activity based business management model (feys)

Proposal for Activity based Business Management Model

This project is co-financed by the European Union and the Republic of Turkey

Proposal for Activity BasedBusiness Management Model

V.2

January 2015Ankara


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“Proposal for Activity Based Business Management Model” study is developed as an output of theProject “Decision Making and Performance Management in Public Finance”,EuropeAid/129067/D/SER/TR financed by the EU and carried out by the Strategy Development Unitof Ministry of Finance. The pilot implementations will continue to be performed together with theapplication software support in 2014 and a separate guideline will also be developed based on theproposed model.

We want to thank to all the staff in the beneficiary administrations and the project team for theircontribution to the study with their opinion, suggestion and document support.

Developers of the Study:

Ahmet İLHAN – Strategy Development Unit, Ministry of Finance

Atilla ÇAKIR – Strategy Development Unit, Ministry of Finance

Aydın Nusret GÜÇLÜ – Team Leader, Technical Assistance Project Team

Fecir ŞENGÖZ ÇELİK – Strategy Development Unit, Ministry of Finance

Ferdinand POT – Key Expert, Technical Assistance Project Team

Ferhan ERGÜN – Strategy Development Unit, Ministry of Finance

Ferhat EMİL – Faculty of Political Science, Ankara University

Hakkı Hakan YILMAZ – Faculty of Political Science, Ankara University

İslam İNCE – Strategy Development Unit, Ministry of Finance

İsmail ERASLAN – Strategy Development Unit, Ministry of Finance

Lale ÖZTOPCU – Project Expert, Technical Assistance Project Team

Melek ERCAN DEDE – Strategy Development Unit, Ministry of Finance

Senior Programme Officers:

Genç Osman YARAŞLI – Deputy Undersecretary, Ministry of Finance

Ahmet KESİK – Administrative Services General Directorate, Ministry of Development (Former Head ofStrategy Development Unit, Ministry of Finance)

Ertan ERÜZ – Strategy Development Unit, Ministry of Finance


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Those Who Contributed To:

Aydın ULUCAN – Business Administration Department, Hacettepe University

Baha KARAÇOLAK – Strategy Development Unit, Undersecretariat of Treasury

Bilgen BAYGUT – Strategy Development Department, Undersecretariat of Treasury

Çiğdem EREN – Strategy Development Unit, Grand National Assembly of Turkey

Gülistan SEVGİ – Strategy Development Unit, Ministry of Finance

Hasan GÖLCÜK – Strategy Development Department, Ministry of Development

Kamil KILINÇ – Strategy Development Unit, Grand National Assembly of Turkey

Kenan DURAK – Strategy Development Department, Undersecretariat of Treasury

Kutluhan TAŞKIN – Institutional and Strategic Administration Department, Ministry of Development

Lale ERASLAN – Strategy Development Unit, Prime Ministry

Melik ÖZSÖZ –Strategy Development Unit, Prime Ministry

Muhammet Fatih YILDIRIM – Institutional and Strategic Administration Department, Ministry of Development

Muhsin SEZGİ – Strategy Development Unit, Prime Ministry

Mustafa AKMAZ – Economy Counsellor of Paris, (previous head of SDU, Undersecretariat of Treasury)

Mustafa KAYA – Business Administration Department, Hacettepe University

Naim ÇOBAN – Strategy Development Unit, Grand National Assembly of Turkey

Ömer Faruk GÜLSOY – Strategy Development Department, Ministry of Development

Rasim ERYILMAZ – Strategy Development Department, Undersecretariat of Treasury

Salih AYDIN – Strategy Development Unit, Grand National Assembly of Turkey

Sinan HAZNEDAR – Strategy Development Department, Undersecretariat of Treasury

Tanju YAZGANARIKAN – IT Department, Grand National Assembly of Turkey

Umur TOSUN – Department of Public Finance, Hacettepe University

Volkan ERKAN –Planning Expert, Ministry of Development


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INDEX

INDEX iii

LIST OF ABBREVIATIONS .................................................................................................v

INDEX OF TABLES............................................................................................................vi

INDEX OF FIGURES..........................................................................................................vi

1. EXECUTIVE SUMMARY................................................................................................7

2. THE PROGRAMME BUDGETING SYSTEM AND THE MAIN CHARACTERISTICS OF THEPFM SYSTEM .................................................................................................... 13

2.1. Main Characteristics of the New PFM System ...........................................................13

2.2. What Does Programme Budgeting Foresee? .............................................................14

2.2.1. Historical Background ...................................................................................................14

2.2.2. The Structure of Programme budgeting ......................................................................16

2.2.3. Programme Budgeting in Turkey: Starting Point and Reasons for Failures ...............19

2.2.4. Why has programme budgeting implementation become important in Turkey? Why is it anissue again?.....................................................................................................................22

3. ACTIVITY-BASED BUSINESS MANAGEMENT MODEL ..............................................26

3.1. General Objectives of the Model ............................................................................... 26

3.1.1. From Budget/Accounting Focus to Business Focus Oriented Budgeting Approach . 26

3.1.2. Increasing Linkage ........................................................................................................ 27

3.1.3. Increasing Traceability .................................................................................................. 27

3.1.4. Adopting Measuring and Evaluation Approach .......................................................... 27

3.1.5. Accountability by Integrating Business Outcomes and Financial Outcomes............. 28

3.1.6. Common Terminology .................................................................................................. 28

3.2. Main Structure of the Model...................................................................................... 29

3.2.1. Proposal for Better Linkage and Assumptions of the Model ..................................... 30

4. CONSTRUCTION OF THE PROGRAMME STRUCTURE .............................................34

4.1. Programme ................................................................................................................. 34

4.1.1. Important Topics While Identifying the Programmes ................................................ 34

4.1.2. The Process of Programme Preparation and Proposal............................................... 36

4.1.3. General Administration Programme ............................................................................ 40

4.1.4. To-be Allocated Expenditures Programme ..................................................................41

4.2. Subprogramme ........................................................................................................... 42


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4.2.1. Identification and Definition of Subprogrammes ....................................................... 42

4.2.2. Preparation and Proposal Process of Subprogramme ............................................... 44

4.3. Activity.........................................................................................................................44

4.3.1. Definition and Scope of Activity................................................................................... 44

4.3.2. Preparation and Proposal Process of Activity ............................................................. 46

5. PROGRAMME BUDGETING PROCESS ..................................................................... 48

5.1. Budget Preparation Process ......................................................................................48

5.2. Annual Objectives and Indicators ..............................................................................50

5.2.1. Performance Indicators .................................................................................................51

5.3. Linking Programmes and Subprogrammes with Institutional Strategic Plans ....... 53

5.4. Activity Costing ........................................................................................................... 54

5.4.1. Conceptual Framework ................................................................................................ 54

5.4.2. Direct and Indirect Costs .............................................................................................. 55

5.4.3. Programme Allocation Tables ...................................................................................... 57

5.5. Budget Coding ............................................................................................................60

6. BUDGET IMPLEMENTATION .....................................................................................67

7. MONITORING AND EVALUATION SYSTEM ............................................................. 69

7.1. Monitoring in Programme budgeting system...........................................................69

7.2. Evaluation in Programme Budgeting System............................................................ 70

8. FURTHER STUDY ....................................................................................................... 71

9. LINKS WITH THE NEW STRATEGIC PLANNING GUIDELINES .................................. 72


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LIST OF ABBREVIATIONS

ABC Analytical Budget Classification

DP Development Plan

TGNA Grand National Assembly of Turkey

HPC Higher Planning Committee

KBÖ Total allowance allocated in financial year beginning together with appropriation bill

