Performance BudgetingPerformance Budgeting

in the Government of Canadain 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

Canadian Context

New Expenditure Management System

Foundation – MRRS & Evaluation

Strategic Review Process

Whole of Government Reporting

Lessons Learned

Outline

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The Canadian Context

• 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 …

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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

Insurance14%

Transfers for Health and Social

Programs26%

Operating expenses

58%

Capital asset amortization and loss on disposal of

assets4%

Crown Corporation

expenses8%

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

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

Late70’s

Mid 90s

2000

Today’s Agenda

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 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 …

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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

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

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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

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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

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 sportSO

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

Well structured information helps decision-making …

DEPARTMENTSManagement Tool

Reflects full mapping of programsBetter alignment of resources & priorities

More evidence based reporting Improve program performance

Finance PCO

Budget Plan

TBSInformed decisions on

investment choices based on priorities and value for money

PARLIAMENTReporting Tool

Stronger accountability for spending and results

Common basis for planning

and reporting inside and

outside

More logical and consistent basis for interaction

MRRSPolicy 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 framework16

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

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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

• 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

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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

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

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 …

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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

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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.

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Whole-of-Government Reporting

Whole of Government Framework

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RPP Overview for Parliamentarians

Searches may be customized by spending area and by organization

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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 resultsExpected and actual resourcesIndicators 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 AffairsSpending Areas (4)

Government of Canada Outcome areas (13)Canadian

Culture/HeritageHealthy

CanadiansDiverse 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)

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

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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

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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/tbs-

sct/audience-auditoire/parliamentarian-parlementaire-eng.asp Whole-of-Government Planning and Performance: http://www.tbs-

sct.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 Canada’s Performance 2006-2007: http://www.tbs-sct.gc.ca/reports-

rapports/cp-rc/2006-2007/cp-rctb-eng.asp 2007-2008 Guidelines for preparing RPPs and DPRs: http://www.tbs-

sct.gc.ca/rpp/0708/guide/guide_e.asp Performance Reporting: Good Practices Handbook: http://www.tbs-

sct.gc.ca/rma/dpr3/06-07/handbk-guide/gph-gbp_e.asp

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