Sequencing Budgetary Reforms: Lessons from Singapore 26 May 2000

2 Briefing Outline Mission Budgeting Policy Evolution of Budgeting System The Future of Budgeting

3 Mission To Advance the Well-being and Development of Singapore through FINANCE

4 Mission We will accomplish this with: –Superior Stewardship and Prudent Investment of Public Funds –A Financial Environment Conducive to Business and Enterprise –Policies and Frameworks which Enhance Excellence in the Public Sector –Practices and Results which distinguish MOF as a World Class Organisation.

Budgeting Policy What we want to do and Why...

6 Budgeting Policy Promote sustained and non-inflationary economic growth Foster growth in the private sector Live within our means Invest in the future Safeguard our Reserves

7 People at operations are in the best position to decide on the most effective and efficient use of resources to obtain the best value for money Budgeting Philosophy

8 Are they allowed to do it? Are they capable of doing it? Are they doing it? Key Questions

Evolution of Budgeting Systems How did we get from There to Here?

10 Budgeting Systems Past: –Up to 31 Mar 78Line Item Budgeting –From 1 Apr 78Programme Budgeting –From 1 Apr 89Block Vote Budgeting Present: –From 1 Apr 96Budgeting For Results

11 Evolutionary Trends General trends: –More flexibility and autonomy –Greater accountability –More focus on outputs, objectives and outcomes –Greater overall fiscal discipline

Line Item Budgeting How many paper clips do you need?

Line Item Budgeting Budget of each department of a Ministry expressed in terms of the kinds and quantities of goods and services to be purchased Ministries had to keep expenditure within the amounts approved for each object

Line Item Budgeting Strengths: Effective in ensuring financial control Adequate basis for allocating limited resources at a time when Government activities were limited

Line Item Budgeting Limitations: Rigid, unable to cope with –rapidly changing priorities and circumstances –creation of new government services Budget evaluation mechanism difficult without mechanism to link “things to be bought” with “things to be done”

Line Item Budgeting Limitations: New budgets based on previous budget with increments for price increases –no evaluation of whether objectives are still met or cost-effective

Programme Budgeting How much money do you need?

Programme Budgeting Programme Budgeting from 1 Apr 78: Emphasizes things to be done Adopted from the US “Planning, Programming and Performance Budgeting System” (PPPBS) Systematically identify the programmes and activities necessary to achieve the goals and objectives of each Ministry

Programme Budgeting Programme Budgeting from 1 Apr 78: Funding based on resources required to undertake each programme

Programme Budgeting Strengths: Greater awareness of goals to be achieved More flexible than Line Item Budgeting –gradually relaxed transfer of budgets between objects of expenditures and between activities/programmes

Programme Budgeting Limitations: With the expansion of existing programmes and the introduction of new ones, there was no mechanism to ensure that the overall expenditure would not outgrow revenue collection.

Block Vote Budgeting How much money can we give you?

Block Vote Budgeting Top-down approach Cabinet approval of budget priorities and aggregate allocations Ministries given flexibility in managing allocations (transfers between programmes, activities and line-items) Control through published workload and performance indicators

Block Vote Budgeting Set Targets for: Government Expenditure as percentage of GDP such that –Total expenditure < Operating Revenue –Expenditure to GDP by Sectors and Ministries

Block Vote Budgeting Strengths –Better ensure a balanced budget –Contain Government expenditure as a proportion of GDP –Help Ministries respond speedily to changing priorities –Improve the effectiveness and efficiency of Government operations –Make senior civil servants responsible and accountable for expenditure budget

Block Vote Budgeting Limitations Less emphasis on outputs and deliverables –Ministries only required to budget the amount of inputs needed to fund their operations. Inadequate incentives to achieve greater operational efficiency

Budgeting For Results What results can you produce?

28 Budgeting For Results Key elements: –Pre-specification of outputs and performance targets –Output-based funding allocations –Granting financial and personnel management flexibility –Ministries and departments operated as Autonomous Agencies

29 Budgeting For Results Strengths: –Budget based on outputs –Emphasis on performance and results –Greater autonomy and flexibility –Greater accountability –Departments more aware of outputs and cost of producing outputs –Puts decisions on deployment of resources in the hands of people at operations

30 Budgeting For Results Shortcomings: –No clear link to desired outcomes –Lack of focus on processes –Does not address need for sustained superior performance and results –With tighter fiscal position, need for greater emphasis on inter-ministry allocations

The Future of Budgeting How do we get from Here to There?

32 The Future of Budgeting Moving ahead: –Budgeting 21 –Managing For Excellence –Resource Management

33 To build an excellent Public Sector through harnessing the creativity of our people and superior management of our resources Managing For Excellence

34 Managing For Excellence MFE is about: –Superior leadership and development of staff –Superior management through results- oriented processes –Sustained organisational excellence

35 Managing For Excellence Scope of MFE: –People-Centred Management –Systems-Oriented Approach –Customer-Focussed Culture –Networked Government

36 Resource Management Management, deployment and utilisation of resources for maximal results –Resource Accounting & Budgeting Based on Accrual Accounting –Accurate Costing & Pricing –Enhanced Inter-Departmental Charging –Net Economic Value

37 Budgeting 21 Future envisaged –Proposals outrun resources –Beyond least for output to most from input –Expenditures grow at GDP rate –MOF focuses on outcomes; ministries manage outputs for those outcomes

38 Budgeting 21 Key features –Predetermined overall and sectoral budget ceilings –“Guaranteed” baseline operating budgets for ministries –Project worthiness distinct from funding –“Productivity dividend” creates fund for inter-ministry bidding –Funding by prioritisation within ministry and across ministries

39 Summary Line Item  Programme  Block Vote –Focus on greater management autonomy –Addresses “Are they allowed to do it?” Budgeting for Results, Managing For Excellence & Resource Management –Focus on outputs and results-oriented processes and best practices –Addresses “Are they capable of doing it?” Budgeting 21 –Focus on outcomes and national priorities –Addresses “Are they doing it?”

Thank you!