Dr David Rosalky

Crawford School of Public Policy, ANU

Special Topic Course on Results-based

Planning, Budgeting & Evaluation

Urumqi, PRC, September 2012

LINKAGES BETWEEN PLANNING

AND BUDGETING

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CONNECTEDNESS OF STRATEGIC

GOVERNMENT ACTIVITY We will be discussing why and how to connect three distinct activities of government

1. Strategic planning – mapping the strategic objectives of the government

2. Budgeting – raising revenues and allocating resources

3. Implementing programs and administering policies

– Within components of government and across levels of government

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CONNECTEDNESS OF STRATEGIC

GOVERNMENT ACTIVITY

• These three activities are commonly disjoint

• Connecting and aligning the activities is essential to effective government and to achieving strategic goals

– Connection is about each activity feeding the next in a logical and holistic manner

– Alignment is about making the activities mutually reinforcing rather than pulling in different directions

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RESULTS-BASED FRAMEWORK

• Planning expressed as desired high-level

results

• Resourcing of programs to contribute to

results

• Actions judged on basis of achievement or

contributions to results

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LOGICAL CONNECTION

• Budgeting process needs both

– to find and to make fiscal space and

– to allocate resources to strategic priorities

• Management puts in place programs that

contribute to strategic goals

• Scrutineers judge the results being

achieved

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OPERATIONAL CONNECTION

• Results framework

– Statements and measures of results cascading from the strategic level to the operational level

– Difficult task

– Making it basis for resource allocation and external scrutiny even harder

• Without it

– Development plans are little more than political rhetoric

– Breakdown in confidence in, and legitimacy of, government’s plans and possibly of government

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PURPOSE OF DEVELOPMENT

PLANNING

• To set direction for economic and social

change • May be visionary or aspirational

• To announce medium-term political agenda

• To move systematically to specified goals to

advance the social and economic lot of

citizens

• MDGs provide an internationally endorsed set of

goals

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FROM ASPIRATION TO FULFILMENT

For the goals to be grasped by government,

they need to be:

• Stated in practical terms

• Assessed for feasibility or scaled to make

them achievable

• Given relative priorities or sequenced

• Resourced

• Implemented

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FROM ASPIRATION TO FULFILMENT

• Can be a leap

• Depends on language

• Plans often talk in “directional” language and

without specifics – eg “improve” conditions

• PRC’s current plan emphasises “inclusive growth”

• Depends on process of generating plan

• Does the process include policy and line

ministries?

• Usually plan needs to be turned into policies

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TRANSITION FROM PLAN TO POLICY • Development plans are strategic policy

• There is a continuum from vision to strategy to program to operation

• Government activity requires operational policies

• E.g. inclusive growth may require policies on income redistribution, education, industry support and, perhaps later, housing and availability of consumer goods

• Identifies type of activity and responsible agencies

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TRANSITION FROM PLAN TO POLICY • Need a “model” of policy impacts

– What’s the mechanism by which education reduces socio-economic conditions disparity?

– Have to understand dynamics of your society

– Need good data about current condition and marginal changes

• Need policy model (how does policy work?) – What drives good outcomes? Numbers, class

sizes, teacher quality, curriculum?

• Assumptions – What assumptions were made to reach

conclusions about how policies work?

– How sensitive is the result to those assumptions? 11

PURPOSE, RESULTS, PERFORMANCE

• Three terms describing overarching framework

• Not the same but logically connected

• PURPOSE: government plans and activity have clear sense of purpose – why it is pursuing this activity

• RESULTS: government’s purpose needs to be expressed as results – what will happen as it pursues its purpose

• PERFORMANCE: measured level of achievement of its intended results

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PURPOSE-DRIVEN GOVERNMENT

• Government activity at all stages to be driven by statement of PURPOSE

• Expressed as hierarchy of RESULTS

• Strategic impact: ultimate effect of a policy on society or the economy

– e.g. increased socio-economic inclusion

• Policy outcome: key result intended from policy

– e.g. improved educational and skill levels

• Program outputs: results of managerial activity

– e.g. schools, students, teachers

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KEY FEATURES Hierarchy of identifiable results

