Outcome Based Budgeting an integrated approach to public sector performance management in Malaysia National Budget Office Ministry of Finance Malaysia 28 August 2014 www.themegallery.com

Outcome Based Budgeting an integrated approach to public sector performance management Presentation outline 1 Performance management & budgetary reforms 2 Factors taken into consideration under OBB 3 Integrated approach to OBB using Logic Model 4 OBB implementation journey 5 Critical Success Factors & Challenges in implementing OBB

Performance Management in Public Sector Setting National Priorities & Goals Revenue policy Macroeconomic Planning MTF Debt policy Summative Outcome planning Evaluation Results Based Budget Formulation Formative Performance Budgeting Program Rectification Delegation and accountability Program Delivery Program Implementation Expenditure Management Performance Monitoring & Reporting

Budgetary Reforms in Malaysia Traditional PPBS MBS OBB 1957 - 1969 1969 - 1990 1990 - 2013 2013 - date Integrated Approach Integration Alignment Budgeting for results Results Reporting Monitoring & Evaluation Accountability, flexibility & delegation Disaggregated Budget Budget Ceilings Program Agreements Exceptions Reporting Monitoring & Evaluation Programs & Performance Program Performance Program- Activities Performance Indicators Monitoring & Evaluation Detailed Controls & Discipline Incremental line item budgeting

Presentation outline 1 Introduction 2 Outcome Based Budgeting 3 Integrated approach to OBB using Logic Model 4 OBB implementation journey 5 Challenges in implementing OBB

Why Change was required?? Greater demand for quality results Need to rationalise government expenditure & improve public sector services delivery Government has identified six transformation levers: Focus on outcomes Systematic monitoring and evaluation system SIX LEVERS Vertical alignment of national priorities and ministry activities Accountability in the public sector and authority over resources Managing cross cutting initiatives Coordination of operating and development budgets

Monitoring & Evaluation OBB Strategic Cycle Planning for Outcome Budgeting for Outcome Monitoring & Evaluation Results Reporting Developing the strategic Results Framework for the Ministry Performance reporting and policy formulation Managing information for monitoring, evaluation and decision support system Preparing the resource requirements to drive the ministry results

OBB plays a key role in linking the national transformation pillars from implementation to RESULTS… TRANFORMATION PILLARS OBB ENVIRONMENT RESULTS Planning for outcome Budgeting for Outcome M&E Results Reporting Government Transformation Programme Economic Transformation Programme Strategic Reform Initiatives National Key Economic Areas VISION 2020 Strategic management tool for managers at all levels Structured mechanisme linking national planning to implementation at agencies Vertical alignments Horizontal linkages Integrated budgeting Malaysia’s Medium-term Plan (10th & 11th Plan) 8

National Results Framework Creating the Environment for Unleashing Economic Growth Moving towards Inclusive Socio-Economic Development Developing and Retaining a First-World Talent Base Building an Environment that Enhances Quality of Life TERAS STRATEGIK 4 Transforming Government to Transform Malaysia TERAS STRATEGIK 5 STR. THRUST 1 STR. THRUST 2 STR. THRUST 3 STR. THRUST 4 STR. THRUST 5 KRA 1 KRA1 KRA 1 KRA 1 KRA 1 KRA 2 KRA2 KRA 2 KRA 2 KRA 2 KRA 3 KRA3 KRA3 KRA3 KRA3 KRA 4 KRA4 KRA4 KRA 4 KRA5 KRA 4 KRA5 KRA 5 KRA 6 5 National Outcomes 4 National Outcomes 5 National Outcomes 6 National Outcomes 4 National Outcomes 5 National Programmes 6 National Programmes 10 National Programmes 4 National Programmes 9 Source: EPU

Programme-Activity Structure Strategic Thrusts 10th Malaysian Plan KRAs National Results Framework (NRF) 10th Malaysian Plan Outcomes National Programmes Ministry Outcome 1 Outcome 2 Outcome 3 Outcome n Min. Prog. 1 Min. Prog. 2 Min. Prog. 3 Mini. Prog. n Ministry level Results Framework Activity 3 Activity 5 Activity 7 Activity n Activity 1 Activity 6 Activity 2 Activity 4 Activity 8 S/Activity Project Sub-Activity Project Sub-Activity Project

