Elementos Esenciales para efectuar la Seleccion y Comprobacion / Javier Berro...
Institutionalizing Performance Budgeting: Key Institutions and Actors - Roles and Incentive Structures / Teresa Curristine - Fiscal Affairs Department, IMF Colombia
1. Institutionalizing Performance Budgeting:
Key Institutions and Actors - Roles and Incentive
Structures
Teresa Curristine, Senior Economist
Fiscal Affairs Department, IMF
Colombia
December 11-13 2014
2. Overview of Presentation
1. Essential building blocks for Performance
Informed Budgeting (PIB).
2. Designing PIB System: the role of key institutions.
3. Developing the right mix of incentives - motivating
agencies and managers to improve performance.
4. Engaging the political leaderships – the role of
politicians and developing incentive structures.
5. Dispelling the myths and framing the debate.
2
3. 1) Essential Building Blocks for Developing
Performance Informed Budgeting (PIB)
•Establishment of strategic goals and objectives
•Develop Performance Information (PI) to measure
and evaluate achievement of results (Including
program evaluations).
•Integration of PI into the budget preparation and
decision making at both the central budget authority
(CBA) and spending ministries level.
•Integration of PI into accountability and management
processes
4. Placing Performance Budgeting (PB) in
Context of PFM
• Fiscal sustainability and basic PFM processes needed for PB.
• PB can contribute to PFM objectives:
– effective allocation of resources
– efficient and effective delivery of public goods and
services.
• PB linked to PFM reforms, especially MTBF
– MTBF and PB part of one reform package e.g. France,
Korea and Austria.
• PB to succeed needs to be integrated with government
budgeting an management processes
• Managing for results – financial and managerial flexibility
• Accountability and reporting systems
4
5. 5
2) Designing PIB Reform Initiatives Requires:
• Setting key reform objectives
• Developing implementation strategies
– Overall approach (top-down or bottom–up)
– Introducing and managing reforms
– Establishing legal frameworks
– Supporting reforms: Institutional, human, and technical
capacities
– Engaging stakeholders and creating the right incentives
• Developing sequenced approach to implementation.
• Adapting reforms, while maintaining coherence of, and
interest in, reforms over the long-term.
6. Different Possible PB implementation
strategies and Roles for Key Institutions
• Top-down (central agencies lead) versus bottom-up
(spending ministries/agencies lead)
• Incremental approach- Australia, Canada, France
or “big bang” approach- Korea and Austria
• Comprehensive coverage versus partial
6
7. What Role Should Central Agencies play in PB?
• Varies across countries
– At one end MOF/CBA has a high degree of involvement
in reforms (Developing performance measures and
setting and negotiating performance targets) .
– At the opposite end it is left to individual ministries - the
MOF/CBA has a low level of involvement.
• Role played is influenced by:
– Wider institutional context
– Approach to PB
– Degree centralized of public administration
– Relative power of the MOF
8. Trends in Roles of Central Agencies and
Spending Ministries in OECD Countries
Central Agencies’ Roles
• In 22 OECD countries the CBA has in place a standard
performance budgeting framework which is applied uniformly
across all spending ministries.
• In 19 OECD countries the CBA developed the standard template
for reporting PI.
• In 17 OECD countries the President/Prime Ministers’ office or the
relevant political appointees are responsible for monitoring the
performance of spending ministries
Spending Ministries’ Roles:
• In over 25 OECD countries spending ministries are responsible
for setting performance targets. Spending ministries on average in
OECD countries have a greater role in generating PI and
conducting evaluations.
