Performance budget
reforms in the Netherlands
Maarten de Jong
1
Today…
Day 2 Tuesday 24 03, 9am - 4pm
Morning : Plenary session
(presentations and
discussion)
Afternoon : Group will be
split into 2 for exercise,
including opportunity for
consultation
Maarten
de Jong
& Wim
Kooij
Example of performance
budgeting in the Netherlands
Monitoring and control tools for budget performance (internal use of performance information)
Unité GBO centrale
Unité GBO des 3 vagues
Responsables de
programmes
Today…
Rationale for reforms
Development performance budgeting over time in the Netherlands
Some Pitfalls
Choosing goals and indicators
Adjustments made to performance budgeting recently
Performance information use
Rationale for reforms
Good governance Democratic state
Transparency Accountability
Inclusiveness
Effectiveness and efficiency Participation
Rationale for reforms
Intended results of reforms
Increased transparency of government spending and
results
Allocative efficiency gains
Operational efficiency gains
Increased result orientation
More effective
allocation and management of resources
Rationale for reforms
Development performance budgeting
over time in the Netherlands
Early 1970s-2001
• Early flirtations with performance elements
• line-tem budgets with scarce performance information, development of spending reviews
2001- 2007
• Ambitious budget reform (VBTB)
• program budget aimed at improving transparency and efficiency, emphasis on availability of performance indicators
2007-2011
• Experiments to increase informational value
• program budget aimed at improving transparency, focus on government priorities, attempt at delivery approach (inspired by UK)
2011 - present
• Accountable budgeting reform (VB)
• program budget with more detailed financial information, selective inclusion performance information, increased emphasis on policy evaluation
7
Ambitious Budget Reform (2001-2007)
Comprehensive coverage of all public spending
Introduction program budgeting
‘Big bang’ introduction
Large investment in communication and capacity building
Strong political support
Civil service ‘indoctrinated’ by mantra of these questions:
8
Major players within Dutch Civil Service
in performance and budget dialogue
Ministry of
General Affairs
(PM Office)
Ministry of Finance - Budget Affairs - Budget Inspectorate - Academy of Finance
Line Ministries
- Fin. Econ. Affairs Unit - Policy directorates - Executive Units - Inspectorate
Executive Agencies Executive Agencies Executive Agencies
Line Ministries - Fin. Econ. Affairs Unit - Policy directorates - Executive Units - Inspectorate
Line Ministries - Fin. Econ. Affairs Unit - Policy directorates - Executive Units - Inspectorate
Internal
Audit
Service
National
Court of
Audit
VBTB ‘as intended’
Transport Safety program
Ministry of Infrastructure
10
Art 32 Continuously improve the safety of
persons on roads or railroads, as well as the
safety of public transport
32.01 Reducing
the nr. of victims
on roads
32.0 2 Reducing
the nr. of victims
on railroads
32.0 3 Improving
social safety of
public transport
32.01 .01 Reducing the nr. of victims on roads
32.01.02 Safety standards for vehi cles and technology
32.01.03 Influencing behavior travelers
32.01.04 Adaptations to the infrastructure
32.01.05 Inspection
Problems & Criticism
Strong emphasis line ministries on compliance and legitimization
Lengthy and unaccessible documentation often containing irrelevant information
Heavy administrative burden on civil service
No political interest
Budgets not useful for financial analysis
11
Experiments to increase informational value
(2007-2011)
Focus performance information on
government priorities
Performance reporting for some
Ministries temporarily abandoned
altogether
Introduction of PM’s ‘Accountability
Letter’ to Parliament
Examples of priorities from government coalition:
3. Bringing closer a solution to the conflicts in the Mid-East
20. Annual growth of 5% for public transport by railroad
51. Reduce nr. of stolen bikes by 100.000 compared to 2006
Some major pitfalls
Overcomplexity and bureaucratic burden
Measures
Scrap bad and unclear indicators each year
Pragmatism in attributing organizational costs
Some major pitfalls
Perverse effects
Some major pitfalls
Unclarity of information ownership and integrity
Measures:
State source of information in budget
Perform audits (prefarably risk based)
Some major pitfalls
Departments trying to legitimize spending
Some major pitfalls
Example: Sports article of Ministry of Health
Objective: Achieve a society that enjoys sports and is actively
involved in sports
8 performance indicators including:
The % of people meeting target for weekly physical exercise
The % of people active in sports organizations
The nr of Olympic medal achieved by the NL
Funding: Some 140 € million
17
Some major pitfalls
18
Municipalities
Provinces
Central government
However, in reality:
•Total government spending on sports in the NL: 1,3 € billion mostly by municipalities
•Instruments and expenditure not aligned with goals and indicators
Goals, objectives and targets
‘Un objectif sans plan
s’appelle un vœu’
Le Petit Prince
Antoine de Saint-Exupéry
19
Goals, objectives and targets
S M A R T ? Specific Measurable Achievable Result-oriented Time-constrained
Action-oriented Realistic Tangible
Agreed Relevant Trackable
Attainable Reasonable Timeline
Accountable Responsible Timed
20
Goals, objectives and targets
Or a simple rule of thumb?
2 elements make up goal:
-Something that needs to be influenced (often noun)
-The desired direction of this influence (often verb)
Do you, as a non-specialist, understand these two elements?
21
Choosing indicators
Rule of thumb
A good indicator:
Should give an idea of the level of success of the intended policy (also to
non specialists!)
