The document discusses performance-based budgeting reforms in Estonia. It outlines the challenges that triggered reforms, including a lack of cooperation between planning and budgeting. Estonia is now using performance budgeting, with 2/3 of ministry budgets connected to public services. The concept of performance-based budgeting in Estonia ties resources to outcomes through program budgeting, defining all government costs as services, and service cost accounting. New legal amendments effective in 2020 will integrate strategic planning documents with the budget at the program level, allowing some flexibility in reallocating costs. The reform aims to increase efficiency, transparency, and cooperation through unified performance planning and budgeting systems.

1. Performance Based
Budgeting in Estonia
Eneken Lipp
Project Manager of Performance Based Budgeting
Ministry of Finance, Estonia
eneken.lipp@fin.ee

2. 1. Challenges and past developments
2. Concept and vision of PBB in Estonia
3. Findings of the reform and examples of
practice
4. Performance data and reporting

3. The challenges that triggered the change
• Lack of co-operation
• Planning and budgeting as separate worlds
• Too much attention to inputs
• Not enough performance evaluation and monitoring
• Number of planning documents
• Number of people responsible for strategic planning, producing
planning documents
• Doubled activities, documents, functions, IT systems
• Pressure on budget costs

4. Developments in Estonia
In 2018 already using performance budgeting – ministry of Social Affairs, Ministry of Education
and Research - 2/3 of the costs in the Budget

5. 2. Public Services
100% of Budget costs are
connected to services
3. Service Costing
Cost accounting of services in
Ministries and Agencies. Agencies may
choose between traditional and activity
based costing.
Performance Based Budgeting in Estonia
where resources are connected to outcomes
1. Programme budgeting
Structured strategic planning and
budgeting in all Government areas and
Agencies
Unified performance planning and budgeting - Financial Management Information System and
Costing Software available for all Agencies.

6. Performance planning and budgeting

7. Performance planning and budgeting

9. New amendments in budget law – takes effect in 2020
Planning documents connected to budget are:
• Policy Fundamentals (Parliament)
• Performance area planning documents (Government)
• Programmes (Minister)
 The budget limits are set on programme level. The budget is divided as
follows: Ministry, Performance area(s) and Programme(s).
 Flexibility rule: Gov. is allowed to reallocate costs between
programmes up to 0,25% of programme fixed cost limit.

10. New framework of performance budgeting
Governmentactionplan
4years
Long-term strategic plan „Estonia 2035“15 years
5-10
years
4 years
State Budget1 year
Development plans of performance areas
State Budget Strategy
Performance report of development plansPrevious
year
Programme documents4 years
Programme documents1 year

11. Expected changes
Better
management
Less strategic
documentsPrioritizing
Efficiency
Open data,
Dashboards
No more
silos
Customer Value
Flexibility
01
02
03
04
05
06
07
To reduce
administrative burden
Flexibility for resource
management
Quality Management
To increase co-operation
between Ministries
Transparency in
budget planning
Tool for agency
management
Instrument for
policy planning

12. Main stages for ministries and agencies
to prepare the PBB reform
1. Restructuring of
strategic planning
– new planning
hierarcy
2. Mapping the
services with its
attributes
3. Creating the
costing models
(traditional or ABC)
PROGRAMMES
LISTS OF
AGENCIES
SERVICES
COSTING
MODELS OF
AGENCIES AND
GOV.AREAS
4. Setting the cost
models in IS. Creation
of management reports.
MANAGEMENT
DASHBOARDS
Real-time budget
and performance
information
reporting
RESULTS

