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1. Performance Budgeting
in the Government of Canada
Working Party of Senior Budget Officials
OECD-MENA Senior Budget Officials Network
Bruce Stacey, Executive Director, Treasury Board Secretariat
Cairo, Egypt, November 24 – 25, 2008
2. Canadian Context
New Expenditure Management System
Foundation – MRRS & Evaluation
Strategic Review Process
Whole of Government Reporting
Lessons Learned
Outline
2
4. • This poses unique monitoring and reporting challenges:
– 35 million people in a vast geographic area
– Highly decentralized federation: 10 provinces, 3 territories
– Provinces are equal to the federal government and have real power
– Hundreds of federal-provincial agreements and transfer payment programs
• Over 90 departments & agencies and 46 Crown corporations
– Over 300,000 core public servants
– Over 1,600 points of service
– Diplomatic presence in about 180 countries - Canadian Forces in 17 missions
– Over 2500 programs and 350 million transactions per year
Canada is a big country, with a small population, and a decentralized
government that delivers services across the world …
4
5. Federal Spending Overview 2006-2007
Direct Program
Expenditures
41%
Public debt
charges
15%
Major and Other
Transfer Payments
44%
Canada Child Tax
Benefits
11%
Equalization and
transfers to
Territories
13% Other transfers to
other levels of
government
4%
Old Age Security,
Guaranteed
Income
Supplement and
Spouse's
Allowance
Payments
32%
Employment
Insurance
14%
Transfers for
Health and Social
Programs
26%
Operating
expenses
58%
Capital asset
amortization
and loss on
disposal of
assets
4%
Crown
Corporation
expenses
8%
Grants and
Contributions
30%
Total Expenses $222.2B
(Fiscal Year 2006-07)
Major Transfer
Payments $98.1B
Direct Program
Spending $90.2B
Source: Public Accounts of Canada 2006-07
TB/TBS
Focus
6. Expenditure Review & Results Agenda
in Canada: A History
Federal Accountability Act 2006 - cyclical evaluation of all transfer payment programs
Management, Resources and Results Structures – regaining detailed program level knowledge
Improved Reporting to Parliament – moving to whole of government planning and reporting
Renewed Evaluation Policy – quality, capacity, credibility, and expansion of coverage
Management Accountability Framework – assessing management performance across government
Canada’s Performance – linking programs to societal performance
Results for Canadians – results-based management as a stated priority of government
Transfer Payment Policy – performance frameworks and evaluations reviewed by TBS
Modern Comptrollership – investment in management practices and controls
Program Review – dealing with a large deficit through major expenditure cuts
Departmental Reporting to Parliament – moving to results-based plans and reports on performance
Planning Reporting and Accountability Structures – unsuccessful try at linking resources to results
First Program Evaluation Policy – government-wide implementation
Late
70’s
Mid
90s
2000
Today’s
Agenda
7. Expenditure Management System in Transition
Designed 15 years ago to fight deficit and control new spending
1995: Program Review of the entire spending base
Late 1990s: budget surpluses lead to new spending without an
anchor to discipline that spending
Cabinet time focused almost exclusively on new spending
Ad hoc restraint exercises to control spending with no real focus on
performance
Governments around the world emphasize outcomes – Australia,
U.K., U.S., New Zealand.