MTFP Medium Term Financial Programme

MTP Medium Term Programme

PFM Public Financial Management

PFMCL Public Financial Management and Control Law

PPBS Plan Programme budgeting system

SDU Strategy Development Unit

SPECC Sectorial Programme Evaluation and Coordination Committee

USA United States of America


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INDEX OF TABLES

TABLE 1. PROGRAMME BUDGETING STRUCTURE AND ADMINISTRATION STRATEGIES LINKAGE..............................................32TABLE 2. PROGRAMME BUDGET PREPARATION PROCESS ............................................................................................... 50TABLE 3. COST PROGRAMME RELATION IN PROGRAMME BUDGETING SYSTEM ..................................................................57TABLE 4. ALLOCATION OF COST OF PERSONNEL ASSIGNED TO MORE THAN ONE PROGRAMME........................................... 58TABLE 5. ALLOCATION OF INDIRECT EXPENDITURES TO PROGRAMMES ............................................................................ 59TABLE 6. ALLOCATION OF EXPENDITURES OF HIGH LEVEL MANAGEMENT TO SERVICE PROGRAMMES .................................. 59TABLE 7. BUDGET PRESENTATION - TGNA VOTING LEVEL .............................................................................................. 64TABLE 8. BUDGET SUBMISSION – APPROPRIATION BILL LEVEL ....................................................................................... 65TABLE 9. BUDGET ANNUAL OBJECTIVE AND INDICATORS ............................................................................................... 65TABLE 10. BUDGET YEAR AND IMPLEMENTATION PROGRAMME ..................................................................................... 68TABLE 11. BUDGET YEAR AND IMPLEMENTATION PROGRAMME (FOR ACTIVITY)................................................................ 68

INDEX OF FIGURES

FIGURE 1. HIERARCHICAL PROGRAMME STRUCTURE....................................................................................................... 17FIGURE 2. FUNDAMENTAL STRUCTURE OF PROGRAMME BUDGETING MODEL ................................................................... 29FIGURE 3. PLAN-PROGRAMME-BUDGET DOCUMENTS IN MACRO LEVEL........................................................................... 30FIGURE 4. PLAN-PROGRAMME-BUDGET RELATION ........................................................................................................33FIGURE 5. PROGRAMME HIERARCHY AT ADMINISTRATION LEVEL .................................................................................... 39FIGURE 6. ACTIVITY - PROJECT RELATION AND RESPONSIBILITY AREAS ............................................................................ 46FIGURE 7. PROGRAMME STRUCTURE AND MACRO AND INSTITUTIONAL PLANNING RELATION ............................................ 54FIGURE 8. PROGRAMME COSTING................................................................................................................................57FIGURE 9. ACTIVITY BASED BUSINESS MANAGEMENT MODEL ........................................................................................ 66


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1. EXECUTIVE SUMMARY

The main purpose of budget reforms can be summarized as ensuring macro discipline;allocation and utilisation of the resources in line with the strategic priorities and efficientusage of accountability originates from budget right. Hence, the balance between socialdemand and needs - which are subject to public interference - and the resources must be set upbased on priorities. In this framework, an activity based business management model isproposed that is compatible with the high level policy documents and the strategicmanagement approach.

In practice, variety of high level policy documents and the limited link between them restrainspolitics to direct budget process with a traceable approach and the success expected from theadministrations’ strategic plans. This situation, in practice, limits the adoption of strategicmanagement approach; weakens the relation among plan, programme and budget. Besides,serious problems have occurred in identifying the activity and the projects of theadministration in line with the purposes and the objectives; hence in the resource allocationbased on priorities.

In the framework of this study, a transition to an activity based business management modeland a programme budgeting model that will support the aforementioned model is proposed.Thus, the followings are expected:

• Increasing internal consistency of the administration objectives with the high levelpolicy documents and strengthening the link with financial management,

• Developing activities and projects based on the business programmes, delivering theinstitutional services more efficiently, and having monitoring & evaluation processesand accountability work more effectively.

Financial management and control system in Turkey have changed in a new perspective withthe Public Financial Management and Control Law (PFMCL) No. 5018 that was adopted at theend of 2003 and was started to be implemented in 2006. The new system focused on budgetsystem instead of budget law and was built up based on the concepts, namely, effectiveness,efficiency, transparency and accountability.

According to Law No. 5018 Article 9, the performance indicators that shall be jointly set by theMinistry of Finance (MoF), Ministry of Development (MoD) and relevant public administrationshall be included in the budgets of these administrations. Performance audits are carried out inthe framework of these indicators.

However, during the period after the enactment of law, debates have started concerningparticularly the insufficient link among strategic plan, performance programme and budgetprocess. Therefore, it has also been discussed whether the economic, efficient and effectiveusage of resources have been evaluated or not. As an extension of the mentioned debates, someapproaches have been brought to the agenda such as addressing the programme budgetingapproach which had been implemented before law 5018 with a new perspective like integratingit into the current system with some amendments can be a solution. As a matter of fact, with thetrigger of such requirement, a decision regarding transition to programme budgeting has beenmentioned in the 10th Development Plan which was accepted in the Grand National Assemblyof Turkey (TGNA). In this study, a model is proposed concerning the integration of programmebudgeting approach with the existing budget system.


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Findings about transition phase of programme budgeting can be summarized as follows:• Programme budgeting is not a new concept for Turkish public financial management

(PFM). A budget system which was called programme budgeting system had beenimplemented since 1973 before Law No. 5018 came into force;

• Programme budgeting system has been set up on the necessity of linking budget withdevelopment plan and annual programmes with the purpose of achieving politicalobjectives foreseen in the past development plans to provide annual resourcerequirements. Hence, there is a hierarchical link among them (plan-programme-budget);

• However, in time, this link has severed for some reasons and programme budgetingsystem has transformed into a classical allowance (expenditure item) based system.Some reasons for unsuccessful implementation of programme budgeting in the pastcan be listed as follows;

Inconsistency between programme approach and budget prepared withbottom-up budgeting method,

Short term approach of decision makers, failure of adopting businessconcept in the scope of plan programme and institutional resistances,

Failure of adopting budget coding structure open for improvement andappropriate with programme budgeting systematic,

Failure of establishing monitoring and evaluating system for measuringprogramme outcomes and impacts at administration level.

On the contrary, new budget approach enacted by Law No. 5018 in 2006 with the purpose ofaddressing the disruptions of previous budget system, tried to use world-wide new publicfinancial management as a base while designing the public financial management system.Accordingly, it is expected that a budget system to be based on the following principles willrecover the failures of the previous system:

• Fiscal discipline (up-bottom budgeting approach based on identification of allowanceceilings),

• Resource allocation according to the strategic priorities [Strategic Plan (SP)-strategicmanagement approach],

• Ensuring economic, efficient and effective utilisation of resources (implementation ofperformance based budget focusing on outcome and results),

• Accounting for the utilisation of resources (new auditing approach which themonitoring and evaluation system, financial audit, control systems and reporting isdesigned according to and in which the performance is evaluated).

Therefore, system has been designed not only for implementation (regular expenditure) but aswell with an expectation of using it as a financial management tool within the givenflexibilities by the budget executors. In this process, old programme budgeting system hasbeen left in practice although there was no legal obstacle. However, it has been realised thatthe new system also could not satisfy the expectations in a similar way the programmebudgeting system did. The reasons for that, in particular, are as follows;


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• Failure of establishing a relation among various documents such as development plan,annual programmes, Medium Term Programme (MTP), Medium Term FinancialProgramme (MTFP), regional-sectorial plans defined as high level policy documentsand strategic plan, action plan and performance programmes at administration,

• Failure of establishing relation among plan, programme and budget as a result of notoverlapping of the strategic plan period with the service periods of administrations, inother words, failure of giving up “short-termism” approach in this period as it used tobe. Therefore, failure of adopting strategic management approach beyond being legalobligation and of reflecting it to practice, and inadequacies derived from strategic planpreparation period,

• In connection with this, continuity of classical budget approach blocking the linkingamong plan-programme-budget,

• Lack of cooperation and coordination derived from not having joint working culturebetween public administrations; similarly, lack of compatible work between MoD andMoF which are responsible for general design and coordination of system, andinsufficient support of external audit institution (Court of Accounts) in this period.

