» Topic List
	5.1. Budgetary Forecast for the Education Sector
	5.2. Projected Total Financing Needs and Available Resources
	5.3. Improved Financial Management and Monitoring Systems

5.1. Budgetary Forecast for the Education Sector » Up

The long-term policy goal for education financing is that no potential students will be excluded from access to education and training opportunities due to inability to pay formal or informal charges or contributions. A fair and equitable financing mechanism must therefore be put in place taking account of affordability to Government, parents and other potential contributors. It is also important to ensure sufficient information to all contributors to education costs in order for them to effectively judge on the value of current and future investments in the sector. An associated objective is to forge accountability on Government, parents, private sector and individual service users in the financing of education at all levels.

The ESP 2006-10 is based on an analysis of recurrent and capital unit costs as well as on projections of total operational recurrent and capital costs designed in order to optimize the use of public and non-public education resources.

Table 2: Medium Term ESP Financing Plan, 2006-2010

(million riels)	2005	2006	2007	2008	2009	2010
Total Recurrent Expenditures	399,487	449,423	550,872	600,260	667,826	717,895
- Personnel costs	244,294	280,988	369,345	401,996	461,984	504,712
- Non personnel costs	155,193	168,435	181,528	198,264	205,842	213,184
Total Capital Expenditures		113,400	98,920	91,440	84,000	82,000
Grand Total		562,823	649,792	691,700	751,826	799,895

The overriding principle within the ESP is that the education budget will be a pro-poor instrument targeting an increased share and volume of recurrent and capital expenditure on the poorest communes and for areas where there is under-enrolment, particularly of girls. Key financing tables are attached in Tables A-E.

The key features are:

1) Increased Government spending on basic education with the percentage of recurrent spending on basic education, where the participation of the poorest is the greatest, increasing from 68% to 71% over the period (from Riels 306 billion in 2006 to around Riels 507 billion by 2010, mainly for increasing school operational budgets.)

Target: 20.85% share of discretionary recurrent spending with 70% share for basic education.
2) Sustained capital spending on basic education facilities development and selective capital spending on post-basic facilities development. Building additional primary and secondary schools for the poorest, underserved areas, amounts to around 2/3 of projected capital spending. The capital budget for these programs is over Riels 470 billion (around Riels 93 billion/year). (see Table B). Target: around Riels 100 billion per annum, including basic education share of around 75%.

3) Reduction/elimination of parental contributions to basic education costs, Table C. The share of spending by parents for basic education is projected to fall from the current estimated level of 14.8% to 12.5% especially, on uniform, tuition fees and transportation over the period. Increase in per student spending by Government on basic education projected from 251,000 Riels/student/year to 335,000 Riels by 2010. This significant increase in overall per student spending will also help implement quality improvement strategies, despite the proposed enrolment expansion. The overall projections in enrolment growth, which underpinned the financial analysis, are shown in Table A.

5) Increased non-Government/private spending share on higher education, alongside targeted Government scholarships and waivers for the poor. Target: minimum 40% non-public spending shares by 2008, including Government contributions to salaries and scholarships from 2006.

6) The plan for external assistance is to extend the mix of modalities including recurrent budget support, capital investment and technical assistance. Appropriate modalities will be negotiated on the basis of effectiveness in implementing ESP policies. The high transitional recurrent costs of the proposed reforms argue for a greater share of budget support within the external assistance program. Target: 50% of external assistance for education in budget support ranged Riels 75-125 billion per annum.

7) Demand-led development funds for higher education and MoEYS staff accommodation through greater public/private partnerships. Capital spending on upper secondary and higher education facilities expansion is estimated Riels 170 billion over the next five years. The MoEYS recognizes that implementing the strategies for higher education will require a continued contribution from parents, communities and the private sector. The financing plan projects an increasing share of spending by parents at this level, but with scholarships provided for successful students from poor families. The Ministry will regulate user charges for post-secondary education. Target: 25% of capital spending through such facilities.)

The Ministry's policy for capital spending on education will be to strengthen policy linkage through an increasingly demand side approach to investment, especially for post-basic education services. An associated policy is, on the other hand, to enable equitable access to capital development to both public and private providers, with eligibility criteria based on agreed policy priorities.

5.2. Projected Total Financing Needs and Available Resources » Up

The Ministry recognizes that effective implementation of ESP policy and strategy will require predictability of available resources. The Ministry will therefore continue to work closely with the Ministry of Economy and Finance and CAR to ensure that medium term expenditure planning for education is consistent with the broader MTEF process and ongoing public financial management reform. Strengthening both MoEYS and inter-ministerial collaborative mechanisms, in particular between MoEYS and MoEF through the Education Finance Management Committee (EFMC) at both policy and technical levels will also be a focus.

