Getting started on the PBB reform agenda in Indonesia – a practical outline of the steps to be taken in setting up a framework

7/30/2019 Getting started on the PBB reform agenda in Indonesia a practical outline of the steps to be taken in setting up a framework

1/19

Getting started on the PBB reform agendain Indonesiaa practical outline of thesteps to be taken in setting up a framework

Presented by Pat McMahon

Budget Advisor,

Australian Department of Finance and Deregulation


2/19

Aims of this session:

Examine some practical examples of how PBB

could be applied here at the implementationstage. This is only the setting up stage.

This afternoon, after we have looked at MTEF,

we shall start addressing the plan, andpracticalities, involved in moving to a mature

PBB


3/19

5 phases in developing a performancebudgeting framework

1. The Set-up stage of defining:

outcomes & programs

selection of indicators/specifying targets &

benchmarks

2. Financial management training

3. Introduce operational flexibilities

4. Introduce evaluation and monitoring

5. Review and refine frameworks


4/19

Phase 1 - Six steps in setting up aperformance monitoring regime

There are six basic steps to setting up a performance monitoringregime:

A. Defining outcomes and programs for measurement

B. Selecting indicators

C. Specifying targets, benchmarks and reference pointsD. Data collection

E. Analysis & assessment

F. Reporting


5/19

Step A. Defining outcomes, programs andactivities Examples from DG Budgets

Outcomes & Program structure

Government objectives needs to be defined along with the means(programs/outputs) necessary to achieve those objectives.

Be clear who is to be held responsible for performance

Alignment of program responsibility with responsible officers on theorganization chart

Distribution of expenditures

All expenses need to be distributed among the various programactivities that make up the program


6/19

Step A. Outcomes, Programs, Activities and ResponsibilitiesAn Example

DG- Budget

Directorate of

Budget III

Directorate of

Budgeting

System

Directorate of

Budget II

Directorate of

Budget I

Secretary of

DG Budget

Directorate of

Non-Tax

Revenue

Directorate of

Budget

Preparation

Program

BudgetManagementand

Reform

Program

Activ

ities

Outcome/Objective:: To manage the state budget process to assure that the

governments goals and priorities are translated into annual budgets

1. Review of line ministry budgets

2.

Develop

and

implementb

udget

systemr

eform

3.

Establish

and

monitornon-tax

policyan

d

collectio

n

4.

Preparea

nnual

budget

summaries

Management

and

Direction


7/19

Australian example and some similarities

Figure: Outcome 1 contributing outputs


8/19

Current Main Programs (8 )and DGs Proposed Programs (12) and DGs

1. Revenue Increase and Fund Safeguarding 1. Budget Management and Reform ( DG Budget)

DG Taxes Non-tax Revenue Increase and Fund Safeguarding

DG Customs and Excises Budget System Implementation and Improvement

DG Assets Management State Expenditure Effectiveness

Secretary General

2. Debt Financing and Management (DG Debt)

2. State Expenditure Effectiveness

DG Budget 3. Fiscal Policy and Macro-economic Analysis (Fiscal Policy Board)

DG Treasury Finance and Economic Stabilization

DG Central-Local Fiscal Balance

4. Revenue Policy and Management (DG Tax)

3. State Financial AccountingDG Treasury 5. Intergovernmental Fiscal Relations (DG Fiscal Balance)

4. Financial Institutions Development 6. Customs and Excises Management (DG Customs)

Capital Market and Financial Institutions Management Board

Secretary General 7. Capital Market and non-Bank Financial Institutions Regulation (Capital Markets Board)

5. Financial and Econmic Stabilization 8. Management of State Assets (DG Asset Management)

Fiscal Policy Board

Capital Market and Financial Institutions Management Board 9. Treasury Affairs (DG Treasury)

State Financial Accounting

6. Debt Financing and Management State Expenditure Effectiveness

DG Debt Management

10. Inspector General

7. Budget Systems Implementation and ImprovementDG Budget 11. Training and Continuing Profesional Education

DG Treasury

12. Central Management and Direction

8. State Assets Management Tax Court

DG State Assets Management Secretary General

Public Accounts and Appraisal Regulation

Supporting Programs (5) and DGs Center for IT Finanical System

9. State Apparatus Accountability Center for Policy Harmonization

10. Manpower Management

11. State Apparatus Infrastructure

12. State and Government Leadership

13. In-Service Education

Many DGs involved in each supporting program

Distribution of all expenditures to programs


9/19

Step B. Selecting performance indicators

Remember performance indicators demonstrate that the government's

requirements are met. There are two types of indicators:

Effectiveness indicators

Effectiveness indicators reflect how effective the outputs are in

achieving the outcome.

