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Budgeting for Results:Budgeting for Results:news from the southnews from the south
Jaime Crispi Jaime Crispi
Head of Research, Budget Office Head of Research, Budget Office
Ministry of Finance of ChileMinistry of Finance of Chile
November 2004November 2004
22
General PropositionsGeneral Propositions
Instruments are means towards Instruments are means towards objectives objectives The government budget is a complex The government budget is a complex assembly of public policy instruments assembly of public policy instruments oriented to multidimensional objectivesoriented to multidimensional objectivesObjectives are operationally expressed Objectives are operationally expressed through (measurable) resultsthrough (measurable) resultsBudgeting must be geared towards Budgeting must be geared towards (multidimensional) measurable results(multidimensional) measurable results
33
This PresentationThis Presentation
The Macro Dimension: Chile´s Fiscal RuleThe Macro Dimension: Chile´s Fiscal Rule
The Micro Dimension: Chile´s The Micro Dimension: Chile´s management control systemmanagement control system
News from the South: they can (and News from the South: they can (and should) be integratedshould) be integrated
44
Macro Dimension of the Budget: Macro Dimension of the Budget: Objectives (expected results)Objectives (expected results)
From the macro dimension fiscal policy has From the macro dimension fiscal policy has several complementary objectives:several complementary objectives:
Support short term stability of the economySupport short term stability of the economy
Assure long term sustainability of public Assure long term sustainability of public finances (government´s net worth) finances (government´s net worth)
Support a stable pattern of interannual Support a stable pattern of interannual financing for public programsfinancing for public programs
Provide stability to different agents of the Provide stability to different agents of the economy (credibility) economy (credibility)
55
Macro Dimension of the Budget:Macro Dimension of the Budget:Instruments and conditionsInstruments and conditions
To obtain these results fiscal instrument To obtain these results fiscal instrument must (at least) be:must (at least) be:
Technically well designedTechnically well designedWell adapted to the normative framework Well adapted to the normative framework (laws and norms) in which they are to operate(laws and norms) in which they are to operatePolitically sustainable Politically sustainable
66
Chilean fiscal policy in the 1990s:Chilean fiscal policy in the 1990s: the standard view the standard view
Conventional balance (PSBR) and central government net debt
(as % of GDP)
-3,0%
-2,0%
-1,0%
0,0%
1,0%
2,0%
3,0%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-45,0%
-35,0%
-25,0%
-15,0%
-5,0%
5,0%
15,0%
25,0%
35,0%
45,0%
77
Cíclical component of the Cíclical component of the budget 1987-1999budget 1987-1999
0,8
3,2
4,4
2,4
0,70,8
-0,2-0,1
1,4
0,7 0,8
-0,3
-1,4
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
88
Structural balance in ChileStructural balance in ChileThe structural balance reflects the budget balance that would The structural balance reflects the budget balance that would obtain if GDP was at its trend level and copper price is at its long obtain if GDP was at its trend level and copper price is at its long term level. It is thus adjusted by the effect the economic cycle term level. It is thus adjusted by the effect the economic cycle and the price cycle of Chile´s main commodity ongovernment and the price cycle of Chile´s main commodity ongovernment revenues.revenues.Trend GDP is estimated through the standard methodTrend GDP is estimated through the standard method. .
