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Performance BudgetingPerformance Budgeting
in the Government of Canadain the Government of Canada
Working Party of Senior Budget Officials
OECD-MENA Senior Budget Officials Network
Bruce Stacey, Executive Director, Treasury Board Secretariat
Cairo, Egypt, November 24 – 25, 2008
Canadian Context
New Expenditure Management System
Foundation – MRRS & Evaluation
Strategic Review Process
Whole of Government Reporting
Lessons Learned
Outline
2
The Canadian Context
• This poses unique monitoring and reporting challenges:
– 35 million people in a vast geographic area
– Highly decentralized federation: 10 provinces, 3 territories
– Provinces are equal to the federal government and have real power
– Hundreds of federal-provincial agreements and transfer payment programs
• Over 90 departments & agencies and 46 Crown corporations
– Over 300,000 core public servants
– Over 1,600 points of service
– Diplomatic presence in about 180 countries - Canadian Forces in 17 missions
– Over 2500 programs and 350 million transactions per year
Canada is a big country, with a small population, and a decentralized government that delivers services across the world …
4
Federal Spending Overview 2006-2007
Direct Program Expenditures
41%
Public debt charges
15%
Major and Other Transfer Payments
44%
Canada Child Tax Benefits
11%
Equalization and transfers to Territories
13% Other transfers to other levels of government
4%
Old Age Security, Guaranteed
Income Supplement and
Spouse's Allowance Payments
32%Employment
Insurance14%
Transfers for Health and Social
Programs26%
Operating expenses
58%
Capital asset amortization and loss on disposal of
assets4%
Crown Corporation
expenses8%
Grants and Contributions
30%
Total Expenses $222.2B (Fiscal Year 2006-07)
Major Transfer Payments $98.1B
Direct Program Spending $90.2B
Source: Public Accounts of Canada 2006-07
TB/TBS Focus
Expenditure Review & Results Agenda in Canada: A History
Federal Accountability Act 2006 - cyclical evaluation of all transfer payment programs
Management, Resources and Results Structures – regaining detailed program level knowledge
Improved Reporting to Parliament – moving to whole of government planning and reporting
Renewed Evaluation Policy – quality, capacity, credibility, and expansion of coverage
Management Accountability Framework – assessing management performance across government
Canada’s Performance – linking programs to societal performance
Results for Canadians – results-based management as a stated priority of government
Transfer Payment Policy – performance frameworks and evaluations reviewed by TBS
Modern Comptrollership – investment in management practices and controls
Program Review – dealing with a large deficit through major expenditure cuts
Departmental Reporting to Parliament – moving to results-based plans and reports on performance
Planning Reporting and Accountability Structures – unsuccessful try at linking resources to results
First Program Evaluation Policy – government-wide implementation
Late70’s
Mid 90s
2000
Today’s Agenda
Expenditure Management System in Transition
Designed 15 years ago to fight deficit and control new spending
1995: Program Review of the entire spending base
Late 1990s: budget surpluses lead to new spending without an anchor to discipline that spending
Cabinet time focused almost exclusively on new spending
Ad hoc restraint exercises to control spending with no real focus on performance
Governments around the world emphasize outcomes – Australia, U.K., U.S., New Zealand.
Budget 2006 and 2007 committed the government to a new ongoing approach to managing overall spending
EMS Renewal approved in June 2007
The New Expenditure Management System
• The government wants to deliver high quality services and high value programs at reasonable cost
• Expenditure Management System Renewal is changing the way the government operates and aims to ensure:
• Aggregate fiscal discipline (i.e. control of overall growth in spending)
• Effective allocation of government resources to areas of highest relevance, performance and priority
• Efficient and effective program implementation
The underlying objectives are management excellence and value for money …
9
Privy Council Office•Support elected government in establishing priorities and meeting these through the effective allocation of spending to government priorities by
• Supporting Prime Minister & Cabinet Committees•Managing flow of Cabinet business•Facilitating broad Govt policy development
Treasury Board Secretariat•Supports Treasury Board (TB) in effectively allocating spending in manner that ensures operational efficiency and effectiveness by:
•Establishing and monitoring adherence to TB management policies (financial & non financial)•Supporting TB approval of detailed operational plans & recommendation of resource appropriations for new programs •Supporting TB determination of resource needs / investment opportunities for existing programs
Finance Department
•Ensures aggregate fiscal discipline is maintained by:
•Establishing fiscal framework & determining total spending levels •Budget
The Expenditure Management System in Canada is decentralized between central agencies, each with specific roles
The new System is supported by three pillars
• 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
