Analysis of Performance Budgeting During Recent Fiscal Consolidation in Canada
Mostafa Askari
7th Annual Meeting of OECD Parliamentary Budget Officials and Independent Fiscal Institutions
April 16, 2015
Expenditure Management System
Note: Framework adapted from Dr. Allen Schick’s research; using Government of Canada objectives 1
• Money is aligned with the Government’s policy priorities
Allocative Efficiency
• The Government’s finances are sustainable over the long-term and medium-term fiscal anchors are respected
Fiscal Stewardship
• Programs are managed in a manner that provides “value-for-money”
Operating Efficiency
Program-Based Budgeting
2
Each government department is responsible for managing a suite of programs.
Administratively, funding is provided to
organizations (for example, Health
Canada).
Functionally, money is managed on a program-level basis (for example, medical clinic services
for First Nations).
Comprehensive Management Framework
3
4 Spending Areas
Social Affairs
Economic Affairs
International Affairs
Government Affairs
16 Outcome Areas
Healthy Canadians
Programs aim to create a responsible, accessible, and sustainable health system.
400 Program Activities
Food Safety
Verification of compliance by industry with standards and science-based regulations.
2,000 Performance Targets
95% of tested domestic meat products in compliance with regulations.
Performance-Based Budgeting Challenges
4
Parliamentarians’ access to performance data varies
Challenge 1
Data lacks overall context and cannot be
readily synthesized
Challenge 2
Unknown how influential
performance data is in budgeting
Performance Results
5
Government Performance Percentage of total
Program-weighted2010-11 2011-12 2012-13 2013-14 Average
Met 43% 42% 39% 46% 42%Not Met 19% 14% 12% 16% 15%N/A 38% 44% 49% 38% 43%
Spending-weighted2010-11 2011-12 2012-13 2013-14 Average
Met 51% 45% 45% 50% 47%Not Met 22% 23% 18% 21% 21%N/A 27% 33% 37% 29% 32%
Performance Trend Analysis
6
% o
f ta
rget
s m
et
0
20
40
60
80
100
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
Economy Innovation Environment Incomesecurity &
employment
Securemarketplace
Economic
0
20
40
60
80
100
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
Domestic Safety& Security
A diverse society Health Culture &Heritage
Social
0
20
40
60
80
100
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
GovernmentOperations
Transparency &Accountability
DemocraticInstitutions
Government
0
20
40
60
80
100
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
10
-11
11
-12
12
-13
13
-14
InternationalSafety & Security
Global PovertyReduction
GlobalCommerce
North AmericanPartnership
International
Case Study: Canada’s 2012 Budget
7
• The first comprehensive spending review under new EMS
• 100% of direct program spending reviewed
• 5% in cost reductions proposed
Test case for performance
budgeting
• 3-month review, start to finish
• Business cases not published
• Uncertain risks/returns
Rapid implementation
Performance Budgeting Statistics
8
Prior Year’s Performance Impact on Program Budget: 2010-11 to 2013-14 Percentage of total
Budget Increase
Budget Decrease
Difference
Met 44% 42% 2%
Not Met 16% 14% 2%
N/A 39% 44% -4%
Terminated Average
Met 43% 42%
Not Met 23% 15%
N/A 34% 43%
Prior Year’s Performance Impact on Program Termination: 2010-11 to 2013-14 Percentage of total
Predictive Value of Performance
9
∆ budget = f ( political priorities, performance )
y = 0.21x + 38.22 R² = 0.05
0
10
20
30
40
50
60
70
80
90
100
-100 -80 -60 -40 -20 0 20 40 60 80 100
Pe
rcen
tage
of
tar
gets
me
t ((
20
12
-13
)
Percentage budget change (2013-14)
The EMS is designed to use non-financial performance data for resource allocation decisions.
Yet performance and budget growth are not closely correlated.
Performance-Based Resource Allocations
10
Controlling for other observable variables did not improve the statistical link between budgets and performance
Program performance in the prior year
Program budget size
Program performance two and three years’ prior
Thematic policy area
Key Conclusions
11
• Program performance was not influential during Canada’s recent fiscal restructuring
Canadian performance
budgeting
• May require enhanced or more relevant non-financial information than what is reported currently
Parliamentary clients
• Predictive performance budgeting analysis has a long way to go
• At a minimum, now have an established framework for future spending reviews
PBO