• Production function Y = A KProduction function Y = A KLL
• Trend level of inputs is provided by a comittee of external Trend level of inputs is provided by a comittee of external expertsexperts
Long term copper price is provided by comittee of external Long term copper price is provided by comittee of external expertsexpertsTax revenues are adjusted by GDP gapTax revenues are adjusted by GDP gapCopper revenues are adjusted by the price gap Copper revenues are adjusted by the price gap
99
Structural BalanceStructural Balance
tstt
ttttts ICIC
Y
YTTBAB ,
*
, *
It doesn’t in itself involve a policy It doesn’t in itself involve a policy rule. It is simply an indicator on rule. It is simply an indicator on which to base itwhich to base it
1010
Chilean fiscal policy: Chilean fiscal policy: re-reading the storyre-reading the story
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Effective Balance Structural Balance
1111
It allows automatic stabilizers to operate, thus It allows automatic stabilizers to operate, thus softening the economic cycle (supports softening the economic cycle (supports stability)stability)
With right target neutral long term effect on With right target neutral long term effect on government’s net worth (sustainability)government’s net worth (sustainability)
Limits the need for abrupt expenditure changes Limits the need for abrupt expenditure changes in the extremes of the cycle (stable financing for in the extremes of the cycle (stable financing for government programs)government programs)
If transparently implemented, provides a clear If transparently implemented, provides a clear time horizon for other agents (credibility)time horizon for other agents (credibility)
Why a rule targeting Why a rule targeting the Structural Balancethe Structural Balance
1212
Institutional conditionsInstitutional conditions
Centralized fiscal authority: only the Centralized fiscal authority: only the executive power has initiative in fiscal executive power has initiative in fiscal matters; centralized and broad based tax matters; centralized and broad based tax system; only central government can levy system; only central government can levy taxes and issue debt. taxes and issue debt.
Constitutional ban for revenue earmarking Constitutional ban for revenue earmarking
Mid term fiscal projections incorporated Mid term fiscal projections incorporated into budget process.into budget process.
1313
Political conditionsPolitical conditionsPolitical stability associated to democratic Political stability associated to democratic consolidation.consolidation.
Fiscal deterioration in previous years (fiscal Fiscal deterioration in previous years (fiscal deficit of 1,4% of GDO in 1999) deficit of 1,4% of GDO in 1999)
As new government assumes (2000) incipient As new government assumes (2000) incipient economic recovery generates political space economic recovery generates political space (short period between Asian crisis and posterior (short period between Asian crisis and posterior global slowdown)global slowdown)
Overall: generally broad consensus over fiscal Overall: generally broad consensus over fiscal responsibilityresponsibility
1414
Intermediate ResultsIntermediate Results
1997 1998 1999 2000 2001 2002 2003 2004 (e) 2005 (p)Effective Balance 2,1 0,4 -2,1 -0,6 -0,5 -1,2 -0,4 1,9 1,2Total Cyclical Component
1,2 -0,2 -1,3 -0,8 -1,4 -1,7 -1,2 1,0 0,3
Structural Balance 0,8 0,6 -0,8 0,1 0,9 0,5 0,8 1,0 1,0
(percentage of GDP)
1515
SustainabilitySustainability
Public debt projection under normal cyclePublic debt projection under normal cycle
1616
What the markets say What the markets say (credibility)(credibility)
0
200
400
600
800
1000
1200
1400
EMBI Chile´s Country Risk
1717
Overall macro results:Overall macro results:External crisis and fiscal External crisis and fiscal
policypolicy1975 1982 - 1983 1999 2001-2002
ICE -0,4 -4,7 -5,8 -5,9GDP Growth -13,3 -8,5 -1,1 2,5Unemployment (Average) 15,3 19,1 9,8 9,1Total Public Spending (real growth) -22,8 -2,1 4,7 4,4Public Investment (real growth) -46,8 -13,2 4,7 7,6
Source: Ministry of Finance and Central Bank of Chile,(1) The Índice de Condiciones Externas is expressed as a porcentage of GDP and incorporate the effects of changes in the exchange terms, export volumes and levels of capital flows.
