Performance Budgeting in the Government of Canada

Performance Budgeting in the Government of Canada

Presented to: The Asian Regional Seminar: Promoting Fiscal Sustainability Date: February 28th – March 2nd, 2011, Kuala Lumpur, MalaysiaPresented By: Bruce Stacey, Associate Chief of Defence Transformation

Department of National Defence

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Canadian Context Foundation New Expenditure Management System Strategic Review Process National Defence an Example Lessons Learned

Outline

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Federal Expenditures Overview 2009-2010

Major and Other

Transfer Payments,

44%

Public Debt Charges,

14%

Direct Program

Expenditures, 42%

Elderly Benefits,

31%

Employment I nsurance,

15%Child Care

Benefits, 2%

Other Transfers,

3%

Equalization & Transfers

to Territories, 17%

Health & Social

Transfers, 32%

Grants & Contribution

s, 35%

Operating Expenses,

60%

Crown Corporation Expenses,

5%

Total Expenditures $235.8 B (Fiscal Year 2009-2010)

Major and Other Transfer Payments

$104.3 B

Direct Program Spending $99.6B

Source: Main Estimates – Part I 2009-2010

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A common approach to the collection, management, and reporting of performance information is key …

Management, Resources and Results Structure Policy (2005)

Provides detailed information on all government programs

Establishes the same structure for both internal decision-making and external accountability

Helps to link resources and results -- planned and actual

Is being implemented across government

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Policy requirements for Strategic Outcomes incl: Performance Measures

Policy requirements for each program activity element include:

Program title & description

Expected results

Performance measures

Planned & actual spending

Target & actual results

Governance

Strategic Outcome*

Program Activities*

Sub-Activity Level**

Sub-Sub Activity Level**

Lowest Level programs

Accountability levels to Parliament (Estimates & Public Accounts)*require TB approval, incl. major & minor changes

Departmental PAA: reflect the inventory of all the programs of a department depicted in their logical relationship to each other and to the SO(s) to which they contribute **require TBS approval

The Program Activity Architecture

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The New Expenditure Management System

• All spending must be managed to transparent results/outcomes - Clear measures- Assessed and evaluated systematically and regularly- Demonstrating value for money

• Up-front discipline is applied to new spending proposals to manage spending growth

- Include clear measures of success- Demonstrate how the proposal fits with existing spending and results- Provide reallocation options for funding

• Strategic Reviews assess existing spending over a four-year cycle to ensure alignment with priorities, and effectiveness, efficiency and economy

- Programs expected to demonstrate results in support of priorities- Decision-making to use objective, evidence-based information

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Strategic Reviews – Key Elements

• Objective of Strategic Reviews: - Assess all direct program spending and performance over a 4 year period to

ensure value for money for existing spending• Comprehensive Review of Programs

− Strategic Reviews assess whether programs are aligned with government priorities, are effective and efficient and provide value for money

• Reallocation and Reinvestment Proposals− Through the comprehensive review of programs, organizations identify the lowest

priority and lowest-performing 5 per cent of programs (reallocations) and propose higher-priority, higher performing programs for reinvestment:

Potential for Improvements/ reinvestments

Primary Candidate for Reallocation

Potential for Reinvestment

High-Priority

Low-Priority

Low-Performing High-

Performing

Secondary Candidate for Reallocation

100% Organizational Review Base

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The Bottom Line

needs to be isolated and removed from our baseline and “parked” to be either…

Re-invested in other higher Dept / CF priority activities or initiatives (internal)

Re-allocated to other Govt priorities activities or initiatives (external)

?

Grants

Govt decision will be based almost entirely on the scope / scale of the review we conduct and the storyline we tell

Baseline 2010

5 %

Pers

onne

lO

& M

Cap

ital

Inve

st $

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Strategic Reviews – Scope and Key Elements

Departmental Strategic Reviews to answer specific questions in key areas: Government Priority, Federal Role, Relevance (i.e. continued prog. need) Performance (effectiveness, efficiency, value for money) Management Performance

Departmental Strategic Reviews to be conducted using the following key elements

Analytical Framework: The department’s Program Activity Architecture Information Sources: Evaluations, Audits, Management Accountability Framework

assessments, Auditor General Reports, and other reports Reporting Requirements: Outlined in the Terms of Reference Steering Committee: A departmental steering committee to be established with ex

officio membership from TBS External Advice: Expert outside advice to be involved on each Review to ensure

neutrality and credibility

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National Defence’s Component Definition

ActivityComponent

INPUT

Enabling Inputs (Role filling Resources)

Role or Requirement

Specifications

INPUT

INPU

T

INPU

T

OUTPUT

OUTPUT

OUTCOME

OUTCOME

ENABLING INPUTS

OUTPUTTARGETS

OUTCOMETARGETS

OUTCOME

OUTCOME

ITEMS TO BE DEFINED & JUSTIFIED

1. Outcome Targets2. Output Targets3. Outcomes Achieved4. Outputs Achieved5. Enabling Inputs6. Throughputs7. Role/Requirements

THROUGHPUTS

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PRESENT GOC OBJECTIVES

GOC MANDATE

ENDURING REQUIREMENT

FOR DEFENCE & SECURITY OF

CANADA

Program Integration Efficiency

Relevance to present GOC

Political & Strategic

RelevanceEnduring

Relevance to Canadians

Within Purview of GOC

RELEVANCE

Pan CF/DNDPerformance Management

Q1

Q2

Q3

Defence & Security Delivery

Program Integration

Effectiveness

ProgramEffectiveness

ProgramEfficiency

PERFORMANCE

Individual Program Performance Management

Q5

Q6

Q4

IndividualProgram Delivery

The Assessment

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Initial AnalysisC

ompr

ehen

sive

E

valu

atio

n

Primary International Secondary International Domestic & Standing

Land TrainingLand Inf & Base SptLand Eqt Maintenance

Land C2

Land Readiness

Sustain Land Forces

Component 1

Component 2

Component 3

Component 4

Component 5

ActivityComponent

INPUT Req

INPUT

INPU

T

INPU

T

OUTPUT

OUTPUT

OUTCOME

OUTCOME

ENABLING INPUTS

OUTCOME

OUTCOME

Role/ReqSpecs

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Q& A Text Template Component X

$ to Component Attributions

Recommended Prioritization & Recommendation of bottom 10%

Take assignedPAA activities

Identify Components

Define Components

Analyse Components Prioritize Components

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Analysis A : Sub-Sub-Activity Partitioning & Assessment

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$32M

$14M

$18M

$16M

$2M$5M

$12M

$2M

$10M

$1M

$15M

$11M

$12M

$20M

$1M

$2M

$5M

$5M

$2M$2M

Rel

evan

ce

Performance

Program Activity Component X (compared to all DND/CF)

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What lessons have we learned (#1)?

Need persistent effort to build capacity - will take time Political leadershipHave a plan but experiment and adapt:

• Central agency leadership • Know program base• Identify measures and collect the data• Evaluation capacity means investment • Use the information for decision-making in the

department• Use the same information to improve reporting

Linking performance information to reporting was helpful – but linking it to decision-making in the budget process has been criticalDon’t wait for perfection

What are the lessons learned (#2)?

This is cultural change: expect resistance - go for small wins - communicate - acknowledge risks - adapt - build trust

Rewards and sanctions are important - gaming

Put elected and non-elected officials on the same information base:

• Make it relevant for decision-making• Better management and fiscal results • Sound understanding of the business • Ministerial engagement important

Have realistic expectations - under promise, over deliver

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Questions

Performance Budgeting in the Government of Canada

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