These reasons, as a whole, restrain the questioning of “Value for Money (whether the publicmoney is used efficiently or not)”, linking the inputs used and the outcomes achieved as wellcosting the public services.

The integration of the programme budgeting approach to the system has become importantagain with the purpose of fulfilling the needs occurred by the abovementioned reasons. Apartfrom these, the requirement of budgeting the 25 Priority Transformation Programmessubmitted by the 10th Development Plan made it a necessity. Therefore, by handling theprogramme approach in the delivery of the public services over again, the new requirementsthat will occur be met such as;

Costing individual programmes and measuring their performances,

Costing programmes covering more than one administration, measuring theirperformances and providing their coordination,

Costing thematic (theme based- such as; woman, disabled, children) programmeswhich are the focus of public opinion, Non-Governmental Organizations andinternational institutions; and measuring their performances.

The purpose of this study is to propose a model based on re-establishing the relation amongplan-programme-budget through unifying the programme budgeting approach withperformance budget and strategic management approach tools.

General objectives of the proposed programme budgeting model can be summarized asfollows:

The model is aimed to be tailor made for our country. Existing information, legislationand practices are considered, and the model which will be realistic and can beimplemented phase by phase is developed.

The model has been designed based on business management. In other words, thebudget is supposed to focus on works to be performed and results to be achieved (inthe framework of effectiveness, economic and efficiency rule) as a financialmanagement tool.


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The model aims to increase the link between various policy documents. Therefore, theinsufficient linkage among various documents in practice is expected to be removedwith this aim.

The model is expected to increase the traceability between planning and realisation. Itcovers not only the reporting of the business results at the end of the period but alsothe monitoring mechanisms that will provide follow-up of performed businessesduring the period.

The model is measuring and evaluation focused. In this scope, some methods areconsidered such as costing of services deemed important and the allocation of costs tothe service programmes in the framework of certain allocation rules.

As a result, an approach is proposed based on accountability through integrating thebusiness and financial results.

Besides, in order to ensure a common language, the budget system is proposed to becalled as “programme budgeting”.

In accordance with these principles, the main structure of the programme budgeting model isdesigned as following:

The model is designed as linking the programme, subprogramme and activity in ahierarchical structure. It is based on cascading principal with this aspect.

The model presents a hierarchical coherence within the dual structure of up-bottomand bottom-up approaches. In the up-bottom approach, the political objectives set outin high level-policy documents are reflected to programme and subprogramme areas;and this way, the programmes and subprogrammes to be proposed become theobjectives and purposes of the administration respectively.

In the bottom-up approach, the model proposes designing a business managementsystem that will realise the objectives of programmes and subprogrammes by defining,costing and grouping the activities at administration level.

Thus, the intersection point of two structures is “realisation of the performanceobjectives in accordance with the programme purposes”.

The definitions of programme, subprogramme and activity as key components of programmebudgeting are made extensively. The programmes are mainly defined as a group of activitiesand projects gathered to form a significant complement with each other for producing acertain public service. In this way, the importance of activity designs of administrationswithin a business management model is emphasised.

Starting with the point that government is the real owner of programmes, the definition andrules of the programmes are set out and the following factors are handled regarding theprocess management:

In high level policy documents, MTP is proposed to be the primary document inidentifying the programmes and the subprogrammes, and concreting the generalobjectives mentioned in the development plans (indicating the Priority TransformationProgrammes and thematic programmes in MTP at government level). Thus, it is beingemphasized that MTP is more likely to be a comprehensive and indicative document.


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Apart from the abovementioned programme proposes, a system is designed that allowsadministrations to propose programmes and these programme proposals to be includedin the MTP.

Key rules regarding programme proposal processes and forms to be fulfilled (likeProgramme Proposal Cards) are defined.

Similar definitions are made for subprogrammes in compliance with the hierarchicalstructure.

Higher Planning Committee (HPC) is responsible of approving and confirming theprogrammes and subprogrammes on behalf of government.

HPC determines a responsible administration for each programme and subprogrammeto be published in MTP.

HPC is responsible for monitoring and evaluation of the programmes andsubprogrammes.

HPC performs the abovementioned responsibilities through “Sectorial ProgrammeEvaluation and Co-ordination Committees (SPECC)” consisted of MoF, MoD,Undersecretariat of Treasury and the representatives of the related sector ministries.

A regulation is proposed so that the MoD in coordination with the MoF will follow-upand keep all the programme and subprogramme catalogues after published in MTP.

A mechanism is proposed so that the programme catalogues can be changed after theMTP is published as a result of various reasons (like legislation change).

Key rules and processes concerning the establishment and costing of activities aredefined.

Regulations regarding costing and allocation rules of activities are set out. Somegeneral rules for different cost allocations are proposed to be set out by MoF, but theseshall be performed in a flexible manner by public administrations. A realistic solutionis proposed for instead of “stage costing” unit costing should be handled byconsidering difficulties such as “full costing” and not including depreciation in costdetermination system at this stage. In addition to this, with the development ofinstitutional infrastructure, the bases of the activity costing are also proposed to be putinto practice entirely.

The categorisation of the service programmes, which is the main problem in theprogramme budgeting system, is made. According to this, the designed programmesare as following:

Service Programmes,

General Administration Programme for administration activities (such ashigh level management, consulting, auditing, logistic services) apart fromservice programmes,

To-be Allocated Expenditures Programme as being related to more than oneservice programme, for transfers to other administrations and for commonexpenditures that cannot be determined to be allocated to which serviceprogramme and at what amount during the planning.


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However, as a general principle, it is accepted that all the categories apart fromthe service programmes are to be zeroised by allocating them to the serviceprogrammes through allocation tables by financial reporting periods (per 6months or annual). Therefore, it is aimed to present the total cost (total ofdirect and indirect costs) of the services of a public administration.

Performance indicators and objectives are used for identifying the relation betweencosts and outputs through proportional indicators; thus, some arrangements areforeseen to reflect the relation between the costs and outcomes of service programmesas far as possible, and some examples are given regarding these.

Existing Analytical Budget Classification (ABC) is deemed significant in terms ofcompilation of statistical data and programme budgeting coding is added to thisstructure as a fifth segment. However, ABC codes saved users from memorising codesby working at the background of the software developed in the scope of the project.

In the framework of the model, it is offered that the budget preparation process isscheduled to an earlier time and that the proposal processes of theprogramme/subprogramme are started in January interrelatedly and are designed as aniterative process so that the budget preparations are conducted in a mutual dialoguebetween the central executive administrations and the spending administrations.Accordingly, for the administrations to save time, the declaration time of MTP andMTFP is offered to be shifted to May same as before, and to update them again inSeptember; and to finalise the budget proposals.

Additionally, the SPs prepared by administrations are needed to be redesigned toreflect the programme and subprogramme structure. The programmes andsubprogrammes have to be corresponded with the objectives and purposes,respectively. Both the activity and the budget link are strengthened in the redesignedstrategic plan in this way.

As a crucial subject, the Performance Programme (PP) is offered to be submitted toTGNA as a part of the budget document and not to be prepared as a separate documentapart from the budget as being an important issue for the insufficient link between thebudget and the programme.

When the programme structure is completed in the scope of the proposed model, both SPs andPPs of the administrations will be obtained automatically. Therefore, TGNA will be able tosee and evaluate the SP, the PP and the budget of the administration all together.


