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Presented by Pat McMahon Budget Advisor, Australian Department of Finance and Deregulation
Graphic of five stages taken in implementing & improving Performance Based Budgeting in Australia
1985
1990
1995
2000
2005
1. Program budgets
Stages 1 & 2: Implement concepts and Financial Management Training (from the mid 1980s)
Stage 1: Initial implementation of a framework.
Specification of programs, objectives and performance indicators; and Reporting, budget estimates and appropriations presented on a program (non-running cost) and running cost basis.
Stage 3: Introduce operating cost flexibilities running cost reforms (from the late 1980s)
Greater operating cost flexibility for chief executives has been the most important part of PBB reforms. It was from small beginnings, gradually broadening Running cost budgets & new laws to provide greater flexibility, i.e.: Rolling Property Operating, Repairs and Maintenance, Legal and Minor new capital expenditures into Running Cost Budgets (early 1990s); Amending laws: New financial management and audit acts to give greater powers to CEOs of Departments (mid 1990s); Replacing Running Costs with Departmental (end of 1990s upon the introduction of accruals budgeting).
Stage 3. Appropriations split by running costs & non-running costs from 1988-89
Stage 3. More flexibility by expanding the running cost budget: rolling in Repairs & Maintenance
1988-89 Budget: Repairs and Maintenance appropriations to Dept of Administrative Services
By 1994-95 Budget: Repairs and Maintenance costs were reallocated to line ministries and appropriated within their Running Costs appropriation. Same for some other costs rolled into running costs (i.e. legal, property expenses, capital).
Stage 5. Who now uses performance information & results of evaluations? 2. Parliament
Who now uses performance information & evaluations? 3. Strategic Reviews by Cabinet
Under the Australian system Cabinet is not the main user of performance information
The use of performance information and evaluations by Cabinet in the Budget process is limited to strategic issues Cabinet can, and does, ask for strategic reviews
Department of Finance will use performance information to support savings proposals in the Budget process where there is evidence that programs are performing badly
The Role of the Australian Dept of Finance leader of financial management reform
Innovation and reform in management was strongly encouraged Introduction of MTEF & PBB Followed by continuous improvement & incentives to perform: Being prepared to accept a balance between the questioning role and letting the managers manage this was not easy for a Finance department but it was necessary to get performance. Allowing carry forward of unspent administrative funds other than salary to the next year & to bring forward expenditure (e.g. to 2%) Expecting agencies to make efficiencies and return an efficiency dividend to Government (e.g. 1 % a year).
Step 2: provide financial management and performance training for line ministries Step 3: create incentives to let the managers manage Step 4: create a system to measure performance/evaluations