Performance Budgeting in the Government of Canada 7ièmes Rencontres Internationales de la gestion publique – IGPDE et OCDE Thème: ‘Évaluer les politiques publiques pour améliorer l’action publique’ ‘Évaluer une politique, c’est rechercher si les moyens juridiques, administratifs ou financiers mis en œuvre permettent de produire les effets attendus de cette politique et d’atteindre les objectifs qui lui sont fixés.’ (y compris la validité, l’efficacité, efficience, cohérence) Apprécier le plus objectivement possible les effets de la politique évaluée sur la société et-ou comprendre son fonctionnement Aider le commanditaire politique à porter un jugement de valeur sur la politique évaluée Contribuer pratiquement à l’élaboration de la politique évaluée en éclairant ses différents protagonistes sur le sens, les conditions et les conséquences des leurs actions et décisions Processus d’apprentissage collectif (bénéficiaires, représentants société civile, usagers) Décision de poursuite = acte politique, évaluation = contribue Contexte: Création récent du Secrétariat d’État à la prospective et è l’évaluation des politiques publiques Révision générales des politiques publiques – au cœur des réforme de l’État en France Révisions des programmes Focalise sur l’examen des résultats sous les aspects de l’équilibre des dépenses publiques et de l’efficience L’évaluation inclut la prise en compte des besoins sociaux et des attentes des bénéficiaires pour interroger la pertinence des politiques publiques Qu’elle est la complémentarité des différents dispositifs Working Party of Senior Budget Officials OECD-MENA Senior Budget Officials Network Bruce Stacey, Executive Director, Treasury Board Secretariat Cairo, Egypt, November 24 – 25, 2008

Outline Canadian Context New Expenditure Management System Foundation – MRRS & Evaluation Strategic Review Process Whole of Government Reporting Lessons Learned 2

The Canadian Context

Canada is a big country, with a small population, and a decentralized government that delivers services across the world … This poses unique monitoring and reporting challenges: 35 million people in a vast geographic area Highly decentralized federation: 10 provinces, 3 territories Provinces are equal to the federal government and have real power Hundreds of federal-provincial agreements and transfer payment programs Over 90 departments & agencies and 46 Crown corporations Over 300,000 core public servants Over 1,600 points of service Diplomatic presence in about 180 countries - Canadian Forces in 17 missions Over 2500 programs and 350 million transactions per year (source - Annex – Canada’s Performance) Canada is a decentralised federation of ten provicnes and three territories; Provinces are legally the equal to the federal government and have real power Spheres of responsibility are set out constitually (e.g. health and education are under provincial authority; defence and immigration are federal matters) The Public Service of Canada is the nation’s largest employer, with 250,000 core federal public service employees; There are also 220,000 members of the Canadian Forces, the RCMP and Crown corporations (e.g. CBC, Via Rail, Canada Post) (source: Economic Outlook 2007) Program expenses to GDP is XXX Canada’s size and governmental system pose unique challenges for monitoring and reporting: highly decentralized federation 32,7 million citizens over a vast geographic area Hundreds of federal-provincial agreements and federal programming (weighted towards transfer payments) Federal Government comprises over 90 departments & agencies, 46 Crown corporations Over 250,000 core public servants Over 1,600 points of service accross Canada Federal fiscal position remains strong Ten consecutive federal surpluses ($13.8 billion or 1% of GDP in 2006-07) Program Expense-to-GDP is declining since 2005-06 (at about 13% in 2006-07) On track to eliminate its total government net debt by 2021 4

Federal Spending Overview 2006-2007 Total Expenses $222.2B (Fiscal Year 2006-07) Major Transfer Payments $98.1B Direct Program Spending $90.2B TB/TBS Focus Source: Public Accounts of Canada 2006-07

Expenditure Review & Results Agenda in Canada: A History Federal Accountability Act 2006 - cyclical evaluation of all transfer payment programs Management, Resources and Results Structures – regaining detailed program level knowledge Improved Reporting to Parliament – moving to whole of government planning and reporting Renewed Evaluation Policy – quality, capacity, credibility, and expansion of coverage Management Accountability Framework – assessing management performance across government Canada’s Performance – linking programs to societal performance Results for Canadians – results-based management as a stated priority of government Transfer Payment Policy – performance frameworks and evaluations reviewed by TBS Modern Comptrollership – investment in management practices and controls Program Review – dealing with a large deficit through major expenditure cuts Departmental Reporting to Parliament – moving to results-based plans and reports on performance Planning Reporting and Accountability Structures – unsuccessful try at linking resources to results First Program Evaluation Policy – government-wide implementation Today’s Agenda 2000 Mid 90s Late70’s

