INTRODUCING RESULTS-BASED APPROACHES INTO PUBLIC SECTOR
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INTRODUCING RESULTS-BASED APPROACHES INTO PUBLIC SECTOR

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  • Preliminaries Ladies and gentlemen, good morning. I am going to report on the Philippine experience in introducing results-based approaches into our public sector management processes.
  • Public sector reform has been a battlecry of all governments since the end of the ousted Marcos government in 1986. Several reform initiatives have been undertaken, with dramatic results in opening up the economy and relaxing the stronghold of government in many sectors. Public sector management reform intensified in the middle 1990’s when the administration of then President Ramos advocated a government that steers and not one that rows; and when results-orientation became the key ingredient of the reform program.
  • The intensive campaign for management reform was in direct response to the many dysfunctions in the bureaucracy. The key ones are: Operational leakages, referring to the perceived graft and corruption in the bureaucracy; weak corporate and regulatory environment ; weak public institutions , particularly in the enforcement of laws ; the poor incentive structure within the bureaucracy as well as in the private sector; and the complaints against slow response capability to changing situations and needs of the public . These dysfunctions resulted in government’s inadequacy to provide enough resources for basic services. They contributed to the country’s deteriorating fiscal position, and to its slow and unstable growth which eventually led to a poverty-level that remains high among middle-income developing countries.
  • The Philippine public sector program encompasses several sectors in the bureaucracy. For our purposes, however, I will focus on one key sector—public expenditure management (PEM)—covering all levels of the public sector, from the national government to the corporate sector and the local governments. The PEM component of the reform program focused on a key result in no uncertain terms: to reduce poverty in the long term by addressing two of the key dysfunctions earlier discussed—to respond to the inadequacy of resources for basic services, and to arrest the deteriorating fiscal position of government.
  • Public Expenditure Management (PEM), as a major component of the reform program, made use of the following mechanisms: Use of the budget as instrument for ensuring desired results— which means that the principal tool to enforce the PEM program was through the government budget. Strengthening of existing incentive structures to advocate and implement reforms . The enlistment of civil society, particularly in monitoring results ; and Finally, the establishment of clear targets and assessment mechanisms to ensure transparency in terms of disseminating the desired results as well as the monitoring of such results.
  • Our PEM program followed the framework advocated by the World-Bank. The framework called for the pursuit of the following objectives: Fiscal discipline Allocative efficiency Operational efficiency
  • The PEM program was spearheaded in 1998 by the Philippine Department of Budget and Management (DBM) jointly with the National Economic and Development Authority (NEDA), the highest economic planning agency in the Philippine government, and the Department of Finance (DOF). The major reform initiatives carried under the program were the following: In fiscal discipline , we established a more realistic medium-term fiscal plan (MTFP) and assessed contingent liabilities and other fiscal risks. In terms of allocative efficiency , we refined the medium-term public investment program (MTPIP) to clearly define the public investment priorities of the public sector over the next six (6) years. We also established the organizational performance indicator framework (OPIF), which I will discuss in more detail later on. But, essentially, the OPIF is a scheme whereby programs and projects are ranked and funded in terms of their priority and relevance to the desired outcomes.
  • In terms of operational efficiency , we established two mechanisms for programs/projects review. One is the SEER , which focuses on prioritizing broad sectoral programs. The other is the agency performance review (APR), which focuses on reviewing the program accomplishment of specific agencies. In tandem with these review mechanisms, we advocated and implemented procurement reform and put in place a new government accounting and auditing system to replace a 50-year old system, thus modernizing the way government reports its financial position.
  • We are now undertaking a compensation review . We have completed a program to reengineer the bureaucracy, and will be implementing said program this year. Significant strides were made along reforming the judicial system, in electoral campaign reform, in peace and order, and in regulatory reforms . Coupled with these reforms is the intensified push for investments in IT and the promotion of IT-based services .
  • The installation of the results-based approach can be better appreciated by looking at this diagram. The Medium-Term Philippine Development Plan (MTPDP) serves as the blueprint for Philippine development and is the overall guide for the economy in the next six (6) years. There are two (2) major components: fiscal and investment. On the fiscal side, the MTFP serves as guide for ensuring fiscal sustainability. This accounts for the fiscal targets on a macro level and the broad measures to attain a sustainable fiscal position, eventually reflected in the annual budget submitted to and approved by Congress. On the investment side is the MTPIP. Using the OPIF, public investment programs that best contribute to the medium-term development goals are identified, prioritized, funded, and implemented. In the course of program/project implementation, government undertook SEER and APR to assess the progress/performance of programs and agencies.