(Source OECD 2012 and 2013) n8
9. 9
Benefits Risks
Top-down
approach
Stronger pressure for reform Limiting flexibility to achieve results
Uniformity in approach and framework
across government
Too rule-bound, and performance becomes mere compliance
More information at the centre to make
decisions
Creating too many reporting requirements and becoming an
expensive paper exercise
Better co-ordination and monitoring Failing to gain the support of agencies
Creating perverse incentives and distorting behaviour
Bottom-up
approach
Greater flexibility Inertia due to lack of pressure to reform
Capacity to tailor reforms to agencies’
needs
Being more difficult and time-consuming to implement
Enables greater responsiveness to clients
and local communities
Lack of co-ordination of reforms
Encourages ownership of reforms by
agencies
Lack of information at the centre to make decisions
Source OECD 2007 Lack of consistency in reform efforts and presentation of
data
Potential Benefits and Risks of Top-Down Versus bottom
Up Implementation Approaches
10. 3) Developing the Right Mix of Incentives: Motivating
Agencies and Managers to Improve Performance
• Financial rewards and sanctions through the budget
process
• Increase or decrease financial and managerial
flexibility
• Public recognition: name and shame
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11. Financial Rewards and Sanctions (1/4)
Performance Informed Budgeting
• CBAs do not automatically reward or punish agencies based
on performance results.
• PI is used in the budget negotiations and dialogues between
CBA and spending ministries and within ministries. PI acts
as a signaling device
• In some countries use “Bidding Funds” require PI (e.g.
Singapore Reinvestment Fund) and it is used to decide
between competing proposals.
• PI also used by spending ministries and agencies in budget
process to:
– Setting allocations for programs
– Proposing new areas for spending
– Strategic planning and prioritization and in spending reviews 11
12. Financial Rewards and Sanctions: Budget
Negotiations Between Ministries and their Agencies
(2/4)
• PI more often used by spending ministries
• Agency performance agreements and contracts e.g.
Australia, Netherlands, NZ, and Nordic countries
• Depending on flexibility in wider budget structure used to
redistribute resources
• Used to manage programs
• Across and within countries wide variation in use of PI in
decision making.
• Depended on quality of PI, political pressure, and strong
organizational leadership
13. Financial Rewards and Sanctions (3/4)
Performance Bonus or Top Up Schemes
• States or agencies are given a financial bonus for meeting
targets, achieving performance improvements or
implementing institutional capacity building in selected
programs or areas.
Bonus linked to achieving targets
– US Department of Transportation highway safety belt scheme
– UK local governments when they achieved 60% of targets received
grants from the center for capacity building.
Bonus linked to institutional capacity building reforms
– EU structural fund 4% performance reserve
– US race to the top educational program
14. Financial Rewards and Sanctions (4/4)
Direct Performance Budgeting
• Direct and explicit linking of funding to performance
(usually outcomes or outputs)
• Provide incentives for agencies to achieve targets or
outcomes
• Used in specific sectors e.g in Nordic countries in higher
education and health care (DRGs). In Singapore in tax
collection agencies, health care, and universities.
• Issues with
• Dysfunctional behavior and gaming in health sector
• Quality of service provision
• Implications for control of aggregate financial control
14
15. 15
Increase or Decrease Financial and
Managerial Flexibility (1/3)
• Strongly influenced by:
– Historical factors
– A country’s existing budgeting and public
management and accountability systems.
• Norway- historically decentralised system later
introduced performance system
• UK –historically centralised and target driven
system later introduced flexibility.
• Key Question: Does current system of controls
restrict managers capacity to improve
performance?
16. 16
Increase or Decrease Financial and
Managerial Flexibility (2/3)
• In practice no clear trend across OECD countries
of reducing in input controls
• In selected countries PB reforms accompanied by
reduction in input controls (Andrews 2010)
• In US States new reporting requirements and IT
systems increased control (Moynihan 2006)
17. 17
Increase or Decrease Financial and
Managerial Flexibility (3/3)
Increased flexibility as a reward for good performance
- Local Authorities in UK reduction of inspections and
regulations.
Decreasing flexibility as a punishment poor performance
– Increased monitoring or control for poor performing
agencies
– Continuous poor performers –e.g. schools in UK and US
No child left behind – removing staff, or ultimate
sanction closure
18. Making Performance Public: Name and
Shaming
• In 2000s significant increase in volume of PI released to the public
although quality varies.
