national happiness and public financial management€¦ · national happiness and public financial...

National Happiness and Public Financial Management

Manuel Pietra

ICGFM Past President Chairman of the Advisory Board, World Happiness Summit

President and CEO, FreeBalance

Why “happiness” in Public Policy?

Why Now?

Policy Complexity

Mar

ch 1

3 - 1

5 FISC: FreeBalance International Steering Committee

Mar

ch 1

6 H20: Happy 20 Government Track

Mar

ch 1

7-19

WoHaSu: World Happiness Summit M

arch

20 World

Happiness Report

Busy Happy Week in Miami

FISC

Happy 20

Tal Ben-Shahar Dr. Saamdu Chetri Vicente Fox

World Happiness Summit Statistics

40+

COUNTRIES

WOHASU # 1

2000+

ATTENDEES SPEAKERS

>90

Vote

0%

20%

40%

60%

80%

100%

NGOs Business Media Government

2016

2017

Trust

Source: Edelman Trust Barometer

Government

Tight Budgets

Low Trust

Poor Outcomes

Infrastructure Gap

Poor Citizen Services

Institutions

Communities

Reduced Digital Divide • Social media • Cross-border • Blogging • Rating systems • Mobile

Reduced Information Asymmetry

Power Shift

1. GROWTH AS PUBLIC POLICY

Positive?

GDP, Happiness & Life Satisfaction

GDP

Live

Sat

isfa

ctio

n

Consequences

Stress

Inequality

Health

Time Ticking on GDP

2. SCIENCE OF HAPPINESS

More than “Happiness”

Happiness

Well Being

Social Capital

Prosperity

Life Satisfaction

World Happiness Report

GDP Per Capita

Life Expectancy

at Birth

Generosity Freedom of Life Choices

Corruption Perception

Social Support

Government & Country Statistical

Analysis

Perception Surveys

Self-Reported Behaviour

Happiness?

Pseudo Science

Lacks Objectivity

Cultural Differences

Not for Government

Unrelated to Spending

Immoral

Happiness?

Science of Happiness

More Objective

than Growth

Cultural Differences

Is for Government

Prioritizes Spending

Moral

3. POLICY PRIORITIZATION

Public Policy Spectrum Economics

Short Term Goals

Policy

Budget

Results

Long Term Goals

Public Policy Spectrum Economics

Short Term Goals

Policy

Budget

Results

Long Term Goals

Defence

Public Security

Environmental

Social Welfare

Education

Health

Transportation

Energy

Public Policy Spectrum Economics

Short Term Goals

Policy

Budget

Results

Long Term Goals

Defence

Public Security

Environmental

Social Welfare

Education

Health

Transportation

Energy

Media

Civil Society

Donors

Businesses

Unions

Public Policy Spectrum Economics

Short Term Goals

Policy

Budget

Results

Long Term Goals

Happiness

Defence

Public Security

Environmental

Social Welfare

Education

Health

Transportation

Energy

Media

Civil Society

Donors

Businesses

Unions

Policy Guidelines

Health

Employment

Equity Anti-Corruption

Education

Participation

Policy Guidelines

Health

Employment

Equity Anti-Corruption

Education

Participation Happiness Economics

• Impact of trust in government on stability

• Impact of trust for tax compliance

• Reduced corruption (revenue & expenses) + increased tax compliance = financing better outcomes

Anti-Corruption

Anti-Corruption

• Impact of trust in government on stability

• Improvement of government policy

• Efficacy leads to improved wellbeing

Participation

Participation

• Long-term negative societal impact of unemployment

• Mental health implications of unemployment

• Importance of meaningful work

Employment

Employment

• Perceptions of procedural and discriminatory inequity

• Income inequity perceptions have cultural implications

Equity

Equity

• Negative impact of poor mental health far higher than impact of poor physical health

• Shift to preventative health • Significant linkage between

environment & health

Health

Health

• Cornerstone for happiness & wellbeing

• Shift from exam factories to future skills

• Instill life-long learning

Education

Education

Holistic Considerations

Health

Employment

Equity Anti-Corruption

Education

Participation

Effect of unemployment on mental health

Holistic Considerations

Health

Employment

Equity Anti-Corruption

Education

Participation

Effect of health on education

Holistic Considerations

Health

Employment

Equity Anti-Corruption

Education

Participation

Effect of education on employment

Holistic Considerations

Health

Employment

Equity Anti-Corruption

Education

Participation

Effect of participation on anti-corruption

Holistic Considerations

Health

Employment

Equity Anti-Corruption

Education

Participation

Effect of bias in inequality

Holistic Considerations

Health

Employment

Equity Anti-Corruption

Education

Participation

Cost of corruption to government programs

Personal Happiness & Wellbeing

Social Capital Life Long Learning

Personal Happiness & Wellbeing

Social Capital Life Long Learning

Education Health

Equity Anti-Corruption

Employment

Participation

• Pressure for growth & “doing business” • Globalization • Open Government Partnership • Sustainable Development Goals

• Wide ranging & complex!

