. 42 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS OPTIONS FOR POLICY ACTIONS AND DIALOGUE 5.4 Appropriateness and effectiveness of spending controls Table 5.4 Potential actions for finance and health ministries, and local governments Ministry of finance actions Ministry of health actions Local government actions Create an enabling Engage with MOF on design Provide supervision and environment that balances of tailored control modalities oversight to health service control with the needs of providers Monitor and support health service providers application of control Monitor and support application Consider differentiated protocols of control protocols control policies (e.g., based Support purposeful use of Offer financial management on spending volume) FMIS or alternative systems capacity-building activities Explore use of maturing- within the MOH where within local government and for technology solutions appropriate health facilities Consolidate expenditure controls to reduce fragmentation from multiple financing sources What can a ministry of finance do? may be appropriate for transactions constituting a large fiduciary risk such as bulk drug Ensuring that funds are spent within budget procurement, large transfers, or large capital and as intended is an important function outlays, but applying these to low-value of a PFM system, and expenditure controls transactions such as the procurement of basic are an important tool for this purpose. commodities at the point of service delivery Designing and applying these controls rigidly increases budget managers’ workload, thus across the budget can hinder budget execution, complicating budget execution with only very however. The MOF should acknowledge that a limited gains in risk-management. The MOF can single set of rules (one-size-fits-all type facilitate health budget execution by designing controls) is unlikely to serve all types of and applying controls that are more targeted expenditure transactions well. Rigid controls and sensitive to health service provider needs BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 43 OPTIONS FOR POLICY ACTIONS AND DIALOGUE (Piatti-Fünfkirchen, Hashim, and Farooq 2019).15 source – effectively becoming fungible In addition, the MOF can proactively leverage at the point of use. The MOH can advocate financial technology innovations, such as the to the MOF and to development partners for use of smart cards or mobile money to transfer such an approach, regarding internally funds to and monitor fund use by remotely- generated revenue streams and foreign located providers, as a means of better applying assistance, respectively. controls (Piatti-Fünfkirchen, Hashim, and Farooq 2019, World Bank 2022). What can a local government do? What can a ministry of health do? Local government authorities can play a central role in building basic financial The MOH should keep track of the MOF’s use management capacity at the provincial/ of controls on MOH transactions; if the MOH regional, district, or municipal levels. To the finds that the MOF is applying controls to all extent that the MOF delegates core functions transactions indiscriminately, the MOH including expenditures to health service should inform the MOF that this approach providers, the district or municipal may not be appropriate and difficult to apply administration can provide financial consistently to the budget. By identifying management support directly to the service which transactions are high-risk, and health providers. Local government can also play service provider needs, the MOH can aid the a critical monitoring and supervisory role to MOF to design more meaningful control ensure facilities manage resources effectively protocols. The MOH can then support the in a way that enables them to deliver essential application of those controls by using the services reliably. government’s FMIS purposefully and by making focused decisions about when and where it may be better to use a different type of expenditure management and accounting software than the FMIS.16 More broadly, the MOH can build trust by improving its capacity to manage the budget prudently. At health facility level, the MOH can reduce fragmentation that can result from multiple source financing, by streamlining the control protocols so that funds are subject to the same type of rules and controls regardless of funding n most countries, the expenditure profile is skewed such that a small number of high-value transactions makes up the majority of 15 I total spending; this in turn makes it possible to apply those controls in a risk-based and targeted way, by ensuring they are transacted through the government’s FMIS (Hashim et al. 2019). Allowing for more context-appropriate controls will also facilitate more consistent application of appropriate controls (Hashim, Farooq, and Piatti-Fünfkirchen 2020). 16 The FMIS may be overly complex for use by primary care service providers; simpler financial information systems may be better suited to ensure basic reporting on and accountability for facility-level expenditures. 44 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS OPTIONS FOR POLICY ACTIONS AND DIALOGUE Box 5.4: Adapting controls to health service needs: some emerging practices In the Solomon Islands, the government took measures to reduce excessive internal administrative controls by allowing the Ministry of Health & Medical Services to process its own data and submit payment requisitions and documents to the Ministry of Finance and Treasury electronically. Pakistan’s government introduced a “Green Corridor” to expedite low-value transactions. In Ethiopia, early in the COVID-19 pandemic, the government allocated flexible funds to the MOH, which was then free to use those funds to address identified needs and to make transfers to regional governments for activity implementation. One approach that appears not to have helped health budget execution was the Timor-Leste MOF’s introduction and implementation of the Advance Payment Tracking (APT) tool, based on a newly developed electronic planning, monitoring, and evaluation system. The APT helps to monitor executing government entities’ expenditure reporting and is intended to enable timely releases of next-period cash. As of 2022, the MOH, municipal health services, and referral hospitals had however found that the tool resulted in delays in the release of cash when they submitted their expenditure reports late. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 45 OPTIONS FOR POLICY ACTIONS AND DIALOGUE 5.5 Strengthening procurement and contract management Table 5.5 Potential actions for finance and health ministries, and local governments Ministry of finance actions Ministry of health actions Local government actions Provide clarity on actors’ Communicate with MOF Strengthen internal capacity, roles and responsibilities, on appropriateness of and that of service providers as preventing conflicts of procurement processes in relevant, for procurement and interest the health sector needs contract management Facilitate an enabling Delegate procurement Delegate procurement authority legislative and information- authority closer to service closer to service providers, technology environment providers, where appropriate where appropriate Configure FMIS to allow for Strengthen internal capacity Monitor and supervise service processing of multiyear and to develop procurement providers’ procurement framework contracts plans, organize tenders, and processes, as relevant appraise bids Facilitate sharing of data between FMIS and Build internal technical procurement system capacity to manage contracts What can a ministry of finance do? functionality to process large, multiyear commitments; processing the latter within The MOF is responsible for providing clarity rather than outside of the system will enable on roles and responsibilities in the the procurement process to respect budgetary procurement process – namely who and commitment controls, thus avoiding an manages procurement, who oversees accumulation of arrears and the crowding-out implementation and monitors performance, of other essential spending items (Hashim and who approves invoices, and who makes Piatti-Fünfkirchen 2018). The MOF plays a key payments – in a way that avoids potential role in coordinating procurement, including by conflicts of interest. The MOF also needs to establishing and maintaining an e-procurement ensure that the FMIS system has the system. Such a system can accelerate and 46 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS OPTIONS FOR POLICY ACTIONS AND DIALOGUE make more transparent the major milestones What can a local government do? in the procurement life cycle including planning, tendering, evaluation, awarding, and monitoring, The role local government plays in thereby supporting budget execution.17 procurement can vary significantly depending on a country’s administrative What can a ministry of health do? structure (including whether power is divided federally between a general The MOH plays a central role in procurement government and subnational governments) and contract management and should invest and whether and how local government in its capacity to exercise this function well. is involved in health service delivery. Once a government introduces framework or In instances where procurement will affect multiyear contracts, the MOH should invest in a local government, that government can its technical capacity to manage contracts benefit from participating in the procurement and its ability to continually prepare, negotiate, committee. Technical capacity investments manage, evaluate, and conduct implementation and adequate financial resource allocation reviews. To the extent that the MOH has a are necessary for monitoring performance mandate to provide health services, the MOH contracts. In contexts where local can facilitate health service providers’ work governments have authority for procurement by delegating procurement authority to those of health-related products, those governments providers and allowing them to make their may be able to delegate procurement authority own procurement decisions with the resources to health service providers located within their they have available. The central government jurisdiction, with a view to expediting budget can enable health facilities to procure essential execution processes. To do this successfully, medicines and commodities directly, by the local government may need to strengthen negotiating overarching framework the service providers’ capacity and monitor agreements and multi-year contracts with and supervise the providers’ actions. vendors (Arney and Yadav 2014). Service providers can then select vendors from framework contracts that offer preferential rates, if available.18  he MOF should ensure the e-procurement system exchanges data with the FMIS, which typically is limited to the procure-to-pay 17 T (P2P) cycle. By exchanging data, the two systems can jointly contribute to improved budget execution. For example, such data- sharing will make it possible to confirm the availability of a budget before issuing a contract, to synchronize the MOF’s chart of accounts and master data on vendors, and to ensure the FMIS has information on commitments (Hashim, Farooq, and Piatti- Fünfkirchen 2020).  articularly in LICs, development partners such as UNICEF can dominate health-sector-related procurement, especially for 18 P essential drugs and medical supplies and vaccines, with the process sometimes taking place outside of the government’s procurement systems. The MOH can ensure the government maintains an accurate financial record of these outside transactions, by requiring partners to share information with the MOF which the latter can then capture in the government’s FMIS (Piatti- Fünfkirchen et al. 2021a). BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 47 OPTIONS FOR POLICY ACTIONS AND DIALOGUE 5.6 Strengthening monitoring systems and accountability Table 5.6 Potential actions for finance and health ministries, and local governments Ministry of finance actions Ministry of health actions Local government actions Review expenditure data Ensure adequate Support health-related data for adequacy expenditure reporting on collection, quality control, and the MOH’s various financing performance monitoring Be transparent about sources and actors any shortcomings in the Facilitate enabling institutional expenditure data Facilitate data integration arrangements to link health between information facilities’ results to budget Explore options to systems (ensure MOH’s execution processes strengthen adequacy of systems can integrate with expenditure data the FMIS) Support use of FMIS where Put in place data intelligence appropriate and enable tools to identify links information exchanges with between spending and other systems, as relevant performance data, and Introduce performance enable joint analysis monitoring framework Facilitate attribution of to link budget to results to spending, via programmatic outputs appropriate institutional arrangements What can a ministry of finance do? Inadequate spending data can result in budget execution rates being calculated inaccurately. The MOF should ensure that expenditure The MOF can assure comprehensiveness by reports for health and other sectors are processing spending through the government’s comprehensive and relevant, and should make FMIS as feasible, and by enabling data this spending data publicly available.19 integration between financial information 19 The MOF should regularly review the data for the following core attributes and take action if it detects any shortcomings: (i) data provenance and integrity; (ii) comprehensiveness; (iii) usefulness; (iv) consistency; and (v) stability. 