• Logical connections between plan, policies and program activity

• Logic based on data, understanding and assumptions (hence “model”)

• Results need to be monitored – continuing

• Assumptions need to be tested – Medium-term activity

• Programs need to be evaluated – Medium to long-term activity

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MANAGERIAL IMPLICATIONS • Line of sight between managers at all levels

– Managers need to see where they fit and what contribution they are making to strategies

• Performance framework

– Program managers responsible and accountable for achieving identified results

– Senior managers oversight of organisation’s results

– Strategic oversight that overall framework is achieving strategic goals

– Different timeframes: short-term, medium-term, long-term

– Different accumulations of activity: from team to whole of government

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RESOURCING STRATEGIC GOALS • Budget is link between strategic goals and

implementation

– Budget is a tool for converting policies into measurable action

• Budget process has to:

– Determine priorities

– Create fiscal space • Assumes fiscal limits are in place

• Budgets are highly committed or over committed

– Allocate resources to fund strategic policies and ongoing programs and activities

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PLANNING AND BUDGETING

• Development plans and budgets are the key

government documents, but

• They have different time scales

– Plans have a medium-term perspective

– Budgets (generally) have an annual perspective

• They are rarely linked logically or

procedurally

• Different ministries, different purposes,

different timing

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TRENDS AND EXAMPLES - PLANS

• Few developed countries have strategic

policy plans

– They are generally economic or fiscal in

nature

– They may stem from electoral manifestos and

need to be adopted as formal policy

• Interesting examples of de facto plans

– E.g. Australia’s Intergenerational Reports

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TRENDS AND EXAMPLES - PLANS

• Medium-term planning is a characteristic of developing countries

– Plans are intended to drive development

• Plans produced by specialist organisations

– Strategic policy experts with whole-of-government vision

– E.g. NDRC, BAPPENAS

– Sometimes formal consultation

• Vehicle for donors

– Can see what path development is taking

– Donors fund development activities

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LINKING PLANNING & BUDGETING

• A functional link is essential

• Two-way link

– Plan provides strategic starting point for budget

– Budget imposes reality check on plan • What will it cost and what can be afforded?

• Potential source of tension

– Especially where budget officials resist paring back ongoing programs and commitments

• Budgets have to become strategic 20

LINKING PLANNING & BUDGETING • Link requires collaboration between planners

and budgeters

• They have to think in the same “space” – Plans envision end-states, e.g. income equality

– Budgets built on accounting systems, e.g. charts of accounts

– Budget structures have to reveal spending on policy-related activities

• Effective linkage requires: – Comprehensive budget incorporating development

budget and recurrent budget

– Compatible structures so that components of the plan can map into components of the budget

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LOCATION OF PLANNING OFFICE

• When planning is essential government activity, usual for Planning Agency to be distinct from Budget Agency – Case in many developing countries

– But not in OECD countries

• Gives prominence to planning

• Promotes planning in view of donors

• But leads to lack of coordination and collaboration

• Indonesia keeping separate but linking through performance framework

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LINK THROUGH POLICY

• Policies express the way plans are to take

effect

– Income equality needs policies in respect of

education, regional development, taxation

• Policies speak the language of programs

and budgets

• Comprehensive plans incorporate policies

– Chinese FYP describes how education is to

pursue plan objectives

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SUMMARY CONCLUSIONS • Effective planning needs planning, budgeting

and implementing to be LINKED

• Basis for linking components together is a PURPOSE-BASED FRAMEWORK onto which are attached statements of RESULTS and measures of PERFORMANCE

• Making logical connections between results at the strategic level and the practical level is very challenging

• Failure to make effective connections can make planning a source of cynicism and undermine trust in government and legitimacy

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