Orienting Public Spending towards Achieving Results Performance and

Orienting Public Spending towards Achieving Results Performance and Performance Management: A Conceptual Overview Joel Turkewitz World Bank

Outline of Presentation v The idea of performance in the public sector v Improving Performance Through the Budget Process v Results and Implications for Program Design

Performance in the public sector v Not a new idea – previously around the concept of “public service ethic” v Altered in post World War II environment – Rapid expansion of government – need to demonstrate the value of government spending. – Challenges to idea of “public interest”

The idea of performance has remade the public sector v Re-engineered Processes – Program budgeting, MTEF, accrual, performance auditing, etc. v Reshaped the state – Privatization, decentralization v Changed accountability relations – Monitoring and evaluation, citizen report cards, etc.

Ideas Associated with Improved Performance v Performance improves when managers know what is expected of them and are measured against those expectations. v Performance improves when managers are given flexibility to use resources

Performance ideas (2) Performance improves through the devolution of authority to operating levels and units. v Performance improves when government decisions and controls focus on outputs/outcomes. v Performance improves when mangers are held accountable for the results produced. v

Core Performance Strategies v Increased Competition in the Public Sector v Enhanced Managerial Autonomy v Program Review v Deregulation and Simplification

Each strategy=unique challenges v Performance improvement through competition – ensuring deep markets and reducing transaction costs. v Performance improvement through enhanced autonomy – creating incentives for managers to want to manage for results & establishing real accountability

A quick aside – Measuring and Performance v Frequent assumption – monitoring per se yields improved performance. – “That which gets monitored gets done. ” v Key question – how does monitoring/measuring act to improve performance. – Importance of interest in monitoring results

Performance Budgeting v Sub-set of performance management v Definition: Performance Budgeting = procedures to enhance link between spending and outcomes/outputs through the use of formal performance information.

Long History v v v Initial efforts can be traced back in the U. S. to turn of the 20 th Century First serious efforts – 1960’s – U. S. (PPBS) and Sweden. Now commonplace – 70% of OECD countries include performance info in their budgets – 40% have measures that distinguish between outputs and outcomes

Traditional verses Performance Budgeting Traditional Budgeting Performance Inputs as ends in themselves Relationship between inputs and outputs Changes in inputs at the margin Changes in inputs and results for program Divorced from planning and management Integrated with planning and management Costs Budgeted resources

Types of Performance Budgeting v Ex ante targeting – U. K. Public Service Agreements v Output-based – New Zealand output-purchase v Ex poste linkages – U. S. Program Assessment Rating Tool (PART), Performance Management Agenda (PMA)

Challenges associated with ex ante and ex poste linkage v Ex Ante – translating expectations of performance into performance v Ex poste – managing the burden of evaluation in a process that does not create excessive conflict within the state administration

Issues in Performance Bugdeting v Establishing a program structure v Identifying useful indicators

Program structure v Fundamental to the dynamics of improved performance – Groups activities around a core objective – Groups costs associated with core objective v Not trivial – 10 years after the start of GPRA, fully 50% of programs in U. S. could not be evaluated due to the absence of clear objectives.

Principles of Program Design One program – one objective v Hierarchical structure: program –subprogram-activities-projects. v Size appropriate for efficient management v Clear connection between resources used and outputs produced (and outcomes). v Capture all related activities – integrate capital and recurrent spending v

Principles (2) v Establish accountability for the outputs of programs, sub-programs, and activities. v Responsibility for implementing each program aligned with a single vote in the budget.

Keys to Success in Establishing Program Structure Establish clear rules to guide program identification and the level of sub-program and activity aggregation. v Align programs and organizational structure of government. v Programs and their outputs need to be designed considering the informational resources of the government. v

Program Structure not just about grouping current activities v Program Structure – integrating design, management and accounting. – Strong implications for accounting, financial reporting, internal auditing, and external oversight. – Strong implications for the role of line ministries and central ministries, such as Min Fin.

Identification of indicators v Yes, it is a problem. v Not the core problem v Availability of resources – Other countries, experienced practitioners

Results and Implications for design Widespread belief – Performance management does not work. v Where do we look for results. v – Inter-sectoral allocations – But maybe, we should look instead at: • Intra-sectoral allocations • Intra-program re-allocations.

Evidence of impact of performance info on allocation v Broaden out allocation to not only refer to central processes. v Look at papers in the session – Australia – Harry Hatry – local examples – Look at references in the paper

Performance Improvement v Linked to: – Better calibrated allocative process – Better designed programs – Managed in an environment that demands performance.