Performance Budgeting in the Government of Canada
Presented to: The Asian Regional Seminar: Promoting Fiscal Sustainability Date: February 28th – March 2nd, 2011, Kuala Lumpur, MalaysiaPresented By: Bruce Stacey, Associate Chief of Defence Transformation
Department of National Defence
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Canadian Context Foundation New Expenditure Management System Strategic Review Process National Defence an Example Lessons Learned
Outline
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Federal Expenditures Overview 2009-2010
Major and Other
Transfer Payments,
44%
Public Debt Charges,
14%
Direct Program
Expenditures, 42%
Elderly Benefits,
31%
Employment I nsurance,
15%Child Care
Benefits, 2%
Other Transfers,
3%
Equalization & Transfers
to Territories, 17%
Health & Social
Transfers, 32%
Grants & Contribution
s, 35%
Operating Expenses,
60%
Crown Corporation Expenses,
5%
Total Expenditures $235.8 B (Fiscal Year 2009-2010)
Major and Other Transfer Payments
$104.3 B
Direct Program Spending $99.6B
Source: Main Estimates – Part I 2009-2010
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A common approach to the collection, management, and reporting of performance information is key …
Management, Resources and Results Structure Policy (2005)
Provides detailed information on all government programs
Establishes the same structure for both internal decision-making and external accountability
Helps to link resources and results -- planned and actual
Is being implemented across government
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Policy requirements for Strategic Outcomes incl: Performance Measures
Policy requirements for each program activity element include:
Program title & description
Expected results
Performance measures
Planned & actual spending
Target & actual results
Governance
Strategic Outcome*
Program Activities*
Sub-Activity Level**
Sub-Sub Activity Level**
Lowest Level programs
Accountability levels to Parliament (Estimates & Public Accounts)*require TB approval, incl. major & minor changes
Departmental PAA: reflect the inventory of all the programs of a department depicted in their logical relationship to each other and to the SO(s) to which they contribute **require TBS approval
The Program Activity Architecture
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The New Expenditure Management System
• All spending must be managed to transparent results/outcomes - Clear measures- Assessed and evaluated systematically and regularly- Demonstrating value for money
• Up-front discipline is applied to new spending proposals to manage spending growth
- Include clear measures of success- Demonstrate how the proposal fits with existing spending and results- Provide reallocation options for funding
• Strategic Reviews assess existing spending over a four-year cycle to ensure alignment with priorities, and effectiveness, efficiency and economy
- Programs expected to demonstrate results in support of priorities- Decision-making to use objective, evidence-based information
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Strategic Reviews – Key Elements
• Objective of Strategic Reviews: - Assess all direct program spending and performance over a 4 year period to
ensure value for money for existing spending• Comprehensive Review of Programs
− Strategic Reviews assess whether programs are aligned with government priorities, are effective and efficient and provide value for money
• Reallocation and Reinvestment Proposals− Through the comprehensive review of programs, organizations identify the lowest
priority and lowest-performing 5 per cent of programs (reallocations) and propose higher-priority, higher performing programs for reinvestment:
Potential for Improvements/ reinvestments
Primary Candidate for Reallocation
Potential for Reinvestment
High-Priority
Low-Priority
Low-Performing High-
Performing
Secondary Candidate for Reallocation
100% Organizational Review Base
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The Bottom Line
needs to be isolated and removed from our baseline and “parked” to be either…
Re-invested in other higher Dept / CF priority activities or initiatives (internal)
Re-allocated to other Govt priorities activities or initiatives (external)
?