48 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS OPTIONS FOR POLICY ACTIONS AND DIALOGUE systems. Data also needs to be relevant to over their resources and can be held more ensure that a useful evaluation can take place directly accountable for the services they (for example, spending on primary care rather deliver (WHO 2022). Budget execution data than only compliance on inputs). Secondly, the should ultimately inform decision-making MOF can help set up systems to link expenditure about future budget allocations. with output data. One approach can be to introduce a health-focused program budget, What can a local government do? with a consolidated performance monitoring framework for joint monitoring of financial and The local government can play a central non-financial performance (Barroy, Blecher, role in collecting operational performance and Lakin 2022). data, ensuring data quality, and monitoring performance. To the extent that the local What can a ministry of health do? government has a mandate to oversee health services, it can help put in place institutional The MOH should help in producing adequate arrangements to ensure each health facility expenditure data, by ensuring that MOH in its jurisdiction provides reports on both systems capture and report back on spending and programmatic performance spending from internally-generated funds, (as opposed to having expenditures processed donor funds, or other entities such as a elsewhere). social health insurance agency. In doing so, the MOH should coordinate with the MOF to ensure that these data follow specified adequacy attributes and structure which will allow merging (or at least inter-operability) with other data managed by the MOF. Whether all of the MOH’s expenditure information is to be captured in FMIS will vary by country and by specific type of expenditure. The MOH is also responsible for setting, monitoring, and collecting information on programmatic performance, including baseline data, targets, outputs, and outcomes, which can be triangulated with expenditure information, connecting spending with results.20 Additionally, the MOH should ensure that its institutional arrangements facilitate close attribution between action and programmatic results in health facilities that have control  he MOH can facilitate this triangulation by connecting its data warehouse with a data-intelligence platform (the final step in 20 T digitizing PFM), to support good use of those data (Hashim and Piatti-Fünfkirchen 2020). BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 49 6.0 DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION This section outlines a diagnostic approach for countries to assess their health budget execution performance. As previously 6.1 Overview of the highlighted, many LMICs face challenges in analytical approach executing their health budgets. In the absence of clear guidelines, however, the specific The analytical diagnostic comprises nature and extent of these challenges, and four main steps: their root causes, are often not fully assessed 1. map of funding flows and review and documented. Having that information will of PFM rules for each funding make it easier for governments to develop source in health; effective policies to strengthen budget implementation in health. We therefore present 2. provision of a detailed overview a four-step diagnostic approach to enable the of budget execution rates; systematic assessment of health budget execution performance and to guide the 3. identification of root causes and identification of potential solutions. sub-root causes of bottlenecks in health budget execution; 4. identification of potential solutions Each step is further delineated below. An example of country assessment questions is also provided in Appendix 3. Figure 6.1 Four-step diagnostic approach for health budget execution assessment 1 2 3 4 Map health Identify root budget execution Assess budget Identify causes and sub funding flows and execution rates solutions root causes PFM rules BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 51 DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION 6.2 Map health budget 6.3 Assessing health execution funding flows budget execution and PFM rules performance Step 1 Step 2 The first step consists of mapping health Budget execution performance is generally spending flows and identifying the associated assessed through budget execution rates, PFM rules and characteristics for each source, where the level of actual spending is with a focus on allocation and disbursement compared to the approved budget. This step rules and processes. This exercise combines begins with reviewing aggregate general budget perspectives from health financing and PFM rates. Next, is assessing health sector budget to provide an understanding of the ecosystem execution performance, which consists of for health budget execution. The multiplicity and calculating MoH budget execution rates, using fragmentation of funding sources in the health the MOH’s actual spending and its approved sector can lead to each funding source having budget, to provide an initial quantitative its own distinct allocation, disbursement, and understanding of health budget execution reporting practices and rules. Therefore, it is performance. The government can also collect crucial to consider these two aspects together data on other sectoral ministries, such as as their relationship influences the effectiveness education, to benchmark the health sector’s of budget execution in health. performance. Key sources of information include country-level budget law, expenditure In this process, the first sub-task is to identify reports, audits reports; Public Expenditure and map the main sources of funding and how Reviews (PERs) and PEFA country assessment the funds flow to budget holders and service reports can represent an additional source providers. This assessment should build on of information. available guidance for mapping of funding flows in the health sector (see McIntyre and Kutzin in Assessing additional indicators can provide 2020) and draw on any existing mapping for the a deeper understanding of health budget specific country. The second sub-task is to execution performance. Assessing the budget identify the PFM rules for each funding flow. execution rate by quarter can provide As this is a less common task, countries may information on disbursement timeliness. need to conduct a more in-depth review of PFM Funds that are predominantly released in the laws, budget documentation, and health- final months of the fiscal year can hamper service purchasing literature and practice to budget execution if there is insufficient time identify the relevant rules and practices; and for budget holders, who manage and account in turn to better understand how the country for expenditures, to fully execute their budgets. allocates, disburses, controls, and accounts Examining execution by stage of expenditure for these specific funding flows. (authorization, disbursement, payment) can 52 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION Table 6.1 Indicative indicators for measuring health budget execution performance Indicator Measuring Importance Overall budget Expenditure outturn Provides headline measure of overall budget execution rate relative to the original execution; however, it can mask important aspects approved budget related to the quality of budget execution and does not provide information on sector spending. Health budget Extent to which the Provides information on the health sector-specific execution rate health sector budget budget execution rate. This indicator can begin to expenditure outturn unpack any health-specific budget execution reflects the original challenges. approved budget Health budget Health expenditure Provides information on the timing and alignment of execution rate by outturn relative to health budget execution. Delayed releases can create quarter approved budget by a backlog of expenditure providing little time for quarter spending units to fully execute their budget. If funds are not spent by the end of the fiscal year, then spending units often must return the unspent balance to finance. Unspent funds can incorrectly indicate that the sector was given too much funding. Health budget Health budget During budget execution, funding can be committed execution rate by execution rate by each but not fully paid, leading to arrears. It is therefore expenditure stage stage from approval to important to understand the execution rate by payment expenditure stage, as it allows the identification of bottlenecks along the expenditure chain. Health execution Health sector This indicator is important for highlighting any rate by budgetary expenditure outturn by differences in performance between programs or programs (where program or level of level of care, where the budget structure allows it. they exist) or level care relative to the It can provide indication on what policies are of care (where original approved prioritized/ringfenced or deprioritized during the available) budget spending process. Health budget Health sector Assessing aggregate health budget execution rates execution rate by expenditure outturn can mask variation in performance by economic type. economic type by economic Goods and services are generally underspent in classification relative health, while personnel remuneration is often well to the original executed. Providing a comprehensive view of approved budget budget execution rates by economic items can shed light on those issues. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 53 DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION help in identifying bottlenecks in the The first part of this step is to unpack the expenditure chain. Last, disaggregating budget root causes of deviations from approved execution rates by expenditure categories budget allocations (overspending or (by economic items or programs, depending underspending) both by stage of the budget on the budget structure) can reveal the level cycle (budget formulation, budget of spending by major categories, unveiling execution, and budget oversight) and by specific deficiencies. Table 6.1 provides a list actor (MOH, MOF, and where relevant, local of indicators to guide a comprehensive government). We recognize that the assessment of budget execution performance predefined categories (lefthand column) may in health. not neatly fit with all countries’ specificities, and that not all countries will face challenges in every category described; countries should populate the matrix to reflect their main issues. 6.4 Identifying root causes of health budget The second part of this step is to unpack execution issues the subcauses for each identified root cause. This additional analysis is crucial because the same root cause may have Step 3 different underlying subcauses, depending on the country. In turn, identifying the specific The third step involves using a matrix subcause(s) will make it easier to develop to systematically identify the root causes targeted policy actions. To illustrate, in one that impact health budget execution country the midyear deprioritization of certain performance. By categorizing issues in health-sector expenditures may result from a systematic way, the matrix facilitates a sudden change in political priorities, while in the development of targeted solutions. another it may be due to insufficient revenues The matrix’s prepopulated categories (see which constrain the budgetary space available Table 6.2, lefthand column) emerged from for health. Though contributing to the same a comprehensive analysis of the literature root cause, these different subcauses will on health budget execution in LMICs and likely require different policy responses. from case studies of a selection of LICs and (See Appendix 3 for an illustration of the LMICs (see Section 4). mapping of subcauses in one country). 54 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION Table 6.2 Matrix for identifying root causes and subcauses of health budget execution issues Root cause Subcause Finance Health Local Finance Health Local government government Budget formulation Credibility of the budget Budget structure and rules for allocation Budget execution Regularity and predictability of funding flows Appropriateness and effectiveness of spending protocols Effectiveness and efficiency of procurement and capital investment operations Budget oversight Relevance and quality of monitoring and accountability systems Inability to inform sector performance BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 55 DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION Using this simple, yet structured, diagnostic 6.5 Identifying approach can aid the MOF, the MOH, and local governments in a given country to improvement measures gain a detailed understanding of the current to address causes of status of health budget execution, of specific challenges, and of the root and subcauses poor health budget of those challenges. It also can equip them execution to identify relevant and targeted policy responses. Once actors go through this Step 4 diagnostic process, they can coordinate with a wider group of stakeholders as relevant, Once finance, health, and (as relevant) local both for input into and to gain buy-in or approval governments reach a shared understanding for the proposed solutions; in many cases this of health budget execution performance and will be an iterative process. Once a policy of the root causes and subcauses of any response is agreed, the relevant actors can challenges, these actors can define policy develop a clear implementation plan with actions to address those challenges and specific actions, responsibilities, resources, strengthen budget execution. Table 6.3 goals, and timelines. This plan should be provides a structured approach, in line with the accompanied by a monitoring and evaluation previous analytical categories, for the MOF, component to track progress, adjust MOH, and (as relevant) local government to implementation as needed, and ensure identify concrete policy actions. Governments accountability. Given that this will require input can also use the examples provided in Section 5 from and coordinated effort across finance, to guide the development of responses and health, and different levels of government, policy actions tailored to their country’s specific establishing a coordination mechanism can context and needs. ensure effective and efficient implementation and clarity throughout the process. 