Can it really make a difference?

December 6, 2017

The Potential of Performance Budgeting

Prepared for:

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Who We Are Dr. Stephen Lewarne • Principal in Emerging Markets practice • More than 25 years of experience leading economic and

fiscal reform programs around the world • Supported transitions to market economics across

Eastern Europe and Central Asia

Julie Cooper • International PFM specialist with USAID, IMF, World Bank • 20 years of experience in performance budgeting in

Central Asia, Africa and the Middle East • Supported PFM reforms in Australian Federal

Government

Jimmy Rollins • PFM and performance management specialist with

USAID, World Bank, IMF, CDC • Supported government performance budgeting efforts in

Jordan, Jamaica, Bangladesh, and the US

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Overview

• What is performance budgeting

• History of performance budgeting

• Performance budgeting today

• Success factors for performance budgeting

• Common challenges

• Can performance budgeting really make a difference?

• Case studies

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What is Performance Budgeting?

WHAT IT IS

• A comprehensive framework

• Integration of planning and budgeting

• Performance reporting • Adaptable tools and

techniques • One part of performance

ecosystem

WHAT IT ISN’T

• Formula/algorithm for funding decisions

• A single tool or technique • Use to cut or increase

budgets • Only for Budget

Department • Remedy for all

performance issues

ü û

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History of Performance Budgeting

Performance budgeting has been in practice for decades

1950s: introduction of the principles of Management by Objectives

1990s: extensive public sector reforms in response to economic, social and political pressures

New Public Management evolved which widened the scope of Performance Budgeting

Today: term used to mean a comprehensive public sector management framework

Performance budgeting today

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Performance budgeting today

• Comprehensive framework

−Budget planning and preparation

−Budget execution and reporting

• Performance management culture

−Focus on outputs and outcomes over inputs

−Focuses on quality, efficiency and effectiveness

−Influences policy decisions

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Performance budgeting today

• Tool for performance improvement opportunities

• Stronger accountability and transparency

• Includes civil service and reform to work culture

• Drives behavior changes

Deloitte has developed the following framework in its extensive work with governments around the world

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Performance Budgeting Success Characteristics

Performance data informs policy

decisions

Are there clear links to strategic priorities?

Are programs rational and costed appropriately?

Are KPIs clear and compelling?

Are budget documents structured clearly?

Is performance used in internal budget allocation decisions?

Do systems provide availability of timely, reliable data?

Do regular reviews of progress take place within ministries?

The right things are measured

Performance is monitored and

evaluated regularly

Management culture focuses on

performance

Does senior leadership focus on performance management?

Are roles and responsibilities clearly defined?

Is performance used in national level budget allocations?

Do regular reviews of progress take place with central authorities?

Is performance information available to citizens?

Success Factors

Are program managers held accountable?

Is there a system of program evaluation?

Are program and funding changes made when needed?

Success characteristics

Deloitte works with organizations to realize benefits of multiple simultaneous reforms

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Success characteristics

Challenge:

Governments need assistance to prioritize, sequence and implement PFM reforms

Possible Solution:

Rationalize and prioritize key process improvement initiatives:

Tools and Approaches:

• Synthesis of Existing Assessments

• Detailed Risk Questionnaires

• PFM Risk Assessment

• Capability Maturity Model

• PFM Improvement Plans

Challenge:

Public service job duties and skills often do not keep pace with reform

Possible Solution:

Build institutional abilities to absorb and sustain PFM reforms

Tools and Approaches:

• Training Needs Assessment

• Training Plan

• Competency Framework and Surveys

• Training of Trainers Program

• Strategic Organizational Reviews

Challenge:

Governments struggle to align resources with public goals and objectives

Possible Solution:

Link strategies with budget formulation and execution:

Tools and Approaches:

• Program Creation or Rationalization

• Forward Estimates Framework and Tools

• Performance Measures Assessment and Guidance

• Analytical Tools

• Business Process Reengineering

Technical Process Improvement

Performance Budgeting

Sustainable Capacity Development

Common implementation errors

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Common implementation errors

• Lack of a comprehensive performance framework

• Continued focus on inputs

• Little or no attention to creating a performance work culture

• Used to name and shame rather than to improve performance

• Monitoring and evaluation system not used as a management tool

• Emphasizing technical solutions over improving analytical skills

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Common implementation errors

• Oversimplified performance reporting (Green/Yellow/Red headlights)

• Not improving governance and accountability for service delivery

• Ignore concurrent reforms

• Downplay institutional capacity constraints or resistance

• No or little focus on budget execution requirements

Can it make a difference?

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Can it make a difference? YES

• But it’s not easy

• Requires mandate and political support

• Civil service needs to be performance focused

• Integrate with government-wide performance management practices

Performance budgeting cases

Illustrative example: Jamaica

Fiscal Policy

Potential topics to address with assignment countries include revenue and expenditure planning, public expenditure management, policy implications and sustainability

In this area, Deloitte has:

• Provided taxation and expenditure technical assistance in dozens of countries, including Zambia, Rwanda, Kosovo, Jordan and Paraguay

• Developed or evaluated performance budgeting frameworks and procedures in Jamaica, Jordan, and Bangladesh for the World Bank and USAID

• Motivation: macroeconomic downturn, government transition

• Reform: rationalize programs and integrate performance measures

• Focus on change management

The World Bank

Illustrative example: Jordan

Fiscal Policy

Potential topics to address with assignment countries include revenue and expenditure planning, public expenditure management, policy implications and sustainability

In this area, Deloitte has:

• Provided taxation and expenditure technical assistance in dozens of countries, including Zambia, Rwanda, Kosovo, Jordan and Paraguay

• Developed or evaluated performance budgeting frameworks and procedures in Jamaica, Jordan, and Bangladesh for the World Bank and USAID

• Motivation: program budget not changing culture

• Reform: move from compliance to management

• Upgrading Budget Analyst skills seen as critical

U.S. Agency for International

Development (USAID)

Illustrative example: Oklahoma

Fiscal Policy

Potential topics to address with assignment countries include revenue and expenditure planning, public expenditure management, policy implications and sustainability

In this area, Deloitte has:

• Provided taxation and expenditure technical assistance in dozens of countries, including Zambia, Rwanda, Kosovo, Jordan and Paraguay

• Developed or evaluated performance budgeting frameworks and procedures in Jamaica, Jordan, and Bangladesh for the World Bank and USAID

• Motivation: commodity price drop, no strategy

• Reform: government-wide programs and objectives

• Link with Chart of Accounts

• Focus on transparency to public

Illustrative example: Australia

Fiscal Policy

Potential topics to address with assignment countries include revenue and expenditure planning, public expenditure management, policy implications and sustainability

In this area, Deloitte has:

• Provided taxation and expenditure technical assistance in dozens of countries, including Zambia, Rwanda, Kosovo, Jordan and Paraguay

• Developed or evaluated performance budgeting frameworks and procedures in Jamaica, Jordan, and Bangladesh for the World Bank and USAID

• Motivation: focus on greater efficiency and effectiveness

• Reform: Output and Outcome Framework

• Accrual budgeting and accounting

• Purchaser/Provider agreements

Conclusion

Questions and Answers

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