11
The Foundation MRRS & Evaluation
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
13
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
Department of Heritage 2009-10 Program Activity Architecture
SO1 Canadian cultural content and artistic
expressions are created and accessible at home and abroad
PA
PSA
SO2 Canadians have a sense of their
Canadian Identity
SO3 Canadians participate and
excel in sportSO
1. Arts
1.4 National Arts Training Contribution Program
1.1 Arts Presentation Canada
1.5 Canadian Arts and Heritage Sustainability Program
2. Cultural Industries
2.3 Canadian Feature Film Policy
2.1 Broadcasting Policy
2.7 Book Publishing Industry Development Program
2.6 Canada Music Fund
2.10 Canadian Culture Online
2.12 Copyright Policy
2.13 Cultural Sector Investment Review
2.14 Trade Routes Program
2.15 TV5
3. Heritage
3.1 Museums Assistance Program
3.4 Canadian Conservation Institute
3.2 Canada Traveling Exhibition Indemnification Program
3.5 Movable Cultural Property Program
3.3 Canadian Heritage Information Network
4. Promotion of and Attachment
to Canada 4.1 Celebration and
Commemoration Program
4.4 Canadian Studies Program
5.6 Historical Recognition Program
5. Engagement and Inclusion
5.1 Multiculturalism Program
5.5 Aboriginal Peoples’ Program
5.4 Building Communities through Arts & Heritage
6.1 Development of Official-Languages Communities Program
6.3 Official Languages Coordination program
6. Official Languages
7. Sport
7.2 Sport Support Program
7.1 (Sport) Hosting Program
7.3 Athlete Assistance Program
7.4 2010 Federal Secretariat
8. Internal Services
(details being developed by central agencies)
2.16 UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions
1.3 Fathers of Confederation Buildings Trust
1.2 Cultural Spaces Canada
2.11 Canada New Media Fund
2.9 Publication Assistance Program
2.8 Canada Magazine Fund
2.5 Film or Video Production Tax Credits
2.4 National Training Program in Film & Video Sector
2.2 Canadian Television Fund
6.2 Enhancement of Official Languages Program
5.2 Action Plan Against Racism
5.3 Human Rights Program
4.2 State Ceremonial and Protocol
4.3 International Expositions
4.5 Exchanges Canada Program
4.6 Katimavik Program
Well structured information helps decision-making …
DEPARTMENTSManagement Tool
Reflects full mapping of programsBetter alignment of resources & priorities
More evidence based reporting Improve program performance
Finance PCO
Budget Plan
TBSInformed decisions on
investment choices based on priorities and value for money
PARLIAMENTReporting Tool
Stronger accountability for spending and results
Common basis for planning
and reporting inside and
outside
More logical and consistent basis for interaction
MRRSPolicy Objective:
Development of a common, government-wide approach to the
collection, management, and reporting of financial and non-financial
performance information - to provide an integrated and modern
expenditures management framework16
Evaluation information is important but there are challenges to getting it …
• Quality, timeliness and strategic focus issues hinder systematic use of
evaluation to support decision-making:
– often small programs - not strategic – about 10% of spending each year - too low– take too long and difficult to understand– can be self serving when funded by program managers
• Capacity issues have made it difficult to deliver
– Need more trained evaluators – Need consistent competencies for managers and staff– Definition of the evaluation “product” same as 20 years ago - may
need a new sort of product
17
Rebuilding evaluation requires focused attention …
• Strategic reviews require credible information on the relevance and performance of government programs … and evaluation is a key source
• Objectives of evaluation policy renewal:– Improve the information base for strategic reviews - increased focus on
value for money (relevance and program performance)– Comprehensive coverage of programs through a regular and systematic
cycle – Improved credibility through agreed upon standards, flexible tools for
evaluation and neutrality of the evaluation function– Improved quality by having the right capacities, people and systems– Continuous learning and improvement - stronger Treasury Board
capacity to lead the function, monitor capacity and use evaluation information
• New Evaluation Policy will require comprehensive evaluation coverage (100% of large departments) of all direct program spending over a 5 year cycle
• Federal Accountability Act requires 100% coverage of all Grant and Contributions 18
Strategic Reviews
• All direct program spending reviewed - 25% each year
• Treasury Board and its Secretariat set terms of reference:
Comprehensiveness – assessment of mandate, departmental objectives, program effectiveness, efficiency and alignment to government priorities
Reallocation proposals – options for program reductions or eliminations to reallocate to government priorities and support overall spending control
Reinvestment proposals – options to better support government priorities
• Departments review the relevance and performance of their spending, identify lowest performing/priority 5% of programs, seek outside expert advice and report to the Treasury Board