  • May I now elaborate on the major outputs of the MTEF. The MTEF, as earlier indicated, is our fiscal blueprint for a six-year period. It has the following features: An explicit statement of medium-term fiscal targets in terms of deficit reduction, revenue and disbursement, and overall debt management strategy. An estimate of the cost of ongoing and committed programs that impact on the medium-term position of the government. This cost estimate is the budget baseline and gives the government information on the budget flexibility available over the medium term. A clear set of rules for updating revenue and cost estimates that might impinge on the credibility of the medium-term fiscal target. On the basis of the MTFP, government has drafted a Fiscal Responsibility Bill the initial draft of which was submitted to Congress last year.
  • By way of information, the current MTFP calls for balancing the national budget by 2009, and reducing the public debt to GDP ratio to a more comfortable 55.03%. Capital project refer to NG cash outlays for infrastructure and other capital outlays, transfers to LGUs, equity and CARP land owners compensation.
  • A companion document to the MTFP is the MTPIP. This lists down the broad investment requirements supporting the growth, allocative, and distributive functions of the public sector. It identifies the programs and projects that will be pursued over a six year period, duly published as a public document. It likewise identifies possible funding modes for some programs or projects in the pipeline.
  • The current MTPIP shows the following investment requirements over the medium term, with indications of possible funding sources to be directly financed by the public sector budget. Notes: Total CO refer to cash levels presented to the DBCC on January 30, 2003: Actual levels for 2003 ODAs refer to obligation FAPs provision assumed to be 100% disbursed.
  • The key to results-based approach is the OPIF, the strategy whereby government is able to establish priority expenditures, identify targets, assess accomplishments, and report results. The aim is to: Shift to output/outcome performance indicators Clarify expected performance and accountability of government agencies Encourage agencies to focus efforts on the delivery of outputs relevant to goal Establish integrated performance management system where organizational performance targets cascaded down to lower level units and used as basis of performance-based compensation Report to public and Congress in clear terms output of departments/agencies
  • The OPIF process involves the following: Identification of desired outputs and outcomes by both the line agency and the oversight agencies of government (i.e., DBM, NEDA, DOF) on a parallel basis; Major final outputs (MFOs), measured in terms of Quantity, Quality, Timeliness, or Cost are identified. Harmonization workshops are then held to ensure a clear understanding of targets at both agency and oversight level. The programs/projects contributing to the MFOs are then identified; and Identification of programs and projects that contribute to the desired outcome.
  • The performance indicators for each MFO are then determined and widely disseminated. These PIs become the gauge by which performance of the program or agency will be measured. The application of the OPIF process was quite long and and tedious, involving so many workshops, harmonization sessions, and training sessions for both line and oversight staff and officials. The outcome, however, was encouraging.
  • Just to illustrate, in the case of one agency, the LTO, which is a government agency tasked to undertake licensing of motorists in the Philippines. LTO identified their desired outcome as road safety, i.e., less incidence of road accidents. Their MFO is drivers licensing services. They defined their PIs in terms of quality and timeliness, specifically the % of licenses issued in accordance with operating and timeliness standards. They targeted this in terms of an acceptable client satisfaction rate.
  • We do not have the exact figures for the number of agencies categorized under various stages of the OPIF process. But we do have examples of agencies under each stage/level. To date, six (6) major departments have substantially completed the OPIF process. Five (5) others are in the intermediate stage, while most of the other agencies are in the early stages of the process.
  • Having established a framework for targetting outcomes, we likewise started a process of performance assessment. One is through the SEER, which is a system of evaluating the effectiveness and efficiency of the programs and projects of an agency and their actual contribution to the desired outcomes. It allows the government to review priorities to determine what will be carried on, what will be discontinued or downscaled over the medium term, and eventually to redirect resources to strategic programs.
  • The SEER process involves wide consultations, with the oversight agency sitting down with the implementing agency in sectoral workshops, applying agreed criteria using an OPIF-like approach but on a broad sectoral basis. Results are presented and submitted to Cabinet Committee for approval and become major inputs to the budget, and the Public Investment Plan.
  • We conducted our first SEER in 2001, followed by a more intensive ODA portfolio review in 2003 with the following results: Cancellation of excess financing for six (6) projects, Termination of one project, Restructuring of 30 projects; and All other projects continue as scheduled
  • The Agency Performance Review (APR) is a more detailed assessment of specific agency performance focusing on the budget utilization performance of agencies. Given a set of criteria, agency budget performance is rated, reported, and becomes an input to the succeeding budget allocation process.