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2. THE PROGRAMME BUDGETING SYSTEM AND THE MAINCHARACTERISTICS OF THE PFM SYSTEM

2.1. Main Characteristics of the New PFM System

After the cold war, public intervention areas have been enlarged all around the world and thepublic sector has been expanded. Financial crisis and searching for efficiency in the usage ofresources have caused many countries, especially the developed countries, to restructure theirfinancial management systems by reforms in the last 10-15 year period.

Public financial management system has been restructured by elaborating the high level policydocuments and the administration plans and programmes. The main titles in this structure can belisted as a budget policy compatible with macro framework, an effective resource allocationprocess to adopt the objectives and purposes of public policy undertaken through budget and theusage of allocated resources in the framework of service programmes/objectives and monitoringof them systematically. In this scope, main reform topics of the period have been policy making,establishing the relation between budgeting and planning; the new structure having a stronginternal control and effective external audit.

After the serious economic crisis in 1994 and 2001 in our country, the most important reformfor public financial management system has been the restructuring of public financialmanagement system with the law 5018 to establish Medium Term Expenditure System withthe purpose of providing budget discipline. Our financial management and control system hasbeen changed in a new perspective with the law 5018 that was accepted in 2003 and started tobe implemented in 2006 and the budget process have been built on the terms of efficiency,effectiveness, transparency and accountability. Planning and budgeting process have been re-defined with the law; and therefore, allocation and usage of public resources in compliancewith the strategic priorities and the realisation of expenditures in the scope of financialdiscipline in the formulation period of the public policies have become important with theeffect of the past crises.

New approach, as a main objective, has propounded to have a successful plan and a budgetprocess for ensuring managerial effectiveness. This approach has been tried to be designedaround four axes listed below with the inspiration of New Public Financial Managementapproach which occurred as an extension of law 5018 New Public Management approach:

Financial discipline (allowance ceilings),

Allocation of resource according to the strategic priorities,

Ensuring the usage of resources efficiently, effectively and economically(performance based budgeting),

Accounting for the used resources (monitoring and evaluation system, performanceauditing and reporting in addition to financial audit).

As a matter of fact, it can be proposed that the four qualifications listed above have a contextthat has been tried to be used partially in various budget designs in the past. For example,while the classic line-item budgeting handles budget as a financial discipline instrument, thezero based budgeting system, comes into forward with the qualification of directingadministrations to make performance plans and reinvestigate their service areas every yearincluding the allocation of resources according to their strategic priorities. Similarly, the Plan


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Programme budgeting System (PPBS) has focused on which approach to be used in effective,economic and efficient usage of resources that is being the important deficiency of the systemin general and what kind of flexibility to be provided to the administrations on this subjectwhile trying to solve the same problem in a longer time dimension (planning).

In this respect, the principle of economy has gone beyond the other principles and theprinciple of saving (focusing on providing input with the lowest cost) in the classical budgetapproach has been handled as principle of economy, but the relation of output and outcome tobe achieved by using these inputs has always been in the second plan. Audit system as aprominence of this, has not gone beyond whether the inputs have been used properly or not.

In this respect, it is possible to say that new public financial management approach tries toestablish more holistic and integrated system compared to previous budget systems, in otherwords, tries to solve issues like both financial discipline and service priorities as well as betterusage of resources (in the meaning of performance based budget).

If we consider this subject in terms of our country, we have to consider the previousimplementations and the reasons for failures of programme budgeting system which wasimplemented in our country1 before new regulations enacted by law 5018 in accordance withthe new public financial management approach and also which forms the basis of this study;because this matter itself includes some clues about why the foreseen system in the scope ofthe law 5018 is not being implemented today.

2.2. What Does Programme Budgeting Foresee?

2.2.1. Historical Background

The aim of this section is to make better understanding of the logic of proposed model for ourcountry and today’s implementations by scrutinising the implementations and the roots ofterms which the programme budgeting logic based on through mentioning the historicalbackground of programme budgeting and the concept of programme term.

The roots of the programme budgeting leans on the beginning of 20th century and it is easy toencounter the tracks of this implementation especially in some industrial institutions (DuPontCorporation, General Motors) and in some public institutions (Department of Agriculture) inUSA 2 . However, as a more systematic effort, it is possible to say that the programmebudgeting implementation in public institutions started with the period in which it wasthought as a method for solving the primary problem in providing raw materials such as iron,steel, aluminium, copper and producing final product (plane, ship, tank etc.) with these as arequirement of military for war in the beginning of World War II in USA. Likewise, theoverload of demands and making decisions on priorities whether to produce consumptionmaterials like cars etc. for civil requirements with the same raw materials have caused that theresources be insufficient for the requirements. This has brought the necessity to identify thepriorities between both the military and civil requirements and the resources to be allocated tothese requirements, in other words “balance between the resources and the requirements” 3.

1 In our country, as known until the law 5018 came into force, budget preparation and implementation had beenperformed according to the bases of budget system called “program budget”John Hagen (1968), Program Budgeting, p 5-7David Novick (1966) Origin and History of Program Budgeting, p 2-42 Novick, p 5-7.3 David Novick (1966), Origin and History of Program Budgeting, p 2-4.


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As a result, this necessity can be defined as the beginning of the period of transition to “PlanProgramme budgeting System (PPBS)” that requires both the requirements to be planned andprioritised and financial resources to be allocated appropriately. David Novick, who is one ofthe significant experts in transition to programme budgeting at war times in USA explainswhy the abovementioned efforts of balancing between resources and requirements are namedas Programme budgeting with an example shown below (Box 1) 4.Box 1. Programme budgeting Logic as an Attempt of a System Analysis Approach

“…As a consequence, in the rest of the war (1943-1945) we audited producing service and outputs providedfrom this system in America by ‘Controlled Material Plan’ method, efficiently and this was the first Federalprogramme budgeting. I call this as programme budgeting since it contains qualifications listed below.

I First, major goals were identified.

- Satisfying war needs of USA and its allies.

-Satisfying main civil needs.

- Satisfying other main military and civil needs.

- Helping friendly countries

- Carrying out requirements of economic war

II. Later, each major goal was identified with programme objectives.

For example;

A. Satisfying requirements of USA military

1. Satisfying materials and equipment of combatant unit in theatre of war.

2. Battle support

3. Activities of hinterland

III. Later, programme objectives were identified with programme elements in depth.

1. Providing materials and equipment of combatant unit in theatre of war.

a. War crafts

1. (were detailed according to type and model)

b. Tanks

1. (were detailed according to size and aim)

c. Automobiles

1. (Truck, jeep, transportation of personnel etc. Later, trucks were spared according to their size and aim ofusage)

IV. Programmes were considered according to requirements of service units intersected horizontally withrespect to simultaneous determined aims.

(Such as; Land, Naval, Air Forces)

V. Budget was prepared for per 3 monthly periods and 16 three monthly budget was prepared that one isbelong to current period and others are belong to 15 three monthly periods.

VI. Producing alternatives were analysed and systematic analysis was performed. For example, when it isunderstood that golden is no needed during the war period, labour and material in this area were shiftedto other mining areas. In any case, activities were leaned on analysis results.

4 Novick, p 5-6.


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In my opinion, either it was implemented to government or to private sector, common issue in Plan Programmebudgeting system is determining main objectives, identifying the programmes which will achieve theseobjectives and resources allocation that will perform specific objectives which take place in these programmes.

As it can be seen from these explanations that this kind of approach of which the programmebudgeting system base was laid at that times maintains its validity today; and also the termssuch as economic planning, programming strategic plan and performance budgetingconstitutes an inspiration for the implementation.

2.2.2. The Structure of Programme budgeting

Programme budgeting is such an approach that seems simple at first sight. This budgetapproach has some advantages compared to incremental classical budget technique in whichthe resources are allocated based on inputs. These advantages are focusing on results of plansand programme to be implemented by governments, doing budget for this reason andproviding opportunity to evaluate results by focusing especially on costs of this budget.Although many years have passed it is not possible to state that there is a complete agreementamong the executors regarding the meaning of programme budgeting and the programmeitself 5.

