The Central Budget Authority builds capacity, internally and within line ministries, to manage and operate the performance budgeting system.
The CBA regularly reviews and adjusts the operation of the performance budgeting system to improve its performance.
Performance measurement systems are progressively improved to provide quality data on a reliable basis.
Performance data is governed and managed as a strategic asset with the objective of ensuring that the data is discoverable, interoperable, standardised and accessible in timely manner.
OECD Good Practices for Performance Budgeting
Good Practice 4: Government invests in human resources, data and other infrastructure needed to support performance budgeting.
CBA capacity building
The CBA typically takes the lead role in the design of the performance budgeting system. Responsibility starts with defining the concept of performance budgeting and planning implementation of the reform, modernising the budget classification, budget reporting formats and controls, then supporting line ministries through the processes of developing programmes, selecting performance indicators and setting performance targets.
These complex tasks require analytical and process skills that go beyond the typical financial and economic skills found in a traditional budget department. To engage effectively with line ministries budget analysts need to develop better understanding of sectoral policies, programme intervention logic and the science of performance measurement. This adds up to a substantial investment in training. Good practice is to create a dedicated team in the CBA, with counterparts in line ministries to develop and roll out the new system over a number of years. France’s performance budgeting reforms, centred around the Loi Organique Relative aux Lois des Finances (LOLF), provides an example of a well-planned and resourced implementation process (Box 7).
Box 7. France - LOLF
Performance budgeting was the centrepiece of an overhaul of the public financial management system, the LOLF (Loi Organique relative aux Lois de Finances), the law that initiated the reforms.
Starting in 2001, the reforms were implemented over a five-year period. They included development of a programmatic structure to the budget, relaxation of line item budget controls, introduction of a new financial management information system (CHORUS), extensive training of personnel and an active programme to communicate the changes.
The new system was implemented only in 2006 after five years of intensive preparation and piloting and has remained broadly stable since that date.
Source: D. Moynihan and I Beazley (2016).
Training needs to cover a large number of officials, including budget analysts in the CBA and line ministries, programme managers and auditors. Other stakeholders, including the budget and accounts committees of parliament, ministers and senior civil servants and wider civil society, also need to be sensitised to the new system. The transition to performance based budgeting often requires a change in culture and mind-set that requires long-term effort. Australia’s PGPA Act of 2013 led to such an effort to improve the government’s capabilities in respect of performance reporting, supported by outreach, guidance and encouragement of systematic lesson learning (see Box 8).
Box 8. Australia - Building a culture of better performance measurement capability
Previously, in the Australian Government there was wide variation in the quality of performance reporting.
Because of this situation with regard to the quality of performance reporting, a key aspect of the implementation of the enhanced Commonwealth performance framework under the PGPA Act 2013 was the introduction of a significant outreach programme. The outreach programme consists of the following;
a series of resource management guides covering the different aspects of the framework include corporate planning, annual performance statements and what constitutes good performance information,
a Performance Community of Practice events bringing together officials from entities involved in measuring performance to learn from each other as well as from the Department of Finance, and
Annual Lessons Learned papers, highlighting the better practice examples from entities’ Corporate Plans and Annual Performance Statements, based on Finance’s analysis.
In support of Finance’s activities, the ANAO audits the performance measurement systems and practices of entities on a rolling basis, as well as auditing the performance of the framework itself. This provides the government and the parliament with assurance that the performance measurement system provides meaningful information.
Source: Australian Government, Department of Finance (2015)
Continuing system review
Performance budgeting systems in many OECD countries have evolved and matured over a long period of time. Once the system is operational the CBA needs to regularly review system operations, to improve the quality of budget programmes and maintain the focus on performance. In practice OECD countries still struggle to produce good quality indicators and set target values consistently across all sectors and programmes. Figure 6 reinforces this point showing, for example, that only 18 OECD countries consistently set targets for all or most programmes.
Figure 6. Does the Government Set Performance Targets?
Note: Data for Israel and the United States are not available.
Source: OECD (2018), OECD Performance Budgeting Survey.
A common problem is information overload, resulting from proliferation of programmes and performance indicators, often broken down into sub-programmes and activities. Countries with the most experience with performance budgeting have steadily reduced the number of programmes and indicators over time. This has been a response to both the administrative burden of reporting and the limited time senior managers have available to monitor performance. France, for example, reduced the number of performance indicators in the budget from 1 173 to 677, giving priority to those that reflect strategic objectives, represent major budget areas, and are internationally recognised performance indicators (see Figure 7).
