Organisation de Coopération et de Développement Économiques
Organisation for Economic Co-operation and Development
PUBLIC GOVERNANCE AND TERRITORIAL DVELOPMENT DIRECTORATE
PUBLIC MANAGEMENT COMMITTEE
HAND OUT
English Text Only
Working Party of Senior Budget Officials
PERFORMANCE & RESULTS
3rd Annual Meeting of SBO Network
EXPERIENCES IN UTILISING PERFORMANCE INFORMATION IN
BUDGET & MANAGEMENT PROCESSES
OECD, Paris
2-3 May 2006
-- DRAFT CASE STUDY –
SWEDEN
Swedish experience in utilising performance information in budget
and management processes
By
Thomas Küchen
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Memorandum
Draft
28 April 2006
Ministry of Finance
Sweden
Budgetavdelningen
Thomas Küchen
Telephone +46 8 4051697
Mobile +46 70 6685619
Fax +46 8 4117014
E-mail thomas.kuchen@finance.ministry.se
Swedish experience in utilising performance information in budget and
management processes
1. Description of performance system
Management by performance in Sweden’s public administration began in the late 1980s. In its
supplementary budget proposal for the 1988/89 budget year, the Government established that
attempts to radically and in a coordinated fashion change how government activities are managed
have been going on since the 1960s. The Government emphasised that the necessary prerequisites
must be created in order to be able to continuously reallocate resources from existing activities
that are no longer deemed important to other activities of higher priority, both in the course of the
budget process and in other contexts. Efficiency and productivity in the public sector would also
need to improve in order to produce more – or more appropriate – services for the same resource
input.
In the same budget proposal, the Government also argued that management through a financial
framework and extended powers and responsibility must be linked to a demand for better followup. The Government should state what results are expected to a considerably greater degree than
previously. The ways in which different activities’ thrust and content are controlled must therefore
be developed. These should be adapted to the prerequisites that apply for each individual field.
Development must to a greater extent be a natural part of day-to-day work at the Government
Offices, at the authorities, and in the interaction between the Government Offices and authorities.
The predominant form of control in state administration, alongside management by rule (laws and
ordinances) and informal control, is economic control.
The concept of economic control consists of two sub-concepts: performance management and
financial control.
 Performance management refers to a control system that involves setting goals for
organisations and activities, collecting performance information systematically, and analysing
and assessing the results against stipulated goals.
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 Financial control is used to set the economic frameworks for organisations’ resource
consumption. These include among other things appropriations, conditions for chargeable
activities, investment frameworks, and borrowing frameworks.
 When the government’s activities and operations are followed up and evaluated, results are
assessed along the lines of both goal attainment and resource consumption.
Economic control plays an important part in the government’s budget process. The budget is
drawn up on the basis of a number of political goals and the resources that are available.
Performance management and financial control must contribute to providing parliament, the
Government, and public administration with relevant bases for taking decisions.
In this context, it should also be noted that the Budget Act – which is the law that regulates
Parliament’s and the Government’s responsibility as regards financial power – states that the
Government shall account for the relevant goals and the results attained in different fields.
Based on the Budget Act, the Government has established a comprehensive set of rules for
economic administration (ordinances) that the authorities must observe. These govern both
performance management and financial control.
In addition, the Ministry of Finance will draw up instructions, in the form of circulars, for internal
work with performance management at the Government Offices. The instructions cover the
content of the annual steering document for the authorities (the letter of appropriation), the
objective and results dialogue between the authority’s management and the management of the
responsible ministry, and the Government’s reporting of results to Parliament.
A common activities structure is being introduced
As of the 2001 Budget Bill, a uniform structure (policy areas) was introduced for government
activities. According to what the Government said at the time, a division of government activities
must in principle comprise all activities controlled by the Government. Such a division must also
enable the Government and Parliament to relate results easily to the politically stipulated goals. A
uniform activities structure will help elucidate how different measures work towards shared goals
and how they interact in order to best contribute to attainment of the shared goals. It will also be
easier to make comparisons between different areas, which in turn will also make it easier to
prioritise between different activities.
According to what the Government proposed in the Bill, the basis of all performance management
is that it must be adapted to specific activities. This means choosing and combining those means
of control that in total are best suited to the management of a specific authority and its particular
activities. The goals that the Government formulates for individual authorities’ activities will thus
reflect the goals at the levels of policy areas and activity areas. The authorities’ reports in turn
constitute a foundation for the Government’s assessment of goal attainment, and provide the
Government with a basis for assessing any need to take measures.
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The national budget is currently divided into 48 policy areas (Labour Market, Transport,
Migration, Equal Opportunities etc). The policy areas comprise approximately 90 per cent of
Government spending.