• Including government wide performance reports, league tables for
schools and hospital (e.g UK) and benchmarking( e.g. states in
Australia).
• Can place pressure on poor performers and generate competition
among similar service providers to improve performance.
• Assumption citizen, interest groups ,and external bodies will use PI
to monitor organizations and push for improved performance
• Research indicates citizens mostly interested in services that impact
them directly ( health, education) and evaluate these services
relative to their individual experiences or by media reports.
• Public recognition of good staff performance- reward ceremony, or
letter or meeting with a minister. Promote training and cross-
organizational teamwork and network. Promote culture of
performance service and integrity
18
19. 4) Engaging the Political Leadership: Roles
and Incentives
What role can the political leadership in the executive
and the legislature play in PI systems?
– Agree/set objectives or wide strategic goals for the
government and programs
– Monitoring performance of agencies/programs
– Use PI in decision making on budget/ programs/policy
– Oversight and accountability- hold the government
accountable for results
– Create pressure to improve performance
Issues and Challenges
– Getting political leadership to set clear objectives – goals can be
vague or a product of political compromise, or conflicting with one
another.
– Getting political leadership to use PI in decision making. 19
20. Political Leadership in the legislature:
Challenges and Incentives
• Only limited use of PI, especially in budgetary allocation decisions
• Although research on US States indicates PI is being used in some
states to inform the budget debate and promote a greater focus on
outcomes in discussions.
• Newer legislative members more open to using PI than those who have
been in power for a number of years.
• Legislatures tend to use PI more for accountability purposes to pose
questions on program performance in a selective as opposed to
systematic manner.
• Informational and Institutional factors limit their incentives to use PI.
– Information overload, poor quality or poorly presented information.
– Priorities are influenced by political and constituency interests. They
often lack of time, resources, and expertise to examine PI.
20
21. Improving Legislative Oversight and
Use of PI
• Improve quality, presentation, and relevance of PI.
• Tailor PI to politicians needs and present it in clear,
concise, and readable form
• Audit PI
• Develop systematic and structured oversight agenda
which includes review of PI and reports
• Set schedule so PI is available to inform budget and
oversight processes when needed
• Supplement rather than a replacement for traditional
accountability mechanisms and information
• Build capacity and resources to review information –
training staff, having experts, and holding hearings.
22. Political Leadership in the Executive: PI Use,
Challenges, and Incentives
• More widespread use of PI by politicians in the executive
• PI used to varying degrees for budgeting, monitoring, and management
purposes.
• Executive politicians and their appointees using PI at national, state, city
and local governments levels
• PI used by the governors, chief executives, political appointees, in US
States. Government Performance Project highlighted ten states as leaders
in performance budgeting including Washington, Texas, Maryland, Oregon,
Utah and Delaware.
• PI is most often used by politicians for monitoring and control purposes.
• In Mexico, Colombia, and Chile, Presidents have developed new or used
existing performance systems to monitor progress towards achieving high
priority goals and targets.
• In UK under the Blair and Brown governments ministers held accountable
for performance targets and a cabinet committee monitored progress.
• In US under Government Modernization Act 2010-cabinet secretaries held
accountable for high priority goals. 22
23. Political Leadership in the Executive: PI Use,
Challenges, and Incentives
• Motivating politicians to use PI in budget decisions remains challenging.
– Politicians do not necessarily use PI in the manner reformers intend.
– A larger volume of PI is produced than ever is used.
– The interest in, and use of, PI waxes and wanes with the political salience or sensitivity
of an issue, with changes in political regimes, and with individual political leaders.
• Growing, recognition of the value of performance systems as governing and
monitoring tools.
– When regimes change, it is important to engage new politicians
– Present PI in a manner which is useful for them, given their interests and time
constraints
– Changing accountability structures can create motivational incentives.
