1. D EPARTMENT OF THE T REASURY Results Based Budgeting in Australia Presentation by Richard Murray, Executive Director - Fiscal and Corporate, Department of the Treasury

2. D EPARTMENT OF THE T REASURY Outline Overview of the Fiscal Framework –Charter of Budget Honesty –Medium Term Fiscal strategy –Accrual Budgeting The Outcomes and Outputs Framework –Outcomes, Outputs and Administered Programs –Case Study: Education What have we learned? –Programs versus Outcomes –Measuring performance against Outcomes –The need for central oversight –Evaluation

3. D EPARTMENT OF THE T REASURY The Fiscal Framework

4. D EPARTMENT OF THE T REASURY Charter of Budget Honesty Guides rather than mandates the conduct of fiscal policy. Requires the Government to: –outline its medium term fiscal strategy –publish financial statements consistent with Australian and international accounting standards –specify fiscal policy actions that are temporary in nature, and the process for their reversal –publish an Intergenerational Report every 5 years

5. D EPARTMENT OF THE T REASURY Medium-term Fiscal Strategy Strategy since 1996/97 is for Budget balance on average over the cycle Supplementary objectives are: –maintain surpluses while economic growth prospects remain sound –no increase in the tax burden from 1996/97 levels –halve net debt – achieved in 2000-01 –improve the Commonwealth’s net worth position over the medium to longer term

6. D EPARTMENT OF THE T REASURY Improvement in Net debt

7. D EPARTMENT OF THE T REASURY OECD comparison of net debt

8. D EPARTMENT OF THE T REASURY Accrual Budgets Provides a more comprehensive picture of government operations –Improves focus on fiscal sustainability (the balance sheet) and intergenerational equity compares assets and liabilities (rather than just inflows and outflows of cash) –for the Budget and forward estimates –for individual agencies as well as whole of government –Imposes more business-like discipline on agencies –Ensures more focus on net worth

9. D EPARTMENT OF THE T REASURY The Outcomes and Outputs Framework

10. D EPARTMENT OF THE T REASURY Outcomes, Outputs and Administered Programs Outcomes are defined by Finance as: ‘The impact sought or expected by government in a given policy arena.’ The focus is on change and consequences: what effect can government have on the community, economy and/or national interest?

11. D EPARTMENT OF THE T REASURY Outcomes, Outputs and Administered Programs Outputs have been defined by Finance as: ‘The actual deliverables – goods and services – agencies produce to generate the desired outcomes specified by government.’ Customers include members of the public, industries or sectors, ministers, members of Parliament, other agencies or even in some instances, interests (eg the national interest).

12. D EPARTMENT OF THE T REASURY Outcomes, Outputs and Administered Programs Administered Programs are defined by Finance as: ‘Those resources administered by the agency on behalf of the government (such as transfer payments to the States, grants and benefits) to contribute to a specified outcome.’ They are identified separately from outputs because they involve different accountability requirements.

13. D EPARTMENT OF THE T REASURY A Model of the Framework Government Policy Platform and Priorities Outcome AOutcome BOutcome COutcome DOutcome E Agency responsible for Outcomes A and B Agency responsible for Outcomes C, D and E Outputs and Administered Items for Outcome B Outputs and Administered Items for Outcome E

14. D EPARTMENT OF THE T REASURY Case Study: Education ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ ‘Individuals achieve relevant skills and learning outcomes from post school education and training.’ ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Output 1.1: Funding for schools Output 1.2: Assistance to individuals including those with special needs Output 1.3: Assistance for quality teaching and learning Output 1.4: Assistance for transition through and from school Output 2.1: Funding for vocational education and training Output 2.2:New apprenticeships Output 2.3: Assistance for skills and career development Output 2.4: Funding for higher education Output 2.5:Assistance to post school students including those with special needs Output 3.1:Research infrastructure Output 3.2: Assistance for science collaboration and innovation Output 3.3: Support for the Australian education and training export industry and international relationships Outcome 1Outcome 2Outcome 3

15. D EPARTMENT OF THE T REASURY Case Study: Education Focus on the end result, not the means of achieving it Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Very Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Fair / Poor

