Results Based Budgeting in Australia

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Results Based Budgeting in Australia

• Presentation by
• Richard Murray,
• Executive Director - Fiscal and Corporate,
  Department of the Treasury

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Outline

• Overview of the Fiscal Framework
• Charter of Budget Honesty
• Medium Term Fiscal strategy
• Accrual Budgeting
• The Outcomes and Outputs Framework
• Outcomes, Outputs and Administered Programs
• Case Study Education
• What have we learned?
• Programs versus Outcomes
• Measuring performance against Outcomes
• The need for central oversight
• Evaluation

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The Fiscal Framework
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Charter of Budget Honesty

• Guides rather than mandates the conduct of fiscal
  policy. Requires the Government to
• outline its medium term fiscal strategy
• publish financial statements consistent with
  Australian and international accounting standards
• specify fiscal policy actions that are temporary
  in nature, and the process for their reversal
• publish an Intergenerational Report every 5 years

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Medium-term Fiscal Strategy

• Strategy since 1996/97 is for Budget balance on
  average over the cycle
• Supplementary objectives are
• maintain surpluses while economic growth
  prospects remain sound
• no increase in the tax burden from 1996/97 levels
  
• halve net debt achieved in 2000-01
• improve the Commonwealths net worth position
  over the medium to longer term

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Improvement in Net debt
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OECD comparison of net debt
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Accrual Budgets

• Provides a more comprehensive picture of
  government operations
• Improves focus on fiscal sustainability (the
  balance sheet) and intergenerational equity
• compares assets and liabilities (rather than just
  inflows and outflows of cash)
• for the Budget and forward estimates
• for individual agencies as well as whole of
  government
• Imposes more business-like discipline on agencies
• Ensures more focus on net worth

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The Outcomes and Outputs Framework
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Outcomes, Outputs and Administered Programs

• Outcomes are defined by Finance as
• The impact sought or expected by government in a
  given policy arena.
• The focus is on change and consequences what
  effect can government have on the community,
  economy and/or national interest?

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Outcomes, Outputs and Administered Programs

• Outputs have been defined by Finance as
• The actual deliverables goods and services
  agencies produce to generate the desired outcomes
  specified by government.
• Customers include members of the public,
  industries or sectors, ministers, members of
  Parliament, other agencies or even in some
  instances, interests (eg the national interest).

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Outcomes, Outputs and Administered Programs

• Administered Programs are defined by Finance as
• Those resources administered by the agency on
  behalf of the government (such as transfer
  payments to the States, grants and benefits) to
  contribute to a specified outcome.
• They are identified separately from outputs
  because they involve different accountability
  requirements.

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A Model of the Framework
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Case Study Education
Outcome 1
Outcome 2
Outcome 3
Individuals achieve high quality foundation
skills and learning outcomes from schools and
other providers.
Individuals achieve relevant skills and learning
outcomes from post school education and training.
Australia has a strong science, research and
innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth.
Output 2.1 Funding for vocational education and
training Output 2.2New apprenticeships Output
2.3 Assistance for skills and career
development Output 2.4 Funding for higher
education Output 2.5Assistance to post school
students including those with special needs
Output 1.1 Funding for schools Output 1.2
Assistance to individuals including those with
special needs Output 1.3 Assistance for quality
teaching and learning Output 1.4 Assistance for
transition through and from school
Output 3.1Research infrastructure Output 3.2
Assistance for science collaboration and
innovation Output 3.3 Support for the
Australian education and training export industry
and international relationships
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Very Good
Focus on the end result, not the means of
achieving it
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Fair / Poor
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Very Good
Be succinct
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Fair
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Very Good
Be specific to the area being addressed
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Fair
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Very Good
Be stated in a way that allows the target group
to be identified
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Fair
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Good
Enable the formulation of effective indicators
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Poor
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Very Good
Be free of value-laden, generalised or
aspirational language
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Good / Fair
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Good
Be amenable to extension across agency boundaries
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Good
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Case Study Education
Outcomes should
Outcome 1 Individuals achieve high quality
foundation skills and learning outcomes from
schools and other providers. Very Good
Be able to be related to Budget documentation
Outcome 3 Australia has a strong science,
research and innovation capacity and is engaged
internationally on science, education and
training to advance our social development and
economic growth. Fair
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Case Study Education

• For Outputs it should be possible to
• define outputs in terms of what is produced
• measure both departmental outputs and
  administered programs in terms of price, quantity
  and quality (PQQ) and
• relate outputs to an outcome
• if this cannot be done the agency should cease to
  produce the output or identify an additional
  outcome that the agency should achieve.

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Case Study Education
Output Groups
Output 2.1 Funding for vocational education and
training Output 2.2New apprenticeships Output
2.3 Assistance for skills and career
development Output 2.4 Funding for higher
education Output 2.5Assistance to post school
student including those with special needs
Output 1.1 Funding for schools Output 1.2
Assistance to individuals including those with
special needs Output 1.3 Assistance for quality
teaching and learning Output 1.4 Assistance for
transition through and from school
Output 3.1Research infrastructure Output 3.2
Assistance for science collaboration and
innovation Output 3.3 Support for the
Australian education and training export industry
and international relationships
Defines what is being provided, price and
quantity are measurable and Outputs relate well
to Outcomes.
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Case Study Education

• Targets and performance indicators
• Mean scores of Australian students in reading,
  mathematical and scientific literacy compared
  with OECD average for 2000 (set to 500)

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Case Study Education

• Graduate starting salaries as a proportion of
  Average Weekly Earnings

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Case Study Education

• Outcome 3 Effectiveness indicator Patents
• Graph 2.3.3 Number of patents issued to
  Australian residents in Australia

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What have we learned?
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Programs versus Outcomes

• Ministers often make policy decisions based on
  programs
• Budget documentation tends to provide information
  on Outcomes
• There has been a move towards providing more
  administered program information to Government

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Measuring performance against Outcomes

• Many outcomes are too broad. For example The
  Defence of Australia
• In this case the Government has moved to define 7
  sub outcomes for reporting purposes
• Outcome 1 Command of Operations in Defence of
  Australia and its interests
• Outcome 2 Navy Capability
• Outcome 3 Army Capability
• Outcome 4 Air force Capability
• Outcome 5 Strategic Policy
• Outcome 6 Intelligence
• Outcome 7 Superannuation and Housing Support
  Services for Current and
  Retired Personnel

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The need for central oversight

• A devolved management model and relative
  financial autonomy has led to a lack of central
  knowledge on financial information
• Leads to a lack of scrutiny of agency performance
  by central agencies
• Directly affects the ability of central agencies
  to advise on Budget Strategy
• The Government has acted to provide the
  Department of Finance with additional resources
  and mandated program and cash reporting

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Evaluation and Audit

• Evaluation of performance information is
  essential to measuring the achievement of
  Outcomes
• Senate Estimates Committees scrutinise
  performance information ex-ante
• The Audit Office scrutinise performance
  information ex-post
• Are Chief Executives held accountable for
  Outcomes?

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Questions?