Two years on: Chile

1
Two years on Chiles Experience in Public Sector
Management Processes

• Mario Marcel, Budget Director
• Ministry of Finance of Chile
• Plenary Session How the Global Context Shapes
  Country Approaches to Managing for Development
  Results
• Managing for Development Results, Second
  International Roundtable
• Marrakech 2004

2
2002 Roundtable

• Chiles experience presented
• Performance monitoring system comprised of five
  tools
• Performance indicators (1994)
• Program evaluations (1997)
• Management improvement programs (1998)
• Comprehensive performance reports (1997)
• Budget bidding fund (2000)

3
Main feature PMS related to budgeting
Performance targets
Programs for evaluation
APPROVAL
Program evaluations
Performance pay
PREPARATION
EXECUTION
Performance indicators and targets
Indicators
EVALUATION
New requirements to PMS
Comprehensive performance reports
4
Main conclusions in 2002

• All instruments in working order
• Chiles experience proves that it is possible to
  build and operate a performance monitoring system
  in an emerging country
• PMS development motivated by frustration with
  value for money rather than by a crisis
• System helped in reallocating resources in the
  face of tighter budget contraints 2000-2002
• Be aware of enabling factors (transparency,
  fiscal discipline, hierarchical budget
  institutions)

5
...and some pending issues

• Consolidation of reforms and political support
• Balance between effectiveness and transparency
  difficult to obtain
• Different views of PS modernisation in peoples
  minds
• Citizens participation and role of Legislature
• Performance, trust and devolution
• High centralization discussed

6
TWO YEARS LATER TOOLS HAVE DEVELOPED
TOOL DESCRIPTION 2002 2004
Performance indicators Indicators of effectiveness, economy, efficiency, quality of service with goals in budget process 537 indicators Limited coverage Performance against targets still not reported 1,684 indicators Number appropriate, still need to diversify Performance reported to Budget and Congress in budget process and CPRs
Program evaluation Programs selected annually for evaluation by independent panels, conclusions ans recommendations reported to Congress 120 evaluations performed, 48 of gov program spending All desk evaluations Ministry-Budget agreements signed -170 evaluations performed or in progress, 75 of gov program spending Growing share ofImpact and comprehensive evaluations Ministry-Budget agreements assessed and reported to Congress in CPRs
Management Improvement Programs (MIP) Annual bonus paid on basis of agencys progress against goals in seven key management areas, benchmark-based approach Bonus 2-4 96 of staff on maximum bonus Bonus 2,5-5 Team performance bonus, max 3 MIP results reported to Congress in CPRs 75 of staff on maximum bonus External ISO 9000-type certification Devolution of financial authority to top performers
Comprehensive Performance Reports (CPR) Annual report prepared by every agency on performance against budget, targets, institutional commitments 200 agencies send CPRs to Finance Committes of Congress 200 agencies send CPRs to permanent Budget Committee of Congress CPRs basis for Presidents report and review by permanent Budget Committee of Congress
Bidding Fund (BF) Pool of funds allocated to innovative programs on basis of quality and consistency of bids from ministries - 4 of gov expenditure allocated through BF 10 of gov expenditure allocated through BF BF suspended for last half of administration
7
Three key reforms

• Accountability. Reform of Congress Regulations
  (March 2003)
• Joint Budget Committee of Congress made permanent
  (from 2-month to year-round work)
• JBC to hear, analyze and give guidance on basis
  of reporting from Performance Monitoring System
  ahead of budget discussion
• Consolidation of Performance Monitoring System.
  Reform of Financial Management Law (June 2003)
• Permanent authority to Ministry of Finance to
  request and provide performance information with
  Budget
• Further reporting mandates medium-term
  expenditure framework
• Human resource management. Reform of Statute of
  Public Employees (May 2003)
• Performance-based pay doubles share of wage bill
  to 7
• Seniority-based career changes to merit-based
  career
• Political appointees reduced from 4,000 to 400
• Chief executives to be selected by President from
  short list provided by independent commission
  after professional screening of candidates
• Chief executives to sign performance agreements
  with ministers
• Civil Service Agency created

8
Not a coincidence - How PMS became a political
winner

• In November 2002 allegations of irregularities in
  Public Works Ministry, followed by financial
  scandal in development agency
• Politicians, business leaders, media blame public
  sector backwardness
• In January contacts between government and
  opposition to respond with public sector reform.
  What reform?
• Political agreement around performance-based
  management, budgeting, promotion and pay, based
  on cumulative experience, thinking on
  results-oriented management over previous years

9
The value added by performance management

• Performance management provided meat to Public
  Sector Reform Agreement
• In some cases, voluntary, administrative
  developments made statutory
• In others, performance orientation and mechanisms
  incorporated into new systems (HRM)
• Accountability to Congress strengthened
• Reforms enacted in matter of weeks
• Trust in Chilean public sector restored,
  transparency assessments suffer little damage,
  country risk drops
• ...and value gained consolidation of reforms

10
Summing up

• In the end, there was some sort of crisis
• But it was sorted out better because of previous
  progress in performance-based management
• Crisis provided an opportunity to consolidate
  reform and gain bipartisan political support
• Lessons for discussion of influence of Global
  Context on country approaches to managing for
  results
• External pressure is unavoidable, even necessary
  for reform
• But readiness of government institutions to
  respond with effective solutions is key to success

11
See system in practice

• www.dipres.cl