Performance B ased M anagement R eforms: G ood P ractices and N ew C hallenges

1. Performance Based Management Reforms: Good Practices and New Challenges Deputy Director of the State Chancellery of the Republic of LatviaMārtiņš Krieviņš,Head of the Policy Coordination Departmentof the State Chancellery of the Republic of Latvia Conference on Good Governance and Public Administrative ReformBucharest, 6 December 2007

2. One goal – different approaches • No unified definition - Aims of performance management is to ensure transparency on goals and intended results, for better prioritization of expenditure and support of more efficient management in public sector • A never ending story - majority of countries that had introduced performance management systems are constantly carrying on with their improvement and incorporation of the performance data into the budget process • Budgeting for results - more than 2/3 of the OECD countries have non-finance performance information included in the budget documentation • Changing accents not approaches – all countries use the same terminology (inputs, outputs, outcomes, impacts), but puts different emphasis and chooses their own reform speed

3. Major benefits • Performance based management and budgeting: • improves the overall quality of policy making and budget planning by providing more information and data on Government priority fields and different sectoral policies, as well as budget programs; • provides a mechanism for setting clear, specific and SMART objectives and monitoring their implementation progress (signaling device); • sharpens management’s focus on achieving results and becoming more efficient in a day-to-day operations; • improves transparency and provides more information for citizens-taxpayers on the use of public funds.

4. Performance budgeting experience • There are three major experiences in incorporating performance data into budget, where performance information acts as: • a presentational tool (accountability); • a support information tool (planning); • a “stick or carrot” tool (resource allocation); • a communication tool (information to society).

5. Major challenges 1 • 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 analysed 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;

6. Major challenges 2 • 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 quality, credibility, relevance and timeliness of performance data is not evaluated - abundance of figures without sense and disbalance between accountability (outputs) and performance (outcomes); • All countries face choices in defining programs and deciding on the number of programs. There is no unique way of defining a program. • The budget process is not changed in a systematic manner – building parallell and artificial systems; • Ministry of Finance does not OWN the process, habits of the traditional budget planning and execution process are strong.

7. Main conclusions • Main focus should be the 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

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

9. Where to search for good examples and experience1 • 75 % of countries having introduced new initiatives in the past five years; • Simplification of performance measures and evaluation - Sweden and USA. • Program evaluation – Sweden, the Netherlands, USA • Information on inputs accrual accounting – Australia, New Zealand, France (financial accounting) • The medium-term budget approach has been a strong feature particularly in Australia and Sweden • Implications from performance evaluation for salary system - only in New Zealand and only at the chief executive’s level. _______________________________________ 1OECD COUNTRY EXPERIENCES IN PERFORMANCE BASED BUDGETING. David Shand, World Bank, 2007

10. Where to search for good examples and experience - LATVIA • Attempts to create an integrated application of performance measurement in all the processes of public administration. • Fighting with problems similar to those in Romania. • Searching for best practises and good experience, networking with other countries • Knowing developments and problemsin Romania • Having good friends and interested attitude to reforms in Romania