 EMS Renewal approved in June 2007 Expenditure Management System in Transition Designed 15 years ago to fight deficit and control new spending 1995: Program Review of the entire spending base Late 1990s: budget surpluses lead to new spending without an anchor to discipline that spending Cabinet time focused almost exclusively on new spending Ad hoc restraint exercises to control spending with no real focus on performance Governments around the world emphasize outcomes – Australia, U.K., U.S., New Zealand. Budget 2006 and 2007 committed the government to a new ongoing approach to managing overall spending  EMS Renewal approved in June 2007

The New Expenditure Management System

The underlying objectives are management excellence and value for money … The government wants to deliver high quality services and high value programs at reasonable cost Expenditure Management System Renewal is changing the way the government operates and aims to ensure: Aggregate fiscal discipline (i.e. control of overall growth in spending) Effective allocation of government resources to areas of highest relevance, performance and priority Efficient and effective program implementation (source - Annex – Canada’s Performance) Canada is a decentralised federation of ten provicnes and three territories; Provinces are legally the equal to the federal government and have real power Spheres of responsibility are set out constitually (e.g. health and education are under provincial authority; defence and immigration are federal matters) The Public Service of Canada is the nation’s largest employer, with 250,000 core federal public service employees; There are also 220,000 members of the Canadian Forces, the RCMP and Crown corporations (e.g. CBC, Via Rail, Canada Post) (source: Economic Outlook 2007) Program expenses to GDP is XXX Canada’s size and governmental system pose unique challenges for monitoring and reporting: highly decentralized federation 32,7 million citizens over a vast geographic area Hundreds of federal-provincial agreements and federal programming (weighted towards transfer payments) Federal Government comprises over 90 departments & agencies, 46 Crown corporations Over 250,000 core public servants Over 1,600 points of service accross Canada Federal fiscal position remains strong Ten consecutive federal surpluses ($13.8 billion or 1% of GDP in 2006-07) Program Expense-to-GDP is declining since 2005-06 (at about 13% in 2006-07) On track to eliminate its total government net debt by 2021 9

Treasury Board Secretariat The Expenditure Management System in Canada is decentralized between central agencies, each with specific roles Finance Department Ensures aggregate fiscal discipline is maintained by: Establishing fiscal framework & determining total spending levels Budget Privy Council Office Support elected government in establishing priorities and meeting these through the effective allocation of spending to government priorities by Supporting Prime Minister & Cabinet Committees Managing flow of Cabinet business Facilitating broad Govt policy development Treasury Board Secretariat Supports Treasury Board (TB) in effectively allocating spending in manner that ensures operational efficiency and effectiveness by: Establishing and monitoring adherence to TB management policies (financial & non financial) Supporting TB approval of detailed operational plans & recommendation of resource appropriations for new programs Supporting TB determination of resource needs / investment opportunities for existing programs

The new System is supported by three pillars All spending must be managed to transparent results/outcomes Clear measures Assessed and evaluated systematically and regularly Demonstrating value for money Up-front discipline is applied to new spending proposals to manage spending growth Include clear measures of success Demonstrate how the proposal fits with existing spending and results Provide reallocation options for funding Strategic Reviews assess existing spending over a four-year cycle to ensure alignment with priorities, and effectiveness, efficiency and economy Programs expected to demonstrate results in support of priorities Decision-making to use objective, evidence-based information A mature performance measurement and reporting infrastructure is already in place All major departments and agencies Have internal audit and evaluation units Produce for Parliament their reports on plans and priorities and departmental performance reports Are developing outcome frameworks for all their programs Have started cyclical expenditure reviews Treasury Board Secretariat Has a strong policy centre for results-based management Assesses management performance across government Produces an annual report called Canada’s Performance Advises Cabinet and the Department of Finance on potential reallocations based on expenditure reviews Office of the Auditor General Produces performance audits of departments and agencies 11

The Foundation MRRS & Evaluation

A common approach to the collection, management, and reporting of performance information is key … Management, Resources and Results Structure Policy (2005) Provides detailed information on all government programs Establishes the same structure for both internal decision-making and external accountability Helps to link resources and results -- planned and actual Is being implemented across government 13