Can be influenced by the intended policy
Is practical and relatively easy to collect at acceptable costs
22
Choosing indicators
23
Choosing indicators
Good example
24
Objective Instrument Budget Performance
Protect land by maintaining coastal line and containing river systems (Ministry of Infrastructure)
-Maintaining and
strenghtening levies
according to program
-Identify weak spots
-Develop strategy for
disaster control
€ 642.011 % of levies that comply with the legally required level of protection
Choosing indicators
Bad (and difficult) example
25
Objective Instrument Budget Performance
Promoting worldwide regional stability by contributing to prevention of conflicts, crisis- operations and providing post –crisis assistance
(BUIZA)
-Diplomacy
-Military assistance (to
NATO operation
Afghanistan)
-Funding development
projects
€ 312.177
Failed States Index
=
Rating 0-120 for stability according to a NGO
Information provided for the 8 worst rated states worldwide
Large ambitions, mixed results
Early 1970s-2001
• Early flirtations with performance elements
• line-tem budgets with scarce performance information, development of spending reviews
2001- 2007
• Ambitious budget reform (VBTB)
• program budget aimed at improving transparency and efficiency, emphasis on availability of performance indicators
2007-2011
• Experiments to increase informational value
• program budget aimed at improving transparency, focus on government priorities, attempt at delivery approach (inspired by UK)
2011 - present
• Accountable budgeting reform (VB)
• program budget with more detailed financial information, selective inclusion performance information, increased emphasis on policy evaluation
Accountable budgeting reform (2011-
present) More detailed financial information in budgets (harmonization!)
Selective use of policy information and indicators
Introduce annual ‘policy conclusion statement’ for each program
Renewed emphasis on policy evaluation
Accountable Budgeting program template
A General objective
B Role and responsibility
C Policy changes / lessons learned
D1 Budgetary table
D2 Budget flexibiliy
E Explanation financial instruments
VBTB program template
A General objective
B Policy description
C Responsibility
D External factors
E Measurable data general objective
F Budgetary table
G Budget flexibility
For each sub article:
H Operational goal
I Policy motivation
J Intsruments used
K Measurable data operational goal
L Evaluation planning
Accountable budgeting reform (2011-
present)
Impact of Gvt. on desired policy
outcome? Significance of financial
contribution by Gvt. ?
Is policy executed by
Gvt. agency?
Gvt. Stimulates
Gvt. Regulates
Gvt. Finances
Gvt. Executes
Accountable budgeting reform (2011-
present)
0 50
100
150
200
250
300
350
400
2011
2013
Nr. of indicators cut by 50% on average
Lessons from a difficult process
Performance information seldom plays a role in allocation by politicians
The budget cannot be the comprehensive and objective ‘mother of all policy documents’
A supply side oriented, uniform approach to performance information is no recipe for use
Attribution of outcomes to spending on an annual basis is most often unrealistic
Rely on multi year ex-post policy
evaluation for assessing
effectiveness
instead of
Relying on PI use in annual
budgetary cycle
Lessons from a difficult process
Despite not having ‘rationalized’ budget allocation by politicians, our
performance based program structure does contribute to fiscal stability and
predictability :
Program structure ensures managerial flexibility
Program objectives and intended measures provide leverage for
budgetary negotiations
Performance information enbables evaluation of effectiveness
In addition performance information can be helpful for:
internal steering and oversight (e.g. agencies)
External accountability
Conclusion reforms in the Netherlands
Despite not having ‘rationalized’ budget allocation by politicians, our
performance based program structure does contribute to fiscal
stability and predictability :
Program structure ensures managerial flexibility
Program objectives and intended measures provide leverage for
budgetary negotiations
Performance information enbables evaluation of effectiveness
32
Helpful institutional factors:
Political support
Highly decentralized financial stewardship by line ministries
Active budgetary dialogue and exchange of information
Performance dialogue between line ministries and agencies developed earlier (since mid 1990s)
Helpful for PI use at agency level:
Learning culture
Reporting tradition
Leadership
‘Engineer mentality’ or metrics driven policy fields
……
33
U$ing PI for improving €fficiency &€ffectiveness
Example: forestry
And the real world is even more complex
35
Output
External factors Efficiency
Input
Effectiveness
Net policy effect
Gross policy effect
Cost - effectiveness
Realization of policy goal
Long road with many obstacles but
well worth the trip!
36
Capacity FEA directorates
Capacity total fin. staff
Counterintuitive to many in public
service..
Deterministic logic Political logic
SMART objectives and sharp definitions
Indefinite (vague) objectives
Efficient information and reporting relationships
Redundancy in information and relations
Decision making in an annual predictable cycle
Seize opportunities in an unpredicatbel process
39
Degree to which government organizations use performance information
depends on many factors such as:
• Organizational culture
• Availiablity perfomance information
• Type of policy (motivational nature)
• Competition
• Measurement challenges
• Managerial autonomy
• Leadership’s commitment to results
(Based on Moynihan&Lavertu 2008, Moynihan&Pandey 2010, Dull 2009, Lagraeid et al 2008)
Use of performance information
Cultural aspects should not be overlooked
Evaluation capacity but also mentality:
• Selection of appropriate staff: mixture of analytic and research capacity
(introvert) and staff with the ability to network, deal with resistance and able to
operate in a fluid environment (extrovert)
• Result orientation in formulating and substantiating policy proposals (a PB
structure can help strengthen this awareness)
• Performance planning and monitoring ought to enhance rather than erode
result orientation of motivated public professionals
41 Use of performance information
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