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Presented by Pat McMahon Budget Advisor, Australian Department of Finance and Deregulation

Aims of the workshop sessions are to:

Gain a better understanding of the power of MTEF and PBB and a clear understanding of the differences to the traditional approach; Examine some practical examples of how MTEF and PBB could be applied in some pilot agencies; and Start addressing the practicalities involved in moving to a mature MTEF and PBB beyond the pilot.

MTEF/PBB are tools for Public Expenditure Management

Public Expenditure Management is concerned with: planning, management, control and accountability of public financial resources
from the point at which those resources enter the public domain to the point at which they leave

Graphic of the milestones in Australian financial management







Program budgets

Accrual-based outcome budgets

Medium Term Financial Estimates Operating Cost Flexibility Accrual accounting, whole-of-government financial reports

Program Evaluation Plans

Financial Management Improvement Program

Budget Estimates and Framework Review

National Commission of Audit

Strategic Review Initiative

New Financial Management & Audit Acts

Charter of Budget Honesty Act

Which should come first, PBB or MTEF?

Australia did both together: MTEF allows better planning and allocation. Once an MTEF was in place the requirements for performance & accountability by CEOs began. The basic features of MTEF have stayed the same since the 1980s.The performance & accountability requirements have increased throughout the period since.

What worked well in Australia & why?

What has gone well? MTEF involving firm forward estimates & PBB involving defining Running costs and devolution of responsibility Followed by accrual reporting & then accrual budgeting Why has it gone well? The adoption of firm forward estimates linked to the budget was a source of greater predictability to Governments & line managers it gave the capacity to better plan & manage Predictability created the climate and expectation for performance Finance provided leadership: It drove reform from mid 1980s.

The focus of the rest of this workshop

PBB 1. 2. The Australian performance framework and its phases; Setting up a performance system in Indonesia

MTEF 3. The features of the Australian MTEF and practical examples on how Indonesia can progress towards adopting an MTEF.
PLANNING MTEF & PBB REFORMS FOR NEXT FIVE YEARS 4. Plan the necessary steps to achieve improved management, control and accountability through an MTEF and PBB over the medium term (e.g. next 5 years)