Sub-Sub Activity Level** The Program Activity Architecture Policy requirements for Strategic Outcomes incl: Performance Measures Strategic Outcome* Accountability levels to Parliament (Estimates & Public Accounts) *require TB approval, incl. major & minor changes Policy requirements for each program activity element include: Program title & description Expected results Performance measures Planned & actual spending Target & actual results Governance Program Activities* Departmental PAA: reflect the inventory of all the programs of a department depicted in their logical relationship to each other and to the SO(s) to which they contribute **require TBS approval Sub-Activity Level** Sub-Sub Activity Level** Lowest Level programs

Department of Heritage 2009-10 Program Activity Architecture SO1 Canadian cultural content and artistic expressions are created and accessible at home and abroad SO2 Canadians have a sense of their Canadian Identity SO3 Canadians participate and excel in sport SO 1. Arts 2. Cultural Industries 3. Heritage 4. Promotion of and Attachment to Canada 5. Engagement and Inclusion 6. Official Languages 7. Sport PA 1.1 Arts Presentation Canada 2.1 Broadcasting Policy 3.1 Museums Assistance Program 4.1 Celebration and Commemoration Program 5.1 Multiculturalism Program 6.1 Development of Official-Languages Communities Program PSA 7.1 (Sport) Hosting Program 2.2 Canadian Television Fund 1.2 Cultural Spaces Canada 5.2 Action Plan Against Racism 3.2 Canada Traveling Exhibition Indemnification Program 4.2 State Ceremonial and Protocol 2.3 Canadian Feature Film Policy 6.2 Enhancement of Official Languages Program 7.2 Sport Support Program 1.3 Fathers of Confederation Buildings Trust 4.3 International Expositions 5.3 Human Rights Program 2.4 National Training Program in Film & Video Sector 3.3 Canadian Heritage Information Network 5.4 Building Communities through Arts & Heritage 6.3 Official Languages Coordination program 1.4 National Arts Training Contribution Program 4.4 Canadian Studies Program 7.3 Athlete Assistance Program 2.5 Film or Video Production Tax Credits 3.4 Canadian Conservation Institute 5.5 Aboriginal Peoples’ Program 2.6 Canada Music Fund 4.5 Exchanges Canada Program 1.5 Canadian Arts and Heritage Sustainability Program 7.4 2010 Federal Secretariat 2.7 Book Publishing Industry Development Program 3.5 Movable Cultural Property Program 5.6 Historical Recognition Program 4.6 Katimavik Program 2.8 Canada Magazine Fund 2.9 Publication Assistance Program 2.10 Canadian Culture Online 2.11 Canada New Media Fund 2.12 Copyright Policy 2.13 Cultural Sector Investment Review 2.14 Trade Routes Program 8. Internal Services (details being developed by central agencies) 2.15 TV5 2.16 UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions

MRRS Well structured information helps decision-making … DEPARTMENTS Management Tool Reflects full mapping of programs Better alignment of resources & priorities More evidence based reporting Improve program performance More logical and consistent basis for interaction PARLIAMENT Reporting Tool Stronger accountability for spending and results Common basis for planning and reporting inside and outside Finance PCO Budget Plan TBS Informed decisions on investment choices based on priorities and value for money MRRS provides more structured and substantive information to better manage programs and enhance reporting on results Structured inventory of the organization’s programs Link programs to resources and results Common foundation to report in Estimates and Public Accounts Gradually being used as a basis to develop planning framework & PMA MRRS provides a strategic framework to help understand the context of an organization’s work and help answer strategic questions such as: Is this organization delivering outcomes for Canadians with their resources? Can we deliver more/better outcomes for Canadians? Is value-for-money being achieved? Enables the government to tell a more comprehensive story More in-depth and systematic information on how tax dollars are being spent Contribute to greater transparency and accountability around management of public funds MRRS Policy Objective: Development of a common, government-wide approach to the collection, management, and reporting of financial and non-financial performance information - to provide an integrated and modern expenditures management framework 16

Evaluation information is important but there are challenges to getting it … Quality, timeliness and strategic focus issues hinder systematic use of evaluation to support decision-making: often small programs - not strategic about 10% of spending each year - too low take too long and difficult to understand can be self serving when funded by program managers Capacity issues have made it difficult to deliver Need more trained evaluators Need consistent competencies for managers and staff Definition of the evaluation “product” same as 20 years ago - may need a new sort of product 17

