Performance Budgeting Reforms
– Sequencing and pacing of reform processes
5th Annual Meeting of OECD Senior Budget
Officials Network on Performance and Results
27-28 October 2008
By Niels Refslund, Chief Advisor,
Danish Agency for Governmental Management; Ministry of Finance
Focus of Performance Based Budgeting (PBB)
• Management of public ressources:
- Based on reliable and relevant information
- Connecting results with dedicated ressources
- Heading for effectiveness as to political goals
• A Management on all levels:
- That pays respect to the difficulty of this approach
- That nevertheless encourages dynamic innovation:
- Evidence is needed (measurements and evaluations)
- Measurements can’t replace accountable leadership!
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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The Parliamentary Chain of Control
- Clarity of roles is important
The Parliament
Electorate
The Government
The Administration
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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New Management-Policy Statement:
(”Effectiveness and responsibility” - To be launched End of 2008)
I. Corporate governance
- Holistic and proactive management
- Management information (Performance Information/PI)
II. Contract management
- Strategic focus on drivers/ core tasks
- Effectiveness and dialogue/ incentives
III.Cost effectiveness
- Accrual budgetting and accounting
- Coupling of resources with results
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
 4
Re. I: Corporate governance
• Basic Control of economic preconditions and rules
-
Follow up: Budget and spending; Long term investment planning
-
Quality of management information
• Improvement of corporate governance
-
Holistic approach to each Ministry and cross cutting Ministries
-
Exploitation of scale of economy (shared services etc.)
-
Evaluation; comparison/bench marking; best practice
• Coherence between resources and results
-
Goal and Performance/Results management
-
Exploitation of accrual budgeting and accounting reform
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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Figure 3 Consideration and choice for version of governmental management model
Mission
Vision
Basic principles
Values
Choice of management set-up
Strategic
holistic
thinking
Choice and
elaboration of
management
set-up
Management
area
Management
tools
Management and Control model
Economy
-Financial
-Capacity
Annual
budgets
Current
controls and
supervision
Activity and
resources
Task
hierarchy
Cost
allocation
Activity and
Resource
management
Goal and result
measurement
Goal clarifying
Contract
management
Quality and
effect
HR
Qualifications
HR-strategy
Motivation
Communication
and Promotion
Management
and Leadership
Holistic
management
Leadership
policy
Corporate
management
organization
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
Efficiency and
Effectiveness
Risk
management
Efficiency strategy
Lean
Benchmark
Risk management
Efficient public
instruction
institutions
Digitization
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Re. II: Goal and Performance Management
• Demand for common corporate concept and approach
• Demand for active follow up of goals and performance
• Focus on few strategic drivers and effectiveness
• Long term contract; annual review; incentives
• Management dialogue – bottom up; ownership
• Stressing end user perspective (Raison d’etre)
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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Outcome
Output
Shift in
focus for
management
Services
Activities
Resources (input)
Financial means
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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Re. III: ”Cost Effectiveness” (Self-Evaluation)
A tool to analyse and evaluate the quality of Economic Management
Goal and Performance Management
Activity and Ressource Management
Financial Management
Demands
Process
/Tools
Information
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
Results
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The need for management differs due to tasks
• Common basic and legal requirements (60%)
• Specific management requirements dependent on
category of tasks for each public institution (40%)
1. Dealing with cases; public administrative casework
2. Knowledge producing public institutions
3. Producers of Public Services; service delivery
4. Consultancy and Supervisory Public institutions
5. Institutions for tasks of readiness; alert; emergency
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
 10
Hierarchy of tasks
Scope of Management
Management Tasks
Outcomes
Output
Goals and Performance
E.g. ongoing internal
follow up on results
and on cost-benefit
analysis etc.