But…

• Pressure for growth & “doing business” • Globalization • Open Government Partnership • Sustainable Development Goals

• Wide ranging & complex! • Now?

• Happiness and Wellbeing?

But…

Gross National

Happiness Pillars

Sustainable and Equitable

Socio-Economic

Development

Environmental Preservation

Promotion and

Preservation of Culture

Good Governance

Happy Planet Index

Health Justice

Ecological Footprint

Well Being

Legatum Prosperity

Index

Health

Education

Economy

Entrepreneurship & Opportunity

Social Capital

Safety & Security

Personal Freedom

Governance

World Happiness Index

Happy Planet Index

Gross National Happiness

World Happiness Summit

Governance Corruption Perception Justice Good Governance

Social Social Support

Health Sustainable & Equitable Socio-Economic Development

Social

Life Expectancy Physical

Cultural Generosity Promotion & Preservation of Culture Community

Economic GDP Per Capita Sustainable & Equitable Socio-Economic Development

Financial

Environmental Ecological Footprint

Environmental Preservation

Personal Freedom of Life Choices

Purpose

Mindfulness

Sustainable Development Goals

3 GOOD HEALTH 4 QUALITY

EDUCATION 6 CLEAN WATER & SANITATION

7 RENEWABLE ENERGY 12 RESPONSIBLE

CONSUMPTION

13 CLIMATE ACTION 15 LIFE

ON LAND 16 PEACE AND JUSTICE 14 LIFE BELOW

WATER 17 PARTNERSHIP FOR THE GOALS

11 SUSTAINABLE CITIES AND COMMUNITIES

10 REDUCED INEQUALITIES

5 GENDER EQUALITY

8 GOOD JOBS AND ECONOMIC GROWTH 9 INDUSTRY,

INNOVATION, INFRASTRUCTURE

1 NO POVERTY 2 NO

HUNGER

Governance

Social

Cultural

Economic

Environmental

4. MEASURING WHAT’S IMPORTANT

Corporate Performance Management

Bottom Line Outcome Output Input

Budget

Output

Output

Outcome

Outcome

Outcome

Outcome

Profit

Government Performance Management

Outcome Output Input Mandate

Objectives Budget

Output Outcome

Outcome

Output Outcome

Outcome

Why “Balance” Performance?

Performance

People

Process Politics

Public Finances

Balanced Scorecard Financial Stewardship

“financial performance”

Internal Business Process “efficiency”

Organizational Capacity “knowledge,

innovation”

Customer/Stakeholder “satisfaction”

