This document discusses challenges in aligning strategic planning and annual budgets, and tools that can help address these challenges. It notes different timescales, people involved, and languages between planning and budgets. A medium-term expenditure framework (MTEF) can align resource allocation with strategic objectives. Performance-based budgeting links spending to results for citizens. Effective MTEFs are multi-year, have clear objectives, and leadership driving a common strategic approach. Performance budgeting strengthens the link between results and resources. Stronger roles for parliaments and audit institutions can enhance accountability and quality of performance information. An integrated budget framework ties these elements together for improved governance.

1. Strategic Planning
and the Annual Budget:
‘Whole-of-government’ approaches
Ronnie Downes
Deputy Head - Budgeting and Public Expenditures, OECD
CESEE Senior Budget Officials
The Hague, 26-27 June 2014

2. What problems need to be addressed?
• Different TIMESCALES
– Annual budget process v. multi-
annual planning process
• Different PEOPLE
– Ministry of Finance v. Ministry of
Planning, Centre of Government
• Different LANGUAGE
– Budget: line items, departmental
allocations
– Plans: strategic programmes,
whole-of-government objectives
• Different LEVELS
– Whole-of-government goals
– Ministry objectives – outputs and
outcomes
– Personal accountability

3. What tools are used to address these challenges?

4. What tools are used to address these challenges?
• Medium-term expenditure framework (MTEF)
– Aligns resource allocation with strategic /
government-wide developmental objectives
• Performance-related budgeting
– Not just what the public is spending – but what it is buying
• Transparent and participative approaches
– Citizens and parliamentary engagement
• Quality and relevance of plans and budgets
– Evaluation of programmes; Periodic spending reviews
– Note the need for professional skills and competencies

5. What makes for an effective MTEF?
• MULTI-YEAR
– common frame of reference for budgets and plans
– ambitions, objectives must match with resources available
• CLEAR OBJECTIVES
– single, strategic approach to designing budgets and plans: away
from “line items” towards strategic programmes
– provides link to Performance-based Budgeting
– Encourages medium-term planning – structural reforms
• LEADERSHIP
– Driven by Centre of Government - all parts of the bureaucracy
understand the common, strategic approach
– MTEF respected as having a fixed, binding character
– provides link to Accountability

6. Medium-term Expenditure Framework (MTEF)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
MTEF in place MTEF not in place
% of countries with MTEF in place
PEMPAL OECD
0%
10%
20%
30%
40%
50%
60%
70%
Overall/ total
expenditure
Other
aggregate
levels
Organisational
level
Other level
Levels of ceilings of MTEF
PEMPAL OECD

7. Length and Revision of MTEF Ceilings
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
3 years 4 years 5 years 6+ years
Length of ceilings
PEMPAL OECD
0%
10%
20%
30%
40%
50%
60%
70%
80%
More than
once per year
Annually Every 2 to 3
years
Other
Frequency of revision of ceilings
PEMPAL OECD

8. Challenges for MTEF?
• Multi-year forecasting of revenue and expenditure
– Potential role for independent institutions
• Political commitment to medium-term discipline
– Link to fiscal rules
– Link to top-down budgeting
• Complete coverage of expenditure envelopes
– Minimise the exceptions
• Deviation from plan?
– Correction, enforcement, credibility?
– CULTURE of medium-term planning is what matters

9. Performance Budgeting
• We know how much we are spending: but what are we buying for
citizens?
– Public services; quality; value-for-money
– This question will always arise with budgeting
• PRESENTATIONAL APPROACH:
– Show performance indicators separately from the budget document
• PERFORMANCE-INFORMED BUDGETING:
– Include performance metrics within the budget document
• PERFORMANCE-BASED BUDGETING:
– Stronger linkage between results and resources; contractual models
• “MANAGERIAL” PERFORMANCE APPROACHES:
– No strong link between allocations and performance
– Focus is on target-setting, monitoring and accountability: culture

10. Common factor: stronger role for parliament
• Performance data should only not be an internal,
bureaucratic concern
• It could – and should – excite the interest of
parliamentarians
– Quality of debate
– Clearer political messages (good and bad)
– Clearer focus on programme logic, performance, implications
for resource allocation and prioritisation
• BARRIERS?
– Information overload
– Focus on technical / administrative data (uninteresting)
• Who controls the data selection?
– Difficulty of focusing on impacts / outcomes

11. Emerging factor: enhanced role for audit institutions?
• Quality is well-established in financial matters
• Too much uncertainty, variability, in non-financial
(performance) matters
– Performance data is not usually audited or auditable
• Moving from
resources  activities  outputs  outcomes
– The frameworks for establishing these “logic models” are often
not subject to external quality assurance
– Essential for identifying, generating and using high-quality
performance information
• A value-added role for audit institutions? Or other
professional bodies?

12. Budgeting
within fiscal
objectives
Towards an integrated, inter-connected budget
framework
Quality,
integrity &
independent
audit
Performance,
Evaluation &
VFM
Comprehensive
budget
accounting
Effective
budget
execution
Alignment with
medium-term
strategic plans
and priorities
Performance,
evaluation &
VFM
Transparency,
openness &
accessibility
Participative,
Inclusive
& Realistic
Debate
Fiscal Risks &
Sustainability
Capital
budgeting
framework

13. Towards an integrated, inter-connected budget
framework
• A clear fiscal constraint, binding over medium term
• A strategic vision of medium-term objectives
• Clear “logic model” for how resources lead to results
• Resources budgeted to fund these objectives
• Evaluation and performance monitoring
• Engagement of public and parliament in the dialogue on
performance and priorities
• External quality assurance on financial and non-financial
matters
• Annual budget is a key part of the multi-annual process