13. Evolvement of transition projects by each Ministry (november 2018)

14. OUTCOME
People's ability to live
independently, live in the
community and participate
in society has improved due
to effective legal protection
and legal aid and assistance
Provision of services for
victims and assurance of
benefits.
Expected result: services will
become more victim-
centered, given the greater
protection and support of
victims and needs of the
victim, and the pursuit of the
perpetrator of violence in the
interests of himself and the
victim. Preventive activities
will have wider scope and
reach for more target groups.
The proportion of victims of violence
during the year (baseline 2,3%; 2020 1,4%)
Deaths due to domestic violence
(baseline 10, 2020 below 5)
Proportion of people that intervene
domestic violence (baseline 77%, 2020
85%)
Proportion of women aware of victim
support (baseline 67%; 2020 80%)
The proportion of victims of violence who
have turned to victim-support (baseline
68%, 2020 80%)
Proportion of attitudes accusing the victim
(baseline 54%; 2020 45%)
Social Care Program Program activity Targets to be achieved with
additional spending
request
Example of additional spending request in 2018, 1.2 million € (Ministry of Social Affairs)

15. Findings during the reform
• Ministries tend to have more services than agencies
• Many direct services in Ministries could be provided by Agencies who manage the service more
effectively and closer to the client.
• Evidence that part of policy planning is made on Agency level.
• Found „missing“ policy areas that were not consciously planned on ministry level before.
• In smaller agencies some staff of management or chief-specialists are performing also technical
support services.
• Ministries still have some budget lines as part of „old habits“, while the service has already been
moved to Agency.
• IT agencies provide services that are closed long time ago.
• Some agencies provide services below internal price (no overhead or development costs included).

16. Already showing benefits in management before
the final stage of the reform (1)
• Full transparency and alignment of goals and services – clear planning hierarchy and clear
accountability system.
• Performance agreements instead of budget approval.
• Findings of doubled activities reorganized services between agencies. For example work
counseling and training of child protection workers.
• Change of management systems – strategy/development department and financial
department have been united - benefits of cooperation.
• Service based management has been introduced allowing greater agility in planning and
designing services.
• Forming informal temporary teams and team-leading to tackle short time development tasks.
It means more flexibility in organizational structure, management and payroll.

17. Already showing benefits in management
before the final stage of the reform (2)
• IT developments in IT Agencies are planned in cooperation with the client-Agency.
Additional spending requests.
• Renewing the SLA-s. Negotiations on service level agreements with client-Agencies. The
service costs are transparent.
• Following the data (KPIs and actual costs) allows to detect errors faster.
• half-year report - family benefits KPI performance 105% but costs of the service 50%.
Report available instantly to the Agency, Ministry of Social Affairs and Ministry of
Finance.
• Some ministries start using the new system a year earlier unoficially. 2019.
Programmes instead of implementation plans and
cost accounting of services in paralleel with the old budgeting system.

18. Integrated reporting
Resources
Vehicles
Buildings
Costs associated to
personnel
IT assets
Machinery and equipment
Grants
Material
Events
Other costs
Costs by economic
Content
Labor costs
Payroll, taxes,
Representation
Operational costs
Transport, travel,
trainings, research
Personnel data
Gender of staff
Education
Grouping posts of service
Age group
Years of experience
Geographic location
Salary full-time equivalent
Reason for leave
Flow
Number of employees
Clients
Public sector
Private sector
individuals
Other
Revenue
Capital costs
Depreciation
Planning hierarchy
Performance area, Programme, Measure,
Program activity, Service, Service activity
Outcome, output and Quality indicators
Time
Work time used to services
or activities
Vacations
Travel for duty
Trainings

19. Government Dashboard
Ministry Performance Area Dashboard
Agency Executive Dashboard
Service Managers Dashboard
Performance management structure,
KPIs and resource planning

20. Service managers compiling dashboars
E-Governance Conference 9.Nov

21. This is a sample text.
Insert your desired text here
11 Govenrment areas use new
performance management and
budget planning
4200 trained
public servants
20 Performance areas
– Strategic Outcomes
ca. 40-60 programmes
– Sub-Goals
150 Goverment Agencies
and Ministries use service
based management and
service costing
2 Financial
Information
Management
Systems
adapted
150 Goverment
Agencies start using
Costing Software
4 legal acts changed and
new Budgeting handbook
released
Estonian
Performance Budget
in 2020
1 new cost object,
5 levels