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BEYOND BUDGETING

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Budgeting can be assessed by considering a fundamental question for each of its key objectives. ... Forward estimates lengthen time frame of budgeting. ... – PowerPoint PPT presentation

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Title: BEYOND BUDGETING


1
BEYOND BUDGETING Allen Schick
ANU / VC Research Seminar15th November 2005
2
Getting the Budget Right
  • Budgeting can be assessed by considering a
    fundamental question for each of its key
    objectives.
  • Fiscal discipline
  • Are total revenue, spending, the surplus or
    deficit, and the public debt appropriate in the
    light of current and prospective economic
    conditions, the governments taxing capacity, and
    demands for public services?
  • Effective allocation
  • Are the governments spending priorities
    appropriate in terms of developing society,
    financing public objectives, and carrying out the
    programs authorized in law?
  • Efficient operations
  • Are government entities spending money and
    managing operations in ways that provide
    high-quality, accessible public services that
    give value for money?
  • Democratic accountability
  • Do citizens and groups have fair opportunity to
    express budget demands and to monitor the
    expenditure of public funds?

3
Each Objective is Associated with Contemporary
Budget Reforms
  • Fiscal discipline
  • Fiscal rules that constrain government or require
    transparent policies.
  • Medium-term expenditure frameworks (MTEF) that
    allocate resources within a 3-5 year horizon.
  • Fiscal sustainability reports that examine
    long-term trends and commitments.
  • Effective allocation
  • Outcome indicators that measure the impacts of
    policies and programs.
  • Program evaluations that assess the effectiveness
    of existing or proposed programs.
  • Strategic budgeting initiatives that plan
    government objectives and allocate resources.
  • Efficient operations
  • Output indicators that measure the goods and
    services of government.
  • Devolved budgeting that gives managers broad
    operating discretion.
  • Performance-based budgeting that links resources
    and results.
  • Democratic accountability
  • Transparent budgets that facilitate citizen
    understanding and participation.
  • Class (or gender) based budgets that show the
    distribution of government resources
  • Public opinion polls that show citizen budget
    preference.

4
Australias Managerial Model
  • Relies on skills, public ethic and commitment of
    public employees to improve performance.
  • Retains traditional, government-wide Australian
    public service.
  • Consolidated existing departments in a small
    number of portfolios.
  • Running cost arrangements give managers
    discretion in using operating funds.
  • Program budgeting and outcomes indicators orient
    managers to results.
  • Forward estimates lengthen time frame of
    budgeting.
  • Cabinet expenditure review committee focuses on
    policy changes.
  • Accrual basis allocates costs to activities.
  • Evaluation strategy aimed to provide objective
    basis for policy initiatives.
  • Ministers/managers encouraged to reallocate
    within their spheres of responsibility.

5
New Zealands Contractual Model
  • The parties to the contract have an arms length
    relationship
  • Policy advice separated from service provision
  • Ministers free to purchase from any supplier
  • Funds appropriated to minister (not department)
  • Providers free to produce outputs as they deem
    appropriate
  • Chief executives have discretion in managing
    operations and using inputs
  • Contracts specify outputs to be produced
  • Budgets are by output class ministers and chief
    executive negotiate output agreements
  • Contracts based on cost of outputs
  • Managers are charged the full cost of operations
    (accrual basis), including depreciation and use
    of capital
  • Performance under contract is reviewed
  • Actual outputs and costs are compared to targets

6
Two Critical Deficiencies
  • Budgeting is still incremental, not strategic.
  • Every budget reform has been a battle against
    incrementalism.
  • Budgeting still weakly ties resources to results.
  • The budget has lots of information on
    performance, but this is not the basis for
    allocation.

7
Beyond Budgeting
  • Originated in Britain.
  • Applied in a small number of firms.
  • Not used in public sector because of legal
    requirements.
  • Argues
  • Budgeting constrains adaptation to changing
    conditions.
  • Budgeting consumes vast managerial resources, but
    results in marginal change.
  • Budgeting takes on an importance of its own,
    often at variance with organisational objectives.

8
Budgeting Without Budgets
  • Maintaining Financial Control.
  • Establishing Strategic Priorities.
  • Selective Reallocation.
  • Managing for Performance.
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