56 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS DIAGNOSTIC APPROACH TO ASSESS HEALTH BUDGET EXECUTION Table 6.3 Policy actions for strengthening health budget execution Policy actions Local Finance Health government Budget formulation Credibility of the budget Budget structure and rules for allocation Budget execution Regularity and predictability of funding flows Appropriateness and effectiveness of spending protocols Effectiveness and efficiency of procurement and capital investment operations Budget oversight Relevance and quality of monitoring and accountability systems Inability to inform sector performance BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 57 CONCLUSION CONCLUSION This report, a collaborative effort between the Improving health budget execution requires WHO and the World Bank, addresses the a holistic approach, encompassing a critical issue of health budget execution strengthening of budget formulation and challenges in low- and middle-income oversight functions, alongside implementing countries. The data analysis shows that the a more agile and responsive PFM system. mean level of health budget execution in 91 LICs, LMICs, and UMICs over the period 2010-2020 This necessitates proactive dialogue and was 87 percent. The mean loss resulting from collaboration among finance and health unspent budgets was significant and equal to authorities, as well as with local governments what many countries spend on primary care. in decentralized contexts. The report This represents a missed opportunity to emphasizes that good health budget execution leverage scarce resources and achieve key is not solely the responsibility of the MOH. results in health. Finance ministries must play a crucial role in making PFM systems more flexible and The report identifies common factors responsive to evolving population health needs. hindering effective budget execution in health, pinpointing challenges on both the The report’s findings have far-reaching health and finance sides, as well as within local implications for achieving Universal Health governments, across all stages of the budget Coverage. Effective and efficient health cycle. The report highlights promising practices budget execution is not merely a technical from specific countries, and offers policy issue; it is a fundamental pillar for ensuring options for MOFs, MOHs, and local governments equitable access to quality healthcare for all. to respond to budget execution challenges. LMIC governments can prioritize this issue on Furthermore, the report proposes a diagnostic their agenda, recognizing its crucial role in approach to systematically identify, analyze, and advancing towards UHC. develop tailored responses to countries’ context-specific health budget execution The report serves as a call to action. It is challenges. This approach, outlined in four time for LMICs to move beyond the status steps, can help governments to gain a deeper quo and embrace a more strategic and understanding of their current situation, collaborative approach to health budget pinpoint specific challenges, and develop execution. By implementing the approach targeted policy options. outlined in this report, governments can unlock the full potential of their health budgets, The findings underscore the critical need ensuring that every dollar invested translates for a paradigm shift in how LMICs approach into more tangible improvements in the health health budget execution. 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Equitable Growth, Finance & Institutions Insight, World Bank, Washington, DC. https://thedocs.worldbank.org/en/doc/c7837e4efad1f6d6a1d97d20f2e1fb15-0350062022/service- upgrade-the-govtech-approach-to-citizen-centered-services. 64 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS Image © ipopba/Adobe Stock APPENDICIES APPENDICIES APPENDIX 1: Appendix Box 1.1: WHO and World Bank initiative WHO and World Bank initiative on health budget execution on health budget execution: The work presented in this summary report main goals involved a two-phase approach including data ❱ Making challenges in health budget analysis, case studies, literature review, and execution visible: In the absence of consultations with experts. consolidated global data on budget The study’s first phase (2017-2020) was an execution and LMICs’ difficulties in accessing consistent national-level exploratory phase consisting of reviewing budget execution data, health budget existing literature, identifying relations execution performance has not been between budget execution and UHC, and thoroughly assessed. This WHO-World providing a preliminary overview of trends in Bank initiative aims to make health health budget execution (Piatti-Fünfkirchen, budget execution performance more Barroy et al. 2021b). visible to country and global leaders. ❱ Enabling a common understanding: The second phase (2021-2024) included an There is often limited understanding examination of the underlying causes of of the root causes of under- or inefficiencies in countries’ health budget overspending of budget allocations execution in specific LMICs via 12 case studies in health. The WHO-World Bank conducted jointly by the WHO and the World initiative aims to facilitate a common Bank in 2021-2022, and a thorough analysis of understanding of the challenges in health budget execution data from 91 LMICs for health budget execution between national-level finance and health the period 2010-2020. The findings from the authorities, as well as with local second phase informed the development of a governments where relevant, by matrix for identifying root causes and sub-causes providing an analytical framework to of challenges in health budget execution. systematically identify driving factors of good/less optimal performance on Both phases included extensive consultation both sides. with experts in the framework of the ❱ Supporting the identification of Montreux Collaborative on Fiscal Space, solutions: When finance and health Public Financial Management and Health authorities blame each other for Financing.21 This report summarizes the key inefficiencies in health budget findings from the two phases of work; in execution, this can contribute to addition to providing visibility on health budget maintaining existing policies. The execution trends, the report proposes a matrix WHO-World Bank initiative aims to for countries to analyze their key bottlenecks in support tailored policy actions to address bottlenecks in health budget health budget execution and to help in execution, by sharing good practices identifying concrete solutions. For an overview and systematically fostering the of the ongoing joint WHO-World Bank initiative identification of solutions. on this topic, see Appendix Box 1.1. 21 For the website of the Montreux Collaborative, see https://www.pfm4health.net/ . 66 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 2: DATA COLLECTION AND ANALYSIS APPENDIX 2: country were not available from BOOST. The resultant sample consists of 91 unique LMICs. See Data collection and analysis Appendix table 3.1 for the distribution of country data across income groups and WHO regions. At the time of analysis, there was a lack of publicly available global datasets on health We developed a set of descriptive statistics budget execution rates. As such, the first step for all sampled countries, disaggregated by was to identify, extract, and consolidate country- World Bank income group and by WHO regional level data from a range of sources. Data were grouping, for the time-period 2010-2020. Time drawn from the BOOST Open Budgets Portal22 trends were reported as means with standard and the Public Expenditure and Financial errors. Distributional analysis was assessed using Accountability (PEFA) program’s23 country boxplots reporting medians and interquartile assessments, for countries classified by the ranges (IQRs). Analysis of health budget execution World Bank as a low-income country (LIC), by budgetary component (wages, services, and lower-middle-income country (LMIC) or upper- capital) and against education relied on BOOST middle-income country (UMIC) over the years data given that such variables were unavailable 2010 to 2020, inclusive. The dataset is made from PEFA. All analysis was run in Stata version 14 publicly available in conjunction with this report (StataCorp, College Station, TX, USA, 2015). to enable further assessments. Data on overall government and health-specific Appendix table 1.1: Distribution of data budget allocations and data on overall government and health-specific expenditure World Bank Income No. of countries Group included in analysis were extracted and consolidated from country- level datasets collected by the BOOST Initiative LIC 19 and from country-level assessment reports LMIC 38 written by PEFA. Comparing the availability of UMIC 34 country data from the two sources for the selected time frame led to the choice of the BOOST Open Total 91 Budgets Portal, which offered datasets from a WHO region larger number of countries, as the primary data source. The BOOST Initiative’s datasets were also African region 36 more detailed, with granular-level data by Region of the Americas 18 budgetary component (for wages, goods, services South-East Asia region 7 and capital, for example) and budget execution European region 13 data for other sectors such as education. In cases Eastern Mediterranean 7 where both the BOOST Initiative and the PEFA region program offered data for a given country, the BOOST Initiative data were selected. PEFA’s data Western Pacific region 10 were selected in cases where data for a given Total 91 22 https://www.worldbank.org/en/programs/boost-portal/about-the-portal 23 https://www.pefa.org/ BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 67 APPENDICIES APPENDIX 3: Country case studies Burkina Faso Study period 2017-2021 Health budget execution performance ❱ Overall absorption rate of the budget allocated to the Ministry of Health is 97.01 percent (2017- 2021), ranges from 87 percent-110 percent against adjusted allocations; or 84-112 percent against original allocations. ❱ The national universal health insurance fund (CNAMU) recorded a relatively low budget execution rate over the 2019-2021 period, approximately equivalent to 53.80 percent with a downward trend in the level of execution of its budget. ❱ Broken down data at national level by economic classification also shows execution rates close to 100 percent for all categories ranging from 94.69 percent - 99.44 percent. Indicates good planning capacity, budgeting for health needs and resource consumption. Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility of the Inadequacies in revenue ❱ Planning based on unreliable data. budget forecasting. ❱ Poor preparation of the budget, based Insufficient information on on historical budgets, general budgetary forecast budgets. constraints and percentage increases compared to previous years. Late communication of the ❱ Poor estimation of costs. ceilings. ❱ Insufficiency of information on the ceilings at the time of budget preparation. ❱ Analyses like Public Expenditure Reviews, Medium Term Expenditure Frameworks, National Health Accounts are stated as not being utilised to make allocation decisions. Burkina Faso continues next page… 68 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Budget structure Budget structure is rigid and rules for (input-based budgeting budget allocation process although attempt to move to program based), lack of flexibility of budget holders in use of funds. Authorization for reallocation often takes time to be granted. Regularity and Funding unpredictable. ❱ Existence of multiple financing flows predictability of Mid-year reprioritization. creates bottlenecks. funding flows ❱ Ineffective cash management can lead to Delay in releasing funds (also at LG level). the delays in releasing the budget. ❱ Delays in budget reallocation requests. Appropriateness High frequency of controls on ❱ Low mastery of budget execution procedures. and effectiveness the expenditure chain. ❱ Existence of multiple financing flows of spending creates bottlenecks. protocols Authorization modalities and cumbersome expenditure ❱ Non-compliance of deadlines by service procedures. providers or suppliers. ❱ Hospitals face low quality of the supporting documents provided by the service providers, and large administrative burden. ❱ Hospitals have payment arrears linked to non-compliance of execution deadlines, and late submission of supporting documents for expenses by suppliers after the deadline required for liquidation. ❱ LG can delay payment of suppliers, and submitting documentation, also face challenges of administrative slowness. ❱ LG execution challenges include connectivity issues for the Digital Spending Chain, meaning that stakeholders have to travel to the capital to manually enter data which loses them time. ❱ Weak financial autonomy of the CNAMU. ❱ The processing of requests is sometimes delayed, reducing the time available to carry out the initially planned activities. Burkina Faso continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 69 APPENDICIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Effectiveness Cumbersome and ❱ Procurement plans are not prepared on and efficiency of complex nature of public time and anticipated difficulties are not procurement and procurement procedures well considered. capital investment also causes delays in the ❱ Internal disorganization of suppliers and operations execution of activities and service providers. therefore limits the level of expenditure. ❱ Delay in awarding contracts. Procurement processes ❱ Limited knowledge and technical are lengthy (average of capacities of certain actors in the three months) and pool of expenditure chain. suppliers able to meet the ❱ Administrative burdens in public department’s requirements procurement. is apparently small. ❱ Procurement processes are not adapted Excessive centralized to the specific needs of the CNAMU. administrative controls. Overly centralised procurement processes, all procurement processes, regardless of size, are managed by one department (DMP) for public procurement, regardless of the amount of the order. The time taken to execute orders is sometimes out of phase with that planned by management. This can lead to non-implementation. Relevance Weak financial information ❱ Fragmented reporting, lack of data and quality of systems. consolidation. monitoring and Lack of information on ❱ Lack of internal (to health sector) accountability execution of the allocated processes for monitoring budget systems amounts at LG level. execution. Non-transmission of quarterly physical financial execution reports by town halls. 70 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Cameroon Study period 2018/19-2022/23 Health budget execution performance ❱ The execution rate was above 96 percent from 2017 until 2020. Decline in budget execution rate in 2021 to 75.76 percent. Figure 2: Health budget execution trends 120% 99.82% 99.07% 99.24% 96.35% 100% 92.88% 80% 75.74% 72.29% 60% 62.24% 62.07% 60.12% 40% 20% 0.