16. D EPARTMENT OF THE T REASURY Case Study: Education Be succinct Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Very Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Fair

17. D EPARTMENT OF THE T REASURY Case Study: Education Be specific to the area being addressed Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Very Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Fair

18. D EPARTMENT OF THE T REASURY Case Study: Education Be stated in a way that allows the target group to be identified Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Very Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Fair

19. D EPARTMENT OF THE T REASURY Case Study: Education Enable the formulation of effective indicators Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Poor

20. D EPARTMENT OF THE T REASURY Case Study: Education Be free of value-laden, generalised or aspirational language Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Very Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Good / Fair

21. D EPARTMENT OF THE T REASURY Case Study: Education Be amenable to extension across agency boundaries Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Good

22. D EPARTMENT OF THE T REASURY Case Study: Education Be able to be related to Budget documentation Outcomes should: Outcome 1: ‘Individuals achieve high quality foundation skills and learning outcomes from schools and other providers.’ Very Good Outcome 3: ‘Australia has a strong science, research and innovation capacity and is engaged internationally on science, education and training to advance our social development and economic growth.’ Fair

23. D EPARTMENT OF THE T REASURY Case Study: Education For Outputs it should be possible to: define outputs in terms of what is produced; measure both departmental outputs and administered programs in terms of price, quantity and quality (PQQ); and relate outputs to an outcome –if this cannot be done the agency should cease to produce the output or identify an additional outcome that the agency should achieve.

24. D EPARTMENT OF THE T REASURY Case Study: Education Output 1.1: Funding for schools Output 1.2: Assistance to individuals including those with special needs Output 1.3: Assistance for quality teaching and learning Output 1.4: Assistance for transition through and from school Output 2.1: Funding for vocational education and training Output 2.2:New apprenticeships Output 2.3: Assistance for skills and career development Output 2.4: Funding for higher education Output 2.5:Assistance to post school student including those with special needs Output 3.1:Research infrastructure Output 3.2: Assistance for science collaboration and innovation Output 3.3: Support for the Australian education and training export industry and international relationships Output Groups Defines what is being provided, price and quantity are measurable and Outputs relate well to Outcomes.

25. D EPARTMENT OF THE T REASURY Case Study: Education Targets and performance indicators M ean scores of Australian students in reading, mathematical and scientific literacy compared with OECD average for 2000 (set to 500)

26. D EPARTMENT OF THE T REASURY Case Study: Education Graduate starting salaries as a proportion of Average Weekly Earnings

27. D EPARTMENT OF THE T REASURY Case Study: Education Outcome 3 Effectiveness indicator: Patents Graph 2.3.3 Number of patents issued to Australian residents in Australia

28. D EPARTMENT OF THE T REASURY What have we learned?

29. D EPARTMENT OF THE T REASURY Programs versus Outcomes Ministers often make policy decisions based on programs Budget documentation tends to provide information on Outcomes There has been a move towards providing more administered program information to Government

30. D EPARTMENT OF THE T REASURY Measuring performance against Outcomes Many outcomes are too broad. For example ‘ The Defence of Australia’ –In this case the Government has moved to define 7 sub outcomes for reporting purposes Outcome 1: Command of Operations in Defence of Australia and its interests Outcome 2: Navy Capability Outcome 3: Army Capability Outcome 4: Air force Capability Outcome 5: Strategic Policy Outcome 6: Intelligence Outcome 7: Superannuation and Housing Support Services for Current and Retired Personnel

31. D EPARTMENT OF THE T REASURY The need for central oversight A devolved management model and relative financial autonomy has led to a lack of central knowledge on financial information –Leads to a lack of scrutiny of agency performance by central agencies –Directly affects the ability of central agencies to advise on Budget Strategy The Government has acted to provide the Department of Finance with additional resources and mandated ‘program’ and ‘cash’ reporting

32. D EPARTMENT OF THE T REASURY Evaluation and Audit Evaluation of performance information is essential to measuring the achievement of Outcomes –Senate Estimates Committees scrutinise performance information ex-ante –The Audit Office scrutinise performance information ex-post Are Chief Executives held accountable for Outcomes?

33. D EPARTMENT OF THE T REASURY Questions?