Strategic Objectives Strategy Map

Performance Measures & Targets Strategic Initiatives

Vision and Strategy

FISC WORKSHOPS

Government Balanced Scorecard

Financial

Customer

Internal Process

Learning & Growth

Citizen

Internal Process

Learning & Growth

Financial

Private Sector Public Sector

Balanced Scorecard Concepts

Citizen Perspective

Internal Process Perspective

Learning & Growth

Perspective

Financial Perspective

Government Service Delivery

Automation & Efficiency

Organizational Change

Management

Budget Credibility

Government Transparency & Accountability

Program Management

Learning & Promotion

Opportunities

Debt Management

Equity

Scenario Planning

Adequate Compensation

Value for Money

Employment

Decision Support

Job Satisfaction

Taxation

Health & Education

Policy Coherence

Empowerment

Public Investments

Trust

Citizen Perspective

Internal Process Perspective

Learning & Growth

Perspective

Financial Perspective

Government Service Delivery

Automation & Efficiency

Organizational Change

Management

Budget Credibility

Government Transparency & Accountability

Program Management

Learning & Promotion

Opportunities

Debt Management

Equity

Scenario Planning

Adequate Compensation

Value for Money

Employment

Decision Support

Job Satisfaction

Taxation

Health & Education

Policy Coherence

Empowerment

Public Investments

Efficiency

Citizen Perspective

Internal Process Perspective

Learning & Growth

Perspective

Financial Perspective

Government Service Delivery

Automation & Efficiency

Organizational Change

Management

Budget Credibility

Government Transparency & Accountability

Program Management

Learning & Promotion

Opportunities

Debt Management

Equity

Scenario Planning

Adequate Compensation

Value for Money

Employment

Decision Support

Job Satisfaction

Taxation

Health & Education

Policy Coherence

Empowerment

Public Investments

Effectiveness

Citizen Perspective

Internal Process Perspective

Learning & Growth

Perspective

Financial Perspective

Government Service Delivery

Automation & Efficiency

Organizational Change

Management

Budget Credibility

Government Transparency & Accountability

Program Management

Learning & Promotion

Opportunities

Debt Management

Equity

Scenario Planning

Adequate Compensation

Value for Money

Employment

Decision Support

Job Satisfaction

Taxation

Health & Education

Policy Coherence

Empowerment

Public Investments

Sectors

Citizen Perspective

Internal Process Perspective

Learning & Growth

Perspective

Financial Perspective

Government Service Delivery

Automation & Efficiency

Organizational Change

Management

Budget Credibility

Government Transparency & Accountability

Program Management

Learning & Promotion

Opportunities

Debt Management

Equity

Scenario Planning

Adequate Compensation

Value for Money

Employment

Decision Support

Job Satisfaction

Taxation

Health & Education

Policy Coherence

Empowerment

Public Investments

Other Sectors to Support

Measurement

Citizen Perspective

Internal Process Perspective

Learning & Growth

Perspective

Financial Perspective

Government Service Delivery

Automation & Efficiency

Organizational Change

Management

Budget Credibility

Government Transparency & Accountability

Program Management

Learning & Promotion

Opportunities

Debt Management

Equity

Scenario Planning

Adequate Compensation

Value for Money

Employment

Decision Support

Job Satisfaction

Taxation

Health & Education

Policy Coherence

Empowerment

Public Investments

Goods

Services

Information

Time

Process

Quality

Cost

Relevance

5. ROLE OF PFM

5.1. Classification is Important

Government Matrix Structure

Government

Ministries

… … …

Departments

… … …

Agencies

… … …

Government Matrix Structure

Government

Ministries

… … …

Departments

… … …

Agencies

… … …

National

Objectives

Government Matrix Structure

Government

Ministries

… … …

Departments

… … …

Agencies

… … …

Sectors

National

Objectives

Government Matrix Structure

Government

Ministries

… … …

Departments

… … …

Agencies

… … …

Sectors

National

Objectives

PFM: Core of National Wellbeing

Budget Classification

Fund

Organization

Responsibility

Program

Organization

Accounting

Performance Classification

Climate

Health

Education

Infrastructure

Gender

Growth

Decision-Making Transparency

5.2. Public Investments

Public Investment Planning 2.

1 Pr

ogra

m B

udge

ting

Programs Objectives

2.2

Scen

ario

Pla

nnin

g

Financial Scenarios

2.3

Col

labo

ratio

n Multiple Versions

1.1

Per

form

ance

Str

uctu

re

Objectives Hierarchy

1.4

Cos

t Driv

ers Financial

Assumptions

2.5

Appr

oval

s Formal & Legal Budget Approval

2.4

Mul

tiple

Yea

r Previous Year Multiple Year Estimates 2

.6 P

orta

l

Budget Planning Transparency

5.3. Controls

Income Tax

Customs & Excise Sales Tax Non-Tax Debt

Income

Controls

Purchase Procurement Social

Programs Grants Debt Repay

Budgets Segregation of Duties

Transfers &

Virements Supplemental Process

Income Tax

Customs & Excise Sales Tax Non-Tax Debt

Income

Points of Control Failure

Purchase Procurement Social

Programs Grants Debt Repay

Budgets Segregation of Duties

Transfers &

Virements Supplemental Process

5.4. Fiscal Transparency

Fiscal Transparency O

• No Fiscal Information Available

1 • Printed Fiscal Information Available for a Fee

2 • Printed Fiscal Information Available for Free

3 • PDF Reports Available on Web

4 • Search, Select & Download Fiscal Information from

Web

5 • Open Data – API Integration for Civil Society Software

Role of Public Financial Management

•Performance Structure •Financial Structure •Cost Drivers •Previous Year Financials •Transparency

1. Performance Configuration

•Multiple Year •Scenario Planning •Collaboration •Program Objectives •Approval •Transparency

2. Public Investment Planning •Controls

•Procurement •Contracts •Progress •Transparency

3. Implementation

•Management Dashboards •Performance Outputs •Performance Outcomes •Return on Investment

4. Results

Vote

6. PUBLIC FINANCIAL MANAGEMENT LESSONS

A. Clarity

Wellbeing & Happiness

National Goals

Citizen-Driven Context

Relevant Sustainable Development Goals

Relevant Measurements

Wellbeing & Happiness

National Goals

Citizen-Driven Context

Relevant Sustainable Development Goals

Relevant Measurements

Socio-Cultural Context

“Best Practices”

B. Integration

Performance Integration

Different Databases

•Lack of Consistent Information

Different Classifications

•Metadata •Inconsistent controls

Fragmented Information

•No single view of government • Multiple versions of the truth •No budget visibility

Manual Intervention

•Error-prone •Lack of timeliness

Poor decisions

Decision-Making

Transparency Integration Different

Databases •Lack of Consistent Information

Different Classifications

•Metadata

Fragmented Information

•No single view of government

Manual Intervention

•Error-prone •Lack of timeliness

Poor Transparency

Life, Liberty, and the Pursuit of Happiness