Description of Performance System

1. Australia’s Experience in Utilising Performance Information in Budget and Management ProcessesMathew FoxAssistant Secretary, Budget Coordination BranchDepartment of Finance and AdministrationAustralian Government

2. Description of Performance System • Australia’s current budgeting and management arrangements have been in place since the mid to late 1990’s. • Current arrangements evolved from the budgetary reforms associated with the National Commission of Audit (1996), an independent review commissioned by the then incoming Government. • Key features: • Strong legislative foundations. • Financial Management and Accountability Act 1997 and Commonwealth Authorities and Companies Act 1997.

3. Description of Performance System • Strong legislative foundations cont’d • Charter of Budget Honesty Act 1998, which provides the whole-of-government framework for the transparent conduct of fiscal policy. • Full accrual budgeting (including accrual appropriations) and reporting. • Outcomes and outputs resource management and performance framework. • Under Australia’s devolved framework, performance management is generally the responsibility of individual Ministers and their departments and agencies.

4. Description of Performance System • The Department of Finance and Administration’s role in performance management: • Finance provides guidance on performance management policies relating to budget reporting and requirements for government statutory authorities and companies. • For budget reporting, Finance issues guidelines to agencies, which recommend the level of performance reporting which is to be provided in agencies’ supporting information at Budget. • More broadly, Finance provides Government with advice on whole-of-government expenditure priorities, including advice to Cabinet and Ministers on the performance of agencies and programmes.

5. Measurement and Assessment of Results • Agency outcomes and outputs are the foundation for performance information. • Finance and agencies will review this year, outcomes for all general government sector agencies to ensure that outcomes information is consistent with the framework and appropriate to the needs of Government and Parliament. • Departments and agencies are largely responsible for measuring and assessing the performance of outcomes and outputs. • At Budget and in annual reports, agencies are required to report at the outcome level. • Annual report requirements also require that agencies report, at a minimum, on an organisational basis as well.

6. Measurement and Assessment of Results • At present there is little use of performance targets and results during budget decision making and the performance of agencies against performance targets is not formally reviewed during the budget process. • A further challenge is that the nature of Commonwealth expenditure is not always amenable to the outcomes and outputs framework, for example the Commonwealth has less direct involvement with the delivery of health and education outcomes than many other countries do.

7. Integrating and Using Performance Information in the Budget Process • The influence of performance information on decision-making and resource allocation in the budget process is mixed. • Agencies prepare Portfolio Budget Submissions and Annual Reports provide a comprehensive report to the Government, Parliament and public on funding and performance by outcome and output. • These documents provide public information on performance targets at the beginning of the year and a report against these at the end of the year. • This information is not well integrated into the decision making phases of the annual budget process.

8. Integrating and Using Performance Information in the Budget Process • There is currently no mechanism, and no incentives, to ensure that performance information is taken into account on a standard basis when the Government is making budget decisions. • There are separate initiatives that are helping to move in this direction: • Recently revised format of new policy proposals, with a focus on risk and implementation aspects. • Current work to assess programme review arrangements and examining options for reform.

9. Integrating and Using Performance Information in the Budget Process • Reviews are a central feature of the budget process. This is also an area where performance information can be used to significantly inform budget decision making. Reviews encompass a range of activities: • A process for automatic review of programmes that have been designated as lapsing by the Cabinet; • A ‘targeted reviews’ process intended to focus on government priority areas, including addressing long‑term fiscal pressures identified in the Intergenerational Report 2002‑03; and • Specific reviews commissioned by the Cabinet to address particular issues in the context of new policy decisions or development of new policy.

10. Reporting of Performance Information • Departments and Agencies are required to make performance information available to Government, Parliament and the public. • Budget papers (such as Portfolio Budget Statements) and Annual Reports provide the most common source of this information. • At present this information is not well connected with the budget decision making phase of the budget process.

11. Reporting of Performance Information • Despite the availability of this information, Cabinet and Ministers tend to use other information, and in particular, information on new policy proposals and reviews contained in Cabinet Submissions and Portfolio Budget Submissions when making decisions. • While often related to publicly available material, this information is not typically made public, and is of variable quality and usefulness. • Ministers also rely on: advice from Finance, specific reviews, either prepared by an interdepartmental committee established specifically for that purpose, or external reviews (for example, by the Productivity Commission).

12. Key Challenges • Key challenges are to: • ensure that the link between programmes, outputs and outcomes are clear and measured effectively. • ensure that Government focuses on performance information by better integrating it into the decision making phase of the Budget. • A major challenge in introducing a systematic approach to programme reviews will be to ensure that it adds value to Government considerations, uses agency resources efficiently and does not become a mechanistic exercise.

13. Solutions • Better integration of performance information into the decision making phases of the budget process is a long term challenge that will require long term effort from Finance and agencies. • Continued focus on improving existing framework – Finance / agency review of outcomes, developing more systematic approach to the review framework. • Finance’s work on reviews seeks to make the review framework more coherent, better targeted to Government priorities, and more systematic than current review arrangements.

14. Lessons Learned and Impact • Two recurring themes in establishing good performance information that Australia has faced is: • The quality of performance information in relation to agency contributions to outcomes and outputs; and • The limited use of the performance information for decision making in the budget context. • It is important to ensure links between programmes, outputs and outcomes are clear and measured effectively – particularly if this performance information is to inform budget decision making.