% 2017 2018 2019 2020 2021 l Realisation Rate l Execution Rate BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 71 APPENDICIES Factors contributing to suboptimal health budget execution Factor Generic PFM factors Health sector factors Credibility of the Short time frame to develop ❱ Institutionalized separation of planning and budget budget of 15 days to draft and budgeting processes. submit their comprehensive ❱ Inadequate appropriation in implementing budgets. the operating budget. MTEF is rarely considered ❱ Plans that contain unprioritized during budget negotiations operations and budget request that can and does not serve as a budget disregard the overall budgetary limits and advocacy tool. limit national resources for which other sectors are also competing. ❱ Budgets allocated to the various programs in the health sector do not reflect needs of the programs as expressed in their costed program plans. ❱ Ministry of Public Health bases its budget allocations on the principle of institutional equality. This means that all health facilities rated at the same level of the health pyramid receive the same financial allocation, regardless of the population to be covered, general morbidity, and socioeconomic factors of the area. In part due to PROBMIS, the current budget management software. Budget structure Transitioned to a program ❱ The budget has roughly 13,000 designated and rules for budget budget in 2007 but the budget budget lines, which limits facility managers allocation still retains input-based budget flexibility. characteristics. Regularity and Weaknesses in the cash ❱ Delays in fund release at health facility predictability of management systems level; in addition health facilities received funding flows include liquidity problems and funding from different sources with inconsistent or insufficient different timelines and reporting systems disbursements of funds remain which can create execution challenges. a challenge. Cash budgeting contributes to unanticipated, irregular, and decreased flow of funds, often accompanied by a funding boom towards the end of the fiscal year. Cameroon continues next page… 72 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to suboptimal health budget execution Factor Generic PFM factors Health sector factors Appropriateness Slow physical implementation ❱ Cumbersome execution with multiple and effectiveness of of some joint financing projects layers and numerous stakeholders. spending protocols due to delayed payment of ❱ Centralization of the PBF payment counterpart funds. system ushered in new procedures and processes. Delays in PBF payment. ❱ Administrative delays are also common due to the multiple steps involved in the award of contracts and the validation of contract files. Delays in the receipt of authorizations of expenditure remain a major challenge affecting budget execution within the MoPH. ❱ Expenditures are made without abiding by the rules of commitment, liquidation, procurement, and payment. Effectiveness Insufficient execution of ❱ Inadequate programme management and efficiency of project contract procedures. and operational plans. procurement and Non-compliance with ❱ Transfer delays due to cumbersome capital investment procurement plans. execution protocols and controls as operations a key issue. Lengthy time required to award public contracts. ❱ There are numerous parties involved in the contract award process, which causes delays in the awarding of contracts and the signing of payment authorizations. This frustrates contractors and reduces their willingness to adhere to execution schedules, resulting in a low rate of investment budget consumption. Relevance No penalties imposed ❱ M&E not yet embedded in the operational and quality of on state employees for culture of health sector actors. monitoring and mismanagement of public accountability funds. systems Low level of reporting of financial data at all levels, deficiencies in the financial reporting system Absence of budget monitoring leads to under or over- spending, slow burn-rate, and lack of trust from donors. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 73 APPENDICIES Democratic Republic of Congo Study period 2016-2020 Health budget execution performance ❱ Over the period 2016 to 2020, the average execution rate of the general budget stood at 80 percent compared to 68.8 percent for health. ❱ Low execution rates call into question the credibility of health budget forecasts, hampering the quality of activity planning and the effectiveness of public spending. ❱ Over the same period, the gap excluding salaries averages 52.4 percent per year. By contrast, personnel expenses have a high budget execution rate each year, exceeding 100 percent. The average annual execution rate over the period 2016-2020 stands on average at 103 percent. Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility of the Lack of link between budgetary ❱ Frequent overruns of personnel budget programming and ministry expenditure forecasts are observed priorities. The sectoral each year. The envelope intended for envelopes notified by the personnel expenses is generally below Ministry of the Budget do real needs. not take into account priority ❱ Failure to take into account recurring needs and the Ministry of extra-budgetary expenditure for the Health allocates resources by same categories of expenditure. renewing budget lines from These expenses are never taken into previous years. account in the health budget despite Budget preparation process is their recurring nature. not very participatory. ❱ Investment spending and spending on goods and services constitute Lack of realism in the projection extra-budgetary spending. E.g., The of revenues. Projection contributions for vaccines are paid by the based on political objectives Ministry of Finance without this being leading to an overestimation reflected in the health budget. of revenues. The execution of which is difficult to achieve. ❱ Failure to take health sector priorities into account in determining envelopes. Democratic Republic of Congo continues next page… 74 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility of the ❱ Failure to take into account all external budget (continued) financing in the health budget. ❱ Sector priorities are developed after the budget preparation process, which does not allow them to be taken into account in the budget. ❱ Weak budget preparation and poor cost estimates, leading to budget allocations misaligned with sector needs and making implementation complex. Budget structure ❱ The Minister of Health can decide to and rules for budget use resources for other needs without allocation informing units. Regularity and Transfer delays due to ❱ Lack of communication and capacity in predictability of cumbersome protocols and public finance management. Information funding flows execution controls. on the amount and structure of the budget voted for the Ministry of Health At provincial level, reallocating is not known by all stakeholders in the these resources to new ministry. The operational structures of priorities which most of the the ministry do not have information on time do not concern the health their allocation and the procedures to sector. follow for the release of resources. ❱ Hospitals have a specific budget based on their own resources and on the subsidy received from the State which is irregularly released. Democratic Republic of Congo continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 75 APPENDICIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Appropriateness The strong concentration ❱ Frequent use of emergency procedures. and effectiveness of of budget execution of all This procedure, intended for specific and spending protocols ministries at the level of the exceptional cases, has become the norm Minister of Economy and for budget execution to the detriment of Finance. The Ministry of the normal procedure. The consequence Finance remains the sole is the execution of extra-budgetary authorizer of the state budget. expenditure which does not correspond to the programmed priorities. Budget execution is governed by the budgetary commitment ❱ General non-compliance with plan (PEB) and the cash expenditure controls. flow plan (PTR) which are ❱ Health actors who submit files late developed quarterly. These while the period for implementing documents aim to prioritize the activities is close. needs of ministries in relation ❱ The PEB being the reference for the to resource mobilization. execution of ministries’ expenditure Unfortunately, these is often prepared late by the budget documents are insufficiently ministry. This delay also impacts the used for the execution of execution of the Ministry of Health’s expenditure. budget. Operating expenses are ❱ The lack of mastery of the procedures not released for both health for executing donor resources which facilities and the structures are sometimes different from national of the Ministry of Health. procedures but also the procedures differ Budgetary allocations are from one donor to another. made each year in the finance law, but their execution is ❱ The multiplicity of controls for non-wage almost non-existent although operating costs in the normal procedure is these expenses have been not adapted to the objective of improving included in the PEB. the level of health spending, especially to ensure the functioning of health care establishments. ❱ Payment by the purchasing agency is hampered by delay in the provision of resources due to the delay in signing financing agreements due to the cumbersome nature of contractual procedures; the poor performance of providers who do not produce sufficient quantities of services to absorb the available funding, bad governance and fraud among providers which lead to a reduction in disbursements; delay in carrying out verification activities. Democratic Republic of Congo continues next page… 76 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Effectiveness The cumbersomeness of ❱ For bulk purchases of medicine, there are and efficiency of the procurement procedure a fairly large number of controls which procurement and with the different levels of extend the delays and which can lead capital investment control and intervention of to a delay in providing patients with the operations several actors from different necessary medications. ministries does not facilitate the improvement of the level of use of resources. Non-prioritization of investments in PEBs adopted by the Ministry of the Budget. The investment amounts are always programmed in the budget but are rarely taken into account in the PEB for execution. Tested solutions and good practices: ❱ Following an initiative dating from 2020, a tripartite Health-Budget-Finance committee was set up to monitor budget execution. In addition, the committee can propose corrective measures if necessary. The objective was to bring together around the same table the main actors in charge of executing the health budget to periodically analyze the execution situation in relation to forecasts and, if necessary, propose and monitor urgent actions to improvement. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 77 APPENDICIES Ethiopia Study period 2016/17-2020/21 Health budget execution performance 2016/17-2020/21 ❱ On average, between 2016/2017 and 2020/2021, 98 percent of the adjusted health budget was executed, while 95 percent of the overall government budget was executed. ❱ Apart from 2016/17, the health budget execution rate has been higher than the overall government budget execution rate, indicating that relative importance is given to the health budget in the overall context of public expenditures. ❱ The capital budget has weaker execution rates, ranging between 75 percent to 102 percent (average 90 percent) than the recurrent budget, which was executed at rates in between 97 percent to 115 percent (average 103 percent). ❱ Capital budgets are particularly under-executed at regional and woreda level. ❱ Recurrent expenditures are more predictable and therefore the execution rate is higher for both regions and federal government, and the adjustments mid-year through budget changes smaller. ❱ Regions are executing less of their budget compared with the federal government (apart from the year 2016/2017). This counts for both execution rates against the original budget, and the adjusted budget. ❱ During the Covid-19 outbreak, resources were allocated as grants to the Ministry of Health with unrestricted decision-making on how to spend it; this might have contributed to the over- execution of budget during that period. Figure 1: Overall and health budget execution rates 120% 108% 100% 103% 100% 96% 95% 98% 94% 94% 90% 80% 88% 60% 40% 20% 0% 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 l Health l Total Government 78 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility of the ❱ Budgets from facilities tend to be inflated, budget assuming later cuts to it. If facilities get the budget approved in full by woredas (and even get revised further upwards by woredas) and regions, the facilities have unplanned resources available without the necessary capacities to implement the budget in full, reducing specifically capital budget execution rates. ❱ External resources should be recorded and estimated more accurately and the process needs to be aligned with the government budgeting process. ❱ The overall payment discipline of the government is high, with few arrears reported at the end of the fiscal year, although cash management has been cited as one of the challenges related to payment. Budget structure Transfers within budget lines and rules for are possible with the approval budget allocation of MoF – which can be a tedious process, limiting the flexible use of budget funds and ability to respond to needs. Regularity and There have been instances of ❱ Delays in approvals for budget reallocation predictability of cash unavailability, leading to requests, as well as funds and in-kind support funding flows delays in transfers and some coming through various channels, causing arrears due to not being able challenges with budget allocation and cash to pay invoices. management and ultimately decreasing budget execution. Transfers to sub-national levels are announced on time ❱ Budget releases reach facilities late, and in a transparent way, contributing to underutilization of budgets. using the approved resource allocation formula. However, actual disbursements can be up to three months late due to cash flow issues. Ethiopia continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 79 APPENDICIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Appropriateness Given the extent of the fiscal ❱ All three channels use different information and effectiveness decentralization, there is very systems to manage and track their of spending limited control from federal expenditures, posing challenges for overall protocols level over the actual utilization alignment to national priorities, as well as not and onward transfers of block fully enabling efficiency gains. grants to regions. This could mean that regions allocate resources not in line with federal priorities, preferring their own regional priority list. This might lead to poor service delivery at woreda level. Effectiveness ❱ Capital budgets are particularly under-executed and efficiency at regional and woreda level, with an average of procurement execution rate of 68% between 2013 and 2018, and capital compared to 77% at the federal level during investment the same time. Some of the reasons might be operations that the cash for regional transfers is delayed, delaying budget implementation, or a lack of understanding, forward planning or other limitations for implementation of capital projects. ❱ There are delays in processing procurements in addition to poor planning and implementation capacities at woreda level, reducing budget execution and causing room for inefficiencies. Relevance A high level of fiscal ❱ Currently, it is not possible to track program- and quality of decentralization poses related expenditures and execution rates monitoring and challenges in fully assessing across the health sector. accountability the execution rates of health ❱ Unreliable, fragmented reporting systems systems budgets, as well as their across the different levels of government and effectiveness and efficiency. channels of spending make it difficult to provide Budget execution data is not a comprehensive picture of budget execution. publicly available, making ❱ Given that facilities are not linked with any of accountability more difficult the financial management information system, and decreasing transparency. it is difficult to get access to sufficient data on Health stakeholders are financial performance of health facilities. In case involved in the annual where audits conducted at facility level show planning session, but have mismanagement of funds – whether on purpose or limited insights into the by lack of better knowledge or capacity – there can budget execution progress. be consequences and penalties for staff in charge. Ethiopia continues next page… Tested solutions and good practices: 80 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES ❱ Payroll accuracy is high, with change requests responded to within 48 hours if the budgeting entity is using the integrated Financial Information System (iFMIS, implemented at federal level) and within weeks if outside of the iFMIS, but usually in time for the end-of- month payments. ❱ The payment discipline of government is considered to be high in general, with arrears reported across government to be less than 1 percent of actual expenditures. This is partly due to a grace period at the end of the fiscal year to finish paying commitments, as well as regular reporting and rigorous commitment tracking of budget entities. ❱ The budget calendar is adhered to and budgets for upcoming fiscal years, including details of transfers to sub-national levels, are communicated in time to regions and woredas. This helps the regions and woredas with their planning and commitment processes. