Benchmarking

Financial Management Institute of CanadaOttawa, Ontario September 25, 2014

Mike Lionais Acting Executive Director, Costing Centre of Expertise Office of the Comptroller General

Kiran HanspalExecutive Director, Results-based ManagementExpenditure Management Sector

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Table of Contents

• Benchmarking• Challenges in the Public Sector• Benchmarking Internal Services• Continued Efforts to Benchmarking• Annex A – Definition of Internal Services• Annex B – Internal Services Performance

Measurement Framework

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Benchmarking• The action of identifying, comparing,

understanding and adapting outstanding practices found either inside or outside an organization. Benchmarking is based mainly on common measures and the comparison of obtained results both internally and externally. Comparing results against those of a best practice organization will help the organization to know where it is in terms of performance and to take action to improve its performance.*

*Source: Treasury Board of Canada’s Supporting Effective Evaluations: A Guide to Developing Performance Measurement Strategies

Done right, benchmarking can drive performance!

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Challenges in the Public Sector• In the private sector, benchmarking can be done

more readily:• common goal of profitability; and • comparable services amongst competitors.

• In the public sector, benchmarking faces unique challenges:• concept of value for money is focused on

public good, effectiveness and efficiency rather than profits;

• agencies and departments are often the sole provider of goods and services (e.g., issuing passport); and

• varying mandate of organizations has led to inconsistency in measures and interpretations.

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Benchmarking Internal Services

• The Canadian government has been paving the way to make benchmarking feasible for internal services.

• Often referred as corporate and administrative services (CAS), these functions incur costs in support of departmental programs and activities. The costs are normally incurred outside of program branches for the benefit of the department as a whole (Annex A).

• Establishment of proposed internal services performance measurement framework (Annex B).

• Our government has been reporting on internal services as a common program activity since 2009:• Recent spending reviews have provided

additional insights on the use of internal services in program operations.

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Continued Efforts to Benchmarking

• To allow historical and comparable information on internal services, the Canadian government has recently:• developed draft standard internal service

performance measures for 7 of the 10 IS categories;

• streamlined the presentation of internal services;

• developed a Guide on Internal Services Expenditures: Recording, Reporting and Attributing; and

• issued a Guide to Costing to ensure fundamental costing principles and concepts are consistently applied in decision making, performance comparison and resource management.

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Contacts

• Expenditure Management Sector (EMS) mrrs-sgrr@tbs-sct.gc.ca

• Office of the Comptroller General (OCG) fin-www@tbs-sct.gc.ca

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Annex ADefinition of Internal Services

*Source: Treasury Board of Canada’s Guide on Internal Services Expenditures: Recording, Reporting and Attributing

Revised structure effective April 1, 2015 Sub-programs   

Management and Oversight Communications Legal Human Resources Management Financial Management Information Management Information Technology Real Property Materiel Acquisition 

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Program - Internal Services Link

Cost should be linked to results

Program outputs’ costs = direct costs + all supporting costs (both in the program or in internal services)

Program Direct

SupportCost

Internal Services

Program Outputs

Program DirectCost

Program effectiveness.

Program efficiency.

Internal Services effectiveness.

Internal Services efficiency.

Measurement regime

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Annex B Proposed Internal Services Performance Measurement

FrameworkOutcome Measures• Measures of any departmental-wide impact of the service • This should be aligned with any TB Policy Objectives, beyond compliance of the policies• Would be best to have an outcome statement (s) e.g. the department rates the condition of all major assets and

uses this to allocate resources.• Measures would be % of department assets rated; % of departmental assets in poor condition; evidence of

allocation of resources based on asset condition

Services Measures • Typical measures of any service• Establishment of service standards and monitoring achievement• Measurement of client satisfaction

Cost/Efficiency Measures • Relative cost of the service e.g. cost of service as a percentage of departmental spending• The efficiency of the service, usually a cost per output. E.g. cost per HR action. Proxies can be used to measure

efficiency e.g. cost per departmental FTE, where the FTE is a proxy count of the number of outputs.

Example of Proposed Measures: Financial

Management

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Outcome Measure

The department has financial systems and controls in place to ensure the integrity of resource management and to produce the information needed for decision making by the department and central agencies

% collection of internal services costs at the lowest level in the PAA structure

% collection of program costs at the lowest level in the PAA structure

% collection of internal services costs allocated to programs at the lowest level in the PAA structure

Service Measure

% supplier payments paid on the due date

% of interest due to suppliers for late payments that is paid according to the Directive on Payment Requisitioning and Cheque Control% of departmental budget allocated to Responsibility Centre managers with financial authorities by the end of the 1st quarter of the fiscal year

Cost/Efficiency Measure

Departmental cost to process invoice

% of lapse at year end related to Supplementary Estimates C funding approved in-year

FINANCIAL MANAGEMENT