Presentation to SBO Network on Performance and Results
2-3 May 2006
Danish experiences with Performance
and Results
Rikke Ginnerup, Ministry of Finance &
Niels Refslund, Agency for Governmental Management
Agenda
• Brief background
• Outline of the Danish performance system
– Efficiency Strategies and Performance Contracts
– Reporting on performance information (Annual
Reports)
– Accrual Accounting and Budgeting Reform
– Performance information in the budget
• Key challenges
Background
• 1980’s: Budget reform and introduction of framework
budgeting
• 1990’s: Introduction of performance contracts
• After a 10-year period a number of weaknesses were
identified:
– Too many targets and objectives, few measurable
– Targets directed internally at the organization
– Targets and objectives were not prioritized
– Lack of linkage between directors contracts and
performance contracts
Introduction of Efficiency Strategies in 2003
• Mandatory policies in the efficiency strategies:
– Performance management
– Clear targets for citizens oriented services
– Contracting out
– Procurement
• Voluntary:
– Mission and vision
– Organisation and structure
– Key areas of action
New outline of performance contracts
• Focus on outputs and outcomes (external targets and
objectives)
• Merging performance contracts with director contracts
• A limited number of output targets (5-10) but many
measures
• Analysis of the ”hierarchy of tasks and activities” as a
condition
• Focus on distribution of costs (ABC)
• Review of targets and objectives in yearly reports
Hierarchy of tasks and activities
Outcomes
Outputs
”Results”
Tasks
Activities
Resources
Funds
”Processes”
Performance contracts
An example of a hierarchy of tasks and activities
Sustainable agriculture
Payment of grants
Financial support to ecological
agriculture
Administration
Material
Cleaning
Personel
Appropriations Fees
Management
Advise
Research
Outcome
Output
Task
Activity
Resources
Money
Review of performance contracts in the Danish
central government (2004)
Table showing aggregate measures of the performance contracts
Total number Total number
of
of
Total number Total number Total number
measurable quantitative
of contracts of objectives of targets
targets
targets
119
853
* percentage of all targets
3701
No. of external and
internal targets
Internal
targets
External
targets
3508
1472
1060
2641
94,8 %*
39,8 %*
28,6 %*
71,4 %*
Examples of output and outcome targets
• The Danish Medical Agency
”It is satisfactory if time of case processing for new composite
drugs and vaccinations is 210 days in 95 % of the cases.”
• The Danish Competition Authority
”For 2004 the target is that the agency's productivity for
running services rises with at least 2 % compared to 2003”
• Danish Commerce and Companies Agency
”In 2004 it is expected that the company portal gets 600 users
on average per month. This should give 7.200 new registered
users in 2004 adding up to a total of 11.200 users by the end of
2004.”
• Statistics Denmark
”The level of user satisfaction is 4,3 (on a scale from 1 to 5).”
Reporting on results in Annual Reports
• Introduction to mission and organisation
• Performance report
– Statement of output performance
– Statement of general financial performance
• Financial account
– Profit and loss account and balance sheet
– Cash flow statement
– Various financial key figures
• Approval and attachments
Accrual Accounting and Budgetting Reform
• Applying private sector accounting principles to the
public sector
• From cash to accruals: focus on the use of resources
(depreciation) rather than payments
• All departments and agencies must prepare financial
statements with balance sheet, income statement etc.
• More focus on cost distribution
• A better basis for substitution of factors of production
• A precondition for performance based budgeting
Performance information in the budget
• The performance information is only to a limited extent
linked to the budget
• However, ”taximeter-budgeting” links the allocated
budget to the output (productivity) of the institution
– Primarily used on the education sector: eg. 30-50
pct. of the university budgets depend on the amount
of students passing the exam
– Is presently considered in new areas as a follow-up
on the accrual accounting and budgeting reform
Planning &
Budgetting
Management
of expenditure
frames
Tools to compare
costs, activities &
results
Performance
management
MoF: Budgetary
framework
•long-range budgets
•investment planning
•consolidated budgets
•guidance for corporate
governance
Performance
objectives
•speedy procedures
•key figures (MIS)
•cash management
•activity based costing
•task hierarchy
Day-to-day
management using
various information
systems
Budget
proposals
Periodic
control &
follow-up
Accounting
Quarterly approval
of accounts
Framework
statement
Annual
report
National annual
account
•approval of accounts
•surplus reserves
•performance reporting
Performance
contracts
Annual
report
Performance
reporting
Key challenges: performance contracts
• Measurement of targets
• Risk of goal distortion
• Cross-cutting targets
• Fragmented performance information
• Resistance against a very centralized and systematic
program approach
• Transparency can create pressure for more resources
• No direct integration between the performance
information and the budgets
Key challenges: Taximeter-budgetting
• Perverse effects
• Expenditure control
• Need to fine-tune the grants and simplify the model