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 81 APPENDICIES Kyrgyzstan Study period 2016–2020 Health budget execution performance ❱ Between 2016 and 2020 the average budget execution rate has averaged approximately 93 percent compared to the revised budget, and 98 percent compared to the initially approved budget. ❱ The execution rate of the MOH budget compared to the revised budget has averaged 85.5 percent. The execution rate of the MHIF compared to the revised budget has averaged 94.7 percent. Table 4. Health budget execution rates Year Approved Execution of Percent Revised Execution Percent Budget the approved of the budget of the of the (MOH+MHIF) budget approved (MOH revised revised (MOH+MHIF) budget +MHIF) budget budget execution execution 2016 15659.5 14558.9 92.90% 15363.4 14558.9 94.70% 2017 15639.7 15421.3 98.60% 16598.5 15421.3 92.90% 2018 16568.4 16136.8 97.30% 17246 16136.8 93.50% 2019 17463.6 17075.9 97.70% 18470 17076 92.40% 2020 18283.5 19473.1 106.50% 21090.5 19473.1 92.30% 82 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility Poor quality revenue forecasts. ❱ Poor cost estimation and challenges of the budget Budget formulation based on with prioritization leads to discrepancies historic expenditure. between budget allocations and actual policy costs and needs. The Ministry of Finance (MoF) frequently changes the rules for ❱ MoH, MHIF and health care organizations budget preparation. (HCOs) struggle with weak capacity and weak incentives among managers and finance staff to prepare realistic budgets. Budget structure Although allocation is based on ❱ Input-based norms continue to be used and rules for administrative and functional as the basis for budgeting by HCOs. budget allocation classification, during budget ❱ MoF and MHIF still require HCOs to execution control is exercised submit budgets and cash plans broken using line-items control. down by economic classification for Burdensome authorization approval at the execution stage and for procedures for re-allocation of the purposes of “cash rationing” which is funds across line-items during based on prioritization of line items. the fiscal year. Regularity and As part of the cash management ❱ Fragmented funding allocations to HCOs predictability plan MoF withholds 30% of for some programmes (notably the of funding flows the budget allocation of non- prescription drug budget) leads to a mix protected line items (many of unspent balances and unmet needs non-wage operating costs and across different HCOs. capital) in the first 10 months ❱ HCOs cannot absorb big bulk of funding of the year. This leads to the arrived in last months of year effectively. accumulation of funds that must be transferred in the last months of the year. Late information about commitment ceilings. Mid-year budget re-allocations usually increase the budget but lead to lower execution rates. Appropriateness Control of expenditure against ❱ Low autonomy of HCOs to manage and effectiveness budget is largely effective. budgets more efficiently and aligned with of spending needs. protocols Kyrgyzstan continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 83 APPENDICIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Effectiveness ❱ Lack of procurement specialists in the and efficiency of regional HCOs. procurement and ❱ Delays in MoH’s management of bulk capital investment procurement and capital procurement operations processes. Relevance Fragmented reporting systems ❱ Low capacity of HCO accounting staff in and quality of make it difficult to provide a the regions. monitoring and comprehensive picture of health ❱ Annual accounts and reports of HCOs, accountability budget execution. MHIF and MoH are not published. systems Long-standing weaknesses in personnel and payroll data and reporting. There is no accounting and reporting of budgets by programme. Onerous annual external audit of HCOs by the Chamber of Accounts makes managers cautious about re-allocating funds away from historic patterns and out-dated norms. Tested solutions and good practices: ❱ Automation of the Central Treasury single account system beginning in 2014, all income and expense transaction are executed through the Single Treasury Account online. ❱ Single line in the economic classification for MHIF’s budget, which is intended to enable HCOs to reallocate funds at their discretion depending on priorities and needs. However, for purposes of budget execution and analysis, MoF and MHIF still require HCOs to submit for approval budgets and cash plans broken down by economic classification. ❱ Other solutions that have improved flexibility is the reduction in the levels of detail used in the economic classification in the budget for MoH and its HCOs, removal of prior MoF controls on MHIF cash plan re- allocations and execution of payments to HCOs, providers can carry forward unspent balances at year end to the following year. ❱ HCOs use one system for execution, accounting and reporting for all four sources of revenue. 84 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Lao PDR Study period 2015/16–2019 Health budget execution performance ❱ Overall budget credibility and reliability of the Lao PDR health budget is good. From fiscal year 2015/16 to 2019, the aggregate execution rate has ranged between 89 percent to 104 percent. ❱ The budget execution of capital expenditure is well executed. Total actual domestic capital spending was within six percent of plan for three of the four years analyzed, with the largest underspend being 13 percent in FY2015/16. Table 3. Health budget execution rates Fiscal Year Classification Execution Rate 2015/16 Ch. 60, 61: Salary, allowances and compensation 90% Ch. 62, 63, 64, 65, 66: Non-wage Recurrent Exp. 96% Ch. 67 Locally-funded Capital 87% 2017 Ch. 60, 61: Salary, allowances and compensation 99% Ch. 62, 63, 64, 65, 66: Non-wage Recurrent Exp. 98% Ch. 67 Locally-funded Capital 94% 2018 Ch. 60, 61: Salary, allowances and compensation 103% Ch. 62, 63, 64, 65, 66: Non-wage Recurrent Exp. 78% Ch. 67 Locally-funded Capital 96% 2019 Ch. 60, 61: Salary, allowances and compensation 98% Ch. 62, 63, 64, 65, 66: Non-wage Recurrent Exp. 103% Ch. 67 Locally-funded Capital 100% BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 85 APPENDICIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility The budget preparation ❱ Inaccurate revenue estimates reduce of the budget process for wages and salaries certainty over the total estimated health is not very precise, with worse budget and complicate the work of estimation at provincial MoH planners. As revenues are a major source compared to central MoH. of funding for operations and maintenance Spending units prepare this can delay the implementation budgets for wages and salaries of activities and lead to poor budget based on historical information execution. plus a percentage increment. The submission is not linked to the number or type of positions, promotions, or allowances that it is intended to support. Budget structure ❱ The implementation of National Health and rules for Insurance (NHI) has changed the budgeting budget allocation processes for health facilities and impacted on budget execution. This change in budgeting practice has resulted in a poor allocation of funding. ❱ Financial and health performance information is tied to budget allocation. Long processes and inaccuracies can lead to poor budget allocation and delayed cash disbursements which can impact on budget execution. ❱ Disconnect between strategic policy goals and the existing administrative structure complicates the task of budgeting and oversight. For instance, it is difficult to determine which departments or divisions should receive additional funds to implement a strategic decision to increase the proportion of the health budget dedicated to preventative health care. Lao PDR continues next page… 86 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Regularity and Cash shortages have pushed ❱ MoH manages large and complex predictability of treasury to ration quarterly revenue flows. The monitoring of revenue funding flows cash allocations, meaning that collection is complicated by the highly line ministries, such as MoH, decentralized structure of MoH. Revenue have little certainty about forecasts and reports are consolidated quarterly cash-flow. With at the district, provincial and then central growing demands on revenues, levels. The lengthy consolidation process MoH have reported quarterly means revenue monitoring is delayed and cash disbursements are often forecasts are less accurate. delayed. Payments were ❱ Health facilities have reported that NHI once made at the beginning payments are increasingly unpredictable of the quarter but now are and delayed, even being received in not received until the end of the next fiscal year. Cash disbursement the quarter. Unpredictable tracking reveals the extensive procedure and delayed disbursements required for cash disbursements to be reduce the time available and released from the central NHIB department complicate the work of budget to health facilities. The long delays in implementation. receiving payment can shorten the timeframe for budget implementation. ❱ Health facilities can maintain substantial cash balances, allowing for more independence from cash disbursements through the treasury system. These funds are only permitted to be used for non-wage recurrent expenditure. The large cash balances held by health facilities may partly explain the relatively good performance of non-wage recurrent expenditure. Effectiveness Explanation for the consistent ❱ The Ministry of Health’s low level of and efficiency of over-execution of the capital involvement during the implementation of procurement and budget at the local level can capital projects is another area of concern. capital investment be found in the Amended Law MoH involvement is essential to ensure operations on the State Budget 2006. that projects are aligned to strategic plans Article 6 paragraphs 4 and 5 and that projects meet the needs of the and article 32, paragraph 9 ministry. allows provincial authorities to allocate any revenues beyond approved plans to capital expenditures. Lao PDR continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 87 APPENDICIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Relevance The lack of transparency ❱ A minority of health budget units are using and quality of regarding public finances in a financial management system approved monitoring and Lao PDR is alarming. Of the by the Ministry of Finance. A survey of four accountability few public documents that are provinces in 2018 found that 40 percent systems produced by MoF, many are of provincial hospitals and half of health published late and lack detail. centres were not using the standard financial reporting forms required of all budget units. ❱ Health facilities and many MoH departments do not have access to the GFIS financial management system. Health facilities, divisions and departments keep offline, and paper based financial records. Records must be consolidated at the district, provincial and the central level. The record keeping system is error prone while the many layers of consolidation lead to reporting delays. Tested solutions and good practices: ❱ The ring-fencing of the health budget is a factor that explains the good budget execution rates in the health sector. ❱ While the Lao PDR is being forced to cut government spending due to increasing debt service costs, the government has committed to protecting the health budget. This assurance has helped MoH budgeting and has reduced the chance of in-year budget cuts. 88 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Pakistan Study period 2017/18-2020/21 Health budget execution performance ❱ Health budget execution rates are high (overall average of 90 percent); rates are even higher relative to the revised budget estimates (104 percent). ❱ Budget execution rates across provinces vary significantly, for example budget execution rates were 81.6 percent in Sindh and 82.6 percent KP in 2016/17, compared to over 100 percent in other provinces (i.e. Punjab 110 percent in 2016/17). Large spending variations within provinces likely highlight weaknesses in the budgeting process. ❱ Expenditure above 100 percent can be problematic and implies initial budgets did not anticipate policy changes. ❱ Expenditure-related data across facilities also indicate high variations in execution rates. Factors contributing to sub-optimal health budget execution Factor Generic PFM factors Health sector factors Credibility of the Overoptimistic provincial ❱ PHC facilities do not prepare their budgets, budget (own) resource estimates. leads to misaligned demands and allocations. Expenditure projections This greatly affects the day-to-day are based on uninformed management of PHC health facilities. revenue targets - evident ❱ PHC