The Ministry will make every effort to ensure that the projected recurrent budget requirements are derived from Government revenues and other resources. The Government commitment to increase spending on education is evidenced by the increased education share of recurrent expenditure, which is currently around 17.3% in 2004/05. In order to assess the realism and sustainability of the ESP financing plan, the Ministry has drawn on broad macro-economic and MTEF projections shown in Table E. It is projected that the education share of recurrent spending will need to be immediately increased and sustained at around 20.85% over the ESP 2006-10 period, primarily to facilitate front-loaded increases in performance based teacher remuneration. As part of the ESP design, the Ministry has prepared an alternative scenario, which is based on stagnation in the education budget at 17.74% up to 2010 (see table 3).

Table 3: ESP Financing Scenarios

(Riels Billions)	2006	2007	2008	2009	2010
Projected Current Expenditures	2,534	2,866	3,047	3,238	3,443
ESP Projection % Education Share	17.74%	19.22%	19.70%	20.62%	20.85%
Alternative Scenario: %Education Share	17.74%	17.74%	17.74%	17.74%	17.74%
Alternative Scenario: Potential Shortfall	0	43	60	93	107

On this basis, the alternative scenario projects a potential recurrent budget shortfall of around 303 billion Riels over the next five years. The Ministry would therefore seek an increase in policy-led recurrent budget support from the international community in order to mitigate any risk of financing shortfalls in order to secure a predictable financial base for the sustained ESP reforms.

The projected overall capital budget requirements amount to around 470 billion Riels over the next five years. Once again, the Ministry will make every effort to secure increased capital expenditure from Government while recognizing the current financial constraints. The Ministry would anticipate significant support from the donor community to fill this potential shortfall with a broad target of 50% external assistance for budget support and 50% for facilities development and capacity building.

Overall, against the alternative Government financing scenario, the potential total financing gap could amount to around 773 billion Riels (US$ 193 million) over the ESP 2006-10 implementation period. In other words, the total potential financing gap could amount to around 155 billion Riels per annum (US$39 million). In order to ensure greater predictability of external assistance, the Ministry proposes a number of measures including: a) confirmation from donors and NGOs on budget providing for the current programming implementation; b) early negotiation on additional assistance as part of the ESP/ESSP review process; and c) negotiation on greater flexibility in the mix of external assistance modality to cover transitional costs of reform. As part of the process, the Ministry will seek the further cooperation and commitment from the ESWG and NEP for attaining EFA FTI status.

5.3. Improved Financial Management and Monitoring Systems » Up

The current Government financial systems will be consolidated and extended as part of ESP 2006-10, with particular emphasis on further improvements in financial management, accounting and audit procedures. The Ministry will ensure transparency and accountability of all sources of financial support for education, including external assistance, and will closely monitor and report on expenditures, as well as on releases and disbursements.

The Ministry proposes that the following recurrent financial planning management mechanisms are used for the various priority programs, including:

  Education service pay reform programs and performance incentive schemes.

  Improved guidelines on budget use for Provincial and district education service monitoring.

  That central MoEYS department and post secondary institutions operational budgets be managed through specific and delegated budget allocations.

  Majority of priority action programs of sub-sectoral, institutions and provincial budget allocations?

  Budget allocations to provincial and sub-sectoral of scholarship programs implementation for the poor, alongside additional support under the capital budget framework.

The Ministry recognizes that the proposed financial management/monitoring system for ESP 2006-10 may have to be adjusted over the next five years and anticipates a gradual shift to broader program-based budgeting and management systems. As a designated priority ministry, MoEYS anticipates being a pilot ministry for any PFM reforms related to line ministries. The details of both recurrent and capital priority programs are outlined in Section 6.

The Ministry has gained significant experience and capability in managing capital programs, especially for school construction and capacity building technical assistance. It is anticipated that the management of these programs will be designed on a case-by-case basis, including greater decentralization of facilities development finance to the provinces. The Ministry will also investigate with potential donors the scope for developing pooled funding and management arrangements for facilities programs in order to optimise existing facilities management capacity within MoEYS.

The Ministry proposes significant expansion of capacity building in financial monitoring systems and procedures as part of ESP 2006-10. Focus will be on strengthening provincial and district accounting and reporting systems through the new PFMIS; improving coordination and consolidation of program financial reports within central MoEYS directorates and departments; and on expanding internal audit operations for BMCs and programs, with a target of annual audit of around 200 units. Financial management, including audit and accounting, of these capacity building programs will continue to be designed on a case-by-case basis, depending on the scale and complexity of the programs, in negotiation with donors and NGOs. Once again, the Ministry's guiding principle will be to use Government financial planning and management systems. MoEYS' Finance Department and, in some instances, individual MoEYS departments will have increased use of dedicated accounts in the Government Treasury.

The Ministry intends to broaden the scope of the financial performance report prepared as part of the ESSP review process. The target will be to provide up-to-date information on disbursement and spending for all recurrent/capital priority programs, including provincial disaggregating. In addition, the performance report will incorporate key features including: a) a summary of recommendations and internal audit findings; and b) an analysis of trends and impact related to pro-poor and pro-gender equity expenditures.

» Topic List
	5.1. Budgetary Forecast for the Education Sector
	5.2. Projected Total Financing Needs and Available Resources
	5.3. Improved Financial Management and Monitoring Systems