Efficiency indicators

Indicators ofquantity, quality and cost reflect the efficiency of the

departments performance in delivering its outputs.


10/19

Step B. Australian example ofperformance indicators for Budget outputs


11/19

In choosing output group indicators and targets,agencies should aim to answer yes to all of thefollowing questions:1. Is it possible to demonstrate the relationship between the indicators

and the outcomes the Government wants?

2. Are the indicators easily understood by non-technical stakeholders?

3. Are the indicators and targets:

a Specificclear, concise and precise;

b Measurablequantified;

c Achievablepractical and reasonable;d Relevantto stakeholders (including Government, Parliament, customers,

beneficiaries); and

e Time boundrelated to a period of time or time limit?


12/19

In choosing output group indicators and targets,agencies should aim to answer yes to all of thefollowing questions (continued):4. Do the indicators provide sufficient and balanced representation of actions

taken, and goods and services delivered by the program/activity/service?

5. Do the indicators adequately capture the intended relationship between

Government programs/services and outcomes (or, if not, is there a robust

means of monitoring and evaluating the contribution of Government

programs/services to the outcome)?

6. Will the results of measuring programs/services be available for evaluation

and reporting in an appropriate form when needed for a reasonable cost?

7. Is there a mechanism for review and revision of program/services

measurement to ensure that it remains appropriate and sufficient for

agency and Government needs?


13/19

Step B. Testing some early Performance Indicatorsdefined for Budget Management & Reform

Activity 1. Review of line ministry budgets 1. Parliament adopts line ministry budgets with only minor changes

Activity 2. Develop and Implement budget system reforms

1. PBB implementation (no. of line ministries) / 2. MTEFimplementation (no. of line ministries) / 3. PBB and MTEF guidelines

issued and training provided to line ministriesActivity 3. Establish & monitor non-tax policy and revenue collection

1. Actual non-tax revenues as a % of projections

Activity 4. Prepare annual budget summaries

1. Quality I accounts are produced in a timely manner

Outcome/Objective: To manage the state budget process to assure that the

governments goals and priorities are translated into annual budgets


14/19

Step B.

Performance indicators for DG Treasuryactivitiesindicators serve different purposes:accountability, analysis and decision-making

Activity 1. Budget execution 1. Annual number of disbursements made/ 2.Annual number of

budget execution documents processed

Activity 3. Financial management of public service institutions

1. Number of public service institutions managed

Activity 7. Financial accounting and reporting

1. Annual number of financial accounting reports issued


15/19

Step C. Specifying targets, benchmarks & referencepointsExamples from Australian Customs

Output 2: Trade facilitation and revenue collection


16/19

Step C. Specifying targets, benchmarks &reference pointsTesting of other earlierprepared indicators not endorsed by DG Customs

Activity 1. Development of customs technical procedures

1. Number of technical procedures revised and issued/Number of new

technical procedures issued

Activity 2. Management and operation of customs facilities

1. Number of individual facilities maintained and operated/Total squaremetres of facilities maintained and operated/Square metre cost of

maintaining and operating

Activity 3. Excise policy and procedures

1. Number of new or revised procedures issued

Outcome/objective: To execute state laws and regulations on imports andexports and to collect taxes


17/19

Step C. Specifying targets, benchmarks &reference pointstesting of indicators continued

Activity 4. Enforcement and investigations

1. Number of investigations initiated / 2. Number of investigations

completed/

3. Average cost per completed investigations

Activity5. Conduct of audits

1. Number of audits initiated/ 2. Number of audits completed/ 3. Average

cost per completed audits/ 4. Average number of completed audits per

auditor

Activity 6. coordination with international agencies

1. Number of agreements concluded

Activity 7. Preparation of customs and excise regulations

1. Number of new and amended regulations issued


18/19

Step F. Reporting

Internal reporting for Agency Management

Managements requirements ideally issued

through the Chief Executive Officer of the

Agency

External reporting for Parliament Governments requirements ideally issued

through Minister for Finance


19/19

More this afternoon - Planning the introduction ofoperating cost flexibilities and revisedaccountability arrangements

Defining outcomes, programs and performance

indicators is only the start. Performance will be limited unless there is proper planning of operating cost

flexibilities. The preliminaries before any reforms in this area must include:

Training

Defining running costs (where operational flexibilities are introduced) and

non running costs (related to expenditures over which the Government hastotal control and where operational flexibilities cannot be applied)

Grouping costs within running cost to groups where flexibilities could be

granted and planning the staging the degree of flexibility granted

Planning the audit, review and evaluation mechanisms to be used

Documents

Getting started on the PBB reform agenda in Indonesia – a practical outline of the steps to be taken in setting up a framework