budget allocations are not based from budget revisions. on type, size and catchment area (local demography) of the health facility. They are generated from historic allocation decisions. ❱ Costing studies that inform budget estimates do not exist, as a result, budget allocations are not in line with needs. Pakistan continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 89 APPENDICIES Factors contributing to sub-optimal health budget execution Factor Generic PFM factors Health sector factors Budget structure ❱ PHC facilities are not spending units (cost and rules for budget centers) and do not have budget autonomy. allocation ❱ Vertical programs operate in parallel. They rely on different structures that can cause duplication (e.g., for supervision and M&E). Regularity and ❱ Insufficient, irrelevant and delayed resources predictability of compromise service quality (hygiene, access funding flows to basic utilities, availability of drugs, etc.). Reportedly, heath facilities cannot pay utility bills, do basic repairs or maintenance, pay mobility allowances for vaccinators and LHWs, etc. Appropriateness Expenditure commitment ❱ Total dependence of PHC health facilities and effectiveness of controls not always followed. on DHO or DAO for their spending (i.e. no spending protocols Excessive controls for autonomy) which can impact quality of operational expenses and healthcare delivery. inefficiencies prevail and ❱ Facilities depend on DHOs that may ignore, applied to all transactions delay, partially pay, etc. their requests. At irrespective of the value. For the district level, the system is completely example, a bill of PRs200 blind to the time it takes for DHOs to submit undergoes the same level of bills to the DAO. Claims can be parked at the scrutiny as a bill of millions DHO for months awaiting approval; as a result of rupees and involves healthcare delivery in BHUs/RHCs can be duplicate internal controls of severely affected. six different officers in two different entities. Effectiveness ❱ Audit findings noted multiple issues with and efficiency of procurement done at DHO, including non- procurement and compliance of controls, lack of transparency capital investment for tenders, purchasing medicine at a higher operations rates. Pakistan continues next page… 90 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution Factor Generic PFM factors Health sector factors Relevance Current CoA is not aligned ❱ The current system does not establish clear and quality of with healthcare (referral) lines of accountability between DHO/DAOs monitoring and services and does not allow with financial responsibility and Medical accountability budget and expenditure Officers (MOs) with medical responsibility. systems recording of primary, ❱ Weak transparency over budget at the facility secondary and tertiary level and tertiary facilities, including not healthcare (i.e. no such maintaining proper books of accounts and report can be generated). non-availability of records. These inconsistencies make it hard to track budget allocation and expenditure at PHC level. Also impedes a smooth roll- out of performance-based budgeting that is mandatory at federal and provincial levels. There is no mechanism to record arrears. Tested solutions and good practices: ❱ Payroll is completely automated and salaries are paid regularly. Reportedly no arrears; no ghost workers. ❱ The Federal government recently ratified a series of Acts to improve oversight of the health sector legislation. At tertiary level the Acts grant health facilities autonomous budget and expenditure management. Under these Acts, federal government transfers a single-line budget to these autonomous entities. ❱ A remaining challenge is the quality of financial oversight and reporting inside MoNHSR&C. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 91 APPENDICIES Senegal Study period 2017-2021 Health budget execution performance ❱ The MSAS budget execution rate is at a satisfactory level (94.92 percent in 2020 and 95.34 percent in 2021, excluding personal budget). ❱ From 2017-2021, health workforce spending was executed at 100 percent. ❱ Spending on goods and services has been variable, due to unrelease of funds. ❱ Capital expenditure, although experiencing a constant increase over time with the exception of the year 2020, has always seen much weaker execution. Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility of the The low participation of ❱ Weaknesses in planning by responsible budget beneficiaries in the process. units through the Annual Work Plan (PTAs). Failure to take into account the opinions of sectoral Ministries during ❱ Coordination problems between negotiations with the Ministry of the State operating budget and the Finance and Budget (MFB). contribution of external partners within the framework of the PTAs. Low stakeholder ownership of the budget formulation process. Budget allocation poorly distributed and does not take into account objective criteria. Regularity and Partial transfer of state budget ❱ Delays are also often noted in the predictability of resources/subsidies. transfer of funds which is done in funding flows instalments for National Supply Budgetary adjustments and Pharmacy (PNA). budgetary cuts are often made. Administrative delays observed in State transfers (FDD, FECT, BCI) to LG, in addition scarcity of resources. Sengal continues next page… 92 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Appropriateness Frequent shutdown of the SIGFIP ❱ Incorrect budget allocation and and effectiveness system and delays in issuing non-compliance with the rate of of spending payment orders. consumption. protocols ❱ The absence of supporting documents or documents that do not comply with the expenditure procedure. ❱ Non compliance of processes and authorisations. ❱ Non-payment in full due to insufficient budget recorded on the line dedicated to its purpose. ❱ The lack of mastery of changes e.g. new integrated financial management platform. ❱ Lack of funds disbursement for certain programs. ❱ Calculation errors on invoices or insufficiently detailed invoices. ❱ Non-compliance with payment methods specific to each type of expense. ❱ Rejection of authorisation and payment due to absence of correct documentation, errors in submitting reports, incorrect invoices. Effectiveness Cumbersome nature of ❱ Failure to comply with procurement and efficiency procurement processes. plans. of procurement ❱ The lack of justification for competitive and capital bidding procedures. investment operations Relevance ❱ Absence of IT tools dedicated to and quality of monitoring and evaluation. monitoring and accountability systems Sengal continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 93 APPENDICIES Solomon Islands Study period 2015-2020 Health budget execution performance ❱ Ministry of Health and Medical Services (MHMS) tends to spend most, if not more (104 percent in 2015) than its original Solomon Islands Government (SIG) domestic recurrent budget allocation each year. This is largely due to the large share being used for payroll and to the relatively non- discretionary nature of these expenditures. ❱ Because of the legal commitment related to paying payroll, expenditures are not restricted to the commitment process and are paid by MoFT automatically whether the budget is available or not. ❱ Budget execution rates for development partner recurrent expenditure are much lower due to poor integrated planning with MHMS systems, and delays in disbursement of cash from some DPs to MHMS. ❱ The SIG development budget execution rates were very low in 2015, 2016, 2017 and 2020 because of various bottlenecks and constraints, and potentially the Covid-19 pandemic in 2020. Table Annex 1.2: Budget execution rates Year Budget Ledger Original Budget Execution Rate 2015 SIG recurrent budget (L276) 104% DP recurrent budget (L376) 74% SIG development budget (L476) 34% 2016 SIG recurrent budget (L276) 105% DP recurrent budget (L376) 63% SIG development budget (L476) 14% 2017 SIG recurrent budget (L276) 103% DP recurrent budget (L376) 69% SIG development budget (L476) 36% 2018 SIG recurrent budget (L276) 94% DP recurrent budget (L376) 56% SIG development budget (L476) 211% 2019 SIG recurrent budget (L276) 88% DP recurrent budget (L376) 74% SIG development budget (L476) 101% 2020 SIG recurrent budget (L276) 101% DP recurrent budget (L376) 85% SIG development budget (L476) 34% ❱ SIG recurrent budget (L276) = domestic recurrent budget/expenditure. ❱ DP recurrent budget (L376) = Development partner (DP) recurrent budget/expenditure. ❱ SIG development budget (L476) = domestic development budget/expenditure. 94 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility of the Development Partner ❱ MHMS has improved its budget preparations in budget recurrent budget regard to identifying the range of domestic and revenues are often external funding to the health sector, however not realised. As such, issues concerning adequate planning of these budget execution rates funds to operational plans still exist. Poor planning are understated. and scrutinisation of division operational plans by management impact poorly on execution rates. MoFT budget submission timelines ❱ A review by MHMS into the administration of are often delayed. This employee allowances uncovered significant has often resulted in evidence of both under and overpaying of MHMS not knowing employees (2017 MHMS annual report); from 2018, its domestic budget the payroll and salaries budget was adjusted to a ceilings until late in more realistic amount. the process, leaving insufficient time to prepare the budget. This leads to confusion, poor planning and inevitably poor budget execution rates. Budget structure Budgets are and rules for appropriated by budget allocation division and by economic line item, and MHMS must formally request any changes to the original budget appropriation to MoFT if it wants to re-allocate budget. Re- allocations can only be done within a specific budget ledger. Solomon Islands continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 95 APPENDICIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Regularity and Examples of delayed ❱ Delays in disbursement of cash from some DPs predictability of fund releases by MoFT to MHMS – both of which cause delay in activity funding flows are also reasons why implementation. outstanding arrears ❱ TB funding is managed centrally by the national accumulate for MHMS. divisions; poor planning of funding flows to the provincial areas has led to inefficient Budget cuts tend to implementation of budget objectives. impact development expenditures, i.e. a ❱ Examples of delayed liquidation of funds impacting budget deficit in 2017 RMNCAH implementation of activities from forced MoFT to cut provinces to the national program. back on some non- ❱ The SIG supplementary budget process can often be essential activities delayed, and as such, often additional development and caused the delay budget L476 funding made available to MHMS occurs of payments which late in the financial year where there is not sufficient somewhat impacted time to implement the additional funds. the implementation of the 476 budgets for ❱ Examples of insufficient budget that requires that year. divisions to do virements. Appropriateness MHMS is responsible for ❱ DP budget expenditure faces challenges due and effectiveness its budget execution, all to complex payment processes, bureaucratic of spending transactions processed bottlenecks to access the funds, low absorption protocols by MHMS are submitted capacity to manage and implement these budgets. to MoFT for processing ❱ Small MHMS teams that struggle to implement – MoFT manages all the large DP budgets. SIG bank accounts. ❱ MHMS must wait for funds to be available in the Examples of delayed DP bank account tied to the DP recurrent budget payment by MoFT before they can start spending. There are ongoing are also reasons why complications and delays with accessing DP funds outstanding arrears despite DPs theoretically being on-system. This accumulate for MHMS. can lead to low and/or late activity implementation. ❱ The health sector is a crowded and complex financial space, with many domestic and external funding sources. There are a number of different funding modalities and timeframes for donor funding that are different to the SIG financial year. This creates significant pressure on the local staff and local system, as often there is a need to maintain parallel processes for each donor. As such, this can delay fund disbursement and implementation. Solomon Islands continues next page… 96 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution performance: Factor Generic PFM factors Health sector factors Appropriateness ❱ Examples of delay in execution of recurrent budget and effectiveness due to noncompliance with financial processes. of spending ❱ Over-expenditure in payroll and staff benefits. protocols ❱ Spending limit for MHMS is set by MoFT, however weak controls and monitoring of funds flow and spending across by all Divisions has resulted in overspending or no payment made to supplier. ❱ MHMS is a highly centralised organisation, but most health activities are required at the provincial level. Processing payments and allocating staffing, transport, logistic support centrally can be inefficient and lead to implementation delays, contributing to poor budget executions. As a result, funding and resources are often far removed from where they are needed. Effectiveness Very rigid and manual ❱ The main challenges include the weak capacity of and efficiency of procurement systems the infrastructure unit for planning and delivering procurement and lead to significant infrastructure projects at the MHMS, and vacant capital investment processing lead times positions within the unit. operations for payments, which ❱ Multi-year nature of infrastructure projects that do can be a bottleneck to not align with annual budgets. Managing the annual implementation. The 476 budget to fund infrastructure projects that manual movement of span several years of implementation is a challenge paperwork between for the MHMS. the MHMS and MoFT is inefficient and can lead ❱ National Referral Hospital procurement challenges to long delays when lead to late initiation of procurement of specialized issues or discrepancies medical equipment’s leading to low absorption and are found, and poor performance. payments are rejected. Relevance ❱ Some DPs require acquittals of funding tranches and quality of before new tranches can be released. Slow or monitoring and inadequate reporting can prevent DP funds accountability from being received, and as such, leads to low systems implementation rates. ❱ Poor communication, unclear reporting lines, and lack of accountability at all levels of MHMS affect budget execution and service delivery negatively. