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CHALLENGES IN IMPLEMENTING CHALLENGES IN IMPLEMENTING A PERFORMANCE FRAMEWORK – A PERFORMANCE FRAMEWORK –

Polish experiencesPolish experiences

dr. Piotr Perczynskidr. Piotr Perczynski

National Coordinator for Performance BudgetNational Coordinator for Performance Budget

in Ministry of Financein Ministry of Finance

Washington DC; December 3th, 2009Washington DC; December 3th, 2009

Ministry of Finance Ministry of Finance

11

6,2

5,0

3,03,4

1,4

2,5

3,1

3,6

6,8

0,91,2

2,8

6,8

5,0

0

1

2

3

4

5

6

7

8

2005 2006 2007 2008 2009 2010 2011 2012 2013

%

MF data OECD

The public finance sector in Poland The public finance sector in Poland GDP GDP growth in 2005-2013growth in 2005-2013

33

38,9 39,7 41,2 40,4 41,2 41,5

41,9 41,8 41,1 42,044,5

47,4

-3,0-2,1

-1,6

-3,3

-5,9-4,3 -3,9

-1,9

-3,9

-6,6 -7,3

0,1

20

30

40

50

60

70

80

2005 2006 2007 2008 2009 2010

% G

DP

-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

% G

DP

income expenses result result ESA'95

•MF data, draft of nb 2010: forecast 2009-2010; Result ESA’95: Eurostat 1999-2008, UC Forecast 2009-2010

The public finance sector in PolandThe public finance sector in PolandRevenue, expenditure and public finances result Revenue, expenditure and public finances result

in 2005in 2005--2010 (% GDP)2010 (% GDP)

44

47,5 47,8

44,8

47,0

49,8

54,5 54,854,7

40

42

44

46

48

50

52

54

56

2005 2006 2007 2008 2009 2010 2011 2012

The public finance sector in Poland The public finance sector in Poland - - debt to debt to GDPGDP ratio ratio in 2005-201in 2005-20122

55

The puzzle of public financeThe puzzle of public finance

fiscal rules

consolidation of

fiscal sector

performance

budget

multi-annual

planning

66

Polish model of Performance Budget Polish model of Performance Budget

Polish solutions only to be directly applied in PolandPolish solutions only to be directly applied in Poland..

Countries which directly adopted foreign models later had to Countries which directly adopted foreign models later had to adjust these models adjust these models or or reconstruct them completely with reconstruct them completely with respect to: respect to:

• specifics of their own public financesspecifics of their own public finances;;

• national prioritiesnational priorities;;

• social-economical circumstancessocial-economical circumstances..

There is no single model of performance budget

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The The PolPolishish definition definition of of Performance BudgetPerformance Budget

Performance budgetPerformance budget – – consolidated expenditure plan for entities from the public finance sector for more than one budgetary year, prepared in a functional system (function, task, subtask), based on the targets and measures of their realisation.

88

Performance Budget – Performance Budget – modern expenditure modern expenditure

management in public sector based onmanagement in public sector based on::

Multi-annual planning

Transparency

Effectiveness

Efficiency

99

Polish calendarPolish calendarof Performance Budgetof Performance Budget

4th stage

3rd stage

2nd stage

1st stage

2006 2007 February 2008 20102006 2007 February 2008 2010

2012

1010

Governmentalinitiative

Performance Budget –

a pilot stage inthe Ministry of Scienceand HigherEducation

The first rulesconcerning

performancebudget

in PublicFinance Act

1st stage

February 2006 – February 2007

1111

Presentation of performance budgets of most Presentation of performance budgets of most budgetary chapters trustees into justification to budgetary chapters trustees into justification to budgetary act draft for 2008budgetary act draft for 2008..

Performance budget covers Performance budget covers 44%44% of State budget of State budget expenditure. Multi-annual structure principle is not in expenditure. Multi-annual structure principle is not in full use. full use. HHigh degree of trustee discretion into shaping igh degree of trustee discretion into shaping budget’s budget’s structure on all levels.structure on all levels.

2nd stageFebruary 2007 – February 2008

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In the first quarter of 2008 the project moved to the MIn the first quarter of 2008 the project moved to the MoF.oF.