1818
Micro Dimension of the Budget:Micro Dimension of the Budget: the nature of the problem the nature of the problem
Governments experienced a significant change in the scope of their Governments experienced a significant change in the scope of their activities throughout most of the 20th centuryactivities throughout most of the 20th century
Such change implied moving from the provision of classical public Such change implied moving from the provision of classical public goods to become massive service providersgoods to become massive service providers
Today 3/4 of government activity is providing servicesToday 3/4 of government activity is providing services
Yet service provision from governments is supposed to happen in a Yet service provision from governments is supposed to happen in a transparent, objective waytransparent, objective way
This results in government organizations having:This results in government organizations having: Multiple mandatesMultiple mandates Broad, sometimes diffuse objectivesBroad, sometimes diffuse objectives Free service provisionFree service provision
This involves a peculiar framework for public management, where This involves a peculiar framework for public management, where performance is not a straightforward conceptperformance is not a straightforward concept
1919
Management control in the Management control in the private sectorprivate sector
COMPANY CUSTOMERSRESOURCEPROVIDERS
BALANCE$$$
INPUTS GOODS AND SERVICES
REVENUES
$$$
COSTS
$$$
2020
Management control in the Management control in the public sectorpublic sector
GOVERNMENT
ENTITYCITIZENS
RESOURCEPROVIDERS
INPUTS PUBLIC GOODS AND SERVICES
COSTS
$$$
TREASURY
FU
ND
ING
TAXES
PERFORMANCEINFORMATION
LINE-ITEMBUDGET
+PERFORMANCE
ASSESMENT=
PERFORMANCE BUDGET
2121
Micro Dimension: Micro Dimension: performance questionsperformance questions
Ex-ante questions:Ex-ante questions: Are programs/policies likely to achieve their aims?Are programs/policies likely to achieve their aims? Have programs/policies been designed cost-effectively?Have programs/policies been designed cost-effectively? Are investment projects socially profitable?Are investment projects socially profitable?
Ongoing:Ongoing: Have programs/policies operated as planned?Have programs/policies operated as planned? Were public goods and services provided transparently?Were public goods and services provided transparently? Did programs/policies achieve their aims?Did programs/policies achieve their aims? Was the set of programs/policies in an area consistent?Was the set of programs/policies in an area consistent? Are things improving?Are things improving? Is contribution of public managers and employees to results Is contribution of public managers and employees to results
properly acknowledged/rewarded?properly acknowledged/rewarded?
2222
Chile´s Management Control Chile´s Management Control System: InstrumentsSystem: Instruments
Performance indicators Performance indicators
Bidding FundBidding Fund
Management Improvement ProgrammesManagement Improvement Programmes
Program EvaluationProgram Evaluation
2323
Performance IndicatorsPerformance IndicatorsAimed at telling how a government organization is performing Aimed at telling how a government organization is performing over timeover time
Agencies compete with their past recordAgencies compete with their past record
Ongoing, periodical informationOngoing, periodical information
Measure performance in different:Measure performance in different: Dimensions (effectiveness, efficiency, economy, service quality)Dimensions (effectiveness, efficiency, economy, service quality) Delivery levels (process, output, outcome)Delivery levels (process, output, outcome)
Need reliable data collection methodsNeed reliable data collection methods
Chilean experience:Chilean experience: Started 1994Started 1994 Incrementalist approach, starting on voluntary basisIncrementalist approach, starting on voluntary basis Budget-relatedBudget-related Disclosure policy: Congress and general publicDisclosure policy: Congress and general public Subject to growing quality standardsSubject to growing quality standards