Integrated approach under OBB National level National Strategic Thrusts National Outcome Key Performance Indicator National Programme Vertical alignments Horizontal linkages Integrated budgets NRF Ministry level Ministry’s Outcome Key Perf. Indicator Programme Ministry level Ministry’s Outcome Key Perf. Indicator Programme MES Programme level Prog. Outcome KPI Activity Programme level Prog. Outcome KPI Activity Programme level Prog. Outcome KPI Activity Programme level Prog. Outcome KPI Activity PPMF Activity level Activity Outcome KPI Activity Output PI Activity level Activity Outcome KPI Activity Output PI Activity level Activity Outcome KPI Activity Output PI Activity level Activity Outcome KPI Activity Output PI Activity level Activity Outcome KPI Activity Output PI Activity level Activity Outcome KPI Activity Output PI Budgets are built Budgets are built Activity level Activity Outcome KPI Activity Output PI Activity level Activity Outcome KPI Activity Output PI Activity level Activity Outcome KPI Activity Output PI APMF

Presentation outline 1 Introduction 2 Outcome Based Budgeting 3 Integrated approach to OBB using Logic Model 4 OBB implementation journey 5 Challenges in implementing OBB

Linear Logic Model Implementation When Planning INPUT PROCESS OUTPUT Outcomes are the changes we bring to a problem or need situation INPUT PROCESS OUTPUT OUTCOME We have a tendency to focus on Inputs …and outputs are assembled based on inputs The focus should be on Outcomes When Planning

Addressing Needs and Problems Outcome Needs/Problem Triangulation NEEDS & PROBLEMS ANALYSIS OUTCOMES Addressing Needs and Problems

BUDGET CYCLE JANUARY March FEDERAL TREASURY (NATIONAL BUDGET OFFICE) NOVEMBER Determination of ET by Treasury JANUARY Call Circular for New Year Estimates March Receive submissions and BRO makes Individual Study APRIL Preliminary Analysis MAY-JULY Budget examination JULY - AUGUST Approval of New Year Estimates by the Minister of Finance and Cabinet Agencies Prepare and Submit New Year Estimates SEPTEMBER Budget Document Printed and submitted to Parliament SEPTEMBER-DECEMBER Parliament Debates and Approves New Year Budget Disbursement/Reporting by Accountant General END OF DECEMBER Minister of Finance issues Warrant of Expenditure Budget Execution by Agencies

Presentation outline 1 Performance management & budgetary reforms 2 Factors taken into consideration under OBB 3 Integrated approach to OBB using Logic Model 4 OBB implementation journey 5 Challenges in Implementing OBB

OBB Implementation Journey 2016 > Full implementation of OBB recommendations including full systems and institutions 2014 - 2015 Continuous data quality refinement Focus on monitoring & performance reporting Initiate COE & evaluation cycle to be operational Budget prep. for 2016 to be fully OBB compliant Integrated performance monitoring & reporting to be 2012-2013 OBB Policy Circular Roll out of OBB to all ministries (Parallel in 2012) Data validation & refinement (selected Min initiative) Strengthening the role of MOIC in Planning 2010 - 2011 Developed OBB Conceptual Framework Awareness Programs Capacity Building (Trainers and RLs) Developed Initial Results Framework for all Ministries PHASE 2 PHASE 1

Presentation outline 1 Performance management & budgetary reforms 2 Factors taken into consideration under OBB 3 Integrated approach to OBB using Logic Model 4 OBB implementation journey 5 Critical Success Factors & Challenges in Implementing OBB

Critical Success Factors OUTCOMES Performance information must be demand driven by stakeholders Leaders must empower their team and execute strategy BROs must focus on program performance and accountability Sustainable capacity building Report on performance through effective monitoring and evaluation OUTPUTS PROCESS INPUTS

Challenges in implementing OBB Understanding the concepts Role of management in strategy building Quality of information in the results framework Culturalising performance Redefining the roles of budget review officers – focus on performance & accountability Sustainable capacity building and frequent movement of OBB trainers Identifying the right IT solution and translating business requirements into an IT system

MyResults: Performance Management System Ministry/Agency Planning Budgeting Monitoring Evaluation Reporting Demand Analysis

thank you terima kasih myresults@treasury.gov.my