DEPARTMENT OF THE TREASURY
Results Based Budgeting in Australia
Presentation by
Richard Murray,Executive Director - Fiscal and Corporate,
Department of the Treasury
DEPARTMENT OF THE TREASURY
Outline• Overview of the Fiscal Framework
– Charter of Budget Honesty
– Medium Term Fiscal strategy
– Accrual Budgeting
• The Outcomes and Outputs Framework– Outcomes, Outputs and Administered Programs
– Case Study: Education
• What have we learned?– Programs versus Outcomes
– Measuring performance against Outcomes
– The need for central oversight
– Evaluation
DEPARTMENT OF THE TREASURY
The Fiscal Framework
DEPARTMENT OF THE TREASURY
Charter of Budget Honesty
• Guides rather than mandates the conduct of fiscal policy. Requires the Government to:– outline its medium term fiscal strategy
– publish financial statements consistent with Australian and international accounting standards
– specify fiscal policy actions that are temporary in nature, and the process for their reversal
– publish an Intergenerational Report every 5 years
DEPARTMENT OF THE TREASURY
Medium-term Fiscal Strategy
• Strategy since 1996/97 is for Budget balance on average over the cycle
• Supplementary objectives are:– maintain surpluses while economic growth prospects remain
sound
– no increase in the tax burden from 1996/97 levels
– halve net debt – achieved in 2000-01
– improve the Commonwealth’s net worth position over the medium to longer term
DEPARTMENT OF THE TREASURY
Improvement in Net debt
-5
0
5
10
15
20
1982-83 1986-87 1990-91 1994-95 1998-99 2002-03 2006-07
-5
0
5
10
15
20
Pro
ject
ions
Est
imat
es
Out
com
es
Per cent of GDP Per cent of GDP
DEPARTMENT OF THE TREASURY
OECD comparison of net debt
0
10
20
30
40
50
60
70
80
90
Germany Total OECD EuropeanUnion
Japan United States Australia
0
10
20
30
40
50
60
70
80
90
Decade from 1995 to 2004
Per cent of GDP Per cent of GDP
DEPARTMENT OF THE TREASURY
Accrual Budgets• Provides a more comprehensive picture of
government operations– Improves focus on fiscal sustainability (the balance sheet)
and intergenerational equity
• compares assets and liabilities (rather than just inflows and outflows of cash)
– for the Budget and forward estimates
– for individual agencies as well as whole of government
– Imposes more business-like discipline on agencies
– Ensures more focus on net worth
DEPARTMENT OF THE TREASURY
The Outcomes and Outputs Framework
DEPARTMENT OF THE TREASURY
Outcomes, Outputs and Administered Programs
• Outcomes are defined by Finance as:
‘The impact sought or expected by government in a given policy arena.’
• The focus is on change and consequences: what effect can government have on the community, economy and/or national interest?
DEPARTMENT OF THE TREASURY
Outcomes, Outputs and Administered Programs
• Outputs have been defined by Finance as:
‘The actual deliverables – goods and services – agencies produce to generate the desired
outcomes specified by government.’
• Customers include members of the public, industries or sectors, ministers, members of Parliament, other agencies or even in some instances, interests (eg the national interest).
DEPARTMENT OF THE TREASURY
Outcomes, Outputs and Administered Programs
• Administered Programs are defined by Finance as:
‘Those resources administered by the agency on behalf of the government (such as transfer payments to the States, grants and benefits) to contribute to a specified outcome.’
• They are identified separately from outputs because they involve different accountability requirements.
DEPARTMENT OF THE TREASURY
A Model of the Framework
Government Policy Platform and Priorities
Outcome A Outcome B Outcome C Outcome D Outcome E
Agency responsible for
Outcomes A and B
Agency responsible for
Outcomes C, D and E
Outputs and
Administered
Items for
Outcome B
Outputs and Administered
Items for Outcome E
DEPARTMENT OF THE TREASURY
Case Study: Education
‘Individuals achieve high quality
foundation skills and learning outcomes from schools and other providers.’
‘Individuals achieve high quality
foundation skills and learning outcomes from schools and other providers.’
‘Individuals achieve relevant skills and learning outcomes from post school education and
training.’
‘Individuals achieve relevant skills and learning outcomes from post school education and
training.’
‘Australia has a strong science, research and
innovation capacity and is engaged
internationally on science, education and training to advance our social development and
economic growth.’
