Sequencing Budgetary Reforms: Lessons from Singapore

26 May 2000

Briefing Outline
Mission Budgeting Policy Evolution of Budgeting System The Future of Budgeting

Mission

To Advance the Well-being and Development of Singapore through FINANCE

Mission
We will accomplish this with:
Superior Stewardship and Prudent Investment of Public Funds A Financial Environment Conducive to Business and Enterprise Policies and Frameworks which Enhance Excellence in the Public Sector Practices and Results which distinguish MOF as a World Class Organisation.
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Budgeting Policy
What we want to do and Why...

Budgeting Policy
Promote sustained and non-inflationary economic growth Foster growth in the private sector Live within our means Invest in the future Safeguard our Reserves

Budgeting Philosophy
People at operations
are in the best position to decide

on the most effective and efficient use of resources to obtain the best value for money
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Key Questions
Are they allowed to do it?
Are they capable of doing it? Are they doing it?

Evolution of Budgeting Systems

How did we get from There to Here?

Budgeting Systems
Past:
Up to 31 Mar 78 From 1 Apr 78 From 1 Apr 89 Line Item Budgeting Programme Budgeting Block Vote Budgeting Budgeting For Results

Present:
From 1 Apr 96

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Evolutionary Trends
General trends:
More flexibility and autonomy Greater accountability More focus on outputs, objectives and outcomes Greater overall fiscal discipline

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Line Item Budgeting

How many paper clips do you need?

Line Item Budgeting

Budget of each department of a Ministry expressed in terms of the kinds and quantities of goods and services to be purchased Ministries had to keep expenditure within the amounts approved for each object

Line Item Budgeting

Strengths: Effective in ensuring financial control Adequate basis for allocating limited resources at a time when Government activities were limited

Line Item Budgeting

Limitations: Rigid, unable to cope with
rapidly changing priorities and circumstances creation of new government services

Budget evaluation mechanism difficult without mechanism to link things to be bought with things to be done

Line Item Budgeting

Limitations: New budgets based on previous budget with increments for price increases
no evaluation of whether objectives are still met or cost-effective

Programme Budgeting
How much money do you need?

Programme Budgeting
Programme Budgeting from 1 Apr 78: Emphasizes things to be done Adopted from the US Planning, Programming and Performance Budgeting System (PPPBS) Systematically identify the programmes and activities necessary to achieve the goals and objectives of each Ministry

Programme Budgeting
Programme Budgeting from 1 Apr 78: Funding based on resources required to undertake each programme

Programme Budgeting
Strengths: Greater awareness of goals to be achieved More flexible than Line Item Budgeting
gradually relaxed transfer of budgets between objects of expenditures and between activities/programmes

Programme Budgeting
Limitations: With the expansion of existing programmes and the introduction of new ones, there was no mechanism to ensure that the overall expenditure would not outgrow revenue collection.

Block Vote Budgeting

How much money can we give you?

Block Vote Budgeting

Block Vote Budgeting Top-down approach Cabinet approval of budget priorities and aggregate allocations Ministries given flexibility in managing allocations (transfers between programmes, activities and line-items) Control through published workload and performance indicators

Block Vote Budgeting

Set Targets for: Government Expenditure as percentage of GDP such that
Total expenditure < Operating Revenue Expenditure to GDP by Sectors and Ministries

Block Vote Budgeting

Strengths
Better ensure a balanced budget Contain Government expenditure as a proportion of GDP Help Ministries respond speedily to changing priorities Improve the effectiveness and efficiency of Government operations Make senior civil servants responsible and accountable for expenditure budget

Block Vote Budgeting

Limitations Less emphasis on outputs and deliverables
Ministries only required to budget the amount of inputs needed to fund their operations.

Inadequate incentives to achieve greater operational efficiency

Budgeting For Results

What results can you produce?

Budgeting For Results

Key elements:
Pre-specification of outputs and performance targets Output-based funding allocations Granting financial and personnel management flexibility Ministries and departments operated as Autonomous Agencies

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Budgeting For Results

Strengths:
Budget based on outputs Emphasis on performance and results Greater autonomy and flexibility Greater accountability Departments more aware of outputs and cost of producing outputs Puts decisions on deployment of resources in the hands of people at operations
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Budgeting For Results

Shortcomings:
No clear link to desired outcomes Lack of focus on processes Does not address need for sustained superior performance and results With tighter fiscal position, need for greater emphasis on inter-ministry allocations

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The Future of Budgeting

How do we get from Here to There?

The Future of Budgeting

Moving ahead:
Budgeting 21 Managing For Excellence Resource Management

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Managing For Excellence

To build an excellent Public Sector through harnessing the creativity of our people and superior management of our resources

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Managing For Excellence

MFE is about:
Superior leadership and development of staff Superior management through resultsoriented processes Sustained organisational excellence

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Managing For Excellence

Scope of MFE:
People-Centred Management Systems-Oriented Approach Customer-Focussed Culture Networked Government

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Resource Management
Management, deployment and utilisation of resources for maximal results
Resource Accounting & Budgeting
Based on Accrual Accounting

Accurate Costing & Pricing Enhanced Inter-Departmental Charging Net Economic Value
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Budgeting 21
Future envisaged
Proposals outrun resources Beyond least for output to most from input Expenditures grow at GDP rate MOF focuses on outcomes; ministries manage outputs for those outcomes

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Budgeting 21
Key features
Predetermined overall and sectoral budget ceilings Guaranteed baseline operating budgets for ministries Project worthiness distinct from funding Productivity dividend creates fund for inter-ministry bidding Funding by prioritisation within ministry and across ministries
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Summary
Line Item Programme Block Vote
Focus on greater management autonomy Addresses Are they allowed to do it?

Budgeting for Results, Managing For Excellence & Resource Management

Focus on outputs and results-oriented processes and best practices Addresses Are they capable of doing it?

Budgeting 21
Focus on outcomes and national priorities Addresses Are they doing it?
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Thank you!