2424
Performance IndicatorsPerformance Indicators2005 Budget2005 Budget
Government Functions Process Product Total
Itermediate Final Total
A General functions
85 168 36 19 55 308
B Social Functions
224 436 108 53 161 821
C Economic Functions 87 297 64 11 75 459
Total 396 901 208 83 291 1.588
% 25.0% 56.7% 13.1% 5.2% 18.3% 100%
Source: National Budget Office
Result
2525
CurrentBudget Inertial
spending
Unallocatedpool
Bidding Fund•Started 2000 with preparation of 2001 Budget•Competitive bidding mechanism to improve rationale of budget allocations•Aimed at moving away from incrementalist practices•Inertial spending strictly constrained•From comparison with spending ceilings, unallocated pool of resources
2626
Bidding FundBidding Fund
Ministries submit bids for resources from poolMinistries submit bids for resources from poolBids require submission based on logical Bids require submission based on logical framework matrix (aims, goals, expected framework matrix (aims, goals, expected results, components, indicators, target results, components, indicators, target population)population)Many programs with sunset clausesMany programs with sunset clausesFinance makes proposal on basis of quality, Finance makes proposal on basis of quality, consistency with government priorities and consistency with government priorities and strategies, President makes final decisionstrategies, President makes final decisionProvides benchmark for future assessmentProvides benchmark for future assessment
2727
Management improvement Management improvement programsprograms
Started 1998, from agreement with public sector unionsStarted 1998, from agreement with public sector unions
Reward mechanism for central government employeesReward mechanism for central government employees
PUBLIC SECTOR PAY STRUCTURE
70%
22%
8%Grade basesalaryPersonalallowancesPerformance-related
• Bonus determined by organizational performance
2828
Management improvement Management improvement programsprograms
First two years: performance against quantitative goals, 1,200 indicatorsFirst two years: performance against quantitative goals, 1,200 indicators
Budget unable to assess relevance and accuracy, 99.5% received Budget unable to assess relevance and accuracy, 99.5% received maximum benefitmaximum benefit
In 2000 focus changed towards assessing progress in managerial systems In 2000 focus changed towards assessing progress in managerial systems developmentdevelopment
Managerial systems in 7 areas:Managerial systems in 7 areas: Human resourcesHuman resources Customer serviceCustomer service Strategic planning and management controlStrategic planning and management control Internal auditingInternal auditing DecentralizationDecentralization Financial managementFinancial management Gender focusGender focus
For each of the above, previous regulations, directives, but little complianceFor each of the above, previous regulations, directives, but little compliance
2929
Program evaluationProgram evaluationAssesses ongoing programs against their stated aims and Assesses ongoing programs against their stated aims and expected resultsexpected results
Requirements: relevance, independence, timeliness, Requirements: relevance, independence, timeliness, transparencytransparency
Started 1997Started 1997
Budget-relatedBudget-related
Programs selected with CongressPrograms selected with Congress
Performed by independent evaluators selected by public Performed by independent evaluators selected by public tenderingtendering
Evaluators with authority to request information, commission Evaluators with authority to request information, commission studiesstudies
Counterpart in ministries/agencies in charge of programsCounterpart in ministries/agencies in charge of programs
Reports to Budget, full disclosure to Congress and the publicReports to Budget, full disclosure to Congress and the public
Followed by formal agreements between Budget and AgencyFollowed by formal agreements between Budget and Agency
3030
Types of EvaluationsTypes of EvaluationsProgram reviewsProgram reviews
