Tools for spending review in Japan and the use of key performance indicators (KPIs), Toshiaki...
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Transcript of Tools for spending review in Japan and the use of key performance indicators (KPIs), Toshiaki...
Tools for Spending Review in Japan and
the Use of Key Performance Indicators (KPIs)
Toshiaki Hiromitsu Director of Research Division
Budget Bureau
Ministry of Finance, JAPAN
17th December 2015 11th Meeting of OECD-ASIAN Senior Budget Officials
Outline of Presentation
I. Tools for Spending Review in Japan
a. National Audit
b. Policy Evaluation
c. Budget Execution Survey
d. Administrative Programs Review
(Reference) Relation to Budget Process
II. The Use of Key Performance Indicators (KPIs)
III. Comments
1
I. Tools for Spending Review in Japan
a. National Audit (External Audit) • Board of Audit (established in 1880), an independent body, audits state
accounts
• Examines legal compliance, efficiency, and effectiveness in project implementation
*In FY2014 report on the results of settlement audit, 570 projects amounting to 157 billion yen was pointed out.
b. Policy Evaluation (Self Assessment) • Ministries set organizational policy goals and assess achievements (since 2001-)
• Results are reflected in budget requests by line ministries
c. Budget Execution Surveys (Internal Audit) • MOF (Budget Bureau and regional agencies) conducts surveys on selected on-
going individual programs (since FY2002-)
• Examines necessity, effectiveness, and efficiency
• Results are reflected in budget requests by line ministries *In FY2014, 75 programs examined, of which 6 programs were abolished in whole or part. Reflected in the FY2015 budget (Expenditure cuts in the FY2015 budget: 37.9 billion yen.
2
I. Tools for Spending Review in Japan
d. Administrative Programs Review (i)
Line ministries make self-evaluation on individual programs (all programs in the central government (over 5,000 programs)).
Experts outside the government evaluate about 1,000 programs in 5,000 programs intensively.
The discussions by experts are open to the public .
1st Phase: Experts outside the government discuss whether the budgets of
some programs were used properly in the previous year. The
results of the discussion are reflected in the budget request for the
next fiscal year. The discussion is open to the public.
2nd Phase: Programs further needed to be reviewed are discussed by experts outside
the government and officials in the government. Then, experts evaluate
whether programs are necessary or not in terms of its clarity and
effectiveness. The discussion is open to the public and the results are
reflected in the budget formulation for the next fiscal year.
3
(Autumn Review) Every November
Every June
d. Administrative Programs Review (ii)
The results of administrative Programs Review in FY2014
About 100 billion yen was reduced at the budget formulation
process through the discussion at Autumn Review, compared to the
budget request process.
(Examples)
- Reduction in reward for nursing care FY2015 budget request: 2,756 billion yen ⇒ FY initial budget: 2,631 billion yen (minus 125 billion yen)
- Reduction in subsidies for the regional revitalization FY2015 budget request: 6 billion yen ⇒ FY initial budget: 3.8 billion yen (minus 2.2 billion yen)
- Reduction in the programs for developing human resources in
science area FY2015 budget request: 5 billion yen ⇒ FY initial budget: 0.1 billion yen (minus 4.9 billion yen)
4
I. Tools for Spending Review in Japan
Budget process
Apr. Fiscal year starts
May
Jun.
Jul.
Aug.
Budget requests submitted to MOF
Sep.
Oct.
Nov.
Dec.Draft budget decided by Cabinet
Jan. Draft budget submitted to the Diet
Feb.
Mar.
Budget approved
Policy EvaluationBudget Execution
Surveys
Review of Administrative
ProgramsNational Audit
Reflect performance information in budget requests
Publication of Review Sheets
Budget formulation(MOF)
Set organizational policy goals
Assess achivement of organizational policy goals in the previous fiscal year
Publication of the results
Publication on expenditure cuts in the draft budget
reflecting the budget execution surveys
Use performance information in budget formulation
Budget Execution Surveys(MOF, Regional agencies)
Work on Review Sheets(line ministries)
For all projects;Interim publication of
review sheets and open
Through a whole year: Implementation of audits
* Settlement report by MOF also submitted
Meeting with MOF
Meeting with MOF
Meeting with MOF
Report on the results of settlement audit
to the Diet and the Cabinet
(Reference) Relation to Budget Process
5
Use Performance information in budget formulation
Autumn Review by Administrative Promotion
Council (Open to the public)
• The commitments of the government
1) Primary Balance: to be in surplus by FY2020
2) Public debt (to GDP): to be steadily reduced beyond FY2020 over the medium- to long-term
• Mid-term review
In FY2018, progress will be assessed against the following benchmarks.
– PB deficit: approx. -1% of GDP in FY2018
– Size of expenditure: extending the recent 3-year trajectory of the expenditure* of the
Central Government towards FY2018, that is, the total rise of \1.6 trillion for the 3 years,
taking into account the economic and price development.
* excluding the expenditures for (i) national debt service and (ii) local allocation tax grants, etc.
