By Niels Refslund, Chief Advisor, Danish Agency for Governmental Management; Ministry of Finance

1. Performance Budgeting Reforms – Sequencing and pacing of reform processes 5th Annual Meeting of OECD Senior Budget Officials Network on Performance and Results 27-28 October 2008 By Niels Refslund, Chief Advisor, Danish Agency for Governmental Management; Ministry of Finance

2. Focus of Performance Based Budgeting (PBB) • Management of public ressources: • Based on reliable and relevant information • Connecting results with dedicated ressources • Heading for effectiveness as to political goals • A Management on all levels: • That pays respect to the difficulty of this approach • That nevertheless encourages dynamic innovation: • Evidence is needed (measurements and evaluations) • Measurements can’t replace accountable leadership! Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

3. The Parliamentary Chain of Control- Clarity of roles is important Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

4. New Management-Policy Statement:(”Effectiveness and responsibility” - To be launched End of 2008) I. Corporate governance • Holistic and proactive management • Management information (Performance Information/PI) II. Contract management • Strategic focus on drivers/ core tasks • Effectiveness and dialogue/ incentives III.Cost effectiveness • Accrual budgetting and accounting • Coupling of resources with results Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

5. Re. I: Corporate governance • Basic Control of economic preconditions and rules • Follow up: Budget and spending; Long term investment planning • Quality of management information • Improvement of corporate governance • Holistic approach to each Ministry and cross cutting Ministries • Exploitation of scale of economy (shared services etc.) • Evaluation; comparison/bench marking; best practice • Coherence between resources and results • Goal and Performance/Results management • Exploitation of accrual budgeting and accounting reform Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

6. Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

7. Re. II: Goal and Performance Management • Demand for common corporate concept and approach • Demand for active follow up of goals and performance • Focus on few strategic drivers and effectiveness • Long term contract; annual review; incentives • Management dialogue – bottom up; ownership • Stressing end user perspective (Raison d’etre) Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

8. Outcome Output Shift in focus for management Services Activities Resources (input) Financial means Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

9. Demands Process /Tools Infor-mation Results Goal and Performance Management Activity and Ressource Management Financial Management Re. III: ”Cost Effectiveness” (Self-Evaluation) A tool to analyse and evaluate the quality of Economic Management Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

10. The need for management differs due to tasks • Common basic and legal requirements (60%) • Specific management requirements dependent on category of tasks for each public institution (40%) • Dealing with cases; public administrative casework • Knowledge producing public institutions • Producers of Public Services; service delivery • Consultancy and Supervisory Public institutions • Institutions for tasks of readiness; alert; emergency Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

11. Hierarchy of tasksScope of ManagementManagement Tasks E.g. ongoing internal follow up on results and on cost-benefit analysis etc. E.g. distribution of costs, capacity control, planning of investments E.g. control of loan frameworks, liquidity, and follow up on budget and accounts Goals and Performance Activities and Resources Financial Management

12. Total Score on level of Management (Optimal Score versus Actual Management Score) Goals and Results Potential degree of Management / Control (%) 100 80 Actual degree of Management / Control (%) 60 40 20 0 Activity and Resources Financial Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

13. Characteristics of danish PBB-reform processes • Pragmatic (Flexibility) • Experimental (Also risk for single case pressure) • Participation from different involved groups (consensus/ inclusive approach) • The main purpose is good performance, greater efficiency and better effectiveness • Departement of Finance has the role as a reform driver • And the Agency of Governmental Management is an agent for development and implementation • The Parliament (Folketing)has only been little involved Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

14. Historic glimps about PI related to State Budget (SB) • 1965 – Intro of framework budgetting + activity information • 1975 – Extended quantitative information + service standards • 1987 – Budget reform; Schematic activity overview incl. info on demand, supply, resources/capacity, productivity, quality • 1994 – Intro of business activity survey; tailor made • 1999 – Intro of Annual Report incl. Accounts for each institution; decoupling of PI and SB to avoid mix of decisions • 2005 – Adaption of Annual Report to requirements following the introduction af accrual budgetting & accounts (2003-2007) • 2008 – Extended emphasis: Tailored management information Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

15. National Auditors Office in action (Example):Report to Parliamentary State Auditors on development and quality assurance of University Educations Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

16. The Danish Press initiates public discussion of the effect of Acitivity Based Budgeting (”Taximeter-System”):An example concerning higher education Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

17. Main tools for performance management • Accrual budgeting & accounting – Cost-Based appropriations • Focus on use of resources and cost distribution (by task-hierarchy etc.) • Long term investment planning (precondition for PBB!?) • Performance agreements (contract based management) • Performance objectives and demanded results • Regular reporting – coupling of results with incentives • Taximeter budgetting (activity based budgetting) • Actual performance (production) releases a calculated budget • Is applied for selected sectors: Education & hospitals • Periodical/ Annual Reports (incl. performance reporting) • Statement of output performance & overall financial performance • Statement of approval & management accountability • Evaluations & budget analysis (ad hoc, external/self evaluation) • Focus on selected policies, programmes or institutions Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

18. How to motivate and pace performance – how to engage various actors ? • Leadership accountability through: • Vision, mission, demands for results, service information • Directors contract, incl. an element of bonus/incentives • Management flexibility in line with accrual budgetting and acc. • Employee dedication through: • Ongoing qualification measures – courses, on the job training etc. • An element of incentives connected to personal effort/performance • Competition and transparency: • Competition/ comparison between institutions (best practice etc.) • Team work as well as competition/incentives at individual level • Common political-administrative understanding of reform • F. ex. Launching of a comprehensive public sector ”Quality reform” Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

19. A ”Quality Reform” was launched as from 2007 • High political priority: Rooted in Prime Ministers office • Comprehensive dialogue with citizens and experts: • 5 main lines of focus and priority: • Citizens choice, user involvement/personal responsibility • Coherent public service –respecting the individual citizen • Clear objectives/targets and responsibility for results • New ways of thinking - competition, innovation • Management, involvement, motivation of public employees • Major challenges: • State-Municipality: Long range contract mgm. by objectives • Proper balance between front end efforts and documentation Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008

20. Improvement of Management and Performance Capabilities – renewed campaign 2008: • Nine principles for good public service management: • At eye level(meet the citizen where she/he is) • Clear speach(Open and clear communication) • Clear expectations(clarify for users what can be expected) • Humbleness(be humble as to your role and power) • Act on failures(failure must be adressed without hesitation) • Professionalism(Skills and competence is basis for good service) • Coherence(users must experience a unified public interface) • Development(Developm. & innov. must mark the public sector) • Ressources and reflection(Use public ressources carefully) Niels Refslund - OECD-Network, Paris 27-28 Oct. 2008