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 97 APPENDICIES Timor Leste Study period 2017-2021 Health budget execution performance ❱ Average budget execution rate of health sector in Timor-Leste between 2017 and 2021 was 88 percent of the total government budget allocated to health and hit the lowest point of annual execution rate in 2021, 76 percent. ❱ Overall, the average outstanding payment or arrears accumulated by the health sector institutions was below 2 percent, while in 2021 recorded 3.5 percent of arrears during the Covid-19 pandemic. ❱ Between 2017 and 2021, on average, approximately 11 percent of the total government budget to health were not spent annually, remained in the non- obligated account which was returned to the treasury account at the year end. ❱ The average annual health expenditure growth is 4 percent between 2017 and 2021, with fluctuation over the period. Factors contributing to sub-optimal health budget execution performance Factor Generic PFM factors Health sector factors Credibility of Mixed approach to budget ❱ Poor planning and budgeting practices the budget formulation using program-based have led to weak priority setting, poor cost budgeting and historic expenditure estimations, and low budget executions of based allocation led to lack of budgeted programs and budget line-items. clarity and confusion in budget ❱ Weak understanding, technical knowledge allocation decisions. and capacity in planning and budgeting, Direct budget allocation by the e.g., program-based budgeting. MoF to health sector institutions ❱ Poor coordination among agencies within and off-balance budget plans by the health system. For example, the development partners contributes budget estimates are done by the MoH, to unpredictable funding. while budget allocation decisions are made separately by the Autonomous Agency for the Purchase of Medical Supplies and Equipment. Timor Leste continues next page… 98 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution performance Factor Generic PFM factors Health sector factors Credibility of the Time required for both national ❱ Health facilities only need to fulfil the budget (continued) and sub-national governments requirement to submit budget proposal to prepare programs’ budget on time. The baseline is largely derived considered as limited and from the previous year’s spending, with insufficient. Government entities less attention given to performance. This have limited time to assess budget preparation practice has resulted programs and define priorities to in inefficient and ineffective budget align with the proposed budget execution and numerous in-year budget envelopes distributed by the MoF. adjustments (i.e., virement). Poor revenue forecast for the health sector. Budget structure Poor budget execution in health ❱ Ministry of Health still distributes budgets and rules for sector is in part due to the ongoing to municipal health services and referral budget allocation PFM reform which includes hospitals using detailed line-items and implementing program-based they have no financial flexibility and budgeting. Technical staff do not autonomy to manage and control cash have sufficient information on the that was released to them. reforms and updates undertaken ❱ Clarity on the implementation of program at the national level. budgeting needs to be improved. Rigid budget classification ❱ Fragmentation of activities and more structures based on economic than one entity being responsible for line-items. implementation has led to difficult program budget control and diminishes MoF plays dominant role in budget flexibility. formulation and direct budget allocation authority. Complex, burdensome authorization procedures for re-allocation of funds across line- items in the cash plan. Timor Leste continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 99 APPENDICIES Factors contributing to sub-optimal health budget execution performance Factor Generic PFM factors Health sector factors Regularity and Late budget releases by MoF. ❱ Health facilities rely on fund transfers from predictability of central MoH. However, health facilities do funding flows Cumbersome authorization not receive budget transfers from central modalities and spending government in a timely manner and are procedures. uncertain if budget will be approved. Quarterly expenditures limits of ❱ The quarterly basis cash release by the 25 percent of the total allocated MoH to health service providers by line- budget. items budget limits flexibility of finance managers in managing expenditures. ❱ Health facilities delay the implementation of activities, reporting on expenditures and verification has frequently delayed next quarter cash release from the treasury. ❱ Finance managers at the health facility levels have no authority to retain unspent cash. ❱ Limited financial management capacity of health facility managers to manage multiple funding. Appropriateness Rigid budget execution rules and ❱ Key health programs budgets are and effectiveness practice can lead to delays in managed and controlled directly by of spending spending the health budget. the Budget and Finance Management protocols Directorate of MoH. They do not have Payments are made through direct involvement in the budget execution direct payment and through process until the release of the payments. procurement process. Direct payment is straightforward and ❱ Multiple budget request approval stages does not cause delays in spending at the health facility level contribute to the as long as all required documents delay in budget execution. are available. No special arrangements to bypass any stages for approval. Therefore, any urgent payment requests cannot be accommodated immediately which can be problematic due to the nature of health sector activities. Timor Leste continues next page… 100 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution performance Factor Generic PFM factors Health sector factors Appropriateness Next year’s budget submitted and effectiveness to the national parliament at the of spending same time as the closing of budget protocols commitments has often caused (continued) payment delays. This has led to unanticipated payment arrears. Build-up of payments arrears has meant that previous year unpaid liabilities become a burden to current year budget execution. Effectiveness Overly centralized administrative ❱ Limited technical knowledge and capacity and efficiency of controls and cumbersome on the management of procurement of procurement and procedures. goods and services. capital investment Payments made through ❱ Lack of procurement specialists at the operations procurement process take several municipal health services and as well as at days and even months to be central MoH. released because the process ❱ 90-120 days for goods delivery term lead must go through multiple stages to stock out of drugs, medical equipment and approvals. and supplies. ❱ Limited suppliers of goods and services available at the municipality level and low value tender for goods and services. Relevance Fragmented reporting systems ❱ Lack of consolidated approach to and quality of make it difficult to provide a expenditure and activity monitoring data. monitoring and comprehensive picture of budget ❱ Paper-based expenditure reporting by accountability execution. the health facility finance managers, with systems Lack of regular internal and potential errors for expenditure reporting. external audit and poor ❱ Low knowledge and capability of enforcement for follow-up. accounting and quality control staff both at the central and municipal level. ❱ Lack of regular dissemination and publication budget execution reports including internal audit reports are not shared with internal management team. Timor Leste continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 101 APPENDICIES Tested solutions and good practices ❱ Transition to full program-based budgeting is in progress and on yearly basis the Ministry of Finance leads the rationalization of programs and budgets process during budget formulation and preparation process. As a result, the health sector institutions are left with two key budgetary programs – Health and Good Governance and Financial Management. The effect of such exercise has been significant as the government budget allocations to health can now be adequately tracked and monitored. ❱ Delegation of Treasury functions from MoF to the Ministry of Health and Municipality Authorities and Administrations is enabled. ❱ This decentralizing of Treasury functions is part of the PFM decentralization aimed at giving financial management autonomy to executing public entities, while the Ministry of Health strengthens and monitoring and verification system. 102 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Uganda Study period 2018/19- 2022/23 Health budget execution performance Table 5. Health budget execution rates Year Approved Supplementary Revised Absorption % % Budget Budget Budget Rate Budget Budget (Ugx Bns) (Ugx Bns) (Ugx Bns) Released Spent FY2018/19 2310 56.5 2367 94% 80% 76% FY2019/20 2590 125 2715 96% 89% 85% FY2020/21 2789 324 3113 92% 81% 75% FY2021/22 3331 397 3728 80% 95% 76% FY2022/23 3685 318 4003 85% 82% 78% Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility Poor revenue estimates. ❱ The government uses a resource of the budget Operational budget cuts, the central allocation formula to allocate grants government has increasingly reduced to health facilities which does not recurrent expenditure to save funds take into consideration all factors. for increasing the development ❱ The health sector planning is budget. inadequate, and prioritization and Regular supplementary budgets. sequencing of health projects remain challenging, creates budget Weak linkage between resource execution challenges. Delays in project allocation and results. implementation due to poor planning lead to time and cost overruns. In addition, there is a tendency to implement new work plans before completing the old ones leading to over commitments and arrears. Uganda continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 103 APPENDICIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Credibility ❱ Lack of equity and discretion of of the budget resources allocated to LGs in the (continued) hard-to-reach areas. ❱ The local governments cannot influence central government funding allocations to the health facilities under their jurisdiction, which compromises transparency in the budget process. ❱ Issues of allocative efficiency due to poor planning and prioritization. Budget structure Budgets that are insufficiently ❱ Fragmentation means that providers and rules for funded compromise the quality of can use funds from specific sources budget allocation services due to the rigidity (10% cap) for certain items but cannot use all in re-allocation between budget lines funds for all line items, leading to evident in the PFM Act 2015. inefficiency in budget execution. More capacity and resources required for the PBB reform. Regularity and Delays between when the MoFPED ❱ Failure or delay in release funds predictability of issues the release paper and when to pay suppliers of medicines and funding flows the local government receives the pharmaceutical supplies, lead to funds. As a result, local governments disruptions in service delivery and often have to reconcile the paper curtail implementation of health release and amounts transferred to sector workplan. the local government bank account. Sometimes, the payments received are inconsistent with the release schedule. Appropriateness The rigidities in spending protocols ❱ Each financing source often has its and effectiveness create service quality issues since spending protocols, rendering the of spending health providers spend on certain pre- execution environment for these protocols defined items for budget compliance service providers fragmented. reasons, thereby undermining the ❱ Poor pace of implementation quality of services. and absorption for donor funded projects. ❱ Need to connect all hospitals to IFMS, PBS and other platforms. Uganda continues next page… 104 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to suboptimal health budget execution performance: Factor Generic PFM factors Health sector factors Effectiveness Procurement delays. ❱ The health sector experienced and efficiency of delayed procurements due to poor procurement and procurement planning. Procurement capital investment delays coupled with the inadequate operations capacity of contractors affected the timely completion of planned works and drug supply. ❱ Operational delays in the procurement process lead to stockouts of essential drugs. Relevance Weak enforcement of accountability ❱ Excessive financial management and quality of and transparency in service delivery. requirements. monitoring and ❱ Health centers II and I do not employ accountability full-time staff to support health care systems workers in financial management, especially in accounting and financial reporting. The health care providers sometimes double as administrators at the health facilities and are consumed in accounting tasks where they do not have the requisite knowledge. ❱ Late submission of accountabilities by LGs. Other Weak internet connectivity and bandwidth in some local governments. Uganda continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 105 APPENDICIES Tested solutions and good practices: ❱ PFMA Reforms include strengthening the legal framework for budget preparation; approval; execution; accountability of public, strengthening linkage of annual budgets to long-term development agenda, introduction of PBB to improve synergies among MDAs, automation of PFM systems such as the PBS, IFMS, EGP, IBP, OTIMs. ❱ The government of Uganda introduced a Treasury Single Account to improve the predictability of funds to Ministries, departments and agencies as well as sub-national governments for budget execution. ❱ For the health sector the IFMS was rolled out at the Ministry of Health, Local governments, Hospitals and Health Centre IV. The expenditure controls at Hospitals and HC IV have been strengthened through the use of electronic cash payments, enhanced system security, fixing of cash withdrawal limits and streamlined approval and authorisation processes. However, the plan to take the integrated financial management system down to lower local governments and health centers is not yet approved. ❱ To strengthen budget execution controls, the government payroll was automated and decentralized. The automation of the payroll system improved expenditure controls, accuracy and reliability of budgeting for staff salaries and wages, reduced leakage, and reduced errors in payroll systems. 