• Privy Council Office identifies review departments every year and assesses, with Treasury Board and the Department of Finance, the departmental proposals
Strategic reviews are program-based and results-informed
20
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
Strategic Reviews –Conditions for Success
Sufficient time for deliberative process
Ministerial engagement throughout the Review process
Clear and strategic alignment of programs and results (value of a strong Program Activity Architecture)
Comprehensive assessment of all programs (100%)-not focussing only on 5%
Early involvement of senior management team – policy, communications, and corporate services
Multiple lines of evidence – evaluations, audits, benchmarking, international comparisons
Overview portion of the Strategic Review should tell a compelling departmental story
Arm’s length expert advice as effective challenge to proposals and alternatives
Seventeen organizations reviewed their programs in 2007
Ministers examined $13.6B, about 15 per cent of direct program spending
$386 million per year was identified as presenting opportunity to:
Increase efficiency and effectiveness: Change the way the Government delivers programs and services
Focus on core roles: Ensure that services are delivered by those best positioned to do so
Meet the priorities of Canadians: Align federal activities with the needs and priorities of Canadians and eliminate programs that are no longer necessary
Savings were redirected to fund new initiatives, both within departments and to broader spending priorities in Budget 2008
The first reviews (2007) generated significant savings but also demonstrated a need to improve the quality of results information …
23
Public Reporting
Key Parliamentary Reports
• Main Estimates – Part I: Government Expense Plan– Part II: Main Estimates (in support of
the Appropriation Act)
• Part IIIs – Reports on Plans and Priorities
(RPPs), support committees in reviewing supply
– Departmental Performance Reports (DPRs), actual achievements against the expected results in the RPP
• Supplementary Estimates – Usually two per year
25
RPP Overview for Parliamentarians– helps parliamentarians and their
staff to navigate through the 91 RPPs (2007-2008)
– provides a whole-of-government view of planned spending
Canada’s Performance– Provides an overview of and helps
parliamentarians and their staff navigate through the 90 DPRs (2006-2007)
Public Accounts– In three volumes, covering financial
performance for most recently completed fiscal year
Parliamentary Reports cont.
26
Whole-of-Government Reporting
Whole of Government Framework
28
RPP Overview for Parliamentarians
Searches may be customized by spending area and by organization
29
Slide on Layered approach Layered Reporting allows a continuous “drill down” from the most aggregate to the most detailed …
Safe and Secure Communities
Expected and actual resultsExpected and actual resourcesIndicators and targets
Whole-of- Government – Layer
Aggregate information on Spending and on Plans and Performance in:
• Whole-of-Government Overview for RPPs
• Canada’s Performance
Comprehensive, Layered, Continuous:
User is able to continuously drill down from the Whole of Government level to detailed financial and non-financial information at the lowest level of the PAA
Economic Affairs
Departmental – Layer
High-level departmental information on:
• Spending, Planning and Performance Indicators
• in concise RPPs and DPRs (30 pages or less)
Electronic – Layer
Detailed information on specific programs and policies
Links to databases and useful policy documents
Social Affairs International Affairs Government AffairsSpending Areas (4)
Government of Canada Outcome areas (13)Canadian
Culture/HeritageHealthy
CanadiansDiverse Society
Citizenship and Immigration RPP
Maximum Contribution to the Economy…
Successful Integration of Newcomers…
Reflection of Canadian Values…
Integration Program
Citizenship Program
SOs
PAs
SA
SSA
• Supplementary information (i.e. sustainable development strategies, audits and evaluations)
What lessons have we learned (#1)?
Need persistent effort to build capacity - will take time
Political leadership
Have 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 critical
Don’t wait for perfection
31
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
32
Annexes and Background Material
Annex A - Links to Further Information
TBS website: http://www.tbs-sct.gc.ca/tbs-sct/index-eng.asp Management Accountability Framework (MAF): http://www.tbs-
sct.gc.ca/maf-crg/index_e.asp Tools and Resources for Parliamentarians: http://www.tbs-sct.gc.ca/tbs-
sct/audience-auditoire/parliamentarian-parlementaire-eng.asp Whole-of-Government Planning and Performance: http://www.tbs-
sct.gc.ca/wgpp-prpg/ Management, Resources and Results Structure (MRRS) Policy:
http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/mrrsp-psgrr/mrrsp-psgrr_e.asp Results-based Management: http://www.tbs-sct.gc.ca/rma/rbm-gar_e.asp Audit and Evaluation Database:
http://www.tbs-sct.gc.ca/rma/database/aeve_e.asp Canada’s Performance 2006-2007: http://www.tbs-sct.gc.ca/reports-
rapports/cp-rc/2006-2007/cp-rctb-eng.asp 2007-2008 Guidelines for preparing RPPs and DPRs: http://www.tbs-
sct.gc.ca/rpp/0708/guide/guide_e.asp Performance Reporting: Good Practices Handbook: http://www.tbs-
sct.gc.ca/rma/dpr3/06-07/handbk-guide/gph-gbp_e.asp
34