Budget 2006 and 2007 committed the government to a new ongoing
approach to managing overall spending
EMS Renewal approved in June 2007
9. • The government wants to deliver high quality services and high value
programs at reasonable cost
• Expenditure Management System Renewal is changing the way the
government operates and aims to ensure:
• Aggregate fiscal discipline (i.e. control of overall growth in
spending)
• Effective allocation of government resources to areas of highest
relevance, performance and priority
• Efficient and effective program implementation
The underlying objectives are management excellence
and value for money …
9
10. Privy Council Office
•Support elected
government in
establishing priorities and
meeting these through
the effective allocation of
spending to government
priorities by
• Supporting Prime
Minister & Cabinet
Committees
•Managing flow of
Cabinet business
•Facilitating broad
Govt policy
development
Treasury Board Secretariat
•Supports Treasury Board (TB) in effectively allocating
spending in manner that ensures operational efficiency
and effectiveness by:
•Establishing and monitoring adherence to TB
management policies (financial & non financial)
•Supporting TB approval of detailed operational
plans & recommendation of resource
appropriations for new programs
•Supporting TB determination of resource needs /
investment opportunities for existing programs
Finance
Department
•Ensures aggregate
fiscal discipline is
maintained by:
•Establishing fiscal
framework &
determining total
spending levels
•Budget
The Expenditure Management System in Canada is decentralized
between central agencies, each with specific roles
11. The new System is supported by three pillars
• All spending must be managed to transparent results/outcomes
– Clear measures
– Assessed and evaluated systematically and regularly
– Demonstrating value for money
• Up-front discipline is applied to new spending proposals to manage spending
growth
– Include clear measures of success
– Demonstrate how the proposal fits with existing spending and results
– Provide reallocation options for funding
• Strategic Reviews assess existing spending over a four-year cycle to ensure
alignment with priorities, and effectiveness, efficiency and economy
– Programs expected to demonstrate results in support of priorities
– Decision-making to use objective, evidence-based information
11
13. A common approach to the collection, management, and
reporting of performance information is key …
Management, Resources and Results Structure Policy (2005)
Provides detailed information on all government programs
Establishes the same structure for both internal decision-making and external
accountability
Helps to link resources and results -- planned and actual
Is being implemented across government
13
14. Policy requirements for
Strategic Outcomes incl:
Performance Measures
Policy requirements
for each program
activity element
include:
Program title &
description
Expected results
Performance
measures
Planned & actual
spending
Target & actual
results
Governance
Strategic Outcome*
Program Activities*
Sub-Activity Level**
Sub-Sub Activity Level**
Lowest Level
programs
Accountability levels
to Parliament
(Estimates & Public
Accounts)
*require TB approval,
incl. major & minor
changes
Departmental
PAA: reflect the
inventory of all
the programs of
a department
depicted in their
logical
relationship to
each other and
to the SO(s) to
which they
contribute
**require TBS
approval
The Program Activity Architecture
15. Department of Heritage 2009-10 Program Activity Architecture
SO1
Canadian cultural content and artistic
expressions are created and accessible at
home and abroad
PA
PSA
SO2
Canadians have a sense of their
Canadian Identity
SO3
Canadians participate and
excel in sport
SO
1. Arts
1.4 National Arts Training
Contribution Program
1.1 Arts Presentation
Canada
1.5 Canadian Arts and
Heritage Sustainability
Program
2. Cultural
Industries
2.3 Canadian Feature Film
Policy
2.1 Broadcasting Policy
2.7 Book Publishing Industry
Development Program
2.6 Canada Music Fund
2.10 Canadian Culture Online
2.12 Copyright Policy
2.13 Cultural Sector Investment
Review
2.14 Trade Routes Program
2.15 TV5
3. Heritage
3.1 Museums Assistance
Program
3.4 Canadian
Conservation Institute
3.2 Canada Traveling
Exhibition
Indemnification
Program
3.5 Movable Cultural
Property Program
3.3 Canadian Heritage
Information Network
4. Promotion of
and Attachment
to Canada
4.1 Celebration and
Commemoration
Program
4.4 Canadian Studies
Program
5.6 Historical Recognition
Program
5. Engagement
and Inclusion
5.1 Multiculturalism Program
5.5 Aboriginal Peoples’
Program
5.4 Building Communities
through Arts & Heritage
6.1 Development of
Official-Languages
Communities
Program
6.3 Official Languages
Coordination
program
6. Official
Languages