Services
Activities
Activities and Resources
E.g. distribution of
costs, capacity
control, planning of
investments
Resources
Financial means
Financial Management
E.g. control of loan
frameworks,
liquidity, and follow
up on budget and
accounts
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Total Score on level of Management
(Optimal Score versus Actual Management Score)
Goals and
Results
100
Potential degree of
Management /
Control (%)
80
60
40
Actual degree of
Management /
Control (%)
20
0
Financial
Activity and Resources
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
 12
Characteristics of danish PBB-reform processes
• Pragmatic (Flexibility)
• Experimental (Also risk for single case pressure)
• Participation from different involved groups
(consensus/ inclusive approach)
• The main purpose is good performance, greater
efficiency and better effectiveness
• Departement of Finance has the role as a reform driver
• And the Agency of Governmental Management is an
agent for development and implementation
• The Parliament (Folketing)has only been little involved
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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Historic glimps about PI related to State Budget (SB)
• 1965 – Intro of framework budgetting + activity information
• 1975 – Extended quantitative information + service standards
• 1987 – Budget reform; Schematic activity overview incl. info on
demand, supply, resources/capacity, productivity, quality
• 1994 – Intro of business activity survey; tailor made
• 1999 – Intro of Annual Report incl. Accounts for each
institution; decoupling of PI and SB to avoid mix of decisions
• 2005 – Adaption of Annual Report to requirements following
the introduction af accrual budgetting & accounts (2003-2007)
• 2008 – Extended emphasis: Tailored management information
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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National Auditors Office in action (Example):
Report to Parliamentary State Auditors on development
and quality assurance of University Educations
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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The Danish Press initiates public discussion of the effect
of Acitivity Based Budgeting (”Taximeter-System”):
An example concerning higher education
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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Main tools for performance management
• Accrual budgeting & accounting – Cost-Based appropriations
-
Focus on use of resources and cost distribution (by task-hierarchy etc.)
Long term investment planning (precondition for PBB!?)
• Performance agreements (contract based management)
-
Performance objectives and demanded results
Regular reporting – coupling of results with incentives
• Taximeter budgetting (activity based budgetting)
-
Actual performance (production) releases a calculated budget
Is applied for selected sectors: Education & hospitals
• Periodical/ Annual Reports (incl. performance reporting)
-
Statement of output performance & overall financial performance
Statement of approval & management accountability
• Evaluations & budget analysis (ad hoc, external/self evaluation)
-
Focus on selected policies, programmes or institutions
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
 17
How to motivate and pace performance – how
to engage various actors ?
• Leadership accountability through:
-
Vision, mission, demands for results, service information
-
Directors contract, incl. an element of bonus/incentives
-
Management flexibility in line with accrual budgetting and acc.
• Employee dedication through:
-
Ongoing qualification measures – courses, on the job training etc.
-
An element of incentives connected to personal effort/performance
• Competition and transparency:
-
Competition/ comparison between institutions (best practice etc.)
-
Team work as well as competition/incentives at individual level
• Common political-administrative understanding of reform
-
F. ex. Launching of a comprehensive public sector ”Quality reform”
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
 18
• A ”Quality Reform” was launched as from 2007
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High political priority: Rooted in Prime Ministers office
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Comprehensive dialogue with citizens and experts:
-
5 main lines of focus and priority:
•
•
•
•
•
-
Citizens choice, user involvement/personal responsibility
Coherent public service –respecting the individual citizen
Clear objectives/targets and responsibility for results
New ways of thinking - competition, innovation
Management, involvement, motivation of public employees
Major challenges:
• State-Municipality: Long range contract mgm. by objectives
• Proper balance between front end efforts and documentation
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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• Improvement of Management and Performance
Capabilities – renewed campaign 2008:
• Nine principles for good public service management:
- At eye level (meet the citizen where she/he is)
- Clear speach (Open and clear communication)
- Clear expectations (clarify for users what can be expected)
- Humbleness (be humble as to your role and power)
- Act on failures (failure must be adressed without hesitation)
- Professionalism (Skills and competence is basis for good service)
- Coherence (users must experience a unified public interface)
- Development (Developm. & innov. must mark the public sector)
- Ressources and reflection (Use public ressources carefully)
Niels Refslund - OECD-Network,
Paris 27-28 Oct. 2008
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