Review consistency in design, execution and reportingReview consistency in design, execution and reporting Based on logical framework methodologyBased on logical framework methodology Performed by panels of 3 independent experts, selected by public Performed by panels of 3 independent experts, selected by public
tenderingtendering Final reports in 6 monthsFinal reports in 6 months
Program evaluationsProgram evaluations Assess program effectiveness on basis of impact measuresAssess program effectiveness on basis of impact measures Methodology includes extensive data collection, more sophisticated Methodology includes extensive data collection, more sophisticated
evaluations techniques (CBA, CEA), control groupsevaluations techniques (CBA, CEA), control groups Performed by consulting firms, universities, selected by public tenderingPerformed by consulting firms, universities, selected by public tendering Final reports in 1-11/2 yearsFinal reports in 1-11/2 years
Comprehensive expenditure reviewsComprehensive expenditure reviews Assess consistent of ministry/agency portfolio of programsAssess consistent of ministry/agency portfolio of programs Search for duplications, inconsistencies, opportunities to generate Search for duplications, inconsistencies, opportunities to generate
sinergies and savingssinergies and savings
3131
EVALUACIÓN – PROCESO
Evaluación.• Resultados• Recomendaciones
Compromisos Institución / Ministerio de Hacienda• Acciones Específicas• Plazos
Seguimiento
• Selección de Programas• Selección de Evaluadores• Preparación de Antecedentes• Capacitación y Preparación Marcos Lógicos Preliminares
Envío al Congreso
3232
Program evaluations 1997-2004Program evaluations 1997-2004
1997-1999
2000 2001 2002 2003 2004 Total
Program reviews80 20 18 14 13 13 158
Impact Evaluations 2 4 4 (4) 14
Comprehensive Expenditure Reviews
1 2 (2) 5
Total 80 20 20 19 19 19 177
( ) = Under progress
Program reviews+impact evaluations: US$ 3.1 bn in govt. expenditure; 61% of program spending
3333
Evaluation Evaluation effects of program reviews effects of program reviews and and eevaluations valuations 202000-200400-2004
Effects Percentage of Programs
1.- Minor adjustments 24%
2.- Important changes on program design and management processes
39%
3.- Major program re-design 21%
4.- Institutional re-location 6%
5.- Program ending 10%
Total 100%
3434
Compliance with corporate agreements Compliance with corporate agreements Evaluated programs and institutions 1999-2003Evaluated programs and institutions 1999-2003
Partially Not Total N° of CommitmentsAchieved Achieved Valid by 30/06/2004
MINISTRY OF AGRICULTURE 74% 25% 1% 134MINISTRY OF NATIONAL RESOURCES 100% 0% 0% 15MINISTRY OF NATIONAL DEFENSE 57% 43% 0% 14MINISTRY OF ECONOMY, DEVELOPMENT AND RECONSTRUCTION 80% 20% 0% 64MINISTRY OF EDUCATION 70% 20% 10% 205MINISTRY OF FINANCE 92% 8% 0% 24MINISTRY OF JUSTICE 88% 12% 0% 33MINISTRY OF MINING 54% 41% 5% 22MINISTRY OF PUBLIC WORKS 85% 15% 0% 33MINISTRY OF PLANNING AND COOPERATION 77% 16% 7% 206MINISTRY OF FOREING AFFAIRS 45% 44% 11% 54MINISTRY OF HEALTH 74% 23% 3% 66MINISTRY OF TRANSPORT AND TELECOMMUNICATIONS 64% 26% 10% 39MINISTRY OF HOUSING 90% 9% 1% 76MINISTRY OF INTERNAL AFFAIRS 72% 18% 10% 102MINISTRY OF LABOR AND SOCIAL SECURITY 52% 44% 4% 54GOVERNMENT GENERAL SECRETARIAT MINISTRY 39% 26% 35% 188PRESIDENTIAL GENERAL SECRETARIAT MINISTRY 82% 16% 2% 49 Average/Total 69% 22% 9% 1378
Ministry Achieved
Percentage of achievement of commitments Qualification
Note: The current commitments correspond to a universe of 77 evaluated programs and 8 evaluated institutions.
3535
Uses of Evaluations at the Public Agencies (Period 2000 – 2003)
Survey results
Use of evaluation results in resource allocation
Agency level Ministry level
Managers of the Program
56% -
Head of Planning Unit 61% 60%
Ministerial Coordinators - 47%
3636
Use of evaluation results in budget preparation at agency level
- Justifying existing allocation. 30%
(Head of Planning Unit and Managers of the program)
- Allocating resources within the program.
32%
(Head of Planning Unit)
- Compelling or pushing change of work processes in the program.