  • In 2002, the Budget Department conducted the first ever APR in all agencies of government. The idea is to assess progress of budgets utilization and the need for further fund releases to agencies. Due to the very tight budget position, most got ratings of close to outstanding. In 2003, in the second APR, low-budget agencies were exempted from the APR. The result was a turnaround from that of the previous year: most agencies rated satisfactory, 2 notches below outstanding.
  • Underlying the MTEF framework is the incentive structure that provides the impetus to the installation and sustainability of the entire results-based approach to public sector reform. The incentive structure includes the following features: a) provision for greater flexibility in exchange for financial discipline hurdles, including the use of savings from procurement and streamlining activities, creation of one-liner budgets , and expenditure autonomy for low-budget agencies. Use of savings as an incentive simply means that agencies able to save funds from streamlined activities were allowed to keep those and to use them for their priority undertakings. One-liner budgets mean that instead of itemizing the various accounts in their budget, agencies were given autonomy in allocating funds assigned to them. In the case of agencies whose budgets are small, they were given expenditure autonomy in managing their budget subject to certain guidelines. b) Another feature is Performance-based management which involves the design of a compensation system that is related to the performance not only of the individual but also that of the unit or agency to which that individual belongs. We have also introduced the collection negotiation agreement where rank-and-file employees are given the opportunity to negotiate certain improvements in their work environment and enjoy certain incentives subject to the accomplishment of negotiated improvement plans.
  • After close to five years, our expenditure management reform program has accomplished the following major tasks: In planning and budget processes, we have: linked Budget to Planning starting in 1999 changed from input-based to outcome-based budgeting in 2002 Budget Call formulated budget strategy as precondition to approval of new foreign loans in 2001 conducted first Sectoral Effectiveness and Efficiency Review (SEER) 2001 conducted first Agency Performance Reviews (APRs) in 2002 conducted ODA Portfolio Review in 2003
  • In reengineering the bureaucracy, we have formulated Reengineering Plan for the Bureaucracy reengineered key regulatory agencies: financial markets, energy, ICT In capability building (1999-2003), we have undertaken workshop and training programs in 18 oversight agencies and in individual agencies
  • Finally, we have documented the 2001 Budget Preparation process, particularly its Performance Orientation. The Public Expenditure Management Manual is expected to come out by June 2004. We have also documented the 2002 APR and the Public Expenditure, Procurement and Financial Management Review with World Bank (WB) and Asian Development Bank (ADB) was completed.
  • To be sure, the task remains a challenge, but not an insurmountable one. Installing a results-based approach is a test of three Ps, persistence, perseverance and partnership. Persistence because one needs to vigorously pursue, despite the many obstacles, the objective of the program. Perseverance, because it is a test of patience, fortitude and compassion, all at the same time. And partnership because it takes government, non-government, as well as private sector stakeholders, working together towards a common goal to successfully implement a revolutionary program such as PEM Reform.
  • Moving forward, we are looking towards accomplishing the remaining tasks, and committed to making PEM fully operational by 2007. The task remains daunting but there is no turning back. We hope the international community will continue to support the Philippine government’s endeavor to establish a fully operational results-based Public Expenditure Management System.
  • Thank you and good day!

