PIA 2020 Introduction to Public Affairs Managing Budgets and Money Week 10

Focus Themes for the Week: Bureaucracies, Budgets and Decision-Making

How Purposeful? Understanding the Budget

Decision-Making Models and Spending: An Overview of Concepts Rational- Comprehensive Standard Operating Procedures (SOPs) Bureaucratic Politics Group Think Satisficing/Incrementalism Cybernetic Theories (chaos theory) Decision-Making and Financial Management (The Hub of the Debate)

Decision-Making and Budgets Themes and Definitions

1. Rational Model Comprehensive Approach Optimal for achieving a goal or solving a problem. Determining optimality for rational behavior Complete Availability of Information

Zero Based Budgets

2. Standard Operating Procedures- SOPs

Standard Operating Procedures Pre-defined steps and activities of a process or procedure. An SOP provides employees in an organizational set of actions response to common external practices, activities, or tasks. Established Procedures

Bureaucratic Norms?

SOPs- Scientific Origins

Bureaucratic Politics Officials are motivated by the need to promote their own organizations special interests in Competition with other Agencies in the decisions that they make “Defending their Turf” “Staying in Your Own Lane”  

Bureaucrat Bashing as a Problem?

Bureaucratic Politics Military Phrase:

Group Think Group members, fearing to upset the leader, try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoint

Victims of Group Think?: Irving Janis (Vietnam)

Satisficing/Incrementalism Satisficing is a decision-making strategy that attempts to meet an acceptability threshold (first available option) at a very low level of analysis (Herbert Simon) Incrementalism is a method of working by adding (or subtracting) to a project using many small (often unplanned) changes Standard Budget Process

Graham Allison: Org. Theory Cuban Missle Crisis Kennedy Center, Harvard Born, March 23, 1940

Satisficing/Incrementalism

Incrementalism

Cybernetic Theories vs. Chaos Cybernetic Theories:  Causal chains of action that move from action to sensing to comparison with desired goal, and again to action (Models based on electricity, mechanics, or machines) Chaos: Small differences in initial conditions (such as those due to rounding errors in numerical computation) yield widely diverging outcomes

Cybernetics

Chaos

Decision-Making and Financial Management A Review of Themes

Themes a. Budget: Recurrent vs. Capital (Development) Budgets b. Financial Management- Incrementalism and Satisficing vs. Zero Based Budgeting (Planning Systems) c. Accounting- Cost and Benefit vs. profit and loss

Themes d. Auditing vs. Accountability- Quantitative vs. Qualitative e. Evaluating- Assessment vs. Judgement f. Budgeting: Two themes- Reforming and Decision-makin g. Program vs. Project Budgets

Acounting vs. Acountability

Decision-Making and Financial Management (Review of Issues and Authors) 1. Privatization and Contracting Out- Commercialization and intra-governmental competition (E.S. Savas) 2. Economic Bureaucracy, Public Sector Management: An Asian Model? (Chalmers Johnson) 3. End of the Third World? End of Development Budgets (SAPS) (Nigel Harris)

The Asian Model Issue: Capital vs. Developmental

Decision-Making and Financial Management 4. Imbalance- Political vs. Bureaucratic Development in the role of financial management (The Corruption Problem) (Ferrel Heady) 5. Values and Education, money and Bricks- Development Management (John Armstrong) 6. International Organizations, NGOs and Development (Contracts vs. Grants) (Paul Nelson)

Bureaucracy and the Danger of Corruption- World Patterns

Author of the Week Robert Klitgaard the president of Claremont Graduate University and his book on Corruption

Decision-Making and Financial Management 7. Private Sector Development vs. Development Management: The role of public sector financial management (Oversight) (Mark Turner and David Hulme) 8. Public Sector Reform (Guy Peters and Michael Barzelay) 9. (Planning vs. Budgeting) Naomi Caiden and Aaron Wildavsky- 10. Is Budgeting and financial management impacted by Group Think? (Irving Janis)

Planning, Financial and Budgetary Management Systems in Poor Counties Five historical periods- From a development perspective Caiden and Wildavsky- Planning and Budgeting in Poor Countries Best Book on realities of Public Budgeting and Development

Historical Periods: Famous Five i. Until the 1950s- recurrent budgets- law and order. ii. 1950s-1960s- growth. Domestic development Funds with bilateral technical assistance =Recurrent vs. Development budgets iii. 1960s-1970s: Distribution and basic needs. World Bank and Poorest of the poor

iv. Mid-1970s to mid-1980s: Planning vs. Budgets Planning demanded by technical assistance Technical assistance- both grants and loans (no private loans to Africa) Project planning "wins" over national planning and budgeting systems

(and since 2001)- Structural Adjustment vs. Social Crisis v. The Current State of Financial Management: Structural Adjustment- 1983-2000 (and since 2001)- Structural Adjustment vs. Social Crisis

Conditionality- What is the future? Privatization of the economy a. divestiture b. contracting out c. liquidation d. sell off public private partnership shares

Privatization Debates

Privatization: Contracting and non-profits The Answer to Bad Governance, Corruption and Inefficiency? This "neo-classical" model of development has been exported overseas Especially to the less developed and transitional states in Africa, Asia, Eastern and Central Europe and Latin America.

The Current State of Financial Management 1. IMF Stabilization- currency reform, auctions and trade liberalization 2. Decentralized Budgeting- Part of Governance Debate 3. World Bank and UNDP "Management" - Opposing views to SAPs 4. Human Resource Development (Millennium Development Goals) 5. Exceptions for Security Challenge Countries (SCC)

The Current State of Financial Management 6. Continued Absence of recurrent budgets and loss of control in Crisis: especially re. “Terror Prone,” Collapsed and Fragile States 7. Activity (economy) driven by technical assistance projects - the only game in town 8. Bridging and sectoral loans and grants- major source of international involvement 9. Crisis in Governance and Human Security

Somalia- 2008

Canadian Broadcasting System Image INDEPTH: ECONOMY Outsourcing: Contracting out becomes big business CBC News Online | March 7, 2006 Canadian Broadcasting System Image

What is the Future? Privatization (Commercialization) of the bureaucracy vs. IN-SOURCING- Reinventing Government

The British and Spending The Hospital