Methodological changes aimed towards:Methodological changes aimed towards:

• setting tasks by the Ministry of Finance Decree to introduce setting tasks by the Ministry of Finance Decree to introduce budgetary expenditure classification based on COFOGbudgetary expenditure classification based on COFOG;;

• preparing indicators, which enable full application of medium-preparing indicators, which enable full application of medium-term and multi-annual expenditure planning mechanismsterm and multi-annual expenditure planning mechanisms;;

• implementation of functional structureimplementation of functional structure of performance of performance expenditure planning.expenditure planning.

3rd stageFebruary 2008 – 2010

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FFunctional structure of unctional structure of performance expenditure planningperformance expenditure planning

1st level

2nd level

3rd level

4th level

State functions – expenditure of one State activity area;

Tasks – expenditure according to objectives;

Subtasks – influence on the achievement of objectives on the task level;

Activities – most important elements of objectives achievement process on the level of subtask and task.

1414

Objective setting – levels

Priority objectivesSet by Prime Ministeron the functional level

Strategic objectivesSet by Minister/Office Head

on the task level

Operational objectivesSet by Secretary/Undersecretary of State

on the task and subtask level

Administrational objectivesSet by General Director

on the task and subtask level

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PProcessrocess

Ministry of Finance

Individual Ministries

National Coordinator for

Performance Budget

Department of Public Finance

Reform

State Budget Department

Strategic group (representatives of management)

Ministry coordinators

Budget Departments

1616

Performance budgeting structure of expenditure

2008 r. 2009 r.

166 tasks 454 subtasks 656 objectives 957 indicators

152 tasks 550 subtasks 1041 objectives 1060 indicators

performance budget cover 44% of State budget expenditure;

performance budget cover 100% of State budget expenditure;

part of trustees excluded from performance planning;

the first performance budgeting structure of expenditure for all budgetary chapters trustees;

preliminary expenditure projection for two bugetary years;

full expenditure projection for 2010 and 2011;

tasks and subtasks specified by trustees within the scope of particular budgetary chapters.

tasks and subtasks defined by trustees in accordance with functional expenditure structure, according to the list of functions and tasks specified by the Minister of Finance.

Expenditure plan in Performance Budget structure in 2008 and 2009

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Example of Function 20. Organization of health policy and health care

Function/task/subtaskFunction/task/subtask TrusteesTrustees ChapterChapter ObjectiveObjective

IndicatorIndicatorPlanned state budget Planned state budget

expenditure in 2009 (thousand expenditure in 2009 (thousand pln)pln)

NameName Base Base valuevalue

ValueValue

in 2009in 2009TotalTotal

Specific Specific provision’sprovision’s

shareshare

11 22 33 44 55 66 77 88 99

Function 21. Organization of health policy and Function 21. Organization of health policy and health policyhealth policy 1 724 6571 724 657 53 79053 790

Possibility to comparetrustees’

effectiveness and efficiencyof spending within the

equivalent activity

List of all trustees’objectives determined by

their policiesPossibility to showall trustees who realize

objectives in the given function

Consolidation of expenditure spentby all trustees on objectives

within given function

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Budgetary act for 2010in Performance Budget structure

100% of State budget expenditure in performance budget structure.

Forecast for 2011-2012 in performance budget structure.

Multi-annual and investment programs in performance budget structure.

Financial plans of other public finance sector units (100% of agencies, 25% of state legal entities).

Description of tasks and subtasks.

Specification of priority tasks in strategic areas.

Description of financial plans of public finance sector units.

Table form Descriptive form

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2012

Executed simultaneously according to traditional and performance classification

4th stage2010 – 2012

Traditional Budget

Performance Budget

Annual report of 2012 in performance budgeting structure with elements of traditional structure

2020

Target benefits from Performance Budget implementation in Poland

rational use of resources by public administration – decrease of the cost for State functioning and transfer achieved savings to priority tasks, optimizing of employment level in public sector;

assurance of planning cohesion of funds for tasks conducted by various institutions within the framework of State budgetary functions;

improvement of efficiency and effectiveness of government administration and judicial entities;

more universal and competent supervision and estimation of public funds spending, beneficial from the point of view of the qualitative and quantitative aspects of costs.

2121

Thank youThank youfor your attentionfor your attention

Ministry of FinanceMinistry of Finance