INTRODUCING RESULTS-BASED APPROACHES INTO PUBLIC SECTOR MANAGEMENT PROCESSES: The Philippine Experience

A Paper Presented by

SECRETARY EMILIA T. BONCODIN

Department of Budget and Management Philippines 2nd International Roundtable on Managing for Development Results Marrakech, Morocco 05 February 2004

RESULTS-BASED APPROACH:
Major Element of Philippine Public Sector Management Reform Program

Republic of the Philippines Department of Budget and Management

PUBLIC SECTOR MANAGEMENT REFORM PROGRAM

To address key dysfunctions:
operational leakages weak corporate and regulatory environment weak public institutions and enforcement poor incentive structures slow response capability to changing situations and needs inadequate resources for basic services deteriorating fiscal position slow and unstable growth poverty

Republic of the Philippines Department of Budget and Management

PUBLIC EXPENDITURE MANAGEMENT: DESIRED RESULTS

To reduce poverty by creating investment and job opportunities through:

a) Addressing the inadequacy of resources for basic services

b) Arresting the deteriorating fiscal position

Republic of the Philippines Department of Budget and Management

PUBLIC EXPENDITURE MANAGEMENT: FOCUS ON RESULTS

Use of the budget as instrument for ensuring desired results
Strengthening of existing incentive structures to advocate and implement reforms Active partnership with civil society in monitoring results

Clear targets and assessment mechanisms

Republic of the Philippines Department of Budget and Management

PUBLIC EXPENDITURE MANAGEMENT FRAMEWORK

Fiscal Discipline
Allocative Efficiency Operational Efficiency

Republic of the Philippines Department of Budget and Management

MAJOR REFORM INITIATIVES

OUTCOME INSTRUMENT

Fiscal Discipline

Medium Term Fiscal Plan (MTFP)

Assessment of contingent liabilities; fiscal risks

Allocative Efficiency

Medium Term Public Investment Program (MTPIP) Organizational Performance Indicator Framework (OPIF)

Republic of the Philippines Department of Budget and Management

Major Reform Initiatives

OUTCOME Operational Efficiency INSTRUMENT Sectoral Effectiveness and Efficiency Review (SEER) Agency Performance Review (APR) Procurement reform

Installation of new government accounting system and auditing procedures

Republic of the Philippines Department of Budget and Management

Major Reform Initiatives

OUTCOME INSTRUMENT
Compensation Review

Reengineering the bureaucracy

Strengthening key sector areas: judicial reform; electoral campaign reform; peace and order campaign; regulatory reform Investment in IT and IT-based services
Republic of the Philippines Department of Budget and Management

MEDIUM-TERM EXPENDITURE FRAMEWORK

Medium-Term Philippine Development Plan FISCAL INVESTMENT

Medium-Term Fiscal Plan

Medium-Term Public Investment Program Organizational Performance Indicator Framework

Annual Budget

Sectoral Effectiveness and Efficiency Review

Agency Performance Review

Incentive Structure

MEDIUM-TERM FISCAL PLAN: FEATURES

Explicit medium term fiscal targets: deficit reduction strategy; revenue and disbursement targets; debt management strategy Medium term estimates of cost of ongoing and committed programs (baseline +)

Proposed revenue enhancing measures over the medium term

Clear rules for updating revenue and cost estimates Fiscal Responsibility Bill
Republic of the Philippines Department of Budget and Management

MEDIUM-TERM FINANCIAL PLAN: HIGHLIGHTS

Particulars NG Deficit (% of GDP) Public Investment (% of GDP) (Capital projects) Public Debt to GDP ratio (NG Outstanding Debt) 2003 4.6 2004 4.2 2005 3.6 2006 2.9 2007 2.1 2008 1.2 2009 0.2

2.7

2.2

1.8

2.0

1.9

2.1

2.2

69.1

66.9

65.1

63.1

61.5

58.1

55.0

Republic of the Philippines Department of Budget and Management

MEDIUM-TERM PUBLIC INVESTMENT PROGRAM

Sectoral investment requirements over 6 years Published major sectoral investment programs Alternative financing modes for specific projects
Republic of the Philippines Department of Budget and Management

MEDIUM-TERM PUBLIC INVESTMENT PROGRAM

200

In Billion Pesos

150 100 50 0 2003 2004 2005 2006 2007 2008 Others 2009

Total CO

ODA

Republic of the Philippines Department of Budget and Management

ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: GOALS

Shift to output/outcome performance indicators

Clarify expected performance and accountability of government agencies Encourage agencies to focus efforts on the delivery of outputs relevant to goal Establish integrated performance management system where organizational performance targets cascaded down to lower level units and used as basis of performance-based compensation Report to public and Congress in clear terms output of departments/agencies
Republic of the Philippines Department of Budget and Management

ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: PROCESS

Identification of desired outputs and outcomes a Agency; Oversight a MAJOR FINAL OUTPUTS (MFOs), in terms of quantity, quality, timeliness, cost (QQTC)

Harmonization: Agency with Oversight (DBM,

NEDA)

Identification of programs/projects contributing to the accomplishment of MFOs

Republic of the Philippines Department of Budget and Management

Organizational Performance Indicator Framework: Process

Establishment of Performance Indicators

PI to determine whether program/projects contributed to MFO PI must be verifiable in a quick, accurate and cost-effective manner

Republic of the Philippines Department of Budget and Management

ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: Example: LTO

Outcome MFO Road safety (less incidence of road accidents) Licensing services (Drivers)

Performance indicators: Quality % of licenses issued in accordance with operating standards; client satisfaction -

Timeliness -

% of licenses issued in accordance with timeliness standards

Republic of the Philippines

Department of Budget and Management

ORGANIZATIONAL PERFORMANCE INDICATOR FRAMEWORK: STATUS

Agencies in advance stage of the OPIF process
Agriculture sector agencies (Agriculture, Agrarian Reform, Environment and Natural Resources) Social Welfare Labor and Employment, Education Agencies in intermediate stage of OPIF Health Internal Revenue Customs Agencies in the early stage Infrastructure agencies
Republic of the Philippines Department of Budget and Management

SECTOR EFFECTIVESS AND EFFICIENCY REVIEW: FEATURES

Periodic review of ongoing programs and projects in terms of relevance, performance, cost/benefit System for establishing and updating strategic priorities over the medium term Allows the redirection of resources to strategic programs
Republic of the Philippines Department of Budget and Management

SECTORAL EFFECTIVENESS AND EFFICIENCY REVIEW: PROCESS

Consultations: agencies; stakeholders; funding agencies Presentation of Results and Recommendations Approval of Cabinet Committee

Input to Updated Development Plan, Public Investment Program, Budget

Republic of the Philippines Department of Budget and Management

SECTORAL EFFECTIVENESS AND EFFICIENCY REVIEW: Results

Cancel excess financing (6)

Terminate projects or remaining components of projects (1)

Restructure projects, including loans (30) Proceed (68)

Republic of the Philippines Department of Budget and Management

AGENCY PERFORMANCE REVIEW

Short term review of revenue and expenditure performance vis--vis budget targets Ranking of Agency Budget Performance and public reporting

Republic of the Philippines Department of Budget and Management

AGENCY PERFORMANCE REVIEW: RESULTS

CY 2002 All agencies of the National Government underwent APR Most got outstanding rating; review was based on agencydetermined targets CY 2003 Low-budget agencies were exempted from the APR Most got satisfactory rating
Republic of the Philippines Department of Budget and Management

INCENTIVE STRUCTURES
Greater flexibility in exchange for financial discipline hurdles Use of budget savings from procurement and streamlining activities Creation of one-liner budgets Expenditure autonomy for low-budget agencies Performance-based management Performance-based compensation

Collective negotiation agreements (CNA)

Republic of the Philippines Department of Budget and Management

KEY ACCOMPLISHMENTS TO DATE

A. Planning/Budget Processes Linked Budget to Planning starting in 1999

Changed from input-based to outcome-based budgeting in 2002 Budget Call

Formulated budget strategy as precondition to approval of new foreign loans in 2001 Conducted first Sectoral Effectiveness and Efficiency Review (SEER) 2001 Conducted first Agency Performance Reviews (APRs) in 2002 Conducted ODA Portfolio Review in 2003
Republic of the Philippines Department of Budget and Management

Key Accomplishments to Date

B. Reengineering the Bureaucracy Formulated Reengineering Plan for the Bureaucracy

Reengineered key regulatory agencies: financial markets, energy, ICT

C. Capability Building (1999-2003) Workshops, Training Oversight agencies (18) Individual agencies (3 major, 17 minor)
Republic of the Philippines Department of Budget and Management

Key Accomplishments to Date

D. Assessments and Documentation

2001 Budget Preparation, Performance Orientation,

Public Expenditure Management Manual

Documentation of 2002 APR

Public Expenditure, Procurement and Financial Management Review with World Bank (WB) and Asian Development Bank (ADB)

Republic of the Philippines Department of Budget and Management

CHALLENGES
Refining multi-year resource constrained planning Completing inventory of contingent liabilities Enhancing the predictability of revenues

Cascading performance management system down to personnel appraisal

Shifting to a performance based compensation system Advocating PEM reforms in Congress

Republic of the Philippines Department of Budget and Management

MOVING FORWARD
2004
limited budget autonomy compensation review reengineering the bureaucracy

2005
expanded budget autonomy

2006
PEM substantially operations

2007
PEM fully operational

Alignment of Initial agency with implementation of compensation individual performance reform Reengineering the bureaucracy
Republic of the Philippines

Department of Budget and Management

THANK YOU !!!

Republic of the Philippines