Sequencing Budgetary Reforms: Lessons from Singapore

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Sequencing Budgetary ReformsLessons from
Singapore

• 26 May 2000

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Briefing Outline

• Mission
• Budgeting Policy
• Evolution of Budgeting System
• The Future of Budgeting

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Mission

• To Advance the Well-being and Development of
  Singapore through FINANCE

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Mission

• We will accomplish this with
• Superior Stewardship and Prudent Investment of
  Public Funds
• A Financial Environment Conducive to Business and
  Enterprise
• Policies and Frameworks which Enhance Excellence
  in the Public Sector
• Practices and Results which distinguish MOF as a
  World Class Organisation.

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Budgeting Policy

• What we want to do and Why...

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Budgeting Policy

• Promote sustained and non-inflationary economic
  growth
• Foster growth in the private sector
• Live within our means
• Invest in the future
• Safeguard our Reserves

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Budgeting Philosophy
People at operations are in the best position to
decide on the most effective andefficient use of
resources to obtain the best value for money
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Key Questions

• Are they allowed to do it?
• Are they capable of doing it?
• Are they doing it?

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Evolution ofBudgeting Systems

• How did we get from There to Here?

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Budgeting Systems

• Past
• Up to 31 Mar 78 Line Item Budgeting
• From 1 Apr 78 Programme Budgeting
• From 1 Apr 89 Block Vote Budgeting
• Present
• From 1 Apr 96 Budgeting For Results

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Evolutionary Trends

• General trends
• More flexibility and autonomy
• Greater accountability
• More focus on outputs, objectives and outcomes
• Greater overall fiscal discipline

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Line Item Budgeting

• How many paper clips do you need?

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Line Item Budgeting

• Budget of each department of a Ministry expressed
  in terms of the kinds and quantities of goods and
  services to be purchased
• Ministries had to keep expenditure within the
  amounts approved for each object

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Line Item Budgeting

• Strengths
• Effective in ensuring financial control
• Adequate basis for allocating limited resources
  at a time when Government activities were limited

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Line Item Budgeting

• Limitations
• Rigid, unable to cope with
• rapidly changing priorities and circumstances
• creation of new government services
• Budget evaluation mechanism difficult without
  mechanism to link things to be bought with
  things to be done

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Line Item Budgeting

• Limitations
• New budgets based on previous budget with
  increments for price increases
• no evaluation of whether objectives are still met
  or cost-effective

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Programme Budgeting

• How much money do you need?

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Programme Budgeting

• Programme Budgeting from 1 Apr 78
• Emphasizes things to be done
• Adopted from the US Planning, Programming and
  Performance Budgeting System (PPPBS)
• Systematically identify the programmes and
  activities necessary to achieve the goals and
  objectives of each Ministry

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Programme Budgeting

• Programme Budgeting from 1 Apr 78
• Funding based on resources required to undertake
  each programme

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Programme Budgeting

• Strengths
• Greater awareness of goals to be achieved
• More flexible than Line Item Budgeting
• gradually relaxed transfer of budgets between
  objects of expenditures and between
  activities/programmes

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Programme Budgeting

• Limitations
• With the expansion of existing programmes and the
  introduction of new ones, there was no mechanism
  to ensure that the overall expenditure would not
  outgrow revenue collection.

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Block Vote Budgeting

• How much money can we give you?

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Block Vote Budgeting

• Block Vote Budgeting
• Top-down approach
• Cabinet approval of budget priorities and
  aggregate allocations
• Ministries given flexibility in managing
  allocations (transfers between programmes,
  activities and line-items)
• Control through published workload and
  performance indicators

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Block Vote Budgeting

• Set Targets for
• Government Expenditure as percentage of GDP such
  that
• Total expenditure lt Operating Revenue
• Expenditure to GDP by Sectors and Ministries

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Block Vote Budgeting

• Strengths
• Better ensure a balanced budget
• Contain Government expenditure as a proportion of
  GDP
• Help Ministries respond speedily to changing
  priorities
• Improve the effectiveness and efficiency of
  Government operations
• Make senior civil servants responsible and
  accountable for expenditure budget

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Block Vote Budgeting

• Limitations
• Less emphasis on outputs and deliverables
• Ministries only required to budget the amount of
  inputs needed to fund their operations.
• Inadequate incentives to achieve greater
  operational efficiency

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Budgeting For Results

• What results can you produce?

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Budgeting For Results

• Key elements
• Pre-specification of outputs and performance
  targets
• Output-based funding allocations
• Granting financial and personnel management
  flexibility
• Ministries and departments operated as Autonomous
  Agencies

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Budgeting For Results

• Strengths
• Budget based on outputs
• Emphasis on performance and results
• Greater autonomy and flexibility
• Greater accountability
• Departments more aware of outputs and cost of
  producing outputs
• Puts decisions on deployment of resources in the
  hands of people at operations

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Budgeting For Results

• Shortcomings
• No clear link to desired outcomes
• Lack of focus on processes
• Does not address need for sustained superior
  performance and results
• With tighter fiscal position, need for greater
  emphasis on inter-ministry allocations

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The Future of Budgeting

• How do we get from Here to There?

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The Future of Budgeting

• Moving ahead
• Budgeting 21
• Managing For Excellence
• Resource Management

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Managing For Excellence
To build an excellent Public Sector through
harnessing the creativity of our people and
superior management of our resources
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Managing For Excellence

• MFE is about
• Superior leadership and development of staff
• Superior management through results- oriented
  processes
• Sustained organisational excellence

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Managing For Excellence

• Scope of MFE
• People-Centred Management
• Systems-Oriented Approach
• Customer-Focussed Culture
• Networked Government

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Resource Management

• Management, deployment and utilisation of
  resources for maximal results
• Resource Accounting Budgeting
• Based on Accrual Accounting
• Accurate Costing Pricing
• Enhanced Inter-Departmental Charging
• Net Economic Value

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Budgeting 21

• Future envisaged
• Proposals outrun resources
• Beyond least for output to most from input
• Expenditures grow at GDP rate
• MOF focuses on outcomes ministries manage
  outputs for those outcomes

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Budgeting 21

• Key features
• Predetermined overall and sectoral budget
  ceilings
• Guaranteed baseline operating budgets for
  ministries
• Project worthiness distinct from funding
• Productivity dividend creates fund for
  inter-ministry bidding
• Funding by prioritisation within ministry and
  across ministries

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Summary

• Line Item ? Programme ? Block Vote
• Focus on greater management autonomy
• Addresses Are they allowed to do it?
• Budgeting for Results, Managing For Excellence
  Resource Management
• Focus on outputs and results-oriented processes
  and best practices
• Addresses Are they capable of doing it?
• Budgeting 21
• Focus on outcomes and national priorities
• Addresses Are they doing it?

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Thank you!