INTRODUCING RESULTS-BASED APPROACHES INTO PUBLIC SECTOR INTRODUCING RESULTS-BASED APPROACHES INTO PUBLIC SECTOR Presentation Transcript

  • INTRODUCING RESULTS-BASED APPROACHES INTO PUBLIC SECTOR MANAGEMENT PROCESSES: The Philippine Experience A Paper Presented by SECRETARY EMILIA T. BONCODIN Department of Budget and Management Philippines 2 nd International Roundtable on Managing for Development Results Marrakech, Morocco 05 February 2004
  • RESULTS-BASED APPROACH: Major Element of Philippine Public Sector Management Reform Program Department of Budget and Management Republic of the Philippines
  • PUBLIC SECTOR MANAGEMENT REFORM PROGRAM
    • operational leakages
    • weak corporate and regulatory environment
    • weak public institutions and enforcement
    • poor incentive structures
    • slow response capability to changing situations and needs
    • inadequate resources for basic services
    • deteriorating fiscal position
    • slow and unstable growth
    poverty To address key dysfunctions : Department of Budget and Management Republic of the Philippines
  • PUBLIC EXPENDITURE MANAGEMENT: DESIRED RESULTS
    • To reduce poverty by creating investment and job opportunities through:
      • Addressing the inadequacy of resources for basic services
      • b) Arresting the deteriorating fiscal position
    Department of Budget and Management Republic of the Philippines
  • PUBLIC EXPENDITURE MANAGEMENT: FOCUS ON RESULTS
    • Use of the budget as instrument for ensuring desired results
    • Strengthening of existing incentive structures to advocate and implement reforms
    • Active partnership with civil society in monitoring results
    • Clear targets and assessment mechanisms
    Department of Budget and Management Republic of the Philippines
  • PUBLIC EXPENDITURE MANAGEMENT FRAMEWORK
    • Fiscal Discipline
    • Allocative Efficiency
    • Operational Efficiency
    Department of Budget and Management Republic of the Philippines
  • MAJOR REFORM INITIATIVES OUTCOME INSTRUMENT Fiscal Discipline Medium Term Fiscal Plan (MTFP) Assessment of contingent liabilities; fiscal risks Allocative Efficiency Medium Term Public Investment Program (MTPIP) Organizational Performance Indicator Framework (OPIF) Department of Budget and Management Republic of the Philippines
  • Major Reform Initiatives… OUTCOME INSTRUMENT Operational Efficiency Sectoral Effectiveness and Efficiency Review (SEER) Agency Performance Review (APR) Procurement reform Installation of new government accounting system and auditing procedures Department of Budget and Management Republic of the Philippines
  • OUTCOME INSTRUMENT Compensation Review Reengineering the bureaucracy Strengthening key sector areas: judicial reform; electoral campaign reform; peace and order campaign; regulatory reform Investment in IT and IT-based services Major Reform Initiatives… Department of Budget and Management Republic of the Philippines
  • MEDIUM-TERM EXPENDITURE FRAMEWORK Medium-Term Philippine Development Plan Medium-Term Fiscal Plan Annual Budget Medium-Term Public Investment Program Organizational Performance Indicator Framework Agency Performance Review Sectoral Effectiveness and Efficiency Review Incentive Structure FISCAL INVESTMENT
  • MEDIUM-TERM FISCAL PLAN: FEATURES
    • Explicit medium term fiscal targets: deficit reduction strategy; revenue and disbursement targets; debt management strategy
    • Medium term estimates of cost of ongoing and committed programs (baseline +)
    • Proposed revenue enhancing measures over the medium term
    • Clear rules for updating revenue and cost estimates
    • Fiscal Responsibility Bill
    Department of Budget and Management Republic of the Philippines
  • MEDIUM-TERM FINANCIAL PLAN: HIGHLIGHTS Department of Budget and Management Republic of the Philippines
  • MEDIUM-TERM PUBLIC INVESTMENT PROGRAM
    • Sectoral investment requirements over 6 years
    • Published major sectoral investment programs
    • Alternative financing modes for specific projects
    Department of Budget and Management Republic of the Philippines
  • MEDIUM-TERM PUBLIC INVESTMENT PROGRAM Department of Budget and Management Republic of the Philippines
  • ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: GOALS
    • Shift to output/outcome performance indicators
    • Clarify expected performance and accountability of government agencies
    • Encourage agencies to focus efforts on the delivery of outputs relevant to goal
    • Establish integrated performance management system where organizational performance targets cascaded down to lower level units and used as basis of performance-based compensation
    • Report to public and Congress in clear terms output of departments/agencies
    Department of Budget and Management Republic of the Philippines
  • ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: PROCESS
    • Identification of desired outputs and outcomes
      •   Agency; Oversight
      •   MAJOR FINAL OUTPUTS (MFOs), in terms of quantity, quality, timeliness, cost (QQTC)
    • Harmonization: Agency with Oversight (DBM, NEDA)
    • Identification of programs/projects contributing to the accomplishment of MFOs
    Department of Budget and Management Republic of the Philippines
  • Organizational Performance Indicator Framework: Process…
    • Establishment of Performance Indicators
      • PI to determine whether program/projects contributed to MFO