31%
(Managers of the program)
3737
AssessmentAssessment
Strong integration into decisionmakingStrong integration into decisionmaking
Mostly due to link with budgetingMostly due to link with budgeting
But also due to openess, availability to But also due to openess, availability to CongressCongress
Timeliness and independence as key Timeliness and independence as key featuresfeatures
Extensive training, development of Extensive training, development of evaluations community inside and outside evaluations community inside and outside governmentgovernment
3838
Assessment by World Bank team Assessment by World Bank team (forthcoming)(forthcoming)
Seeks to generate useful information on programs for Seeks to generate useful information on programs for budget process even comprising abstract standardsbudget process even comprising abstract standardsExternal evaluators guarantee objective, transparent External evaluators guarantee objective, transparent evaluationsevaluations““Factory” of evaluations, generates value added for Factory” of evaluations, generates value added for policy decisions at low costpolicy decisions at low costQuality of some evaluations is compromised by Quality of some evaluations is compromised by shortcomings in program design more than by shortcomings in program design more than by evaluation methodsevaluation methodsAdvantages of centralization outweight disadvantagesAdvantages of centralization outweight disadvantagesNeed to further stregthen ownership of evaluations by Need to further stregthen ownership of evaluations by ministries and agenciesministries and agencies
3939
Quest for complementarity, Quest for complementarity, consistencyconsistency
BUDGETMANAGEMENTIMPROVEMENT
PROGRAMS
COMPREHENSIVEPERFORMANCE
REPORTSPERFORMANCE
INDICATORSPROGRAM
EVALUATIONS
BUDGET BIDDING FUND
PERFORMANCEPAY
PUBLICREPORTING
4040
PREPARATION
APPROVAL
EXECUTION
EVALUATION
Integration into Budget cyclePerformancetargets
Programs
for evaluation
Performance pay
Indicators
Comprehensive
performance reports
Performance indicators and targets
Program evaluations
Project appraisal
New requirements
to PMS
4141
Keys To “Success”Keys To “Success”Chile’s experience shows that it is possible to build and operate a Chile’s experience shows that it is possible to build and operate a performance monitoring system in a developing country.performance monitoring system in a developing country.The Chilean reform process was motivated not by crisis, but by The Chilean reform process was motivated not by crisis, but by frustrationfrustrationBut, be aware of enabling factors:But, be aware of enabling factors: Strong public institutionsStrong public institutions Honest civil servantsHonest civil servants Long tradition of strong executive agenciesLong tradition of strong executive agencies Streamlined public sector: privatization, decentralization, Streamlined public sector: privatization, decentralization,
contracting outcontracting out Healthy public finances, growth environmentHealthy public finances, growth environment Hierarchical budget institutions provide drive to Finance over Hierarchical budget institutions provide drive to Finance over
other ministriesother ministries Budget process, procedures and tight schedules link with Budget process, procedures and tight schedules link with
public sector culturepublic sector culture Performance information and budget decision-making, Performance information and budget decision-making,
adaptation of budget preparation proceduresadaptation of budget preparation procedures
4242
STAGES INBUDGET
PREPARATION
CONVENTIONALPROCEDURE
CURRENTPROCEDURE
Evaluation Done by budget officials Done by budget officials withministries
Performance indicators, MIPs,and evaluations analyzed
Exploratory budget Funding ceiling Inertial spending
Analysis of budget bids Agencies bid foradditional funding
Proposals analyzed attechnical committee
Inertial spending estimatesreviewed with ministries
Performance goals proposedand analyzed
Proposals to bidding fundsubmitted for technicalassesment to MIDEPLAN,prioritized by line ministers
Draft budget fromFinance
Based on budget officials’opinion
Inertial spending plusallocation of bidding fund
Budget proposal Negotiated with lineministers
Includes only revenue andspending data
BF allocation approved byPresident
Minor adjustments proposedby line ministers
Includes corporate statement,performance goals, indicators,evaluations
4343
Recap: Performance-related Budgeting Recap: Performance-related Budgeting and implementation Strategyand implementation Strategy
Rationale of performance control systemRationale of performance control system There is no single instrument that would respond to all questionsThere is no single instrument that would respond to all questions Instead, a monitoring and evaluation systemInstead, a monitoring and evaluation system Feedback from citizens is not an issue of marketing but of democracyFeedback from citizens is not an issue of marketing but of democracy
