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Performance Budgeting: Current issues and ambitions
Ronnie Downes
Deputy Head, Budgeting and Public Expenditures OECD
European Commission Joint Research Centre
Ispra, 15 October 2015
Performance Budgeting – Simple in Theory…
€ ₩ $
…Difficult in Practice
1 1.5 2 2.5 3 3.5 4 4.5 5
Pay cut for head of programme/organisationProgramme transferred to other…
Negative consequences for leaders' evaluationsProgramme eliminated
More staff assigned to programme/organisationNew leadership brought in
Budget freezesBudget increases
More training provided to staff assignedBudget decreases
More intense monitoring in the futurePoor performance made public
No consequences
2007 2011
What happens when performance objectives are not met?
Some approaches to Performance Budgeting
• PRESENTATIONAL APPROACH – Show outputs, performance indicators separately from the budget
document – Easy – but effective?
• PERFORMANCE-INFORMED BUDGETING – Include performance metrics within the budget document – Involves re-structuring of budget document – more engaging?
• PERFORMANCE-BASED BUDGETING – More direct linkage between results and resources; contractual
models – Involves extensive re-working of budget lines – is it worth it?
• also: MANAGERIAL PERFORMANCE APPROACH – Focus on managerial impacts and changes in organisational behaviour – Less emphasis on link to budget allocation
• Transparency • Accountability
– Government (achieving strategic goals?) – Organisational (delivering our targets?) – Managerial (delivering my targets?)
• Austerity – Inform difficult government decisions, cuts
• Efficiency – Allocative (where resources have best effect) – Operational (value-for-money, “more with less”)
• Culture-shift (focus on results and delivery)
Performance information is used for a variety of purposes
Variation across OECD countries
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1.0
Kore
aM
exic
oCa
nada
Switz
erla
ndN
ethe
rland
sSl
oven
iaTu
rkey
Swed
enEs
toni
aSl
ovak
…N
ew…
Chile
Finl
and
Fran
ceIre
land
Aust
ralia
Uni
ted…
Denm
ark
Nor
way
Japa
nU
nite
d…Lu
xem
bour
gPo
land
Italy
Gre
ece
Belg
ium
Aust
riaSp
ain
Hung
ary
Czec
h…G
erm
any
Port
ugal
OECD average
Index of performance budgeting practices at the central level of government (2011)
Some perennial problems
• Quality, relevance and objectivity of performance information
• What’s the proper response to Poor Performance? – More resources, or fewer?
• “Gaming” of performance targets – An issue where the target corresponds weakly to the public
service objective – “Outcomes” are better targets than “outputs” – but harder
• Engagement by politicians, public and bureaucrats • Any real impact on policy-making and accountability?
Principle: quality of spending affects performance
Slovak Republic
Czech Republic Estonia
Israel
Poland
Korea
Portugal New Zealand
Canada Germany
Spain
France
Italy
Singapore
Finland
Japan
Slovenia Ireland Iceland
Netherlands
Sweden
Belgium
United Kingdom
Australia Denmark
United States
Austria
Norway
Switzerland
Luxembourg
Viet Nam
Jordan
Peru
Thailand Malaysia
Uruguay
Turkey
Colombia
Tunisia
Mexico Montenegro
Brazil
Bulgaria
Chile
Croatia
Lithuania Latvia
Hungary
Shanghai-China
R² = 0.01
R² = 0.37
300
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600
650
0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 180 000 200 000
Mat
hem
atic
s pe
rfor
man
ce (s
core
poi
nts)
Average cumulative spending per student from the age of 6 to 15 (USD, PPPs)
Student performance and average spending per student
Source: PISA 2012 Results: What makes schools successful? Resources, policies and practices, Volume IV, Figure IV.1.8.
Recent OECD-wide reforms: improving engagement
• Performance data should not be an internal, bureaucratic concern
• It could – and should – excite the interest of parliamentarians and the public – Quality of debate, clearer political messages – Emphasise continuum of policy-making:
resources, activities, outputs, impacts – Grounded in government-wide plans, strategies
European “pioneers” – case of the Netherlands
• Link to fixed multi-year spending ceilings • 2001: Detailed performance targets, monitoring, reporting
– Key Objectives agreed as part of coalition agreement • Experience of recent years: “information overload”
• Too much data – administrative burden • Too “industrial-scale”, “mechanistic”, “technocratic” • Not used by parliamentarians or by public • Not useful in identifying savings quickly
• 2011, 2013: Accountable Budget Reform – more streamlined approach – Differentiated, selective use of performance information – Interpretative “Policy Conclusion Statement” for each programme
Streamlining of performance indicators in France
46%
19%
35% Efficiency for the citizen
Quality of service
Efficiency for the taxpayer
Between 2014 and 2015 : -17% objectives, -19% indicators
US approach: Agency Priority Goals
• GPRA Modernization Act 2010 – Inspired in part by UK experience: PSAs
• Emphasis is primarily MANAGERIAL not BUDGETING – Identification of Agency Priority Goals and Goal-Leaders – Move to quarterly reporting – Government-wide Performance Improvement Council and
dedicated website
• Successful in creating internal ‘ownership’ and commitment to performance targets
Wellbeing indicators – “the Rule of Three?”
1. Economic indicators – Competitiveness – Potential growth
2. Social / Inclusive indicators – Poverty, inequality, relative income – Health, Education – Cultural life
3. Sustainability indicators – Environment – Human and physical capital – Fiscal and Societal Resilience
Examples: France, NZ, OECD
Lessons learned about good and bad practice?
a) use ready-made performance data from policy cycle b) clear programme logic linking inputs, outputs, outcomes c) seamless link to government-wide strategy and goals d) avoid information overload – the “vital few” indicators e) Include national and international benchmarks f) organisational, managerial accountability for results
– Establish routines of behaviour within organisations
g) audited and auditable performance targets h) citizen- and CSO-accessible data
Current Work by the OECD
• Develop a broader conception of “performance” – Whole-of-government concept – Centre of Government – leadership and coordination – HR: accountability of organisations and senior executives – Open government aspects: societal accountability
• Analysis of “what works” in OECD countries
– 2015/16 Survey of Budgeting Practices and Government Performance – Consistency, cooperation with EU Budgeting for Results initiative
• BUT: important to ask the right questions!
– To be discussed: OECD SBO Performance & Results Network, November 26-27, Paris
Budgeting within fiscal objectives
OECD Recommendation on Budgetary Governance
Quality, integrity &
independent audit
Performance, Evaluation &
VFM
Comprehensive budget
accounting
Effective budget
execution
Alignment with medium-term strategic plans and priorities
Performance, evaluation &
VFM
Transparency, openness & accessibility
Participative, Inclusive
& Realistic Debate
Fiscal Risks & Sustainability
Capital budgeting framework