James Brumby of the World Bank discussed the significant cultural and institutional change needed for Performance Based Budgeting. Much in Public Financial Management (PFM) has focused on limiting discretion – but discretion is needed to improve performance.
Performance is determined by where you sit, according to Mr. Brumby. Government performance is complex because of the variety of interests.
Mr. Brumby glossary began by defining inputs, outputs, outcomes and indicators. Outputs are controllable by government organizations and easy to measure. Outcomes are harder to control and measure, according to Mr. Brumby. He pointed out these connect together in a performance chain showing where efficiency and effectiveness measurements are used. He described the difference between intermediate outcomes and final outcomes. A list of indicator types like timeliness and location were presented. He recommends that output measurements should be externally focused, controllable, comprehensive measurable and informative.
3 levels of performance based budgeting include:
- Weakest: Performance as an instrument of transparency
- Moderate: Performance informed budgeting
- Strongest: Direct performance budgeting with an unambiguous contractual mechanism. This is only the case in two OECD countries.
Mr. Brumby described methods of contractual, program, formula-based, purchaser-provider, and the agency model used in performance frameworks in government.
Mr. Brumby described how many countries aspire to performance budgeting – implementation is a journey rather than a destination. He contrasted this with accrual accounting that is a destination. Ideas and objectives change, so there is not destination for performance budgeting.