– If top leaders establish systems to hold their ministers and political appointees
accountable for performance, this creates incentives for ministers in turn to monitor
progress within their departments.
– Potentially performance systems can be used by politicians to obtain more information
and control over senior career civil servants, who traditionally have an information
advantage.
23
24. 5. Dispelling the Myths and Framing the debate
Framing the debate and dispelling some myths about PB and PM.
• Performance reforms will lead to rational decision making and an end to
politics in budgeting
– Experience has proven this is rarely the case, especially in political competitive environments
with strong ideological and partisan divides. PI is one source of information in decision
making.
• Performance information is only performance targets.
– This is rarely the case governments produce a mix of performance information, and
extensively develop evaluations because performance measures and targets provide only a
snapshot of performance in time.
• More information is always better.
– Overloading decision makers with information makes it difficult for them to discern what is
relevant and useful. Awareness is growing that too many indicators make it difficult to focus
on key priorities and are costly to monitor.
• Performance budgeting automatically or mechanically links funds and
performance results.
– PIB is the most common form of PB adopted in OECD countries. In this approach there is no
automatic or mechanical link between resources and results. Financially rewarding good
performance and punishing bad does not take account of government priorities or the
underlying cause of poor performance,
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25. 5. Dispelling the Myths and Framing the debate
• Performance systems inevitably fail when gaming occurs.
– All budgeting systems involve gaming to some extent, as agency supporters seek to obtain more
money for their interests. Gaming, however, does not preclude improved performance it highlights the
importance of performance regimes being dynamic systems that change rules and incentives as
reforms evolve.
• Performance budgeting stands alone.
– PB goes hand in hand with performance management
• Performance budgeting is always accompanied by increased managerial
flexibilities and relaxation of input controls.
– The impulse to relax controls and the speed at which it is accomplished depends on the country and
institutional context. The fundamental question is if the current system of control restricts managers’
capacity to improve performance and what is needed to balance the risks.
• Performance budgeting inevitably turns into a compliance exercise.
– This is more likely when the reforms increase reporting requirements and controls. This development
can be avoided if reform design reduces and minimizes reporting requirements and removes a rule for
each one added, if managers can see PI as useful for their jobs, and if incentives to use PI are related
to the wider management and accountability systems.
• Performance reforms are a failure if the whole government is not using PI to
produce large-scale improvements.
– Expectations of uniform application of reforms across the entire government are not realistic. For
most PFM reforms progress is mixed. Some agencies and programs are reform leaders, some are
laggards, and some never engage.
25
In general when designing performance initiatives to be effective at the start or up front countries need to consider doing the following
require well-defined key reform objectives.
Developing implementation strategies.
These strategies should include the overall approach (top-down, bottom–up or some combination of both);
Developing a process for introducing and managing reforms;
establishing what it any are the necessary legal frameworks
What the institutional and human capacities needed to drive and support the reforms
Strategies for engaging stakeholders
Appropriate sequencing and a realistic timetable are crucial for successful implementation of performance budgeting.
It is this later point I will expand on in the next few slides.
Use in both allocative decisions and peformance inquires
Introducing performance information into budgeting and management processes, in theory, should be accompanied by a relaxation of input controls and giving agencies increased financial and/or managerial flexibility in the areas of spending and staffing.
Countries’ approach to this have varied greatly. More than other areas, this aspect of performance budgeting and management is strongly influenced by historical factors and a country’s existing budgeting and public management system.
In the late 1980s and 1990s reforms gave ministries and agencies increased managerial flexibility in order to improve efficiency and performance and to hold them accountable for results. Extensive improvements were made in managerial flexibility. Allowing agencies to carry over 5 % to the next year; to transfer appropriations for operations between budget lines. In addition agencies were given greater flexibility in personnel management.