2. Measuring and Assessing performance
The goals for the policy areas are formulated within the framework of the Government’s budget
process. The goals are proposed by the Government and decided by Parliament. These goals have
proved to remain stable over time.
Most of the policy areas are subdivided into activity areas (equivalent). At this level, too, goals
are normally set; these are determined by the Government. The Transport policy area, for
example, is subdivided into six activity areas: Roads, Railways, Shipping, Aviation, Interregional
Public Transport, and Research and Analysis. The division of policy areas into activity areas has
also proved to be relatively stable over time, as have the associated goals.
Each authority’s activities are also subdivided into one or more branches. Each branch is unique
in that it can only belong to one activity area (and thus one policy area). An authority can on the
other hand be active within several policy areas. In its letter of appropriation to the authority, the
Government every year stipulates the goals and feedback requirements for each branch (of
activity).
Formally, the political level is involved in establishing goals. In practice, however, performance
management is in the main an issue for officers in both Parliament and the Government Offices
and at the authorities.
The majority of the goals for the policy areas can be regarded as effectiveness goals, while the
goals at the branch of activity level are in principle exclusively performance goals.
Alongside the policy area goals, the Government has also established a handful of goals of a more
political nature. These express, for example, the Government’s ambitions regarding the
employment and unemployment levels, and also the number of people receiving supplementary
benefit. These goals are all quantified and times for their attainment assigned.
3. Integrating and using performance information in the budget process
Parliament appropriates funds for various purposes, for example to authorities and for transfer
payments. Parliament also establishes goals for different policy areas, which constitutes an
organisational division of the national budget. Every year, in the Budget Bill, the Government
submits a statement of operations for each policy area to Parliament. This in turn is intended to
form the foundation for the Government’s budget proposals for the coming years.
The Government in its turn appropriates funds to its authorities on the basis of what Parliaments
decides with regard to the Budget Bill. It does this in a special steering document – the letter of
appropriation. The letter of appropriation also states what goals the authority must attain during
the coming year and what performance information they must give the Government.
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In their Annual Reports the authorities then present a statement of operations that describes what
the authority accomplished during the year, preferably in terms of performance but also in terms
of operational costs. On the basis, among other things, of an authority’s Annual Report, an
objective and results dialogue takes place once a year between the authority’s management and
the responsible ministry (normally represented by the state secretary).
The authorities’ Annual Reports – that comprise both traditional financial accounting, and a
statement of operations – are scrutinised in an external audit made by the Supreme Audit
Institution, an authority that is subordinate to Parliament.
The performance information is not used as a basis for negotiating or deciding on resources for
the future. This is partly due to the fact that the goals are too imprecise and that the results that the
authorities report are one-dimensional and thus difficult to base a position on. Nor is it possible –
or desirable – to require accountability on the part of an authority’s management solely on the
basis of the performance information that the authorities themselves compile.
4. Reporting on performance
Performance management is strongly linked to the Government’s budget process. The
performance information is used by the Government both to follow up the authorities’ activities
and to report the results to Parliament.
Every year, in the Budget Bill, the Government submits a statement of operations to Parliament
The Government’s statement of operations is on both a policy area level and an activity area level.
This information is also primarily in respect of performance, and only in exceptional cases has to
do with effectiveness. Resource consumption in the policy or activity areas is not normally
reported.
5. Key challenges
Performance management was introduced both as a tool for the Government’s budget process, and
as a way for the Government to control its authorities. Both these aspects are considered when we
ask how the different actors perceive performance management and the answers are therefore not
always clear-cut.
How has performance management functioned so far?
What is Parliament’s view?
Parliament has on several occasions called attention to the fact that the operational goals set
should be formulated in such a way as to enable them to be followed up. Performance information
should also be relevant to the goals set. Performance and development should be reported in
quantitative terms to a greater extent than hitherto, using indicators or key ratios. The
Government’s reports to Parliament must also be of such quality that goal attainment can be
assessed (by Parliament).
Parliament has also stipulated that the Government’s reports must focus on performance to a
greater extent than hitherto, and less on activities such as measures taken or ongoing enquiries.
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The reports must also to a greater extent focus on activities and less on authorities’ achievements,
not least with regard to action taken by the government that affects all sectors. The linkages
between results achieved and proposed appropriations should also be improved. In order to
improve the linkage between goal attainment and budget proposals, the Government must clearly
state the reasons for its assessments and conclusions.
These reflections are thus based on the view of performance management as a way of conducting
the budget process.
What is the authorities’ view?
The authorities’ experience of performance management is both positive and negative. The
performance information compiled is used to a fairly large extent within the authorities, and the
dialogue between the authorities and the Government Offices appears to be developing in gradual
stages. On the other hand, the authorities say that they find it difficult to measure the results of
their activities. They feel that the feedback requirements have greatly increased in recent years, at
the same time as it is not clear to them how the performance information is used by the
Government Offices. In their opinion, the Government Offices also have shortcomings as regards
continuity and competence.
