1. Performance Budgeting & Legislative Budget Offices World Bank GN-PBOs Washington, U.S. June 6-9, 2016 Kevin Page Jean-Luc Pepin Research Chair University of Ottawa

2. Outline 1.Performance Budgeting (PB) 2.International Perspectives 3.Canadian Experience 4.Considerations for Parliamentary Budget Offices

3. Performance Budgeting – What it is?  Citizens assess government by results, not intentions  Performance budgeting is a term that describes how performance information (on outputs and outcomes) is used in the budget process. It is a form of budgeting that relates funds allocated to measurable results. Resources can be related to results in a direct or indirect manner  Governments use performance information (management & budgeting) for four reasons  Improve decision making in budget process (allocation)  Improve efficiency  Achieve savings (fiscal prudence)  Improve transparency and accountability Performance Budgeting

4. Performance Budgeting – 3 General Models Performance Budgeting

5. Performance Budgeting – Measurement Performance Budgeting

6. International Experience – Recent History in OECD  Present round of performance based management and budgeting started in Australia and New Zealand in the 1980s followed by … Canada, Denmark, Finland, France, Netherlands, Sweden and UK and US in the 1990s followed by Austria, Germany and Switzerland  Country approaches to performance management and budgeting is evolving -- example – Australia, Netherlands, New Zealand started with focus on output measurement and evolved to outcome  Performance movement (improving it, measuring it) is entrenched. Pressures come from demands to make government services more efficient and affordable. Increased public demands for accountability International Experience

7. OECD Guidelines – Budgetary Governance 1.Budgets should be managed within clear, credible and predictable limits 2.Budgets should be closely aligned with medium-term strategic priorities 3.The capital budgeting framework should be designed to meet national development needs in a cost- effective/coherent manner 4.Budget documents & data should be open, transparent & accessible 5.Debate on budgetary choices should be inclusive, participative and realistic 6.Budgets should present a comprehensive, accurate and reliable account of finances. 7.Budget execution should be planned, managed & monitored. 8.Performance, evaluation & value for money should be integral to the budget process 9.Sustainability & other fiscal risks should be identified, assessed and managed prudently 10.The integrity and quality of forecasts, fiscal plans and budgetary implementation should be promoted through quality assurance & audit.  Parliament and citizens need to understand not just what is being spent, but what is being bought on behalf of citizens – i.e. what public services are actually being delivered, to what standards of quality and with what levels of efficiency  Performance information should inform, and provide useful context for, the financial allocations in the budget report. It is essential that such information should clarify accountability, not obscure  All substantive new policy proposals should be routinely and openly evaluated ex ante to assess coherence with national priorities, clarity of objectives, and anticipated costs and benefits.  Governments should take stock of overall expenditure and reassess its alignment with fiscal objectives and national priorities, taking account of the results of evaluations International Experience

8. OECD Guidelines – Use of PI in Budget Process  No one “best” model  A common whole of govt planning & reporting framework  Performance indicators (PI) should be integrated in the budget  Avoid govt wide systems that directly link performance results to allocation  Independent assessment of PI  Support from political and adminstrative leaders  Reform approaches to evolving circumstances  Use incentives to motivate civil servants and politicians to change behavior International Experience

9. OECD – Sequence & Pacing PB reforms 1.Developing program budget classification and knowledge of program base 2.Developing performance information and information systems 3.Linking medium-term expenditure frameworks with performance budgeting and planning 4.Integrating accounting systems with performance information systems 5.Managerial and financial flexibility and performance budgeting International Experience

10. OECD – State of Play (Professor Schick)  PB is used to inform the budget, not decide it  Latest OECD survey (2011/12) found that no country directly links expenditures to performance  It is difficult for governments to actualize PB. Many factors outweigh performance in deciding how to spend money  Performance informed budgeting (PIB) does not require major changes in budget practices. PIB may do more to enrich quality of public information than quality of budgets  Performance driven budgeting (PDB) suggests that incremental resources should purchase incremental results. Task of budgeting is to allocate resources to change both expenditure & output/outcome baselines International Experience