In addition to this, when the implementations in different countries are considered it ispossible to encounter many unsuccessful stories of programme budgeting. In the basis ofthese problems and the complexity of terms, there lies the definition of programme as well asmany technical details that become more complex when going deeper. Some of these detailsare the difficulties occurred in the definition of the programme as a result of the mass andcomplexity of services delivered by public administrations; and the categorisation and codingof the expenditures in programme budgeting.

The most meaningful and formal programme definition to be made as a result of theabovementioned complexity can be “Programme is the group of activity and projects whichhave been gathered to be compatible and meaningful with the purpose of performing acertain public service” 6 . In the scope of this explanation it can be said that programme termestablishes a framework for gathering the related inputs and outputs to transform them intoconsistent policy interventions with the purpose of achieving a certain policy objective. As aconsequence, programme means a policy area on one hand and a complement of activities andprojects categorised to achieve the mentioned objectives for this policy area on the otherhand.

After defining programme in this way, the second step is to define the objective and hierarchy(cascading system) of programme, namely the programme structure. In practice, generallyprogramme budgeting model combines business, cost and objective, therefore, is handled as ahierarchical model that facilitates the gathering of business and financial results. Thishierarchical model composes of programme, subprogramme, and project/activity elements.Realisation of each programme depends on organising various subprogrammes,activity/projects and spending items.

5 Dong Yeon Kim, William Dorotinsky, Feridoun Sarraf, and Allen Schick “Budgeting-Paths Toward SuccessfulIntroduction of Program Budgeting in Korea” John Kim, From Line-item to Program Budgeting Global Lessonsand the Korean Case World Bank and Korean Institute of Finance, p 44-45.6 Adapted from Jack Diamond (2003), From Program to Performance Budgeting: The Challenge for EmergingMarket Economies”, p 10


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Figure 1. Hierarchical Programme Structure

Programme is the group of activities and projects gathered to form a compatible andmeaningful integration with the purpose of producing a certain public service.

Subprogramme is the narrow-scoped part of the services covered by a certain programmeand in general, that is directly relatable with one spending authority.

Activities, in general terms, can be defined as measurable works performed for converting theinputs to outputs in the production of goods and services.

In programme budgeting systematic, the term “activity” is widely considered by involving theterm “project”. Activities cover projects to constitute integrity, also, especially, a projectregarding thematic subjects can be considered as an activity. Projects are considered to be foronce, not routine and as activities having certain start/end dates and periods. Activities andprojects can be defined under the activities and projects.

Programme structure composes of programme, subprogramme, and project/activity elementsas a hierarchical model (Figure 1. ). Issues related to this topic will be detailed in the nextsection.

An important point to be emphasised in determining programme structure is the coverage ofprogrammes and subprogrammes in terms of projects and activities. Here, main criteria is“serving for common objective” as mentioned above. According to this, each programmemust identify “sole, definable and preferably a measurable objective” and “all projectsand activities that serve for common objective” should be under the same programmetitle. Although the main criterion for determining programme scope is this, two assistant sub-criteria contribute to clarify the subject of the scope which are “substitutability” and“complementarity” 7.

According to the substitutability criteria, “if two or more activities/projects are competitors,namely substitutability, although the public administrations performing these are different, theactivities and projects should be under the same programme title” For example, financialsupport for the children of low-income families with the purpose of increasing their ratio of

7 Don Yeon Kim and ark. p 48-49.


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continuity to education and public reliefs such as clothing, stationery should be under thesame programme.

According to the complementariness criteria, “if two or more activities serve for a commonobjective by completing each other” they also should be grouped under the same programmetitle. For example, the training of police may be propounded by Turkish National Policeregarding the prevention of violence against women while Ministry of Family and SocialPolicies opens women shelters for women living in difficult conditions. Hence, funding maybe required for the police training while women shelters are funded. In this situation, womenshelters under the programme regarding the recruitment of women condition and the trainingof the police shall be covered by the same programme even they are related to different publicadministrations.

In this way, it will be possible to monitor implementation and costs of sustainable andcomplementary activities and projects.

Actually, this programme structure defines the phases of the production process of a publicservice. According to this, final purpose of the public service after the beginning ofproduction is resource allocation for activities and projects under programmes that producemeasurable output (goods/service). This situation requires allocating the public resources(inputs) according to different programme objectives and thus to know each programmecost. For this reason, one of the most critical areas of programme budgeting system is to makecost estimation and allocation. Final objective is to know cost per production ofprogrammes and thus making decision for future via making comparison betweenprogrammes.

Consequently, each programme has cost and programme budgeting helps to get a notion aboutthe link (expenditure – production relation) between the expenditures (input usage) to bemade for the programmes that are determined to be implemented and the produced outputs ofthose programmes 8 . As mentioned before, this situation emphasises the accountabilitydimension of the link between the resources used and the results achieved by a programme.When the budget is designed as programme budgeting, programme responsibility will beinvolved at that moment. Each programme will have a programme manager determined byHPC even they are related to more than one administration.

Necessity of programme budgeting coordination requires the discussion of the concept“categorisation of the expenditures in programme budgeting”. When programmebudgeting first appeared, one of the features that caused major discussion and chaos was thatthe expenditures were not being categorised based on institutions. In other words, being oneof the most important categorising styles of the classical budgeting the institutionalcategorising was not involved in the programme budgeting and the expenditures werecategorised according to the programme objectives. However, in time, combinedcategorisations have been propounded as it has been understood that one categorisation styleis insufficient in budget practice. Therefore, programme categorisation has been started to beused in the categorisation of the budget expenditures together with the institutional, economicand functional categorisation. Today in our country, in the transition phase of programmebudgeting, one of the issues needed to be discussed is merging programme categorisation intoABS again.

8 Raúl Calle and Marcos Makón, Cost estimation in public sector entities: a methodological proposal, p8.http://www. asip. org. ar/en/content/cost-estimation-public-sector-entitiesa-methodological-proposal, (AccessDate: 19 August 2013)


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2.2.3. Programme Budgeting in Turkey: Starting Point and Reasons for Failures

In our country, it should be underlined that “programme budgeting” concept cannot bethought separately from the concept “plan”. As it known, the period of realising economicand social policies started with the perception of “Five-Year Plan” together with theestablishment of State Planning Organization in 1961 in our country. One of the reasons ofthis change essentially applied more distinctly between the years 1960-1980 and called asPlanned Development Period lay down under searching for a solution for the chaotic structureof public investment policies applied between the years 1950-1960. At that time, the“investment – saving imbalance” problem increase to top point as a result of continuouslyfinancing with loan over estimation and not being able to provide the necessary resources forthe investments without ensuring the coordination among the administrations. As a result ofeconomic crisis of the country, a requirement for planning has revealed at the end of 1950sfor coordinating the public investments, continuously fulfilling the funding requirement ofthese investments in the framework of specific priorities known as “resource – expenditurebalance” and a legal basis for planned development was provided in 1960 Constitution.

Sine qua non principle to achieve the objectives foreseen in the plan is allocating the publicresources for achieving these objectives in a new approach. As a matter of fact, in article 166of the Constitution, the mentioned principle is emphasised implicitly by foreseeing planningto provide the country resources to be used efficiently by taking inventory of them and forrealising the economic, social and cultural development. It can be said that the mentionedplanning is the source of inspiration for PPBS started to be implemented primarily in thedefense industry in USA during the 2nd World War and the programme budgeting systemstarted to be implemented in our country as mentioned in the previous chapter9.