Another observation is that there is a risk that the amount of information in the authorities’
appropriation directions will lead to a lack of clarity in the Government’s priorities. A large
number of goals, general requirements, feedback requirements and commissions means that the
effect of the individual signals decreases at the same time as the cost increases.
In all essentials, these observations are based on the view of performance management as a model
for the Government’s control of its authorities.
Future challenges

There are obvious difficulties to formulating goals of political interest for government
activities. It is also difficult to define relevant indicators that capture the degree of goal
attainment. Nor is it a simple matter to relate resource consumption to goal attainment. The
lack of relevant data is manifest in certain areas, but this does not constitute a crucial obstacle
to more appropriate use of performance management as a form of control.

One particular problem that has been identified in Sweden has to do with difficulties in
managing activities horizontally in a vertical structure. Goals that are formulated with an
accompanying demands to report results in a policy area structure (vertical structure), does
not, in some areas, reflect the real activity-wise linkages between different authorities. The
consequence of this is that neither the responsible politicians nor the authorities’ management
understands how stipulated goals and the demand to report performance information are in
agreement with how activities are carried on in practice.

A further dimension is the difficulty of coordinating the performance management effort in
the Government Offices. It is at present the responsibility of the respective ministry’s political
executive, the Directors of the divisions and departments, and the responsible administrators at
the authorities to manage the ministry (by performance).
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6. Solutions, impact and lessons learned
One fundamental question, in the light of our practical experience, is if it is realistic to expect that
performance information can be used to enforce accountability and allocate resources in the
future? We would gain a lot if we could at least accomplish a follow-up of substance both in the
relationship between Parliament and the Government and in the relationship between the
Government and the authorities.
Another question is whether it would be possible to base the reporting of results to Parliament on
the performance information that the authorities provide. A question that is closely related to this
one is whether it would be possible to evaluate the authorities’ activities on the basis of the
performance information that they compile themselves.
There are no obvious answers to these questions. What is possible to say is that performance
management in public administration in Sweden in its present form meets with a number of
problems. One difficulty might be that we have gone too far with its application and its associated
requirements. Another difficulty might be that we attach too much importance to it, which seems
quite clear from the lack of political interest in performance management and the performance
information that is drawn up.
It should be possible for the Government to a certain degree to use the authorities’ performance
information in their reporting to Parliament. But, on the other hand, Parliament cannot normally
use the same performance information for the purposes of evaluation. Nor is it possible that only
the performance information that the authorities provide can be used by the Government to
evaluate the authorities’ activities. Moreover, such evaluations should be made by an actor who is
independent of the authority in question.
It may also possibly be true that the Government’s need for performance information varies as it
on the one hand wishes to manage its authorities by performance in order to realise its policies,
and on the other hand wishes to cater for Parliament’s needs as regards performance information
in order to be able to form an opinion on the Government’s budget proposals.
Where do we go from here?
In order to improve the performance dialogue between the Government and Parliament, we have
set up a working group consisting of representatives from the Ministry of Finance and the
(Parliamentary) Committee on Finance. The question we are discussing is what kind of
performance information Parliament needs to be able to come to a decision on the Government’s
budget proposals. In this context, we have good reason to consider what performance information
should be submitted annually and at specified intervals. The working group has only recently
begun its discussions and therefore it is not possibly to present any results yet.
As far as the application of performance management in the relationship between the Government
and its authorities is concerned, the Government has chosen to appoint an investigator – with a
broad and unconditional mandate – to evaluate how performance management is used in the
relationship between the Government and its authorities. The investigator will also make
proposals as to how performance management can be reformed and developed in order to improve
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the management of the authorities, and also describe the prerequisites this will require, together
with any limitations.
The directives decided by the Government to support the investigator’s work contains a number of
specific questions. The investigator is to, for example:
 evaluate the interaction between performance management and financial control.
 consider what possibilities and limitations exist for the Government to be able to develop clear
goals, in a strategic manner, that are of use in the management of the authorities and that can
be followed up, and also consider the possibilities that exist to draw up clear goals for several
authorities.
 consider and analyse what possibilities and limitations exist for assessing, with the support of
performance information, whether activities and assignments have been carried out in
accordance with the Government’s decisions, and also require accountability on the part of an
authority’s management. One specific set of problems to consider in this context is where a
number of authorities contribute to the same goals.
 consider what possibilities and limitations exist for systematically examining government
activities and authorities with the support of performance information.
 assess what possibilities and limitations exist for adapting performance management to
specific activities and situations to a greater extent.
The investigator’s report is to be submitted in April 2007.
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