Duties and functions of this division are outlined under Executive Order Number 1 (of the Mori and Alik Administration) and can be summarized by the following:
Strategic Goal 1: To improve effective management and execution of Budget Process for the National Government and the States.
Strategic Goal 2: To ensure that economic policies and plans are formulated based on reliable economic and social statistics.
Strategic Goal 3: To evaluate the effectiveness of government programs and to formulate appropriate policies and strategies to promote Economic Growth and Self-Reliance for the nation.
FSM Budget Process
FSM National Government allocates scarce resources to programs and services through the Budget process each year. As a result, Budgeting is one of the most important activities undertaken by the government every year. It is an important tool, a focal point for key resource decisions therefore the FSM National Government invests greatly in preparation of its budgets. The whole Budget cycle extends throughout the year from preparation at department/agency’s level, to review by Executive budget review committee, enactment by the National Congress, and execution.
The FSM President recently directed FSM National Government to switch to Performance-Based Budgeting (PBB) – a result oriented approach. Main goal is to have budgets formulated with identified objectives or results to achieve, whereas in contrast with operation budget approach funds are allocated for operational activities without any objectives or targeted results.
Given the limited resources and the vital developmental challenges faced by the nation, Performance-Based Budgeting appears to be the appropriate approach. Under the Performance Budget model, FSM Budget should be integrated with other activities of the government, such as strategic planning, management functions and performance reporting. A vital Strategic Development Plan (SDP) is in place for the nation, as produced under the 3rd FSM Economic Summit in 2004 and adopted by the FSM Congress. It is to be integrated in the annual budgets to effectively promote Economic Growth and Self-Reliance as envisioned under the SDP.
Macroeconomic Management is another vital part of the Division of Budget and Economic Management mandates. One of the goals is to ensure that economic policies and plans are formulated based on reliable economic and social statistics. The division has the functions to implement the following important and complex objectives:
- To monitor and assess nationwide implementation of economic policies and strategies as called for under the FSM National Strategic Development Plan;
- To compile, draft and publish economic reports and plans for the nation;
- To engage staff in developing an integrated plan which policies and operations are aligned through meetings, integrated performance and budgeting focused on the division core mandates; and
- To undertake plans to hire professional economic staff, to train local counterparts and to provide overall capacity building needed for the nation and for provision of assistance in economic planning for the States or national agencies.
The division has several major on-going programs or projects undertaken or in the pipeline, a few of which are as follows:
Annual Economic Reports
The Economic Report is a component of the Compact Annual Report which is a requirement under Title Two Section 214 of the amended Compact Agreement to be submitted to the President of the United States each year. The economic report is also critical for FSM review of its economic situation. Every year the work on the report commences around May to July due to availability of reliable data such as Audit reports from all the five governments and their component units.
First 5-Year Compact Economic Review Report
Section 104 (h)(2) of the Amended Compact provides that during the fifth, tenth, and fifteenth anniversaries of the date of enactment of the Amended Compact, the US Government shall review the terms of the Amended Compact and consider the overall nature and development of the US-FSM relationship including but not limited to the following five areas:
(A) General social, political and economic conditions, including estimates of economic growth, per capita income and migration rates;
(B) Use and effectiveness of US financial, program and technical assistance;
(C) Status of economic policy reforms including but not limited to progress toward establishing self-sufficient tax rates;
(D) Status of efforts to increase investment including: the rate of infrastructure investment of US financial assistance under the Compact, non-US contributions to the FSM Trust Fund, and the level of private investment; and
(E) Recommendations on ways to increase the effectiveness of US assistance and to meet overall economic performance objectives, including, if appropriate, recommendations to Congress to adjust the inflation rate or to adjust the contributions to the Trust Funds based on non-US contributions.
The findings must be included in the next annual report to the US Congress by the US President, following the review. In conducting the review, the US Executive is required to take into account the operating requirements of the Government of the FSM and its progress in meeting the development objectives set out in its development plan. FSM comments, US President’s response to FSM comments, the findings from the review, and any recommendations for action to respond to such findings, are to be included in the President’s annual report. Based on the foregoing, it means that the review will start in 2008 and be reported in 2009, and, as required under the amended Compact, the annual report by the US President is due no later than December 31 each year.
In anticipation of the fifth year review, the FSM National Government initiated in 2007 the preparatory tasks, first, through the creation of a Compact Review Committee, “CRC”, whose membership consists of the Director of the Office of SBOC as its Chairman, and a representative each from the FSM States. The CRC was fully organized on December 31, 2007 when it elected Mr. Michael Gaan of Yap State as its Vice Chairman, and Mr. Hubert Yamada (Pohnpei) as its Secretary. The other members are Mr. Masachiro Christlib (Chuuk) and Mr. Tiser Reynold (Kosrae). Since that inaugural meeting, the Pohnpei State representative has changed twice so that the current member is now Mr. Ihlen Joseph, Chief of Staff, State of Pohnpei. So far the CRC has held 10th regular meetings, the last one was recently in Pohnpei State in May 2010.
ADB Technical Assistance 4961 -Integrated Budget and Planning (IBP) Project
The FSM requested Asian Development Bank (ADB) for a technical assistance (TA) to support national and state governments in strengthening their execution of performance-based budgeting to facilitate implementation of priority actions identified in the FSM Strategic Development Plan (SDP). The ADB TA was approved in August 2007 and was originally scheduled to start implementation by October 2007 but delayed due to reorganization at the National Government among other things. The Division of Budget and Economic Management within the Office of SBOC is now the executing agency.
In July 2009, a consultant did the inception mission to scope out the way forward for the long-overdue ADB TA. A template was developed known as the Integrated Planning and Budget (IPB) template. This template was developed to assist the various agencies in coming up with their plans or using existing plans for their operations but putting them in a more organized and implementable fashion. With better planning in place, agencies will be able to easily link their budget line items. To date, the two consultants along with SBOC staff have been holding workshops at the various departments/agencies at both the states and national governments. By June 2010 the last workshops were completed in the State of Kosrae. The TA would be more effective if the IPB is incorporated into the Budget Module to be developed by the Department of Finance and Administration. Since the FSM changed its FMIS (financial system) from FOCUS software to AmericanFundware, a Budget Module has yet to be developed.
Key Staff of Division.
Please feel free to contact any of the Division staff at telephone numbers: +(691) 320-2823/2824, if you have questions, or by e-mail per the following:
Mrs. Sancherina Salle, Chief Economist – email@example.com
Mrs. Christina Villazon -Budget Analyst I - firstname.lastname@example.org
Mrs. Esiri Edward, Chief of Budget - email@example.com
Mrs. Rumina S. Edwin - Budget Analyst IV - firstname.lastname@example.org
Mrs. Bri K. Etgar - Budget Analyst - email@example.com
Mrs. Molina Seneres - Budget Analyst - firstname.lastname@example.org
Mr. Sohs John, Budget Analyst - email@example.com