Q

FREQUENTLY ASKED QUESTIONS (FAQ) ON THE PROGRAM AND PERFORMANCE BUDGETING SYSTEM (PPBS)

Q. 21 How successful have countries been in performance-based budgeting

As we saw in our earlier answers, the Program and Performance Budgeting System (PPBS) is a performance-based budgeting system. And many countries have introduced one variant or another of the original model introduced in the US in the sixties.

These countries that have introduced a result-based or performance-based budgeting system have included performance data in their budget. For example, Malaysia produces a PPBS document that documents performance achievement in the past and targets for the coming fiscal year against the past expenditures and proposed allocations. Other countries submit departmental performance reports as part of the budget exercise for parliamentary scrutiny. Canada, the UK and the USA include performance targets in their documentation as well as reports on performance in relation to last year’s targets.

In countries such as Malaysia, USA, Canada, New Zealand, Netherlands and UK, agency heads enter into non-legal contracts with the central budget authority, president or the minister committing themselves to achieving a set of outputs or outcomes for the budget allocated. The extension of these agency heads’ tenure often depends on their consistent achievement of their agreed performance targets.

Three-fourths of all OECD countries routinely include performance data in their budget documentation. Out of these three-fourths, 70% (such as the UK, USA, France and Canada) include performance targets for most of their programmes in the budget. Indeed, in the USA and Canada, performance information is a legal requirement.

Although Japan does not include performance data in the main budget documentation, performance information is used in budget allocations both within agencies and ministries and between ministries. However, such information does not play a significant role in either France or Italy.

Among the countries that have included performance information in the budget, the use of the data is most widespread in the UK whereas the use of performance data in Canada and Malaysia is the most important in allocating resources within agencies and programmes. In the United States, performance data is primarily used in allocation of the resources between ministries. (See OECD Publication (2002): A brief comparison of the budgeting systems in the G7 countries.)

Success in performance budgeting, that is, the use of performance data to budget is a journey that many countries have embarked. Some have had success, such as Australia and New Zealand where appropriations are based on outputs and outcomes. This means the budget is not in terms of items of expenditure. Rather, the budget is for an output or an outcome to be achieved.

The important thing here is that there is a conscious move to relate the budget to performance and to account for what has been achieved – in terms of outputs and outcomes – for the money spent.