Although the First Five-Year Development Plan was started to be implemented in 1963,“programme budgeting” studies started in 1968 and were put into practice with the guidebookpublished in 1973.In current economic and social structure, programme budgeting system is the system that thegovernment responsibilities are evaluated and categorised in terms of services and based onservices (programmes) in allocating resources and performing the activities. The key elementsof the budget system are as follows;

Planning; determination of objective and policies in medium term projection,

Programming; determination of activity groups (service programmes) in thescope of common objectives to implement the plan in shorter period,

Budgeting; Allocation of resources for these activity groups (in a hierarchy ofprogramme-subprogramme-project and activities),

Management; effective structuring and controlling of units in systemimplementation,

9 In other words, the program budgeting shall be taken as a planning tool. In this scope, when expenditures arebeing budgeted their substitutability, complementarity, the benefits and costs of the projects for the sameobjective should be discussed and prioritised. For this reason, it will be meaningful to say the transition toprogram budgeting in the Turkish budget system is realised after the planned period and approximately the sameperiod with the West (PPBS).


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Prioritization; comparison between options by using techniques such as systemanalysis, cost-benefit analysis and evaluation of the results achieved.

The expected improvement from programme budgeting system started to be implemented in1973 was to provide opportunity for prioritization of services, presenting the service-cost-benefit link clearly and thus providing opportunity for resource planning to reach policyobjectives foreseen by government in economic, social and cultural areas. Hence, the keypoint of programme budgeting system is to establish the “plan-programme-budget link”.The main philosophy is that without planning and programming approach the budget cannotbe made and without budget the planning and programming cannot be done.

As seen, today some principles mentioned under the name of reform had been thought 40years ago and budget preparations had been established upon this approach. However, afteryears passed, programme budgeting system has been revealed as a frequently mentionedmatter that it has not been implemented as expected in real life and has lost its operability. Nodocument and information based study has been encountered regarding the reasons for theprogramme budgeting system not being implemented. For this reason, the following findingsare based on deducing from rather impressions, observations and experiences gained throughimplementations.

1. The Effect of Bottom-Up Budgeting Method: In Turkish budget system, animportant structural qualification that might prevent the operation of programmebudgeting system is inconsistency between bottom-up budgeting method andprogramme budgeting. In other words, implementation of bottom-up budgetingmethod during programme budgeting implementation. According to this budgetingmethod, primarily, bargaining for the allowances were being made between thespending administrations and MoF, and then, budget ceilings (allowance limits) wereidentified as a result of this bargaining process. In this system, when submitting theirbudgets to the MoF, the administrations kept their offers as high as possible takinginto account the cut to be made by MoF. On the other hand, MoF had the tendency tocut all those offers as possible taking into account that the administrations’ offers werealready high and this vicious circle was continuing at each budget period. Thus, thelack of measurement (allowance ceilings determined previously) as a guidelines forthe Minister of MoF during the budget allocations caused the bargaining process tobecome a game that the spending administrations applying pressure on the Minister ofMoF (even on the Prime Minister when required). That had the meaning that budgetwas transforming into a “cutting-shear” game between spending administrations andcentral control institutions.

Briefly, in 1973 the Turkish budget system had already built the infrastructure of asystem desired to be implemented even today. However, in time, it has become farfrom being a process in which the resources are allocated to the programmes in certainlimits because the bargaining and bottom-up budgeting system has not been changed.Thus, the programme budgeting system only has kept its name as “programmebudgeting” but in real has transformed into a classical budgeting system (line-itembudgeting) that the resources cannot be linked sufficiently with the services.

2. Short-Termism and Insufficient Adoption of “Plan – Programme” Concepts:Another issue that strengthens the abovementioned issue should be mentioned also.One of the reasons programme budgeting system has lost its effectiveness in time isthat the desire of balancing resources and expenditures has not been handled seriously


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in any government period (except crisis times). Even in planned period, governmentsthat have short lives with the impact of the frequently made elections didn’t have theperspective to evaluate the economic policies in long term planning and they have nottried to link the plan and the resources as they did not have the desire to do so. As amatter of fact, many activities and projects predicted in the plan have been revisedfrequently during the year, and thus, the coherence and consistency of plan andprogramme have disappeared. In such a case, budget bargaining process has become astructure that ruins the budget discipline; because the allowances have not beendetermined according to the requirements predicted in plan and programmes butaccording to the cutting-shear method with the impact of this type of revisions, and asa result the expenditure priorities of administrations were not considered. When thissituation has not been considered the administrations were confronted with manyspending items that they wanted to realise with limited allowance. As a result of this,there were many unfinished investments and more allowance requests for them infuture budgets or other ways have been tried like going beyond the budget. Manyvariations have been faced between the predicted budget allowances and therealisations between the years 1990-2000, allowance provisions have been done byadditional budget frequently, old system has not been sincere anymore and reliabilityof budget has been disappeared for both preparing and executing administrations. As aconclusion, the scope of the budget has started to get narrower, and the tendency ofgoing beyond the budget has been accelerated. In this way, a budget preparationprocess in which the expenditure priorities mentioned in plans and programmes havenot been discussed and questioned has been continued chronically.

3. Lack of Monitoring and Evaluation System for Measuring Outcomes andImpacts of Programmes at Institutional Level: As programme budgeting systemmainly depends on allocation of resources to programmes, a system is required tomonitor the extent of achievement of the identified programme objectives (includingsubprogramme objectives), and the corrective precautions to be taken in case offailure. The programme budgeting system is a tough process that requires theimplementation of many management methods such as identifying the responsibleauthorities and evaluation of the programmes, and reporting the results. Although amonitoring and evaluation system needed to be established for providing closecoordination among central executive administrations which prepare plans and followthe implementation (like MoD in Turkey) and MoF and Treasury that provides budgetfinancing both with one another and the spending administrations (line administrationsor administrations that realise the service programmes in real life) it has been observedthat it has not become real. As a result of this, it has always been a question markwhether the budget resources have been wasted or not, in other words, how close havebeen the spending administrations to the objectives of the plan, whether they haveused the resources efficiently, economic and effectively (Value for Money) whenachieving these objectives. Besides, it can be said that the lack of data consistencyrequired for the implementation of both planning, and measurement and evaluationsystematic have supported the problem. Briefly, the implementation of programmebudgeting system in our country has not been supported by a “performance-basedbudgeting” in which the performance has been monitored and evaluated atinstitutional level. Another result of this has been the failure of presenting objectivesand purposes foreseen in plans and programmes as tangible indicators, thus, the failureof taking down the policy declarations in plan and programme documents from


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intangible wishes level to tangible, measurable indicators level. Hence, spendingadministrations have been far away from the guide showing them a purpose anddirection. That has a negative effect on the importance, reputation and seriousness ofplans in time and had caused programme budgeting implementation to turn into abudgeting practice having low accountability and ownership repeating every year.

Briefly, in our country, programme budgeting system cannot have been implemented asaimed because of the abovementioned reasons affecting each other (institutional resistancefactors can be involved to these). In other words, from 1973 to 2006 “a programmebudgeting experience has been supposed to be implemented but in real it has beentransformed into a classical budgeting system”.

2.2.4. Why has programme budgeting implementation become important in Turkey?Why is it an issue again?

During the design of law 5018 that became effective in 2006, it was detected that one of themost important lack in Turkish budget system was the insufficient link among the plan,programme and budget. In order to fulfil this weakness, the budget system was tried to berestructured according to the conception of “institutional strategic plans” and “performance-based budgeting”. However, the link among the plan, programme and budget is still beingdiscussed although 7 years have passed. In order to mention it clearly, the reason forinsufficient link between the performance-based budgeting and programme budgeting need tobe explained as there is lack of purpose and intention for removing regulations predicted bythe system related with programme budgeting system brought in 1973 during the transition toperformance-based budgeting system in preparation of law 5018. As a consequence, thebudget system based on the institutional strategic plans and performance although started withthe aim to solve the insufficient link among plan, programme and budget, today, is faced witha problem such as not being able to solve the insufficient link. Some certain reasons causingthis problem can be summarised as follows.

