Sequencing Budgetary
Reforms:
Lessons from Singapore
26 May 2000
Briefing Outline
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Mission
Budgeting Policy
Evolution of Budgeting System
The Future of Budgeting
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Mission
To Advance the Well-being and
Development of Singapore
through FINANCE
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Mission
• We will accomplish this with:
– Superior Stewardship and Prudent
Investment of Public Funds
– A Financial Environment Conducive to
Business and Enterprise
– Policies and Frameworks which Enhance
Excellence in the Public Sector
– Practices and Results which distinguish
MOF as a World Class Organisation.
4
Budgeting Policy
What we want to do
and Why...
Budgeting Policy
• Promote sustained and non-inflationary
economic growth
• Foster growth in the private sector
• Live within our means
• Invest in the future
• Safeguard our Reserves
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Budgeting Philosophy
People at operations
are in the best position to decide
on the most effective and
efficient use of resources
to obtain the best value for money
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Key Questions
• Are they allowed to do it?
• Are they capable of doing it?
• Are they doing it?
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Evolution of
Budgeting Systems
How did we get from
There to Here?
Budgeting Systems
• Past:
– Up to 31 Mar 78
– From 1 Apr 78
– From 1 Apr 89
Line Item Budgeting
Programme Budgeting
Block Vote Budgeting
• Present:
– From 1 Apr 96
Budgeting For Results
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Evolutionary Trends
• General trends:
– More flexibility and autonomy
– Greater accountability
– More focus on outputs, objectives and
outcomes
– Greater overall fiscal discipline
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Line Item Budgeting
How many paper clips
do you need?
Line Item Budgeting
• Budget of each department of a Ministry
expressed in terms of the kinds and
quantities of goods and services to be
purchased
• Ministries had to keep expenditure
within the amounts approved for each
object
Line Item Budgeting
Strengths:
• Effective in ensuring financial control
• Adequate basis for allocating limited
resources at a time when Government
activities were limited
Line Item Budgeting
Limitations:
• Rigid, unable to cope with
– rapidly changing priorities and
circumstances
– creation of new government services
• Budget evaluation mechanism difficult
without mechanism to link “things to be
bought” with “things to be done”
Line Item Budgeting
Limitations:
• New budgets based on previous budget
with increments for price increases
– no evaluation of whether objectives are still
met or cost-effective
Programme Budgeting
How much money do
you need?
Programme Budgeting
Programme Budgeting from 1 Apr 78:
• Emphasizes things to be done
• Adopted from the US “Planning,
Programming and Performance
Budgeting System” (PPPBS)
• Systematically identify the programmes
and activities necessary to achieve the
goals and objectives of each Ministry
Programme Budgeting
Programme Budgeting from 1 Apr 78:
• Funding based on resources required to
undertake each programme
Programme Budgeting
Strengths:
• Greater awareness of goals to be
achieved
• More flexible than Line Item Budgeting
– gradually relaxed transfer of budgets
between objects of expenditures and
between activities/programmes
Programme Budgeting
Limitations:
• With the expansion of existing
programmes and the introduction of
new ones, there was no mechanism to
ensure that the overall expenditure
would not outgrow revenue collection.
Block Vote Budgeting
How much money can
we give you?
Block Vote Budgeting
Block Vote Budgeting
• Top-down approach
• Cabinet approval of budget priorities
and aggregate allocations
• Ministries given flexibility in managing
allocations (transfers between
programmes, activities and line-items)
• Control through published workload and
performance indicators
Block Vote Budgeting
Set Targets for:
• Government Expenditure as percentage
of GDP such that
– Total expenditure < Operating Revenue
– Expenditure to GDP by Sectors and
Ministries
Block Vote Budgeting
• Strengths
– Better ensure a balanced budget
– Contain Government expenditure as a
proportion of GDP
– Help Ministries respond speedily to
changing priorities
– Improve the effectiveness and efficiency of
Government operations
– Make senior civil servants responsible and
accountable for expenditure budget
Block Vote Budgeting
Limitations
• Less emphasis on outputs and
deliverables
– Ministries only required to budget the
amount of inputs needed to fund their
operations.
• Inadequate incentives to achieve
greater operational efficiency
Budgeting For Results
What results can you
produce?
Budgeting For Results
• Key elements:
– Pre-specification of outputs and
performance targets
– Output-based funding allocations
– Granting financial and personnel
management flexibility
– Ministries and departments operated as
Autonomous Agencies
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Budgeting For Results
• Strengths:
– Budget based on outputs
– Emphasis on performance and results
– Greater autonomy and flexibility
– Greater accountability
– Departments more aware of outputs and
cost of producing outputs
– Puts decisions on deployment of resources
in the hands of people at operations
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Budgeting For Results
• Shortcomings:
– No clear link to desired outcomes
– Lack of focus on processes
– Does not address need for sustained
superior performance and results
– With tighter fiscal position, need for greater
emphasis on inter-ministry allocations
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The Future of Budgeting
How do we get from
Here to There?
The Future of Budgeting
• Moving ahead:
– Budgeting 21
– Managing For Excellence
– Resource Management
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Managing For Excellence
To build an excellent Public Sector
through harnessing the creativity
of our people and superior
management of our resources
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Managing For Excellence
• MFE is about:
– Superior leadership and development of
staff
– Superior management through resultsoriented processes
– Sustained organisational excellence
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Managing For Excellence
• Scope of MFE:
– People-Centred Management
– Systems-Oriented Approach
– Customer-Focussed Culture
– Networked Government
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Resource Management
• Management, deployment and
utilisation of resources for maximal
results
– Resource Accounting & Budgeting
• Based on Accrual Accounting
– Accurate Costing & Pricing
– Enhanced Inter-Departmental Charging
– Net Economic Value
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Budgeting 21
• Future envisaged
– Proposals outrun resources
– Beyond least for output to most from input
– Expenditures grow at GDP rate
– MOF focuses on outcomes; ministries
manage outputs for those outcomes
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Budgeting 21
• Key features
– Predetermined overall and sectoral budget
ceilings
– “Guaranteed” baseline operating budgets
for ministries
– Project worthiness distinct from funding
– “Productivity dividend” creates fund for
inter-ministry bidding
– Funding by prioritisation within ministry and
across ministries
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Summary
• Line Item  Programme  Block Vote
– Focus on greater management autonomy
– Addresses “Are they allowed to do it?”
• Budgeting for Results, Managing For
Excellence & Resource Management
– Focus on outputs and results-oriented processes
and best practices
– Addresses “Are they capable of doing it?”
• Budgeting 21
– Focus on outcomes and national priorities
– Addresses “Are they doing it?”
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Thank you!