Estonia has undertaken several public finance reforms since 2002 to improve its budgeting and financial management systems. Reforms included introducing accrual accounting in 2004, strategic planning frameworks in 2005, and activity-based budgeting in 2008. More recent reforms focused on implementing a new IT system, training on accrual-based budgeting, centralizing support services, and beginning performance-based budgeting on a pilot basis. Key institutions involved in reforms include the Ministry of Finance and Government Office. Reforms require building HR capacity through training as well as clear goals, coordination across levels of government, monitoring of implementation, and effective communication.

1. Building the institutional and HR
capacities to deliver PFM
reform.
Veikko Kapsta
Head of State Budget Department
Estonia
28 May 2016
PPT ENG 22-Jun Drpbx 22.06

2. The Structure
1. History of public finance reforms in Estonia.
2. The institutional framework.
3. The HR management.
4. The suggestions.
5. The conclusions.

3. History of public finance reforms (1)
2002
4 years
State
Budget
Strategy
2004
Accrual
Accounting
(IPSAS)
2005
Framework
for Strategic
Planning
2008
Big plans –
Activity and
Accrual based
Budgeting

4. History of public finance reforms (2)
2009
2010
- pilots in
accrual
budgeting
- Standardizing
financial data
- Regular
networks
- Centralizing
support services
2011
- Harmonization
of budgeting and
accounting
- need for new IT
systems for
strategic planning
and budgeting
- Centralizing
support services
2012/2013
- Preparing new
standard SAP
system for all
central
government
agencies
- trainings for
accrual basis
budgeting (300)
- Centralizing
support services
- Mapping shortages
in current system,
simplifications
- Start of
Centralizing
support services
- Building capacity
to work out and
implement changes
(networks, pilot
projects,
methodology)

5. History of public finance reforms (3)
2014
2015
- New IT system
for budgeting
- Centralizing
support services
- Trainings for
accrual basis
budgeting (200)
2016
- Preparations to
accrual basis
budgeting
- Centralizing
support services
(100%)
- Start of
performance based
budgeting step by
step (1 line
ministry)
- Project with PwC
- New State
Budget Act
- Centralizing
support services
2017
- Accrual basis
state budget
- Ideas for
changing State
Budget Act

6. Public finance reforms on the way
2020
- Performance
based state
budget
- Other
possible
changes in
budgeting
2018-2019
- Performance
based budgeting
step by step
- methodology and
implementation of
new ideas of State
Budget Act

7. The institutional framework
• Ministry of Finance is the leading institution.
• Cooperation with Government Office.
• 2 frameworks in Estonia:
- financial managers;
- strategic managers.
• Cooperation of strategic and financial management.
• Cooperation with universities (training, synergy
from theoretical and practical approaches).
• Cooperation with private sector.

8. The HR management
• There is a need for a clearly formulated goal.
• All parts of the system should be informed and
involved.
• Training activities.
• Work with HR has to be continuous.

9. The constrains
• Human resources.
• Work load in the Ministry of Finance (and
other ministries) will increase.
• Positive effects will not reveal soon enough
• Motivation question (if reforms stop or
develop slowly).

10. The Suggestions
• Formulate the goals of reform
• Brief the decision makers
• Build up the networks
• Communication in all levels

11. The Conclusions
• Need of extra resources at the beginning
gives output in the future.
• Coordination.
• Monitoring.
• Communication, communication,
communication!

12. Thank You
Veikko Kapsta
veikko.kapsta@fin.ee

13. “The single biggest problem in
communication is the illusion that it
has taken place.”
― George Bernard Shaw