Rebuilding evaluation requires focused attention … Strategic reviews require credible information on the relevance and performance of government programs … and evaluation is a key source Objectives of evaluation policy renewal: Improve the information base for strategic reviews - increased focus on value for money (relevance and program performance) Comprehensive coverage of programs through a regular and systematic cycle Improved credibility through agreed upon standards, flexible tools for evaluation and neutrality of the evaluation function Improved quality by having the right capacities, people and systems Continuous learning and improvement - stronger Treasury Board capacity to lead the function, monitor capacity and use evaluation information New Evaluation Policy will require comprehensive evaluation coverage (100% of large departments) of all direct program spending over a 5 year cycle Federal Accountability Act requires 100% coverage of all Grant and Contributions A mature performance measurement and reporting infrastructure is already in place All major departments and agencies Have internal audit and evaluation units Produce for Parliament their reports on plans and priorities and departmental performance reports Are developing outcome frameworks for all their programs Have started cyclical expenditure reviews Treasury Board Secretariat Has a strong policy centre for results-based management Assesses management performance across government Produces an annual report called Canada’s Performance Advises Cabinet and the Department of Finance on potential reallocations based on expenditure reviews Office of the Auditor General Produces performance audits of departments and agencies 18

Strategic Reviews

Strategic reviews are program-based and results-informed All direct program spending reviewed - 25% each year Treasury Board and its Secretariat set terms of reference: Comprehensiveness – assessment of mandate, departmental objectives, program effectiveness, efficiency and alignment to government priorities Reallocation proposals – options for program reductions or eliminations to reallocate to government priorities and support overall spending control Reinvestment proposals – options to better support government priorities Departments review the relevance and performance of their spending, identify lowest performing/priority 5% of programs, seek outside expert advice and report to the Treasury Board Privy Council Office identifies review departments every year and assesses, with Treasury Board and the Department of Finance, the departmental proposals 20

Strategic Reviews – Scope and Key Elements Departmental Strategic Reviews to answer specific questions in key areas: Government Priority, Federal Role, Relevance (i.e. continued prog. need) Performance (effectiveness, efficiency, value for money) Management Performance Departmental Strategic Reviews to be conducted using the following key elements Analytical Framework: The department’s Program Activity Architecture Information Sources: Evaluations, Audits, Management Accountability Framework assessments, Auditor General Reports, and other reports Reporting Requirements: Outlined in the Terms of Reference Steering Committee: A departmental steering committee to be established with ex officio membership from TBS External Advice: Expert outside advice to be involved on each Review to ensure neutrality and credibility

Strategic Reviews –Conditions for Success Sufficient time for deliberative process Ministerial engagement throughout the Review process Clear and strategic alignment of programs and results (value of a strong Program Activity Architecture) Comprehensive assessment of all programs (100%)-not focussing only on 5% Early involvement of senior management team – policy, communications, and corporate services Multiple lines of evidence – evaluations, audits, benchmarking, international comparisons Overview portion of the Strategic Review should tell a compelling departmental story Arm’s length expert advice as effective challenge to proposals and alternatives Our lessons learned post mortem tried to examine “conditions for success”. Key lessons learned and CSF included: Sufficient time is needed for a deliberative process Serious ministerial engagement is key to ensure proposals put forth can be considered as part of Budget planning, and defended in the eye of the public. Ministers need to be engaged early ( demonstrate ownership, presentation matters) A clear and strategic alignment of programs and results facilitates the Review process and makes the results more meaningful. A strong Program Activity Architecture was key.

The first reviews (2007) generated significant savings but also demonstrated a need to improve the quality of results information … Seventeen organizations reviewed their programs in 2007 Ministers examined $13.6B, about 15 per cent of direct program spending $386 million per year was identified as presenting opportunity to: Increase efficiency and effectiveness: Change the way the Government delivers programs and services Focus on core roles: Ensure that services are delivered by those best positioned to do so Meet the priorities of Canadians: Align federal activities with the needs and priorities of Canadians and eliminate programs that are no longer necessary Savings were redirected to fund new initiatives, both within departments and to broader spending priorities in Budget 2008 23

Public Reporting

Key Parliamentary Reports Main Estimates Part I: Government Expense Plan Part II: Main Estimates (in support of the Appropriation Act) Part IIIs Reports on Plans and Priorities (RPPs), support committees in reviewing supply Departmental Performance Reports (DPRs), actual achievements against the expected results in the RPP Supplementary Estimates Usually two per year 25

