Performance Budgeting in the Government of Canada Working

Performance Budgeting in the Government of Canada Working

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 Outline Canadian Context New Expenditure Management System Foundation MRRS & Evaluation Strategic Review Process Whole of Government Reporting Lessons Learned 2 The Canadian Context Canada is a big country, with a small population, and a decentralized government that delivers services across the world 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 4

Federal Spending Overview 2006-2007 Total Expenses $222.2B (Fiscal Year 2006-07) Equalization and transfers to Territories 13% Transfers for Health and Social Programs 26% Other transfers to other levels of government 4% Major and Other Transfer Payments 44% Old Age Security, Guaranteed Income Supplement and

Spouse's Allowance Payments 32% Canada Child Tax Benefits 11% Employment Insurance 14% Public debt charges 15% Major Transfer Payments $98.1B Operating expenses 58% Direct Program Expenditures 41%

Grants and Contributions 30% Direct Program Spending $90.2B TB/TBS Focus Source: Public Accounts of Canada 2006-07 Capital asset amortization and loss on disposal of assets 4% Crown Corporation expenses 8% Expenditure Review & Results Agenda in Canada: A History Federal Accountability Act 2006 - cyclical evaluation of all transfer payment programs

Todays Agenda 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 Canadas Performance linking programs to societal performance Results for Canadians results-based management as a stated priority of government 2000 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 Mid 90s 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 70s 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 The New Expenditure Management System The underlying objectives are management excellence and value for money 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 9 The Expenditure Management System in Canada is decentralized between central agencies, each with specific roles Finance Department 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 Ensures aggregate fiscal discipline is maintained by: Establishing fiscal framework & determining total spending levels Budget 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 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 The Foundation MRRS & Evaluation

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 The Program Activity Architecture Policy requirements for Strategic Outcomes incl: Performance Measures Policy requirements for each program activity element include: Strategic Outcome* Program Activities* Program title &

description Expected results 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 Sub-Activity Level** Performance measures Planned & actual spending Target & actual results Governance Accountability levels

to Parliament (Estimates & Public Accounts) *require TB approval, incl. major & minor changes Sub-Sub Activity Level** Lowest Level programs **require TBS approval Department of Heritage 2009-10 Program Activity Architecture SO PA PSA SO1 Canadian cultural content and artistic expressions are created and accessible at home and abroad

1. Arts 1.1 Arts Presentation Canada 1.2 Cultural Spaces Canada 1.3 Fathers of Confederation Buildings Trust 1.4 National Arts Training Contribution Program 1.5 Canadian Arts and Heritage Sustainability Program 2. Cultural Industries 2.1 Broadcasting Policy 3. Heritage 3.1 Museums Assistance Program 2.2 Canadian Television Fund 2.3 Canadian Feature Film Policy 2.4 National Training Program

in Film & Video Sector 2.5 Film or Video Production Tax Credits 3.2 Canada Traveling Exhibition Indemnification Program 3.3 Canadian Heritage Information Network 2.6 Canada Music Fund 3.4 Canadian Conservation Institute 2.7 Book Publishing Industry Development Program 3.5 Movable Cultural Property Program SO2 Canadians have a sense of their Canadian Identity 4. Promotion of

and Attachment to Canada 4.1 Celebration and Commemoration Program 4.2 State Ceremonial and Protocol 4.3 International Expositions 4.4 Canadian Studies Program 4.5 Exchanges Canada Program 4.6 Katimavik Program 5. Engagement and Inclusion 5.1 Multiculturalism Program 5.2 Action Plan Against Racism 5.3 Human Rights Program 5.4 Building Communities through Arts & Heritage 5.5 Aboriginal Peoples Program 5.6 Historical Recognition Program

6. Official Languages SO3 Canadians participate and excel in sport 7. Sport 6.1 Development of Official-Languages Communities Program 7.1 (Sport) Hosting Program 6.2 Enhancement of Official Languages Program 7.2 Sport Support Program 6.3 Official Languages Coordination

program 7.3 Athlete Assistance Program 7.4 2010 Federal Secretariat 2.8 Canada Magazine Fund 2.9 Publication Assistance Program 2.10 Canadian Culture Online 2.11 Canada New Media Fund 2.12 Copyright Policy 2.13 Cultural Sector Investment Review 2.14 Trade Routes Program 2.15 TV5 2.16 UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions 8. Internal Services (details being developed by central agencies)

Well structured information helps decision-making DEPARTMENTS More logical and consistent basis for interaction Management Tool Reflects full mapping of programs Better alignment of resources & priorities More evidence based reporting Improve program performance TBS Informed decisions on investment choices based on priorities and value for money Common basis for planning and reporting inside and outside PARLIAMENT

MRRS Reporting Tool Stronger accountability for spending and results Policy Objective: Budget Plan Finance PCO 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 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 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

Strategic Reviews Strategic reviews are program-based and results-informed 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 20 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 departments 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 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 Arms length expert advice as effective challenge to proposals and alternatives The first reviews (2007) generated significant savings but also demonstrated a need to improve the quality of results information 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 23 Public Reporting 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 Parliamentary Reports cont.

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 Canadas 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 26 Whole-of-Government Reporting Whole of Government Framework 28 RPP Overview for Parliamentarians Searches may

be customized by spending area and by organization 29 Layered Reporting allows a continuous drill down from the most aggregate to the most detailed Slide on Layered approach Economic Affairs Social Affairs International Affairs Government Affairs Spending Areas (4) Whole-ofGovernment Layer Aggregate information on Spending and on Plans and Performance in: Whole-of-Government Overview for RPPs

Healthy Canadians Safe and Secure Communities Diverse Society Government of Canada Outcome areas (13) Canadian Culture/Heritage Canadas Performance Citizenship and Immigration RPP Departmental Layer High-level departmental information on: Maximum Contribution to the Economy Successful

Integration of Newcomers Reflection of Canadian Values SOs Spending, Planning and Performance Indicators Integration Program in concise RPPs and DPRs (30 pages or less) Electronic Layer Detailed information on specific programs and policies Citizenship Program PAs Comprehensive, Layered,

Continuous: SA Links to databases and useful policy documents SSA Expected and actual results Expected and actual resources Indicators and targets Supplementary information (i.e. sustainable development strategies, audits and evaluations) 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 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 Dont wait for perfection 31 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 Annexes and Background Material Annex A - Links to Further Information

TBS website: http://www.tbs-sct.gc.ca/tbs-sct/index-eng.asp Management Accountability Framework (MAF): http://www.tbs-sct.gc.ca/ maf-crg/index_e.asp Tools and Resources for Parliamentarians: http://www.tbs-sct.gc.ca/tbssct/audience-auditoire/parliamentarian-parlementaire-eng.asp Whole-of-Government Planning and Performance: http://www.tbssct.gc.ca/wgpp-prpg/ Management, Resources and Results Structure (MRRS) Policy: http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/mrrsp-psgrr/mrrsp-psgrr_e.asp Results-based Management: http://www.tbs-sct.gc.ca/rma/rbm-gar_e.asp Audit and Evaluation Database: http://www.tbs-sct.gc.ca/rma/database/aeve_e.asp Canadas Performance 2006-2007: http://www.tbs-sct.gc.ca/reportsrapports/cp-rc/2006-2007/cp-rctb-eng.asp 2007-2008 Guidelines for preparing RPPs and DPRs: http://www.tbssct.gc.ca/rpp/0708/guide/guide_e.asp Performance Reporting: Good Practices Handbook: http://www.tbssct.gc.ca/rma/dpr3/06-07/handbk-guide/gph-gbp_e.asp 34

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