Grants
Govt decision will be based almost entirely on the scope / scale of the review we conduct and the storyline we tell
Baseline 2010
5 %
Pers
onne
lO
& M
Cap
ital
Inve
st $
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Strategic Reviews – Scope and Key Elements
Departmental Strategic Reviews to answer specific questions in key areas: Government Priority, Federal Role, Relevance (i.e. continued prog. need) Performance (effectiveness, efficiency, value for money) Management Performance
Departmental Strategic Reviews to be conducted using the following key elements
Analytical Framework: The department’s Program Activity Architecture Information Sources: Evaluations, Audits, Management Accountability Framework
assessments, Auditor General Reports, and other reports Reporting Requirements: Outlined in the Terms of Reference Steering Committee: A departmental steering committee to be established with ex
officio membership from TBS External Advice: Expert outside advice to be involved on each Review to ensure
neutrality and credibility
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National Defence’s Component Definition
ActivityComponent
INPUT
Enabling Inputs (Role filling Resources)
Role or Requirement
Specifications
INPUT
INPU
T
INPU
T
OUTPUT
OUTPUT
OUTCOME
OUTCOME
ENABLING INPUTS
OUTPUTTARGETS
OUTCOMETARGETS
OUTCOME
OUTCOME
ITEMS TO BE DEFINED & JUSTIFIED
1. Outcome Targets2. Output Targets3. Outcomes Achieved4. Outputs Achieved5. Enabling Inputs6. Throughputs7. Role/Requirements
THROUGHPUTS
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PRESENT GOC OBJECTIVES
GOC MANDATE
ENDURING REQUIREMENT
FOR DEFENCE & SECURITY OF
CANADA
Program Integration Efficiency
Relevance to present GOC
Political & Strategic
RelevanceEnduring
Relevance to Canadians
Within Purview of GOC
RELEVANCE
Pan CF/DNDPerformance Management
Q1
Q2
Q3
Defence & Security Delivery
Program Integration
Effectiveness
ProgramEffectiveness
ProgramEfficiency
PERFORMANCE
Individual Program Performance Management
Q5
Q6
Q4
IndividualProgram Delivery
The Assessment
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Initial AnalysisC
ompr
ehen
sive
E
valu
atio
n
Primary International Secondary International Domestic & Standing
Land TrainingLand Inf & Base SptLand Eqt Maintenance
Land C2
Land Readiness
Sustain Land Forces
Component 1
Component 2
Component 3
Component 4
Component 5
ActivityComponent
INPUT Req
INPUT
INPU
T
INPU
T
OUTPUT
OUTPUT
OUTCOME
OUTCOME
ENABLING INPUTS
OUTCOME
OUTCOME
Role/ReqSpecs
PF
PF
PF
PF
Req
Req
Req
Req
Req
Req
Req
ActivityComponent
INPUT Req
INPUT
INPU
T
INPU
T
OUTPUT
OUTPUT
OUTCOME
OUTCOME
ENABLING INPUTS
OUTCOME
OUTCOME
Role/ReqSpecs
PF
PF
PF
PF
Req
Req
Req
Req
Req
Req
Req
ActivityComponent
INPUT Req
INPUT
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INPU
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OUTPUT
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OUTCOME
OUTCOME
ENABLING INPUTS
OUTCOME
OUTCOME
Role/ReqSpecs
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ActivityComponent
INPUT Req
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OUTPUT
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ENABLING INPUTS
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Role/ReqSpecs
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ActivityComponent
INPUT Req
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ENABLING INPUTS
OUTCOME
OUTCOME
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INPUT Req
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INPUT Req
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INPUT Req
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INPUT Req
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INPUT Req
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Q& A Text Template Component X
$ to Component Attributions
Recommended Prioritization & Recommendation of bottom 10%
Take assignedPAA activities
Identify Components
Define Components
Analyse Components Prioritize Components
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Analysis A : Sub-Sub-Activity Partitioning & Assessment
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$32M
$14M
$18M
$16M
$2M$5M
$12M
$2M
$10M
$1M
$15M
$11M
$12M
$20M
$1M
$2M
$5M
$5M
$2M$2M
Rel
evan
ce
Performance
Program Activity Component X (compared to all DND/CF)
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What lessons have we learned (#1)?
Need persistent effort to build capacity - will take time Political leadershipHave a plan but experiment and adapt:
• Central agency leadership • Know program base• Identify measures and collect the data• Evaluation capacity means investment • Use the information for decision-making in the
department• Use the same information to improve reporting
Linking performance information to reporting was helpful – but linking it to decision-making in the budget process has been criticalDon’t wait for perfection
What are the lessons learned (#2)?
This is cultural change: expect resistance - go for small wins - communicate - acknowledge risks - adapt - build trust
Rewards and sanctions are important - gaming
Put elected and non-elected officials on the same information base:
• Make it relevant for decision-making• Better management and fiscal results • Sound understanding of the business • Ministerial engagement important
Have realistic expectations - under promise, over deliver
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Questions