Country experience – success stories and failures

1. Country experience – success stories and failures Performance Indicator system in Latvia Baiba Petersone Deputy director of the State Chancellery of Latvia Baiba.Petersone@mk.gov.lv 27th August 2008

2. History of Reforms: First approach 1997 Step 1: Program budgeting exercise Initiative of MoF, Worldwide approach of results based budgeting of the World Bank; Attempt to formulate performance indicators for all budget programs Resons of failure Lack of general understanding on performance measurement and results based budgeting in public administration; Lack of trainings, communication, methodological support; Budget programs established by formal exercise without normal policy process; Lack of defined objectives, outputs, outcomes for budget programs; Existing policies did not fit with budget programs and had different indicators; Focuss on inputs rather than outputs, e.g. number of subordinated institutions, number of staff, etc. Established performance indicators remain formal exercise withought real sense and application in policy evaluation and decision making Nevertheless – large number of indicators

3. History of Reforms: Second approach 2003 Step 2: Performance indicators within a broader scope of introduction of unified (normatively bounded) policy making system in 2001 – 2003 Systematic approach – Guidelines on results and performance indicators Definition of outputs, outcomes, impacts Definition of categories of indicators Methodological support, cases, best practice, trainings Deficiencies Policies still developing separately from budget programs Formal approach continues Indicators defined mainly for inputs Large number of indicators Lack of continuity of indicators Step 3: Introduction of strategic planning system linking policies with budget in 2003 – 2006 alongside training, introduction of structural funds.

4. History of Reforms: Third approach 2006 - 2008 Step 4: introduction of the Medium Term Budgetary Framework (MTBF), accepting strategic planning in budgetary system; Majority of budget programs covered by policies Objectives, outputs, outcomes defined for all policies Increased understanding on performance measurement in administration Deficiencies Large number of indicators Lack of continuity of indicators Cases of artificially reduced values – manipulating indicators Lack of practical sense of indicators Step 5:Gudelines on results and performance indicators (second edition) 2008;

5. Gudelines results and performance indicators (second edition) 2008 More focused regulation on indicators – passport of indicators (taken from France) Selected number of indicators collected in centralized information system Definition of indicators, that should be measured with regularity

6. Recent developments Concept paper “On implementation of strategic planning and medium term budget planning in public administration” adopted by the Government (September, 2006): setting pace for changes to annual budget preparation process; introducing MTBF starting from 2007 an n+3 approach with clear fiscal policy goals (proficit instead of deficit); setting medium term ceilings for all ministries; all the ministries have full strategic plans since 2007. introducing process of centralised review and ranking of New Policy Initiatives; establishing closer link between strategic planning and budget preparation process; Clearly defined part of performance related part in salary of public employees discussion on greater managerial flexibility on budget usage in the future.

7. Main track records up to now Public administration gradually rising its planning skills and monitoring capabilities Bigger demand for quality of performance indicators from politicians and civic society

8. Good performance indicator – one what we measure regulary and what we use regulary !

9. Major challenges Introduction of performance management systems does not necesserily provide all of the indicated benefits per se, because: Request for performance information – bad performance measurement creates disillusionment. Governments and Parliaments are not diligent in using of performance information. Performance information is not analyzed and used for on-going review of base expenditure, instead – just collected and appendiced to budget; Clear understanding of the system is crucial – not to use it in inappropriate way (“cutting the programs”). Priority spending areas and areas to be cut are not clearly identified at the highest political level; There is no preference given to measurement of outputs or outcomes. Most countries use a combination of outputs and outcomes; “What is measured is what counts” it is important to measure the right thing; The budget process is not changed in a systematic manner – building parallell and artificial systems;

10. Main conclusions Main focus should be the policy system reform and budget process reform and not the introduction of a stand-alone performance management system A step by step approach rather than a “big bang” should be chosen in order not to start with advanced performance management systems without passing of initial stages of training, thinking and data collection (risk of reform overload) Leadership of the reform process alongside the recognition for the need of trained human resources and selectiveness about performance indicators should be taken into account Strategic planning systems lies grounds for the introduction of performance budgeting as it connects public policies together with a medium term view on available spending Performance measurement is only one of the elements of a wider system for making the public administration more results-oriented, efficient and transparent

11. Integral approach toperformance mesurement Monitoring Reporting Evaluation Quality management Risk management Human resources management

12. Thank you for attention!Questions?