106 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Ukraine Study period 2015-2021 Health budget execution performance ❱ Overall health budget execution rates tend to be less than 5 percent lower than adjusted annual plans in all years except post-crisis 2015 and 2020. ❱ The central government adjusted plans tended to be relatively more accurate than sub-national budgets in 2016-2019 (with health budget execution rates at the central level 2 to 3 percent lower than adjusted plans, while sub-national government spending was 3 to 6 percent lower). ❱ Within the the Programme of Medical Guarantees (benefit package) (PMG), execution rates across types of services are more variable, reflecting the more challenging task of forecasting expenditure based on new payment methods and the new degree of flexibility to adjust plans within the integrated PMG budget. Health budget execution rates (2015-2021) 2015 2016 2017 2018 2019 2020 2021 Consolidated -6% -4% -5% -4% -3% -6% -3% budget Central budget -10% -3% -3% -3% -2% -6% -3% SNG budget -5% -5% -6% -4% -3% -5% -5% v BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 107 APPENDICIES Factors contributing to sub-optimal health budget execution performance Factor Generic PFM factors Health sector factors Credibility of the Budget allocations to the MoH ❱ Challenges in forecasting components budget and PMG are below the level of the PMG (e.g. Affordable Medicines required to meet current policy Programme). commitments. ❱ Methodology for service costing and pricing is not sufficiently transparent. Costing does not cover expenses for PMG services that patients pay out of pocket (though most PMG services are theoretically free to patients). Budget structure PMG budget appropriated by the ❱ New legal status of the providers provides and rules for legislature is a single programme more autonomy, moving away from the budget allocation line allocation, which allows for rigid input-based spending norms (such flexibility. as staff numbers per bed and salary schedules) and controls to output-based Re-allocation across programmes contracts and ex-post reporting and is possible via executive decisions monitoring of inputs. however, this creates variability in re-allocations and execution ❱ There is a lack of methodology for rates. allocating PMG budgets across regions and services in line with patient needs. Allocations for many services are driven by supply, not need. Regularity and Precedents of reducing PMG ❱ Facilities have their own bank account predictability of budgets via executive CabMin which has led to some cash management funding flows decisions to cover unexpected issues, e.g. healthcare providers deposit cash needs of the wider revenues in commercial banks and hold Government create a risk of balances to earn interest. unpredictability. Ukraine continues next page… 108 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 3: COUNTRY CASE STUDIES Factors contributing to sub-optimal health budget execution performance Factor Generic PFM factors Health sector factors Appropriateness Highly centralized and control ❱ Annual processes for approving the and effective- oriented PFM system with a PMG are complex, onerous, leading to ness of spending number of stages, approvals and very short time frames for contracting protocols rules. This prioritises discipline providers and provider uncertainty about often at the cost of efficiency future revenues until the beginning of the and result orientation. budget year or later. The intricate process of Treasury ❱ Facilities have almost complete flexibility cross-checks to ensure that in managing their budgets from the commitments remain within National Health Service of Ukraine appropriations, expenditure (NHSU) revenues and revenues from paid ceilings, and available budget services in theory, though sub- national funds, makes the controls highly government owners influence or limit effective. changes to resource allocation in practice. Relevance Programme budget indicators ❱ Since introduction of provider autonomy and quality of are formulated and reported and implementation of PMG transparency monitoring and but need to be more results- and accountability of facilities has accountability oriented. Programme indicators decreased. Payments to autonomous are not yet used actively to drive providers are accounted as “transfers to systems accountability or analysed and organizations” without the breakdown by used to inform future budget economic classification lines. allocations. ❱ There is no publicly available information Auditors do not fully understand on actual amounts compared to the the health reform and lack planned spending at the facility level. technical capacity. Audits Facilities report expenditure quarterly to have also become increasingly NHSU by inputs, but these reports are punitive. This has demotivated not audited and may differ from audited providers to exercise their accounts available to sub-national new managerial flexibility and governments. spending efficiency. Ukraine continues next page… BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 109 APPENDICIES Tested solutions ❱ Public financial management and public administration reform occurred before health financing reform, creating a platform of systems and capacities that facilitated implementation of health financing reform. These included an automated Treasury system, programme budgeting, and performance agreements with directors of executive agencies such as NHSU. ❱ Health financing reform - which included the shift to autonomous public providers, the introduction of the PMG benefit package and output-oriented payment of providers - provided more flexibility and autonomy. Regulations that controlled health facility inputs were abolished. Previously, providers had little managerial flexibility to reallocate expenditures during budget execution. Amending the budgets was a bulky exercise requiring a complete repetition of the drafting and approval process. Overall, the speed of financial operations at the facility level following the health financing reform has increased rapidly. ❱ Health care is one of only two areas where key spending units are allowed, in specified cases, to assume expenditure commitments stretching beyond one year (the second area being long-term contracts on energy-saving investment). Such commitments are allowed for up to three years on centralized medicines and medical goods purchases. ❱ Re-allocations within the PMG are linked to adjustments in the forecast utilization of services, particularly within the Affordable Medicines Program (AMP). For instance, the allocation for the AMP was reduced following a forecast estimating lower utilization and not the deprioritization of this program. 110 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 4: MAPPING SUB-CAUSES OF POOR BUDGET EXECUTION IN HEALTH – AN ILLUSTRATION FROM UGANDA APPENDIX 4: Mapping Sub-Causes of Poor Budget Execution in Health – An Illustration from Uganda Phase: Budget formulation Causes Sub-Causes Finance Inaccurate revenue projections Poor macroeconomic and fiscal forecasting models. Insufficient technical capacity. Unanticipated revenue shocks. Deliberate overestimation of revenue. Short timeframe to develop Poor communication of budget timetable. budget development PFM laws provide insufficient time. Non-compliance with the established budget timetable. Limited communication of budget Poor communication between finance and health. ceilings to health Non-compliance with the PFM regulations. Slow transition to flexible budget Capacity issue for defining appropriate programme structure budget structure. Political economy considerations. Resistance to change. Inadequate sector-specific PFM and PBB reforms led by finance with minimal guidance on PBB design and understanding of health spending issues. operationalization Limitations on budget Rigid economic item formulation. re-allocations Lack of flexibility in PFM law for re-allocating budgets across lines. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 111 APPENDICIES Phase: Budget formulation Causes Sub-Causes Health Overuse of historical budgeting Short time frame to produce budget estimates. Weak technical capacity and inappropriate tools. Historical preference for this methodology. Overreliance on input based Historical preference for this methodology. planning Limited technical capacity and understanding of formulation. Inaccurate cost estimation Weak technical capacity and inappropriate tools. Uncertainty in health needs. Underpinning economic assumptions are weak. Deliberate underestimation of costs. Poor priority setting and limited Lack of communication or coordination between health alignment of budget proposals and finance authorities. and health needs Lack of inclusive budgeting process (finance-led only). Continued use of input-based Sector resistance to adopting new approach. budgeting History of input based planning. Inappropriate application of Lack of communication or coordination between health Ministry of Finance guidance and finance authorities. Limited technical capacity to implement new guidance. Lack of adequate direction or procedures for implementing new guidance. No alignment between allocation Lack of communication or coordination between health and implementation responsibility and finance authorities. Lack of inclusive budgeting process (finance-led only). 112 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 4: MAPPING SUB-CAUSES OF POOR BUDGET EXECUTION IN HEALTH – AN ILLUSTRATION FROM UGANDA Phase: Budget execution Causes Sub-Causes Finance Systematic delays and incomplete Poor cash flow forecasting and ineffective cash balance budget releases management. Procedures for the release of appropriations is inadequate. Multiple bank accounts. Inadequate IT systems. Cash rationing due to lower-than- Unanticipated revenue shocks. expected revenues Deliberate overestimation of revenue. Weak cash management systems. In year de-prioritization of health Change in political priorities. budget Weak priority setting. Overspending in other sectors or economic items. Insufficient funding. Cumbersome authorization and Lengthy and numerous ex-ante controls. spending procedures Authorization required from multiple layers of government. Excessive ex-ante controls for small value transactions. Spending and release of funds over reliant on finance authorization. Excessive centralized control (no Disbursement rules established by finance authorities. delegation of authority) Lack of coordination or integrated feedback from local government or health authorities. Political preference for centralized control . Capacity constraints at local government and health authorities level. Multi-layered and over-centralized Cumbersome and lengthy protocols. procurement rules Multiple layers of government involved. Lack of appropriate procurement Insufficient coordination and communication between health protocols and process for health- and finance. related products BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 113 APPENDICIES Phase: Budget execution Causes Sub-Causes Health Delays in cash requests from health Inadequate communication between health and finance. Poor management of commitments. Weak financial management capacity. Fragmented health financing flows and Multiple health financing flows with own spending modalities. inconsistent disbursement schedule Uncoordinated and disjointed health financing mechanisms. including external resources Lack of autonomy for service providers Limited ability to receive and manage funds. Lack of recognition in chart of accounts. Rigidities in the use of funds. Limited financial management capacity Weak technical capacity to undertake complex financial management systems. Insufficient financial management human resources. Constrained ability of service providers Weak and insufficient technical capacity to undertake to develop and implement procurement procurement. plans Insufficient time to execute all requirements. Inefficient operationalization of capital Weak and insufficient technical capacity to undertake capital. investment by budget holders Insufficient time to execute all requirements. 114 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS APPENDIX 4: MAPPING SUB-CAUSES OF POOR BUDGET EXECUTION IN HEALTH – AN ILLUSTRATION FROM UGANDA Phase: Budget oversight Causes Sub-Causes Finance Limited capacity to produce Absence of guidance or mechanism to undertake comprehensive execution reports monitoring. Insufficient clarity on responsibilities regarding monitoring and reporting. Absence of oversight requirements for health authorities to collect data. Insufficient time or tight deadlines to execute monitoring or oversight. Limited availability and accessibility Partial roll-out of IFMIS. of FMIS Limited IT infrastructure. Insufficient and weak technical capacity. Lack of accountability or enforcement for sidestepping FMIS. Emphasis on input-based Systems still use input based approach. accountability Preference for inputs approach. Limited usefulness for health of Inadequate or inappropriate data collected that does not execution reports align with health outcomes or priorities defined by the budget. Lack of process to translate collected data to actionable solution to improve health budget execution Limited coordination and communication between health, finance and local government. Insufficient emphasis on sector Absence of feedback mechanism for sector performance. performance Limited technical capacity to undertake sector performance assessment. Lack of performance metrics and goals. Resistance to change, leadership does not emphasize performance monitoring and feedback mechanism. BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS 115 APPENDICIES Phase: Budget oversight Causes Sub-Causes Health Cumbersome financial monitoring Excessive or redundant procedures . and reporting requirements Manual process for monitoring reporting, and accounting. Lack of data consolidation for Lack of management systems for consolidating different monitoring financial and non-financial data. performance Cumbersome, duplicative reporting mechanisms. Insufficient financial management capacity. Inability to triangulate expenditure Lack of management systems for consolidating different with outcomes data data. Cumbersome, duplicative reporting mechanisms. Insufficient financial management capacity. 116 BUDGET EXECUTION IN HEALTH: FROM BOTTLENECKS TO SOLUTIONS ECO-AUDIT Environmental Benefits Statement The majority of our books are printed on Forest Stewardship Council (FSC)–certified The World Bank Group is committed to paper, with nearly all containing 50–100 reducing its environmental footprint. In percent recycled content. The recycled fiber support of this commitment, we leverage in our book paper is either unbleached or electronic publishing options and print-on- bleached using totally chlorine-free (TCF), demand technology, which is located in processed chlorine–free (PCF), or enhanced regional hubs worldwide. 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