Parliamentary Reports cont. RPP Overview for Parliamentarians helps parliamentarians and their staff to navigate through the 91 RPPs (2007-2008) provides a whole-of-government view of planned spending Canada’s Performance Provides an overview of and helps parliamentarians and their staff navigate through the 90 DPRs (2006-2007) Public Accounts In three volumes, covering financial performance for most recently completed fiscal year 26

Whole-of-Government Reporting

Whole of Government Framework 28

RPP Overview for Parliamentarians Searches may be customized by spending area and by organization 29

Slide on Layered approach Layered Reporting allows a continuous “drill down” from the most aggregate to the most detailed … Slide on Layered approach Economic Affairs Social Affairs International Affairs Government Affairs Spending Areas (4) Whole-of- Government – Layer Aggregate information on Spending and on Plans and Performance in: Whole-of-Government Overview for RPPs Canada’s Performance Healthy Canadians Safe and Secure Communities Diverse Society Canadian Culture/Heritage Government of Canada Outcome areas (13) Citizenship and Immigration RPP Maximum Contribution to the Economy… Successful Integration of Newcomers… Reflection of Canadian Values… Departmental – Layer High-level departmental information on: Spending, Planning and Performance Indicators in concise RPPs and DPRs (30 pages or less) SOs Integration Program Citizenship Program PAs Comprehensive, Layered, Continuous: User is able to continuously drill down from the Whole of Government level to detailed financial and non-financial information at the lowest level of the PAA Electronic – Layer Detailed information on specific programs and policies Links to databases and useful policy documents SA SSA Expected and actual results Expected and actual resources Indicators and targets Supplementary information (i.e. sustainable development strategies, audits and evaluations)

What lessons have we learned (#1)? Need persistent effort to build capacity - will take time Political leadership Have a plan but experiment and adapt: Central agency leadership Know program base Identify measures and collect the data Evaluation capacity means investment Use the information for decision-making in the department Use the same information to improve reporting Linking performance information to reporting was helpful – but linking it to decision-making in the budget process has been critical Don’t wait for perfection Cabinet Ministers, both at TB and at P&P, unanimously concluded that it is critically important that reviews be pursued on an ongoing basis. They found that reviews provide better management and fiscal results relative to past exercises. – some Ministers were skeptical at the beginning They also found that reviews provided a good opportunity for Ministers to gain a solid understanding of the business of their organizations. Cabinet Ministers also found reviews to be effective in identifying duplication, inefficiencies and ineffectiveness, and helped to identify change strategies to address those issues. 31

What are the lessons learned (#2)? This is cultural change: expect resistance - go for small wins - communicate - acknowledge risks - adapt - build trust Rewards and sanctions are important - gaming Put elected and non-elected officials on the same information base: Make it relevant for decision-making Better management and fiscal results Sound understanding of the business Ministerial engagement important Have realistic expectations - under promise, over deliver 32

Annexes and Background Material

Annex A - Links to Further Information TBS website: http://www.tbs-sct.gc.ca/tbs-sct/index-eng.asp Management Accountability Framework (MAF): http://www.tbs-sct.gc.ca/maf-crg/index_e.asp Tools and Resources for Parliamentarians: http://www.tbs-sct.gc.ca/tbs-sct/audience-auditoire/parliamentarian-parlementaire-eng.asp Whole-of-Government Planning and Performance: http://www.tbs-sct.gc.ca/wgpp-prpg/ Management, Resources and Results Structure (MRRS) Policy: http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/mrrsp-psgrr/mrrsp-psgrr_e.asp Results-based Management: http://www.tbs-sct.gc.ca/rma/rbm-gar_e.asp Audit and Evaluation Database: http://www.tbs-sct.gc.ca/rma/database/aeve_e.asp Canada’s Performance 2006-2007: http://www.tbs-sct.gc.ca/reports-rapports/cp-rc/2006-2007/cp-rctb-eng.asp 2007-2008 Guidelines for preparing RPPs and DPRs: http://www.tbs-sct.gc.ca/rpp/0708/guide/guide_e.asp Performance Reporting: Good Practices Handbook: http://www.tbs-sct.gc.ca/rma/dpr3/06-07/handbk-guide/gph-gbp_e.asp 34