‘Australia has a strong science, research and
innovation capacity and is engaged
internationally on science, education and training to advance our social development and
economic growth.’Output 1.1: Funding for schools
Output 1.2: Assistance to individuals including those with special needs
Output 1.3: Assistance for quality teaching and learning
Output 1.4: Assistance for transition through and from school
Output 2.1: Funding for vocational education and training
Output 2.2:New apprenticeships
Output 2.3: Assistance for skills and career development
Output 2.4: Funding for higher education
Output 2.5:Assistance to post school students including those with special needs
Output 3.1:Research infrastructure
Output 3.2: Assistance for science collaboration and innovation
Output 3.3: Support for the Australian education and training export industry and international relationships
Outcome 1 Outcome 2 Outcome 3
DEPARTMENT OF THE TREASURY
Case Study: Education
Focus on the end result, not the means of achieving it
Focus on the end result, not the means of achieving it
Outcomes should:Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair / Poor
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair / Poor
DEPARTMENT OF THE TREASURY
Case Study: Education
Be succinctBe succinct
Outcomes should:Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
DEPARTMENT OF THE TREASURY
Case Study: Education
Be specific to the area being addressed
Be specific to the area being addressed
Outcomes should:Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
DEPARTMENT OF THE TREASURY
Case Study: Education
Be stated in a way that allows the target group to be identified
Be stated in a way that allows the target group to be identified
Outcomes should:
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
DEPARTMENT OF THE TREASURY
Case Study: Education
Enable the formulation of
effective indicators
Enable the formulation of
effective indicators
Outcomes should:
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Poor
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Poor
DEPARTMENT OF THE TREASURY
Case Study: Education
Be free of value-laden, generalised or
aspirational language
Be free of value-laden, generalised or
aspirational language
Outcomes should:
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Good / Fair
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Good / Fair
DEPARTMENT OF THE TREASURY
Case Study: Education
Be amenable to extension across
agency boundaries
Be amenable to extension across
agency boundaries
Outcomes should:
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Good
DEPARTMENT OF THE TREASURY
Case Study: Education
Be able to be related to Budget
documentation
Be able to be related to Budget
documentation
Outcomes should:
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 1: ‘Individuals achieve high quality foundation
skills and learning outcomes from schools and other providers.’
Very Good
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
Outcome 3: ‘Australia has a strong science, research and
innovation capacity and is engaged internationally on science,
education and training to advance our social development and
economic growth.’
Fair
DEPARTMENT OF THE TREASURY
Case Study: Education
For Outputs it should be possible to:• define outputs in terms of what is produced;• measure both departmental outputs and
administered programs in terms of price, quantity and quality (PQQ); and
• relate outputs to an outcome– if this cannot be done the agency should cease to
produce the output or identify an additional outcome that the agency should achieve.
DEPARTMENT OF THE TREASURY
Case Study: Education
Output 1.1: Funding for schools
Output 1.2: Assistance to individuals including those with special needs
Output 1.3: Assistance for quality teaching and learning
Output 1.4: Assistance for transition through and from school
Output 2.1: Funding for vocational education and training
Output 2.2:New apprenticeships
Output 2.3: Assistance for skills and career development
Output 2.4: Funding for higher education
Output 2.5:Assistance to post school student including those with special needs
Output 3.1:Research infrastructure
Output 3.2: Assistance for science collaboration and innovation
Output 3.3: Support for the Australian education and training export industry and international relationships
Output Groups
Defines what is being provided, price and quantity are measurable and Outputs relate well to Outcomes.
DEPARTMENT OF THE TREASURY
Case Study: EducationTargets and performance indicators• Mean scores of Australian students in reading, mathematical and scientific
literacy compared with OECD average for 2000 (set to 500)
528
533
528
525 526 527 528 529 530 531 532 533 534
Reading literacy
Mathematical literacy
Scientific literacy
DEPARTMENT OF THE TREASURY
Case Study: EducationGraduate starting salaries as a proportion of Average Weekly Earnings
81.6
84.2
85.8
82.7
59.9
60.8
60.2
60.3
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
1999
2000
2001
2002
per cent
Bachelor Degree VET
DEPARTMENT OF THE TREASURY
Case Study: EducationOutcome 3 Effectiveness indicator: Patents
• Graph 2.3.3 Number of patents issued to Australian residents in Australia
1,419
1,295
1,418
1,763
0 500 1,000 1,500 2,000
1998/99
1999/00
2000/01
2001/02
DEPARTMENT OF THE TREASURY
What have we learned?
DEPARTMENT OF THE TREASURY
Programs versus Outcomes
• Ministers often make policy decisions based
on programs
• Budget documentation tends to provide
information on Outcomes
• There has been a move towards providing
more administered program information to
Government
DEPARTMENT OF THE TREASURY
Measuring performance against Outcomes
• Many outcomes are too broad. For example
‘ The Defence of Australia’
– In this case the Government has moved to define 7 sub outcomes for
reporting purposes• Outcome 1: Command of Operations in Defence of Australia
and its interests• Outcome 2: Navy Capability• Outcome 3: Army Capability• Outcome 4: Air force Capability• Outcome 5: Strategic Policy• Outcome 6: Intelligence• Outcome 7: Superannuation and Housing Support Services for
Current and Retired Personnel
DEPARTMENT OF THE TREASURY
The need for central oversight• A devolved management model and relative
financial autonomy has led to a lack of central knowledge on financial information
– Leads to a lack of scrutiny of agency performance by central agencies
– Directly affects the ability of central agencies to advise on Budget Strategy
• The Government has acted to provide the Department of Finance with additional resources and mandated ‘program’ and ‘cash’ reporting
DEPARTMENT OF THE TREASURY
Evaluation and Audit
• Evaluation of performance information is
essential to measuring the achievement of
Outcomes– Senate Estimates Committees scrutinise
performance information ex-ante
– The Audit Office scrutinise performance information ex-post
• Are Chief Executives held accountable for
Outcomes?
DEPARTMENT OF THE TREASURY
Questions?