1. Performance Budgeting in the Government of Canada: Transitioning from Surplus to Deficit Reduction Presented to: The Peterson-Pew Commission's International Forum on Performance Budgeting Date:July 14 th, 2011 Presented By: Bruce Stacey, Associate Chief of Defence Transformation Department of National Defence

2.  Canadian Context  New Expenditure Management System  Strategic Review Process  Strategic and Operating Review  Administrative Services Review  Lessons Learned Outline

3. Federal Expenditures Overview 2009-2010 Total Expenditures $235.8 B (Fiscal Year 2009-2010) Major and Other Transfer Payments $104.3 B Direct Program Spending $99.6B Source: Main Estimates – Part I 2009-2010

4. The New Expenditure Management System 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

5. Policy requirements for Strategic Outcomes incl: Performance Measures Policy requirements for each program activity element include: Program title & description Expected results Performance measures Planned & actual spending Target & actual results Governance Strategic Outcome* Program Activities* Sub-Activity Level** Sub-Sub Activity Level** Lowest Level programs Accountability levels to Parliament (Estimates & Public Accounts) *require TB approval, incl. major & minor changes 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 The Program Activity Architecture

6. Strategic Reviews Objective of Strategic Reviews:  Assess all direct program spending and performance over a 4 year period to ensure value for money for existing spending Comprehensive Review of Programs − Strategic Reviews assess whether programs are aligned with government priorities, are effective and efficient and provide value for money Reallocation and Reinvestment Proposals − Through the comprehensive review of programs, organizations identify the lowest priority and lowest-performing 5 per cent of programs (reallocations) and propose higher-priority, higher performing programs for reinvestment: Potential for Improvements/ reinvestments Primary Candidate for Reallocation Potential for Reinvestment High-Priority Low-Priority Low-Performing High-Performing Secondary Candidate for Reallocation 100% Organizational Review Base

7. 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

8. Strategic and Operating Review Budget 2011 committed to a zero deficit by 2015 Government must reduce spending to contribute to this goal - no tax increases - no cuts to transfer payments to provincial governments or payments to Canadians (ex. Employment Insurance, Benefits to Elderly) 67 departments and agencies will contribute at least $ 4 Billion, 5% of government’s discretionary spending Will be accomplished by each of these departments/agencies designing 2 scenarios: a 5% and a 10% and submitting both to a special subcommittee of the Treasury Board who will accept or reject each proposal This review will focus on improving the efficiency and effectiveness of government operations and programs to ensure value for taxpayer money and will replace the next cycle of strategic reviews The review will place particular emphasis on generating savings from operating expenses and improving productivity, while also examining the relevance and effectiveness of programs.

9. Administrative Services Review The Government is also looking for ways to improve services and service delivery to Canadians by examining government-wide solutions that will standardize, consolidate and re-engineer the way it does business A year long review looking a back-office operations and examining other such exercises across Canada and the world. These proposed savings will be introduced through individual departmental Strategic and Operating Reviews

10. 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 Don’t wait for perfection Linking performance information to reporting was helpful – but linking it to decision-making in the budget process has been critical

11. 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

12. Questions