11. OECD – State of Play (Malyshev – 2011/12 Survey) International Experience

12. OECD – State of Play (Malyshev – 2011/12 Survey) International Experience

13. OECD – State of Play (Malyshev – 2011/12 Survey) International Experience

14. OECD – State of Play (Professor Schick)  PB is effective only in well managed countries  Enabling conditions – low corruption, little variance between actual and authorized spending, strong internal controls and public service  PB cannot compensate for government failure or political disregard of results  Irony – high performing governments have least to gain from performance reforms and are most likely to have successful performance system implementation International Experience

15. OECD – Trends & Future Directions (Christian Kastrop)  Shift from extensive indicators sets to smaller  Shift towards PI for management and accountability rather than the allocation of resources  Shift from detailed PI system to relying on executives as being agents of change and accountability  Shift towards better accommodating the needs of the demand side of PI (public and Parliament)  Increasing importance of spending reviews International Experience

16. Canadian Performance Budgeting Story  The performance budgeting story begins in the 1970s with development of evaluation policy  Efforts to strengthen the system with structured information system under a new reporting policy in 2005  Significant cultural and technical challenges  Progress is slow Canada Experience

17. Performance Budgeting in Canada Strategic Budget Reviews – spending restraint exercises Budgets 2010, 2011, 2012, 2013 New Expenditure Management System 2007 Federal Accountability Act 2006 - cyclical evaluation of all transfer payment programs Management, Resources and Results Structure – detailed program level knowledge Improved Reporting to Parliament – expanding 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 Secretariat 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 Late 70’s Mid 90s 2000 2005 – Canada Experience

18. A Common Approach to the Collection, Management, and Reporting of Performance Information The 2005 Policy Management, Resources and Results Structure Policy  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 Canada Experience

19. 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 Alignment Architecture Canada Experience

21. Structured Information DEPARTMENTS Management Tool Reflects full mapping of programs Better alignment of resources & priorities More evidence based reporting Improve program performance FinancePCO Budget Plan TBS Informed decisions on investment choices based on priorities and value for money PARLIAMENT Reporting Tool Stronger accountability for spending and results Common basis for planning and reporting inside and outside More logical and consistent basis for interaction 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 Canada Experience

22. The New Expenditure Management System (Theory) All spending must be managed to transparent results/outcomes  Clear measures  Assessed and evaluated systematically and regularly (All programs over a 5 year cycle)  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 Canada Experience

23. Major Challenges  Resistance to change  Bureaucratic & political  Data architecture, measurement & systems  Management integration  Evaluation and Review  Planning and Budgeting  Executive & Legislative Accountability & Reporting More work! Do not want more transparency! Resources required! Difficult project management! Too many data limitations! Difficult to bring people together! Decision making processes may change! No accountability without transparency! Increased political and bureaucratic risks! Canada Experience

24. What lessons have we learned?  Political and central agency leadership is critical  This a a change in management approach  System and evaluation capacity may require investment.  Need persistent effort to build capacity. It will take time. There is no perfection. Keep simple  Have a plan but experiment and adapt  Reinforce linkages – decision making, evaluation, reporting and accountability Canada Experience

25. What are the lessons learned?  Additional transparency will put elected (government and opposition) and public servants on the same information base  Must create a climate to acknowledge program shortcomings.  Current Canadian system is a decade in plus implementation and many shortcomings exist notwithstanding support for system architecture  Weak linkages – management not taking advantage of information as a planning instrument. Legislature not voting on program activities.  Government and public servants reluctant to share information with legislature – this undermines performance budget information as an accountability instrument Canada Experience

26. Role for GN - PBOs – Performance Budgeting  Assess current state (development, trends) of government performance information, management and budgeting in your country  Assess prospects for utilization of performance materials (information, departmental reports, evaluations, etc) in PBO reports on budgets and scrutiny of spending plans in context of state of government budget practices and accountability to Parliaments  Assess prospects for recommending a strengthening of performance management and performance informed budgeting Role for PBOs

27. Thank-you Jean-Luc Pepin Research Chair University of Ottawa, Canada Faculty of Social Sciences +1 613 562 5800 x3544 www.jlp.uottawa.ca Kevin.Page@uottawa.ca