2.2.4.1. National high level policy documents are outnumbered, disordered anddisconnected

There are many high level policy documents in Turkey such as MTP and MTFP, nationalstrategic documents and regional-sectorial plans prepared for different fields, and inparticular, development plans.

According to the law 5018, it was predicted that public administrations would prepare theirstrategic plans in compliance with the high level policy documents. Thereof, the goals andobjectives in strategic plans prepared at institutional level should contribute to the policy andpriorities in policy documents prepared at national level. Hence, the efficient, effective andeconomic management of public resources according to the national priorities is closelyrelated with the level of internalisation of institutional strategic plans with the national policydocuments.

However, lack of whole compliance and link among high level policy documents as wellhaving limited qualifications of guidance causes the public administrations to be in troubleabout considering and covering all the mentioned high level policy documents whilepreparing their strategic plans. Moreover, this kind of documents only listed policies as a wishto the users instead of drawing a clear road map; in this respect, they had difficulties aboutbeing taken seriously.


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Thus, the compliance has weakened and the success of institutional strategic plans has beennegatively affected because the structure of the high level policy documents has not beenprepared for guiding the institutional plans and the recommendation sets have not beendeveloped at administration level.

Added complexity is the fact that the timing of these documents does not follow an order, andhence they do not necessarily support each other, as expected to be originating from theNational Development Plan and the Government Programme.

2.2.4.2. Strategic Plan Period does not overlap with Administration service period –problem of high level ownership

The success of strategic plans in practice shows parallelism in providing the managerialsustainability at institutional level. Policy makers and executors in public sector have beenchanging frequently as a result of elections and politic relations. Under these circumstances,the change rate of the executive obstructs the long term planning.

As a consequence, some important factors related to process such as the high level ownership,leadership can have a risk of change in short term. For example, even the high levelmanagement support is provided during the preparation phase of strategic plan andperformance objective studies, if the same high level management is not in charge whenstrategic planning period starts and in parallel a budget implementation is carried intopractice, then it is not possible to mention about high level management support. Thissituation has been faced frequently in the last 7 year practice, and has similarity with short-termism problem encountered in previous period.

2.2.4.3. Insisting on classical budgeting approachStrategic management approach foresees the budgets to be constructed on the vision ofadministrations instead of being prepared according to the previous year’s appropriations.Moreover, the strategic management approach foresees fictionalised future with strategicplanning, implementation with performance based budgeting and this way, transition tooutput based budgeting from input based budgeting. Accordingly, strategic management is anapproach which the budget is evaluated as a factor of process, not the focus.

However, in our country, the budget process is still being carried out with traditionalapproach. In other words, there exists a budgeting process in which the resources are notallocated by planning but by an incremental method of the existing resources. As a matter offact, the most important reason for this is the lack of ownership regarding the programmeconcept. Accordingly, the reasons for the old system not being implemented have becomevalid for the failures observed in the new system. As a result,

o It is not possible to use the guidance for resource allocation of strategic plans as a toolin making policy,

o When short-termism is valid, the plan and programme (strategic plan) approachhandled as long term before cannot be harmonised with the new project requests occurafterwards. This situation causes problems such as not being able to monitor the large-scaled projects such as Canal İstanbul, High Speed Railway, Fatih Project etc. in termsof cost, output, outcome etc. in current budget structure. Failure of structuring the linkof plan-programme-budget for reflecting the objectives of administrations and fortracing the cost of achievement of the objectives affects this approach negatively. For


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example, cost of vaccinating per person mentioned in international institution reportsmany times is still unknown.

Focusing on short term results, problem of ownership, hence lack of high level managementsupport that can ask what is aimed and what is done, causes the budget to be perceived as aspending tool not a management tool. At the same time, this has negative effect on thecalculation and reporting of the budget outcomes. Today, the budget and final accountdocuments are also complicated. The focus shifted to details and realisation of the formrequirements instead of political objectives. For this reason, activity reports are alsoinsufficient, business objectives and the financial realisations cannot be integrated. Therefore,the accountancy and the financial statistics cannot provide sufficient contribution to the publicfinance management and the decision support systems.

2.2.4.4. Lack of adaptation of Strategic Management ApproachThe main starting point of the strategic management implementations in publicadministrations is making policies to figure their own futures and reflecting these policies totheir budgets by linking with resources. Strategic management studies carried out fordeveloping added value in public sector have been perceived only as a legal obligation.Although the main purpose was increasing the effectiveness, it became as developingstrategic management documents and it could not go beyond performing the formrequirements of the legislation. Technically successful and formally compatible documentsare being prepared as mentioned in the legislation, but preparing these documents should notbe “the goal”, it should be “the instrument”. The mentioned documents are being preparedand shared with the public but they cannot be utilised in making long term decisions. Strategicmanagement is an institutional transformation, not a business just to be compatible with thelegislation.

In administrations like resistance to change is high, adopting the new approaches like strategicmanagement to managers and employees is hard and long. Strategic management is a newapproach for management of public administrations in Turkey and new approaches need acertain adaptation process. For this reason, the administration employees not being open tochanges and perceiving this process as a legal obligation cause a negative role in success ofthe strategic management with the reasons mentioned above.

Nevertheless, studies done by public administrations should not be ignored. Many of themhave worked at planning studies, intensively. This process has contributed to theadministrations and has offered them an opportunity to enhance themselves.

Strategic plans at administration level are required for performance measurement but cannotdevelop programmes linked with national plans. Hence, if the system is built well, then thislink may be reconstructed with the programme budgeting approach.

In parallel with this, if a good integration is provided with performance programmes andcosting system, then re-transition to programme budgeting will satisfy the below requirementsbetter.

1. Performance Measurement of single programmes: With the 10th Development Plana policy decision was taken regarding the transition to programme budgeting. In thissense, programme budgeting has become an implementation to be performed. With theprogramme budgeting approach implemented together with strategic plans andperformance programmes, input costs, cost efficiency (input/output) and cost


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effectiveness (input/outcome) by measuring outputs and outcomes of a program willbe provided, useful information will be gained regarding the government usage ofresources and accountability will be provided.

2. Performance Measurement of programmes covering more than oneadministration: Today there is not a chance of measurement of general performanceand costs of services delivered by more than one administration but serving for acommon goal. Even if one administration performs its responsible part in the sameprogramme successfully, the whole government policy implementation can beunsuccessful if the performances of other administrations are not good enough.However, having an idea about achievement of programme instead of individualachievement of administration is possible in programme budgeting system as themeasurement of cost and performance of this type of programmes are performed incoherence. Thus, in the 10th Development Plan, 25 Priority TransformationProgrammes were determined and they are related to more than one administration.Programme budgeting has an opportunity to offer more information about cost andperformance of programmes covering more than one administration with respect toperformance-based budgeting being implemented today.

3. Monitoring thematic programmes: Demands regarding the monitoring of theme-based programmes are coming increasingly from public. Monitoring of cost andperformance of budgets covering more than one administration and focusing ongender-based budgeting, children based budgeting, disabled based budgeting, and etc.is possible by monitoring the budget of these theme-based programmes.

With the abovementioned reasons, programme budgeting should be again the major axis ofTurkish budget system by being supported with performance budget instruments.

In this study, “Activity-Based Business Management Model” has been presented for re-establishing the link among plan, programme and budget that could not have been establishedup to now.


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3. ACTIVITY-BASED BUSINESS MANAGEMENT MODEL

3.1. General Objectives of the Model

Turkey has special conditions because of its population, topography, widespread and strongbureaucracy and distribution of public finance management to various administrations. Hence,“programme budgeting” structure should be unique for Turkey, not a copy ofimplementations in other countries. Successful programme budgeting examples abroad maynot be “the best implementation” for our country. In this sense, “necessity of adaptation forthe country conditions” should be taken into account.

