Transcript How FAD is implementing the MTS

Using Performance Information in the Budget
Process in OECD Countries
Teresa Curristine,
Senior Economist
Public Financial Management Division, Fiscal
Affairs Department
IMF
Overview and Objectives of Presentation
1. Definitions of Performance budgeting
(PB) and basic requirements
2. Trends in development of Performance
information (PI) in OECD Countries
3. Integrating PI into the budget process
4. Incentives for using PI in decision making
5. Benefits and Challenges
6. Lessons Learned
2
1. Definitions and Basic requirements
What is Performance Budgeting?
•Citizens are demanding that governments be
made more accountable for what they achieve
with taxpayers’ money
•Move from “how much money can I get?” to
“what can I achieve with this money?”
•Performance Budgeting is concerned with the
use of PI in the budget process and the
allocation of resources
•No single model -Many definitions and models
Performance Budgeting Categories
Type
Linkage between
PI and funding
Planned or actual Main purpose in
Performance
the budget
process
Presentational
No link
Performance
targets and/or
performance
results
Performance
informed
budgeting
Loose/indirect link Performance
targets and/or
performance
results
Planning and/or
accountability/
Resource
allocations
Direct/formula
PB
Tight/direct link
Resource
allocation and
accountability
Performance
results
Accountability
Basic Essential Requirements for
Performance Budgeting
• Establishment of strategic goals and
objectives for government expenditure
• Development of performance information
to measure and evaluate the achievement
of results.
• Formal integration of performance
information into the budget preparation
process and budget funding decisions.
5
2. Developing Performance Information
in OECD and NON OECD countries
• 75% of OECD countries include non-finance
performance data in budget documentation
• Non-OECD respondents approximately 50%
of countries produce non-finance performance
information
• Long term trend: 40% of OECD countries
working on outputs for over 10 years
•Widespread trend: 75% of
6
Over 15 years of reform but constantly
evolving – Recent Initiatives
• Australia -Strategic Reviews 2007
• Canada -Strategic Reviews 2007
• The Netherlands- Fundamental policy
Reviews 2009
• Sweden -Reform budget information 2009
• USA- Government Performance
Modernisation Act 2010
7
New Countries and New Initiatives
•
•
•
•
France LOLF -Full implementation 2006
Korea - Program Evaluation 2006
Poland - Performance Budgeting 2006
Mexico Performance Evaluation System
(SED) - 2007
• Austria -Performance budgeting -2009
8
3. Integrating PI into government-wide
budget process
• Changing the budget structure (e.g. Australia,
the Netherlands, New Zealand and the United
Kingdom, France)
• Using PI in budget negotiations between
Ministry of Finance (MOF) and spending
ministries
• Using PI in budget negotiations between
spending ministries and their agencies
9
Budget negotiations between MOF and spending
ministries
• Presentational PB – No formal mechanism incorporating
PI into budget process e.g. Norway, Sweden
• Performance Informed Budgeting- PI informs budget
allocation along with other information
– PI for planning purposes – loosely linking planned
performance to funding or performance results
influence funding e.g. NZ , UK
– Countries do not automatically link funding to
performance
– Weight give to PI depends on policy area, information
available and political and economic context
% Of OECD countries using PI as part of budget
discussions between MOF and spending ministries
• 67% of countries use evaluations
• 60% of countries use performance
against targets
11
Examples of Use of PI
Poland
• In 2009 Length of express ways and motorways
(in km)to be build 207,6. Expenditure in budget
(in thousand PLN) 10 811 358 to achieve target
Mexico
• Based on results of impact evaluation expanded
resources to program replacing dirt floors with
cement floors and established goal to eliminate
dirt floors by 2012.
12
Performance Information as part of ad hoc or
systematic expenditure review exercises
Netherlands
• Fundamental policy reviews (2009 -)
• Expert study groups (inside and outside the public sector)
• Compulsory 20% reduction option
Canada
• Strategic Reviews (2007 - ) Assess all direct program spending.
Examining whether programs are aligned with government priorities
and are effective and efficient.
• Identify the lowest priority and lowest-performing 5 per cent of
programs (reallocations) and propose higher-priority, higher
performing programs for reinvestment
13
Direct/Formula PB
• Directly and explicitly links performance results to
funding
• Mainly applied in certain sectors and countries
• Sectors – higher education and health (diagnostic
related groups)
• Requires clear and explicit output measures and
information on unit costs
• Issues with
– Dysfunctional behavior and gaming in health sector– Quality of service provision
– Implications for control of aggregate financial control
PI in budget negotiations between ministries
and their agencies
• PI more often used by spending ministries
• Agency performance agreements and contracts e.g.
Australia, Netherlands, NZ and Nordic countries
• Depending on flexibility in wider budget structure
used to redistribute resources
• Used to manage programs
• Across and within countries wide variation in use
of PI in decision making.
• Depended on quality of PI, political pressure, and
strong organizational leadership
4. Incentives to motivate agencies to
improve efficiency and performance
• Financial rewards and sanctions
• Increase or decrease financial and
managerial flexibility
• Public recognition
Financial Rewards and Sanctions
• MOFs do not automatically or mechanically financial
reward or punish agencies based on performance
results
• Exception Korea- announced a 10% budget cut for
ineffective programs
• Most MOF use PI as a signaling device and serves as a
trigger to more closely monitor poor performing
agencies
• With poor performing agencies most common course
of action to hold resources constant and review
during the year
Factors influencing the use of PI in
budgetary decision making
• Process to integrate PI into the budget
process
• Quality of PI
• Institutional capacity of MOF and
spending ministries
• Wider economic and political
institutional structure and context
5. The Opportunities
•
•
•
•
A greater focus on achieving results
A mechanism to set objectives and to monitor progress
A larger emphasis on planning
More information on
– Government goals/priorities
– How national programs fit in with goals
– Actual results and performance
• Improved transparency
• Highlights policies and programs that work and those that
do not work
• Performance Informed budgeting
The Challenges
• Integrating PI into the budget process in a
systematic manner.
• Measurement of outputs & outcomes
• Improving the quality, credibility, relevance and
timeliness of PI
• Developing the capacity of the MOF and spending
ministries
• Resistance to change
• Cross ministry co-ordination
• Changing behaviour and culture of politicians and
civil servants
6. Lessons Learned
• Contextual variables – No one “best” model.
• A common whole of government planning and
reporting framework
• PI should be integrated into the budget process
• Avoid government wide systems that tightly or
directly link performance results to resource
allocation
• Improve the quality and independence of PI
• Focus on outputs and outcomes (external targets and
objectives)
• Limit the number of targets
• Be aware of perverse effects
(Continued)
• Support of political and administrative
leaders is vital
• Reform approaches need to be adapted to
evolving circumstances
• Develop incentives to motivate civil servants
and politicians to change behavior
• Manage Expectations
22
Thank You
23