– The government will consider additional measures in expenditure and revenue, if
needed, to achieve the FY2020 target. 6
The Fiscal Consolidation Plan ---- main points ---- (June 30, 2015)
II. The Use of Key Performance Indicators (KPIs)
Primary Balance of central and local governments (in percent of GDP)
▲ 6.6
▲ 5.7
▲ 4.4
▲ 3.0
▲ 2.5 ▲ 2.3
▲ 1.7 ▲ 1.4
▲ 1.0
▲ 2.5 ▲ 2.1 ▲ 2.2 ▲ 2.2
▲ 7
▲ 6
▲ 5
▲ 4
▲ 3
▲ 2
▲ 1
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
In percent of GDP
FY
Notes: FY2010-2013: from “Annual Report on National Accounts,” FY2013-2020: from “Economic and Fiscal Projections for Medium to Long Term Analysis.” FY2015 primary deficits of central and local governments will be presented in “Annual Report on National Accounts” in December 2016.
■ Target to halve the primary deficit (-3.3%)
⇒Expected to be achieved
Target of Primary Surplus ■
-6.2 trillion yen
-11.9 trillion yen
“Baseline Case” (July 2015)
“Economic Revival Case” (July 2015)
Current plan period
Base year of target to halve the primary
deficit
7
II. The Use of Key Performance Indicators (KPIs)
8
1. In order to implement the fiscal consolidation plan steadily, the reform process and KPI need to be embodied. The government is currently discussing about it. 2. Clarify i) timing of reform implementation, ii) quantitative target, iii) organization in charge. 3. Quantitative benchmark which evaluates the effects for curving expenditures and strengthening growth is especially important.
II. The Use of Key Performance Indicators (KPIs)
Examples
【Social Security area】 Outpatient treatment: indicators measuring the difference in outpatient treatment fees among local regions Medicine, pharmaceutical: indicators measuring usage ratio of generic drugs Behavior of patients: number of patients suffering from lifestyle diseases, indicators measuring medical examination frequency
【Social Infrastructure Improvement】 Promotion of PPP/PFI: number of public-private joint committees in the central and local governments
【Education, Science, Technology】 R&D: Research investment from private companies to universities and public research institute
【Local government’s administrative reform】 IT and work restructuring: indicators measuring optimization, reduction in operational costs
9
II. The Use of Key Performance Indicators (KPIs)
Medical care Expenditure per capita by prefecture
160
180
200
220
240
260
280
300
Okin
awa
Ch
iba
Saitama
Gu
nm
a
Ibaragi
Toch
igi
Tokyo
Kan
agawa
Yaman
ashi
Ao
mo
ri
Nagan
o
Shiga
Miyazaki
Shizu
oka
Iwate
Niigata
Nara
Aich
i
Totto
ri
Toyam
a
Mie
Gih
u
Wakayam
a
Ku
mam
oto
Osaka
Fuku
i
Fuku
shim
a
Yamagata
Kyo
to
Ishikaw
a
Miyagi
Kago
shim
a
Fuku
oka
Ehim
e
Ho
kkaido
Ko
chi
Akita
Hyo
go
Nagasaki
Oita
Okayam
a
Saga
Toku
shim
a
Yamagu
chi
Shim
ane
Kagaw
a
Hiro
shim
a
(thousand yen)
Average: 241 thousand yen
10
III. Comments
Compared with other countries, the scale of social security expenditures is placed at the middle level but the scale of tax revenue is placed at the lowest level.
In addition, the scale of expenditures not relating to social security is placed at the lowest level.
International Comparison of Fiscal Scales
32.8 31.2 30.3 28.0 26.8 26.8 26.7 26.6 25.6 25.4 25.3 24.8 24.0 24.0 23.8 23.0 23.0 23.0 22.1 20.4 20.3 18.5 17.7 17.7 17.2 16.4 16.0 14.5 7.9
0 20 40
1Denmark2France3Finland4Austria5Greece6Italy7Belgium8Sweden9Germany10Slovenia11Japan12Norway13United Kingdom14Portugal15Netherlands16Ireland17Luxembourg18Spain19Hungary20Czech Republic21Poland22Iceland23Estonia24Slovak Republic25United States26Turkey27Israel28Switzerland29Korea
23.0 22.0 21.9 21.7 21.7 21.7 21.6 21.2 20.9 20.5 19.9 19.7 19.3 19.3 19.2 19.1 18.5 18.5 18.4 18.4 18.3 18.1 18.1 18.0 17.6 16.6 16.5 15.5 14.8
0 20 40
1Hungary2Iceland3Belgium4Israel5Sweden6Slovenia7Denmark8Finland9Netherlands10France11Poland12Portugal13Estonia14Czech Republic15United States16Spain17Slovak Republic18Luxembourg19Austria20United Kingdom21Ireland22Greece23Norway24Korea25Turkey26Italy27Switzerland28Germany29Japan
General Government Expenditures
not Relating to Social Security
(as a percentage of GDP)
General Government Tax Revenue
(as a percentage of GDP)
General Government Social Security
Expenditures (as a percentage of GDP)
CY2011
Small and effective government?
Social security reform?
Revenue reform?
46.7 34.3 33.0 31.9 31.8 31.1 29.9 29.5 28.7 27.8 27.4 27.0 26.6 26.5 26.0 24.3 23.7 23.7 22.7 22.7 22.1 21.6 21.6 20.9 20.4 20.1 20.1 19.9 19.8 19.5 18.5 16.9 16.8 16.5
0 20 40 60
1Denmark2Sweden3Norway4Iceland5New Zealand6Finland7Belgium8Italy9United Kingdom10Austria11France12Israel13Luxembourg14Australia15Canada16Hungary17Netherlands18Portugal19Ireland20Germany21Slovenia22Switzerland23Greece24Poland25Estonia26Spain27Turkey28Chile29Korea30Czech Republic31United States32Mexico33Japan34Slovak Republic