7. Sport
7.2 Sport Support
Program
7.1 (Sport) Hosting
Program
7.3 Athlete Assistance
Program
7.4 2010 Federal
Secretariat
8. Internal
Services
(details being developed
by central agencies)
2.16 UNESCO Convention on the
Protection and Promotion of the
Diversity of Cultural Expressions
1.3 Fathers of
Confederation
Buildings Trust
1.2 Cultural Spaces
Canada
2.11 Canada New Media Fund
2.9 Publication Assistance Program
2.8 Canada Magazine Fund
2.5 Film or Video Production
Tax Credits
2.4 National Training Program
in Film & Video Sector
2.2 Canadian Television Fund
6.2 Enhancement of
Official Languages
Program
5.2 Action Plan Against
Racism
5.3 Human Rights Program
4.2 State Ceremonial and
Protocol
4.3 International
Expositions
4.5 Exchanges Canada
Program
4.6 Katimavik Program
16. Well structured information helps decision-making …
DEPARTMENTS
Management Tool
Reflects full mapping of programs
Better alignment of resources & priorities
More evidence based reporting
Improve program performance
Finance PCO
Budget
Plan
TBS
Informed decisions on
investment choices based
on priorities and
value for money
PARLIAMENT
Reporting Tool
Stronger accountability
for spending and results
Common basis
for planning
and reporting
inside and
outside
More logical and
consistent basis
for interaction
MRRS
Policy Objective:
Development of a common,
government-wide approach to the
collection, management, and reporting
of financial and non-financial
performance information - to provide
an integrated and modern
expenditures management framework
16
17. Evaluation information is important but there are
challenges to getting it …
• Quality, timeliness and strategic focus issues hinder systematic use of
evaluation to support decision-making:
– often small programs - not strategic
– about 10% of spending each year - too low
– take too long and difficult to understand
– can be self serving when funded by program managers
• Capacity issues have made it difficult to deliver
– Need more trained evaluators
– Need consistent competencies for managers and staff
– Definition of the evaluation “product” same as 20 years ago - may
need a new sort of product
17
18. Rebuilding evaluation requires focused attention …
• Strategic reviews require credible information on the relevance and
performance of government programs … and evaluation is a key source
• Objectives of evaluation policy renewal:
– Improve the information base for strategic reviews - increased focus on
value for money (relevance and program performance)
– Comprehensive coverage of programs through a regular and systematic
cycle
– Improved credibility through agreed upon standards, flexible tools for
evaluation and neutrality of the evaluation function
– Improved quality by having the right capacities, people and systems
– Continuous learning and improvement - stronger Treasury Board
capacity to lead the function, monitor capacity and use evaluation
information
• New Evaluation Policy will require comprehensive evaluation coverage (100%
of large departments) of all direct program spending over a 5 year cycle
• Federal Accountability Act requires 100% coverage of all Grant and
Contributions
18
20. • All direct program spending reviewed - 25% each year
• Treasury Board and its Secretariat set terms of reference:
Comprehensiveness – assessment of mandate, departmental objectives,
program effectiveness, efficiency and alignment to government priorities
Reallocation proposals – options for program reductions or eliminations to
reallocate to government priorities and support overall spending control
Reinvestment proposals – options to better support government priorities
• Departments review the relevance and performance of their spending, identify
lowest performing/priority 5% of programs, seek outside expert advice and report
to the Treasury Board
• Privy Council Office identifies review departments every year and assesses, with
Treasury Board and the Department of Finance, the departmental proposals
Strategic reviews are program-based and results-informed
20
21. Strategic Reviews – Scope and Key Elements
Departmental Strategic Reviews to answer specific questions in key areas:
Government Priority, Federal Role, Relevance (i.e. continued prog. need)
Performance (effectiveness, efficiency, value for money)
Management Performance
Departmental Strategic Reviews to be conducted using the following key
elements
Analytical Framework: The department’s Program Activity Architecture
Information Sources: Evaluations, Audits, Management Accountability
Framework assessments, Auditor General Reports, and other reports
Reporting Requirements: Outlined in the Terms of Reference
Steering Committee: A departmental steering committee to be established
with ex officio membership from TBS
External Advice: Expert outside advice to be involved on each Review to