      • PI must be verifiable in a quick, accurate and cost-effective manner
    Department of Budget and Management Republic of the Philippines
  • ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: Example: LTO Outcome - Road safety (less incidence of road accidents) MFO - Licensing services (Drivers) Performance indicators: Quality - % of licenses issued in accordance with operating standards; client satisfaction Timeliness - % of licenses issued in accordance with timeliness standards Department of Budget and Management Republic of the Philippines
  • ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: STATUS
    • Agencies in advance stage of the OPIF process
      • Agriculture sector agencies (Agriculture, Agrarian Reform, Environment and Natural Resources)
      • Social Welfare
      • Labor and Employment,
      • Education
    • Agencies in intermediate stage of OPIF
      • Health
      • Internal Revenue
      • Customs
    • Agencies in the early stage
      • Infrastructure agencies
    Department of Budget and Management Republic of the Philippines
  • SECTOR EFFECTIVESS AND EFFICIENCY REVIEW: FEATURES
    • Periodic review of ongoing programs and projects in terms of relevance, performance, cost/benefit
    • System for establishing and updating strategic priorities over the medium term
    • Allows the redirection of resources to strategic programs
    Department of Budget and Management Republic of the Philippines
  • SECTORAL EFFECTIVENESS AND EFFICIENCY REVIEW: PROCESS
    • Consultations: agencies; stakeholders; funding agencies
    • Presentation of Results and Recommendations
    • Approval of Cabinet Committee
    • Input to Updated Development Plan, Public Investment Program, Budget
    Department of Budget and Management Republic of the Philippines
  • SECTORAL EFFECTIVENESS AND EFFICIENCY REVIEW: Results
    • Cancel excess financing (6)
    • Terminate projects or remaining components of projects (1)
    • Restructure projects, including loans (30)
    • Proceed (68)
    Department of Budget and Management Republic of the Philippines
  • AGENCY PERFORMANCE REVIEW
    • Short term review of revenue and expenditure performance vis-à-vis budget targets
    • Ranking of Agency Budget Performance and public reporting
    Department of Budget and Management Republic of the Philippines
  • AGENCY PERFORMANCE REVIEW: RESULTS CY 2002 - All agencies of the National Government underwent APR Most got outstanding rating; review was based on agency-determined targets CY 2003 - Low-budget agencies were exempted from the APR Most got satisfactory rating Department of Budget and Management Republic of the Philippines
  • INCENTIVE STRUCTURES
    • Greater flexibility in exchange for financial discipline hurdles
      • Use of budget savings from procurement and streamlining activities
      • Creation of one-liner budgets
      • Expenditure autonomy for low-budget agencies
    • Performance-based management
      • Performance-based compensation
      • Collective negotiation agreements (CNA)
    Department of Budget and Management Republic of the Philippines
  • KEY ACCOMPLISHMENTS TO DATE
    • A. Planning/Budget Processes
      • Linked Budget to Planning starting in 1999
      • Changed from input-based to outcome-based budgeting in 2002 Budget Call
      • Formulated budget strategy as precondition to approval of new foreign loans in 2001
      • Conducted first Sectoral Effectiveness and Efficiency Review (SEER) 2001
      • Conducted first Agency Performance Reviews (APRs) in 2002
      • Conducted ODA Portfolio Review in 2003
    Department of Budget and Management Republic of the Philippines
  • Key Accomplishments to Date…
    • Reengineering the Bureaucracy
      • Formulated Reengineering Plan for the Bureaucracy
      • Reengineered key regulatory agencies: financial markets, energy, ICT
    • C. Capability Building (1999-2003) Workshops, Training
      • Oversight agencies (18)
      • Individual agencies (3 major, 17 minor)
    Department of Budget and Management Republic of the Philippines
    • D. Assessments and Documentation
      • 2001 Budget Preparation, Performance Orientation,
      • Public Expenditure Management Manual
      • Documentation of 2002 APR
      • Public Expenditure, Procurement and Financial Management Review with World Bank (WB) and Asian Development Bank (ADB)
    Key Accomplishments to Date… Department of Budget and Management Republic of the Philippines
  • CHALLENGES Department of Budget and Management Republic of the Philippines
    • Refining multi-year resource constrained planning
    • Completing inventory of contingent liabilities
    • Enhancing the predictability of revenues
    • Cascading performance management system down to personnel appraisal
    • Shifting to a performance based compensation system
    • Advocating PEM reforms in Congress
  • MOVING FORWARD Department of Budget and Management Republic of the Philippines 2004 2005 2006 2007
    • limited
    • budget
    • autonomy
    • compensation
    • review
    • reengineering
    • the bureaucracy
    • expanded
    • budget
    • autonomy
    • Initial
    • implementation
    • of compensation
    • reform
    • Reengineering
    • the bureaucracy
    • PEM substantially operations
    • Alignment of agency with individual performance
    • PEM fully operational
  • THANK YOU !!! Republic of the Philippines