Implementing Results-Based Budget Management Frameworks: An Assessment of Progress in Selected Countries

IMPLEMENTING RESULTS-BASED BUDGET MANAGEMENT FRAMEWORKS

AN ASSESSMENT OF PROGRESS IN SELECTED COUNTRIES

DECEMBER 2017

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Contents

Tables and Figures

Acknowledgments

Peter Fane, consultant, wrote this report under the supervision of Claudia Buentjen, principal public management specialist at the Thematic Advisory Service Cluster, Sustainable Development and Climate Change Department. Warren Turner, senior public management specialist, peer-reviewed the document. The project team greatly appreciates the strong support and inputs provided by the Governance Thematic Group Committee and Network. Thanks are also due to Jill Gale de Villa, editorial consultant; and Josephine Jacinto-Aquino, Ethyl Bulao-Lorena, and the staff of the Department of External Relations for their support in producing this report.

Abbreviations

Executive Summary

Results-based budget management (RBBM), or new public management (NPM), has been the flavor of the month for at least the last 2 decades with many Organisation for Economic Co-operation and Development (OECD) member countries and development partners. However, there seems to be a significant gap between the rhetoric surrounding the potential benefits of RBBM and the effort and rigor with which principles have been adopted and applied. Responsibility for a significant part of the failure to implement appropriate RBBM structures may be due to the assumption that RBBM is more or less similar to corporate planning, which is far from the truth.

RBBM is intended to hold managers to account for their role in organizing the supply of goods and services to the public, and to enforce a regular review of the purported effectiveness of government expenditure programs in delivering desired outcomes for the community. RBBM is intended to introduce evidence-based evaluation of government interventions through the association of financial expenditures with the delivery of physical outputs, which themselves are purported to deliver intended changes in society that can be measured through changes in outcome indicators. The changes in outcome indicators attributable to government interventions (i.e., the outputs of government) can be termed impacts of government interventions.

However, to measure the efficiency of output delivery and the effectiveness of government interventions (outputs) in effecting outcomes, as measured by outcome indicators, requires the specification of comprehensive sets of output performance indicators, which must then be linked to outcome indicators.

RBBM or NPM should exist within a highly structured data classification framework, designed to support the collation and correlation of relevant statistics. The two critical components of an RBBM system are outputs and outcomes and their associated statistical indicators, and yet no country seems to have developed a standardized nomenclature system for either outputs or outcomes, or implemented a system to classify outcomes or outputs and their statistics—which must span all government expenditures.

This is in contrast with classification systems previously developed as part of government financial statistics detailing aspects of financial expenditure such as economic types, functions of government, and line item accounts. The proponents of RBBM and NPM either did not appreciate the necessity of the statistical framework or were not sufficiently supported in their efforts to establish one. In any case, many of the consultants who proceeded to disseminate the good word of RBBM failed to appreciate the need to invest time, firstly, in defining the statistical framework and supporting information technology (IT) systems before proceeding to implementation across government agencies. Even the approach to identifying outputs and outcomes across agencies has, in almost all cases, proceeded in a haphazard and unstructured manner. Only in recent years have some countries realized the importance of developing a structured classification framework but, even then, the frameworks developed lacked rigor. The outcome classification frameworks that Canada and Singapore developed, as presented in this paper, do not properly span all government expenditures and are potentially unstable over time. An alternative outcomes classification framework in Appendix 3 is based on the classification of functions of government (COFOG) standard developed by the United Nations, OECD, and the International Monetary Fund (IMF), among others. Shown in Appendix 6 is an indicative classification of outcome indicators that has used the COFOG structure as a general starting point for building an outcome indicators classification system.

This report discusses the implementation of RBBM frameworks in the context of national budgeting, but does not examine the extent to which countries have used their frameworks to make meaningful decisions. Unless implementation has been appropriate, fit, and proper, the RBBM framework cannot hope to deliver data that can be used to support and guide decision makers to the appropriate policy choice.

This report examines the extent to which the fundamental structural elements of frameworks put in place in selected countries conform with certain desirable traits, because this is a significant determinant of the probability that the framework can be put to good use in a practical sense. In this context then, this report is simply an assessment of the RBBM frameworks put in place to assist in the national budgeting decision-making processes, where the assessment is conducted against certain business principles upon which the introduction of RBBM and the NPM models are based.

The quality of the implementation of the framework elements also significantly determines the usefulness and appropriateness of the analysis and conclusions derived from using the implemented framework. Therefore, the quality of the framework structure and elements are the fundamental determinants of the successful use of the RBBM framework in a national budgeting context.

As recognized in the presentation by S. P. Lim to the National University of Singapore−World Bank Institute East Asia Urban and City Management Course in May 2000: …the basic concepts and principles [of promoting operational efficiency, and accountability for good governance] are quite universal.¹

While accrual accounting is, in the medium to longer term, a fundamental element of a fully functioning RBBM framework, this report does not assess accrual accounting as part of the implementation of the RBBM frameworks of the selected countries, primarily because the performance measurement of government interventions may be initially introduced at a meaningful level without the concurrent introduction of accrual accounting, and few countries have introduced full accrual accounting in government.

Nor does the report discuss performance-based remuneration of staff, except to note that both literature and practice indicate conflation of corporate planning and organizational management concepts with national RBBM concepts. While a cascading linkage of the national RBBM concepts to corporate planning and remuneration concepts is desirable, it is beyond the scope of this report to discuss how this should be done to ensure the practical use and application of the RBBM performance concepts.

For this report, the term RBBM refers to the general approach to budgeting that uses performance indicators to assist in defining the delivery of outputs produced by an agency, and outcome indicators to measure the progress toward achieving outcome goals, which encompasses performance-based budgeting or any other term devised to describe a form of budgeting that uses performance indicator concepts to measure the delivery of government outputs and the extent to which the objectives of government interventions are achieved.

A swathe of papers has been written about the use of performance information in both the development and analysis of government budgets. The papers seek to enlighten their audiences on using performance information in a government budget context. However, misconceptions of the conceptual foundations underpinning RBBM and its practical implementation across government organizations remain widespread.

Terminology varies from one author to another and authors often fail to distinguish corporate planning and internal management concepts from national budgeting and planning, which should be treated as quite distinct, albeit complementary, subjects.

The conflation of internal management issues (in particular personnel performance measurement, and short-term corporate planning concepts, such as "key result