ensure neutrality and credibility
22. Strategic Reviews –Conditions for Success
Sufficient time for deliberative process
Ministerial engagement throughout the Review process
Clear and strategic alignment of programs and results (value of a strong
Program Activity Architecture)
Comprehensive assessment of all programs (100%)-not focussing only on 5%
Early involvement of senior management team – policy, communications, and
corporate services
Multiple lines of evidence – evaluations, audits, benchmarking, international
comparisons
Overview portion of the Strategic Review should tell a compelling
departmental story
Arm’s length expert advice as effective challenge to proposals and alternatives
23. Seventeen organizations reviewed their programs in 2007
Ministers examined $13.6B, about 15 per cent of direct program spending
$386 million per year was identified as presenting opportunity to:
Increase efficiency and effectiveness: Change the way the Government delivers
programs and services
Focus on core roles: Ensure that services are delivered by those best positioned to do so
Meet the priorities of Canadians: Align federal activities with the needs and priorities
of Canadians and eliminate programs that are no longer necessary
Savings were redirected to fund new initiatives, both within departments and to broader
spending priorities in Budget 2008
The first reviews (2007) generated significant savings but also
demonstrated a need to improve the quality of results information …
23
25. Key Parliamentary Reports
• Main Estimates
– Part I: Government Expense Plan
– Part II: Main Estimates (in support of
the Appropriation Act)
• Part IIIs
– Reports on Plans and Priorities (RPPs),
support committees in reviewing
supply
– Departmental Performance Reports
(DPRs), actual achievements against the
expected results in the RPP
• Supplementary Estimates
– Usually two per year
25
26. RPP Overview for Parliamentarians
– helps parliamentarians and their staff
to navigate through the 91 RPPs (2007-
2008)
– provides a whole-of-government view
of planned spending
Canada’s Performance
– Provides an overview of and helps
parliamentarians and their staff
navigate through the 90 DPRs (2006-
2007)
Public Accounts
– In three volumes, covering financial
performance for most recently
completed fiscal year
Parliamentary Reports cont.
26
29. RPP Overview for Parliamentarians
Searches may
be customized
by spending
area and by
organization
29
30. Slide on Layered approach
Layered Reporting allows a continuous “drill down” from the most
aggregate to the most detailed …
Safe and Secure
Communities
Expected and actual results
Expected and actual resources
Indicators and targets
Whole-of-
Government – Layer
Aggregate information on
Spending and on Plans and
Performance in:
• Whole-of-Government
Overview for RPPs
• Canada’s Performance
Comprehensive, Layered,
Continuous:
User is able to continuously
drill down from the Whole of
Government level to detailed
financial and non-financial
information at the lowest
level of the PAA
Economic Affairs
Departmental – Layer
High-level departmental
information on:
• Spending, Planning and
Performance Indicators
• in concise RPPs and DPRs
(30 pages or less)
Electronic – Layer
Detailed information on
specific programs and policies
Links to databases and useful
policy documents
Social Affairs International Affairs Government Affairs
Spending Areas (4)
Government of Canada
Outcome areas (13)
Canadian
Culture/Heritage
Healthy
Canadians
Diverse Society
Citizenship and Immigration RPP
Maximum
Contribution to
the Economy…
Successful
Integration of
Newcomers…
Reflection of
Canadian
Values…
Integration
Program
Citizenship
Program
SOs
PAs
SA
SSA
• Supplementary information (i.e.
sustainable development
strategies, audits and evaluations)
31. What lessons have we learned (#1)?
Need persistent effort to build capacity - will take time
Political leadership
Have a plan but experiment and adapt:
• Central agency leadership
• Know program base
• Identify measures and collect the data
• Evaluation capacity means investment
• Use the information for decision-making in the
department
• Use the same information to improve reporting
Linking performance information to reporting was helpful – but
linking it to decision-making in the budget process has been
critical
Don’t wait for perfection
31
32. What are the lessons learned (#2)?
This is cultural change: expect resistance - go for small wins -
communicate - acknowledge risks - adapt - build trust
Rewards and sanctions are important - gaming
Put elected and non-elected officials on the same information base:
• Make it relevant for decision-making
• Better management and fiscal results
• Sound understanding of the business
• Ministerial engagement important
Have realistic expectations - under promise, over deliver
32
