1. Session 5: Aligning accounting systems and performance information 28.10.2008 Juha Majanen, Ministry of Finance, Finland Matti Väisänen, Ministry of Education, Finland

2. 2 Aligning accounting systems and performance information  Key elements  Accountability  Agency --> Ministry/Government --> Parliament  Performace targets  True and fair information  Performance management  Agency Ministry  Agreement on resources and performance targets  Information for managerial purposes

3. 3 What is performance management ?  Performance management is an agreement-based interactive control model.  Its operational core is in the ability of the agreement parties (ministry and agency) to find the appropriate balance between the available resources and the results to be attained with them.  The basic idea of performance management is to balance resources and targets on the one hand and efficiency and quality on the other as well as possible and to ensure that the desired effects are cost-efficiently achieved.

4. 4 Performance management development  Performance management problems and development needs have mainly been identified, and they have been taken into consideration in the performance management and accountability reform and in changes to the budget legislation in 2004.  The main aim has been to enhance performance management by emphasising the contolling task and accountability of ministries.  The content of control has been diversified, and a clear distinction has been made between strategic outcome targets and operational performance targets.

5. 5 Use of performance information in budgeting  Different level of targets are set and reported:  social policy targets: changes in the state of society and the conditions of its members and the extent to which the set targets have been achieved (social effectiveness);  costs of achieving the social policy targets (cost effectiveness);  operating performance  outputs, service capacity and the quality of outputs and processes (outputs and quality management)  economy, productivity and the cost effectiveness and profitability of charged and jointly financed operations (operational efficiency)  personnel and job satisfaction, and information, expertise and renewal. Mainly at the level of Government and ministries Mainly at the level of agencies

6. 6 Outcome targets and social impact targets at the level of ministries  The ministries are responsible for the functionality of performance management and for control development within their respective operational branches.  The basic tasks of ministries are emphasized: preparation for political decision-making, strategic control of their operational branches and international influence.  Proper performance management includes the ministries ensuring that proper performance targets are set (also regarding their own operations) and the agencies presenting true and fair information on their operations in their annual accounts.  Social impacts and outcome targets are amphasized in the performanace targets of ministries (policy effectiveness).

7. 7 Operational performace targets at level of Agencies and Institutions  Operational performance targets are emphasized in the perfromance targets of agencies and institutions.  The targets should be connected with operations and resources as closely as possible, whereby their attainment depends direcly on what the agency does and how it is managed.  Alongside positive performance targets and outcome targets, targets conserning unintended effects or side effects should also be set.  Performance targets are set primarily as indicators and only secondarily as verbal targets.

8. 8 Good performance targets Targets are:  connected with and derived from the basic tasks of a government agency  strategic, essential from the point of view of operations  clear, understandable to everybody  concrete and operational  evaluable, measurable and tíme-dependent  preferably comparable  such that the government agency itself can influence them  ambitious and challenging, but attainable and realistic  acceptable, jointly outlined and agreed  such that they cover as large a part of the operations as possible while on the other hand determining priorities

9. 9 Basic performance criteria (true and fair information) Policy effectiveness Outputs and quality management -goods and services - service capacity and quality Operational efficiency -economy - productivity - profitability - cost-equivalence Human resource management Outcome targets Operational performance targets Policy effectiveness: outcomes How operations and finances have affected policy effectiveness Operational results: outputs (which can be influenced through management) PERFORMANCE MANAGEMENT ACCOUNTABILITY

10. 10 Performance information in budgeting  Preliminary performance targets are agreed (between Agencies and corresponding ministries) and set during the preparation of spending limits (medium term fiscal framework)  Preliminary performance targets (operational targets and outcome targets) are represented to the Parliament in the budget proposal together with the appropriations.  At the same time the Financial Statements and the achievement (or non-achievement) of the Performance targets of previuos year is reported to the Parliament  An important budget development point is the presentation of outcome targets in the justifications for classes within the main title for each ministry --> reflects the accountability of ministry concerned.  Budget classes need to be collated into larger entities constituting an administrative sector or policy sector for which an outcome target can be set.

11. 11 Public statement of the ministry (Central Government Budget Decree section 66i§) 1) an estimate of performance and the trend therein and of the outturn of the performance targets set; 2) a statement as to whether the grounds for reporting performance are appropriate with respect to steering and accountability and the ministry´s position on development needs; 3) the measures that should be taken by the agency due to the final accounts and to improve performance; 4) the measures to be taken by the ministry because of the final accounts and to improve performance. The Ministry has to formulate an opinion on performance, (achievements and non-achievements) and take its position Opinion is published

12. 12 Accounting and Performance information I  Netra Reporting System  Operational since 2004  Internet-based tool which includes  Accounting data  Performance data  Tool for performance management --> providing information for decision making and reporting in all levels  Ready-defined reports and user-defined reports  Public --> enhances transparency  Available at www.netra.fi

13. 13 Accounting and Performance information II  On-going reform of budget preparation system and some other systems  Started 2007, operational at 2010  Common tool for preparation process of Budget proposals, Spending Limits (medium term fiscal framework) and Financial Statemens  Will be in use in Agencies, line Ministries and MoF  Enables more coherent approach  Reduces manual work