Figure 7. France: Progressive reduction in the volume of performance information.
Source: Author
Improving the quality of performance data
The quality of performance data is an area of concern for many OECD countries that have a performance budgeting system. OECD survey results (OECD Performance Budgeting Survey, 2018) indicate that the poor quality of performance indicators and their lack of relevance in relation to national and sectoral policy objectives remain significant obstacles.
The selection of good quality indicators involves an iterative process, balancing input from line ministries that have detailed sector knowledge, while the CBA needs to ensure that performance indicators are SMART and target values represent stretch goals.
An important dimension of data quality is consistency with national and international data standards. To the maximum extent possible performance data should be sourced from the national statistical agency. Use of such indicators is preferred both because measurement standards are defined by international institutions, such as the OECD and the United Nations, and because it facilitates benchmarking and learning. France, for example, has integrated internationally comparable indicators of wealth and well-being into the structure of the budget (see Box 9).
Box 9. France - Key national performance indicators and the budget
France offers an example of strong links between key performance indicators established at the national level and budgets. France’s organic budget law (Loi organique relative aux lois de finances (LOLF)) groups expenditures by “missions” that bring together related programmes that are associated with high-level policy objectives and performance indicators. Recent reforms have additionally focused on streamlining the indicators to make them clearer to parliamentarians and the public and France enacted a law in 2015 requiring the Government to present wealth and well-being indicators other than GDP to promote debate on policy impacts. Based on the LOLF system the French government is developing a strategic dashboard using a limited set of internationally comparable indicators, including:
Economic development indicators such as FDI (OECD) and Doing Business (World Bank).
Social progress indicators, such as healthy life expectancy at 65 by gender (OECD), percentage of 18-24 year olds with no qualification who are not in training (France Stratégie/Eurostat) and poverty gaps (World Bank).
Sustainable development indicators such as greenhouse gas emissions per unit of GDP (European Energy Agency/Eurostat).
Source: D. Moynihan and I Beazley (2016).
Managing performance data as a strategic resource
Sharing data is fundamental to good performance management. Ready access to good quality performance data is a key enabler all the major components of performance budgeting; objective setting; performance monitoring; evaluation; accountability and oversight. Ensuring reliable data sources for performance management requires that:
Performance data is governed and managed as an asset. If performance data is to be used as a strategic asset to support and enhance performance budgeting, government needs to set up robust governance arrangements to collect, process, share, control, publish and reuse performance data.
Data is discoverable and accessible by public sector organisations with the right to access it
Data ownership and stewardship roles are clearly defined so that public sector organisations and stakeholders are clear who is accountable for the collection, management, quality and trustworthiness of performance data
Data is interoperable in line with standards and guidelines for data standardisation (e.g. semantics, unique identifiers) across the whole data value chain
Data controls and audits are defined to ensure the integrity of performance data across the whole value chain
Real-time data access is possible (e.g. thorough APIs) therefore allowing the continuous sharing of data between different actors. The model for the sharing and management of performance data can evolve for instance from the centralisation of data assets to the federation of multiple data sources that can inform policy decisions in the public sector.
In light of the above, the success of performance management would not only depend on the ability of public sector organisations to identify and share those data sources that are mission critical in terms of measuring performance in the public sector, but on the capacity of governments to enable a context that places data at the core of the performance management cycle and manages and governs it accordingly.
Examples from Denmark demonstrate how government data is being better managed and governed to facilitate shared use of data amongst public sector organisations (See Box 10). These practices could be escalated to performance management domain in order to lever the value of data assets in the public sector through further data integration and sharing.
Box 10. Data governance and management practices in Denmark
In 2010, the Danish government launched the “Government data and information management policy” to ensure collective commitment across the administration to promote greater openness and reuse of government data. The policy was based on the principle that establishing high-quality data registers would lead to their reuse by all actors in the public sector, and support improved efficiency of the public sector as a whole.
Early efforts to develop the data registers focused on legal compliance instead of considering the needs of data users. As a result, the Danish government launched the “Basic data registries implementation programme” (2013-16) in order to “revisit the governance system of data management within the public sector – including changing laws to clarify responsibilities and improve data quality and use”. The programme strongly emphasized data interoperability, data modelling and semantics. It helped the Danish government create a whole-of-government culture and common agenda putting data governance, data quality, use and sharing of data at the core of reforms in key policy areas such as employment, taxation, and environment.
Source: OECD (2016), Open Government Data Review of Mexico.