However, the government-wide system of performance budgeting and management has developed slowly. Many ministries and agencies have made only limited progress in developing meaningful performance measures and using them in the budget process.. Norway struggles with problems of goal definition and developing good quality performance measures and data.
UK, the institutional and public administration system is more centralised. The earlier rounds of the UK Public Services Agreements were a more centrally driven target setting exercises. One of the issues resulting from this approach was that those on the front line delivering the services lack ownership of the targets and goals and perceived them as a paper requirement imposed from above.
In 2007, learning from earlier experiences, the government reformed the Public Service Agreements framework and sought to move to a more decentralised system which concentrated on outcomes. This new framework seeks to embed genuine engagement of those delivering and using the service in design, delivery and governance across key public services. It also aims to reduced bureaucracy and unnecessary data burdens on those at the front line delivering services. In addition it recognizes that targets are not the only tools to improve performance.
Introducing performance information into budgeting and management processes, in theory, should be accompanied by a relaxation of input controls and giving agencies increased financial and/or managerial flexibility in the areas of spending and staffing.
Countries’ approach to this have varied greatly. More than other areas, this aspect of performance budgeting and management is strongly influenced by historical factors and a country’s existing budgeting and public management system.
In the late 1980s and 1990s reforms gave ministries and agencies increased managerial flexibility in order to improve efficiency and performance and to hold them accountable for results. Extensive improvements were made in managerial flexibility. Allowing agencies to carry over 5 % to the next year; to transfer appropriations for operations between budget lines. In addition agencies were given greater flexibility in personnel management.
However, the government-wide system of performance budgeting and management has developed slowly. Many ministries and agencies have made only limited progress in developing meaningful performance measures and using them in the budget process.. Norway struggles with problems of goal definition and developing good quality performance measures and data.
UK, the institutional and public administration system is more centralised. The earlier rounds of the UK Public Services Agreements were a more centrally driven target setting exercises. One of the issues resulting from this approach was that those on the front line delivering the services lack ownership of the targets and goals and perceived them as a paper requirement imposed from above.
In 2007, learning from earlier experiences, the government reformed the Public Service Agreements framework and sought to move to a more decentralised system which concentrated on outcomes. This new framework seeks to embed genuine engagement of those delivering and using the service in design, delivery and governance across key public services. It also aims to reduced bureaucracy and unnecessary data burdens on those at the front line delivering services. In addition it recognizes that targets are not the only tools to improve performance.
Introducing performance information into budgeting and management processes, in theory, should be accompanied by a relaxation of input controls and giving agencies increased financial and/or managerial flexibility in the areas of spending and staffing.
Countries’ approach to this have varied greatly. More than other areas, this aspect of performance budgeting and management is strongly influenced by historical factors and a country’s existing budgeting and public management system.
In the late 1980s and 1990s reforms gave ministries and agencies increased managerial flexibility in order to improve efficiency and performance and to hold them accountable for results. Extensive improvements were made in managerial flexibility. Allowing agencies to carry over 5 % to the next year; to transfer appropriations for operations between budget lines. In addition agencies were given greater flexibility in personnel management.
However, the government-wide system of performance budgeting and management has developed slowly. Many ministries and agencies have made only limited progress in developing meaningful performance measures and using them in the budget process.. Norway struggles with problems of goal definition and developing good quality performance measures and data.
UK, the institutional and public administration system is more centralised. The earlier rounds of the UK Public Services Agreements were a more centrally driven target setting exercises. One of the issues resulting from this approach was that those on the front line delivering the services lack ownership of the targets and goals and perceived them as a paper requirement imposed from above.
In 2007, learning from earlier experiences, the government reformed the Public Service Agreements framework and sought to move to a more decentralised system which concentrated on outcomes. This new framework seeks to embed genuine engagement of those delivering and using the service in design, delivery and governance across key public services. It also aims to reduced bureaucracy and unnecessary data burdens on those at the front line delivering services. In addition it recognizes that targets are not the only tools to improve performance.