Performance-related budgetingPerformance-related budgeting Avoid mechanical association of budget allocations to performance Avoid mechanical association of budget allocations to performance
measuresmeasures Ability to carry out a “smart” discussion of budgets, supported by Ability to carry out a “smart” discussion of budgets, supported by
performance information. Opposite to incrementalismperformance information. Opposite to incrementalism
Implementation strategyImplementation strategy Build trustBuild trust Voluntary introduction, improving standardsVoluntary introduction, improving standards Pragmatic, sequenced approach to prevent “reform fatigue”Pragmatic, sequenced approach to prevent “reform fatigue” Consistent, self-enforcing set of tools to avoid “pigeonholing” of initiativesConsistent, self-enforcing set of tools to avoid “pigeonholing” of initiatives
4444
PREPARATION
EVALUATION
EXECUTION
APPROVAL-Strong MoF
-Comprehensive budget
-Earmarked taxes forbidden
-Copper fund
--Project appraisal
--Unified pay scale
-MoF statement
-Limited power of Congress to ammend
-Constitutional deadline, Executive’s proposal by default
-Special quorum for borrowing
-Congress Joint Budget Committtee
-Strong limitations to overspend
-Pre-approval by Comptroler General
-Approval of investments by Budget Office
-Borrowing from Central Bank forbidden
-Budget flexibility
-Cash allotments-descentralized payments
-Decentralized procurement
-Centralized contingency reserve
-Monthly execution reports to CG and BO
-Govt accounting by CG
-Bilateral technical committees
-Overall spending limits
-Fisal statistics program
-Reporting on specific operations
-Performance indicators
-Structural surplus rule
-MTEF
-Bidding fund
-GFS2001-compatible classifier
-Comprehensive budget documentation with: indicators, evaluations, MIP
-Public finance report, with MTEF, contingent liabilities
-Budget Protocol, with studies, evaluation program, transparency, reform commitments
-Fiscal statistics yearbook
-GFS2001 accruals-based accounting
-Arrears funding prohibited
-Integrated financial management system
-Electronic procurement
-Transfers to municipalities, public enterprises only by law
-Permanent budget committee
-Management Improvement Programs
-Program evaluations
-Financial management report and estimates update
-Comprehensive performance reports
-Departmental evaluation by Budget
-Recommendations and commitments from program evaluations
-Performance pay
PRE-1990
1990-95
1996-2004
BUDGET SYSTEM IN CHILE
4545
Overall assessmentOverall assessmentContribution of government expenditure to growth depends not Contribution of government expenditure to growth depends not only on investment but on the whole arrange of programs, only on investment but on the whole arrange of programs, policies, regulation, and the way they are managedpolicies, regulation, and the way they are managedDistinction between public investment and current expenditure Distinction between public investment and current expenditure is artificial; social or fiscal returns to education higher than to is artificial; social or fiscal returns to education higher than to roadsroadsPerformance monitoring and evaluation should be as Performance monitoring and evaluation should be as comprehensive as possible, answer to fungibility issuescomprehensive as possible, answer to fungibility issuesNo one methodology can answer everything, variety of tools No one methodology can answer everything, variety of tools and methodologies may be neededand methodologies may be neededIn Chile, new methods are not displacing old ones but In Chile, new methods are not displacing old ones but supplementing themsupplementing them60% of government expenditure subject to some sort of 60% of government expenditure subject to some sort of evaluationevaluation
4646
Overall assessmentOverall assessmentSome information is always preferrable to none as long as it Some information is always preferrable to none as long as it ensures:ensures: ConsistencyConsistency Transparency and independenceTransparency and independence Impact on government decisionmakingImpact on government decisionmaking Follow-upFollow-up
Chile’s choice: budget processChile’s choice: budget processChile’s experience demonstrates that:Chile’s experience demonstrates that: Government-wide systems can be built and applied at Government-wide systems can be built and applied at
relatively low costrelatively low cost Requires discipline and persistence over long periods of timeRequires discipline and persistence over long periods of time Hierarchical budget institutions help a lotHierarchical budget institutions help a lot