An Introduction to the Australian Mid-Term Expenditure Framework (MTEF) and Performance Based Budgeting (PBB) REFORMS
•Download as PPT, PDF•
0 likes•292 views
Presented by Pat McMahon Budget Advisor, Australian Department of Finance and Deregulation
Recommended
Recommended
More Related Content
What's hot
What's hot (20)
Viewers also liked
Viewers also liked (20)
Similar to An Introduction to the Australian Mid-Term Expenditure Framework (MTEF) and Performance Based Budgeting (PBB) REFORMS
Similar to An Introduction to the Australian Mid-Term Expenditure Framework (MTEF) and Performance Based Budgeting (PBB) REFORMS (20)
More from Oswar Mungkasa
More from Oswar Mungkasa (20)
An Introduction to the Australian Mid-Term Expenditure Framework (MTEF) and Performance Based Budgeting (PBB) REFORMS
- 1. AIMS OF THE WORKSHOP AND AN INTRODUCTION TO THE AUSTRALIAN MTEF AND PBB REFORMS Presented by Pat McMahon Budget Advisor, Australian Department of Finance and Deregulation
- 2. Aims of the workshop sessions are to: • Gain a better understanding of the power of MTEF and PBB and a clear understanding of the differences to the traditional approach; • Examine some practical examples of how MTEF and PBB could be applied in some pilot agencies; and • Start addressing the practicalities involved in moving to a mature MTEF and PBB beyond the pilot.
- 3. MTEF/PBB are tools for Public Expenditure Management Public Expenditure Management is concerned with: planning, management, control and accountability of public financial resources from the point at which those resources enter the public domain to the point at which they leave
- 4. Graphic of the milestones in Australian financial management reform 1985 1990 1995 2000 2005 Program budgets Accrual-based outcome budgets Medium Term Financial Estimates Operating Cost Flexibility Accrual accounting, whole-of-government financial reports Program Evaluation Plans Budget Estimates and Strategic Financial Management Improvement Program Framework Review Review National Commission Initiative of Audit New Financial Management & Audit Acts Charter of Budget Honesty Act
- 5. Which should come first, PBB or MTEF? Australia did both together: • MTEF allows better planning and allocation. • Once an MTEF was in place the requirements for performance & accountability by CEOs began. • The basic features of MTEF have stayed the same since the 1980s.The performance & accountability requirements have increased throughout the period since.
- 6. What worked well in Australia & why? What has gone well? • MTEF involving firm forward estimates & PBB involving defining “Running costs” and devolution of responsibility – Followed by accrual reporting & then accrual budgeting Why has it gone well? • The adoption of firm forward estimates linked to the budget was a source of greater predictability to Governments & line managers – it gave the capacity to better plan & manage – Predictability created the climate and expectation for performance • Finance provided leadership: It drove reform from mid 1980s.
- 7. The focus of the rest of this workshop – PBB 1. The Australian performance framework and its phases; 2. Setting up a performance system in Indonesia MTEF 3. The features of the Australian MTEF and practical examples on how Indonesia can progress towards adopting an MTEF. PLANNING MTEF & PBB REFORMS FOR NEXT FIVE YEARS 4. Plan the necessary steps to achieve improved management, control and accountability through an MTEF and PBB over the medium term (e.g. next 5 years)
Editor's Notes
- Gain a better understanding of the power of : MTEF for better planning and budget allocation PBB for improving efficiency of input use and effectiveness of programs Gain a clear understanding the differences to the traditional approach Start addressing the practicalities involved in moving to a mature MTEF and PBB by planning & phasing the reforms ( starting with the pilot followed by gradual implementation by stages over the next 5 years) The outputs should be a start to planning the phasing of the reforms over the next five years
- MTEF/PBB are merely tools for public Expenditure Management. In this workshop we will explore and discuss the following: Planning – how would planning and the issue of spending envelopes occur in a MTEF framework? How would the five year national plan and a five year budget focus fit together? Will Governments make better planning decisions under an MTEF Financial Management – who is responsible for management in an performance based MTEF/PBB framework? Control and ability to manage – what are Governments and managers controlling? What are they managing in a performance based MTEF framework? Can performance happen when everything is controlled centrally? Accountability – Accountability of what: inputs or outputs. What is the meaning of accountability under a performance based framework? How will reporting to the Parliament change with MTEF and PBB? All of these questions need to be considered from the viewpoints of the stakeholders Program managers (line departments) Ministers and the Government The Parliament Financial commentators and the Public I have been asked to skip through the concepts and get down into the detail of how and what was done using the Australian experience. But it would help if I first explain the journey that Australia went through and then make sure we are all with a clear understanding of the concepts.
- There has been a long evolution of reform in Australia. The key initial steps in the 1980s were the introduction of: Forward Estimates as the baseline for Budgets. T he linking of Forward Estimates and the Budget was the most important step Australia took . Operating cost flexibility and letting the managers manage was also very important ! Initially this involved a gradual shift from input controls combined with Financial Management Education and Training of line agency management. A key mechanism was the gradual introduction of o ne line Budgets for running costs for the delivery of programs (this was a major change to provide an incentive to move from a focus on the inputs to a focus on the outputs, both by Central Agencies and Line Agencies) To facilitate these radical changes in the mid 1980s a Financial Management Improvement Program was established. This was a major partnership between Finance and line Agencies to promote Financial Management for performance. It was a deliberate education and training strategy to change the culture from an inputs focus to an outcomes and performance focus and it was delivered by the Dept of Finance.
- Many people in Indonesia have a view that PBB should come first. Australia did both together. Why? Because it is difficult to plan and perform without certainty from one year to the next. Planning is a precondition to gaining performance. Once an MTEF was put in place in Australia it provided certainty and it was then possible to build on the requirements for accountability & performance.
- The forward estimates linked to the budget has worked well from the beginning and is highly valued by governments. Our performance framework has changed greatly over time but the key feature is one of increasingly devolving responsibility to the line agencies. Leadership from the Department of Finance in managing these changes has been a crucial ingredient to success.
- The remaining sessions will focus on the practicalities of: adopting a budgeting system with firm forward estimates, preferably linked to the five year national plan Creating a performance based system which also involves “letting the managers manage” and Creating a system to measure performance and carry out evaluations That’s enough on the focus of the Workshop. Lets now get down to the detail starting with PBB, and late in the morning we shall start our focus on MTEF followed late in the afternoon with a discussion of the way forward