By considering these issues, the objectives of the proposed system are as follows:

3.1.1. From Budget/Accounting Focus to Business Focus Oriented Budgeting Approach

As known, PFMCL envisages a modern public financial management including factors suchas horizontal organization structure and authority delegation as well as a management basedon transparency, accountability, strategic planning and performance management; anddelegates important assignments and authorities to the public administrations.Aforementioned Law also arranges some important liabilities like accountability of publicadministrations in the scope of authority delegation. As it was debated in previous sections, itis obvious the reform has just been on paper and could not have been adopted even a longtime period has been passed after coming into effect in 2006.

It is considered that the activity based business management model will provide the mostimportant support to perform the provisions of the law 5108 by public administrations.Financial management system must be performed in parallel with business managementsystem and there must be a planning and control factor that belongs to business. However,insufficient linking of business structure and public structure either in planning period or inthe period of accounting for realisation results is a main obstacle for monitoring andsustainability; such that, budget and accounting transactions go beyond the services providedby administration. Since the financial structure (budget and accounting) is not based onbusiness, administrations lose their interest in the solutions and systems that requires ratherhigh expenses of public resources for development and sustainability of this structure; andthus they cannot be aware of their responsibilities set out by law.

In this scope, a business management approach must be developed based on accountability inpublic. It is thought that the main rule of being compatible with the rule of being efficient,economic and effective - which is used frequently but every manager understands differently-should be business oriented and in this scope producing maximum public value.

In an environment that the resources become narrower and the public awareness becomeshigher, the requirement of developing a business model is seem to be crucial. This model willenable the planning of works that become necessary because of the legislation and thestrategic objectives and the monitoring of compatibility with the plan. In the scope of theproject “Decision Making and Performance Management in Public Finance” many lessonshave been learned both from international and private sector experiences and this experiencewill be utilised to develop a model that integrates decision making and performancemanagement.


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3.1.2. Increasing Linkage

In public finance management, the instruments currently used are;

• Government Programme, Development Plan, MTP and MTFP that can be mentionedas high policy documents in which the medium term country targets and priorities areset out,

• Annual Programme that the annual objectives and measures are identified at macrolevel and Annual Investment Programme that the investments are programmed,

• Strategic Plan that medium term administration objectives and priorities set out,

• Performance Programme that provides objective, activity and costs at the operationallevel,

• Activity Report that the business results are reflected and Final Account that thefinancial outcomes are explained for ensuring accountability.

Logically, these instruments shall support each other and different phases of public financialmanagement process. At the same time, the mentioned instruments shall complement anddetail each other. On a country basis, medium term planning must be reflected to theinstitutional planning and objectives must be propounded at medium term level and bereflected to the annual periods. Linkage between the objectives and expenditures must bevisible. Otherwise, it is impossible to mention about the effectiveness and economy withoutbuilding the link between the services delivered by public administrations and the productioncost of these services at the stage of planning and evaluation of the outcomes.

Thus, a model is required that business objectives and financial objectives can be plannedtogether, business outcomes and financial outcomes can be reflected together, relationbetween inputs and activities with outputs and outcomes can be built clearly, co-ordination ofthese and achievement degree of the objectives can be audited and the expectedproduct/service can be compared with the realised ones.

3.1.3. Increasing Traceability

Presenting the realisation of the objectives, business outcomes and financial outcomes onlywhen the business is completed blocks the issues that can occur during the activities to beseen and corrected ex-ante. The model aims answering questions such as “what is our target,what will we do for this, how much resources do we need for the activity” by creatingtraceability chains.

As the link between existing financial management instruments increases, traceability willincrease, too. If activities and projects can be reflected to the performance objectives,performance objectives to the administration targets and administration objectives to thecountry objectives, the justification of the public resources that the administrations willdemand for their activities will be healthier.

3.1.4. Adopting Measuring and Evaluation Approach

In addition to a systematic approach deficiency in public resource allocation, one of the mostimportant deficiencies in public is being able to control whether the allocated resources areused in compatible with the objectives. According to different implementations in the world,it is not surprising that the internal control approach, moreover new audit approach is built on


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a continuous control/audit model. Therefore, the administrations are expected to recognise thevariations of objectives and costs ex-ante and to take necessary measures.

However, as implementation deficiencies in the law 5018 are underlined when discussed, amodel has not yet been developed culturally and systematically that can regularly follow therealisation information of the costs regarding the business objectives; to what extent that theactivities and projects are close to the objectives, at what level do these objectives support theinstitutional objectives. Objective realisations, physical realisations and financial realisationsare separate from each other and depend on the declaration of the public administrations.

It is not possible to mention about performance management without building measurementand evaluation system and what is expected from the model is integrating the allocation ofresource, usage of resource and performance management.

3.1.5. Accountability by Integrating Business Outcomes and Financial Outcomes

Although more than 7 years have been passed after Law 5018 came into force, the amount,quality and cost of public services are still not known. It is not possible to know effectivenessand productivity in an environment which the cost of unit service is not measured.

The answer to the question “the amount of technology support and incentives and how itprovides added value” is not satisfying at policy level. Therefore, legislative power andexecutives are making their decisions according to practices not to findings.

Therefore, model to be developed shall present the objectives, outcomes, outputs and costs bylinking them. Cost of reaching business outcomes must be showed and activity report andfinal account should not be thought separately. The condition of establishing an integratedmanagement instrument is making the accountancy system to have a capacity of producingdesired results of management in the phases of approval, commitment, accrual and paymentby recording the business phases; and with this purpose, implementing the cost accountingmodel. To accomplish this, a monitoring & evaluation system is required that operatessmoothly.

3.1.6. Common Terminology

Starting point of developing a solution is to identify the problem correctly. Unfortunately,there is lack of unity of language related to terms in public management, each administrationeven each unit may use the same term with different meaning.

For example, project and process terms still cannot be understood by budget, accounting andinternal control units. On the contrary of international standard definition, administrationsthink project term as the projects which take code in the annual investment programme. As aresult of this, reaching to project targets in the scope of planned cost and time is limited to thedeclarations given to MoD. It is not perceived that mechanisms should be developed tomonitor outputs and outcomes by administrations.

To provide unity of language the model will be referred as programme budgeting in thisdocument and the name can also be called as performance budget or programme-basedperformance budget. In this model, the importance is given to business focus. Relationalthesaurus is also defined in the scope of business management term.


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As a result, the model focuses on that budget is a financial management instrumentwhich managers and administrations that spend public money can manage theiractivities in the best way instead of just a disbursement system.

3.2. Main Structure of the Model

Model, in respect of itself, has a dual structure. Key factors of this structure and therelation between them are also being shown in Hata! Başvuru kaynağı bulunamadı.. Firststructure mainly relies on degrading of decisions and priorities taken at programme level tothe administration level delivering public service during the process of policy-making.Second structure is built on upgrading of administrations activities from lower units to theadministration level on the basis of activities.

Figure 2. Fundamental Structure of Programme Budgeting Model

In the top-down budgeting process, key actors are political authorities during policy makingand programme determining while in the bottom-up budgeting process key determiners arethe administrative authorities within institutional responsibility. In this framework,programme budgeting system model starts with presenting the programmes that reflectpolitical priorities.

Programmes are the final purposes determined at the end of policy making process.Reviewing of service programmes declared in the scope of MTP is also conducted within theframework of MTP. Strategic plans being prepared by administrations will be re-designed toreflect exactly the same programme and subprogramme structure. Programmes will bematched with objectives and subprogrammes will be matched with targets.

At institutional level, relation between activities and subprogrammes are built by annualprogramming. Annual objectives and annual budget as a result of this programming will


30

correspond to performance programme. While annual objectives are degrading medium termsubprogramme objectives to annual and output-based level in one hand, it also constitutes aframework for targets of activities on the other hand. Administrations should determine theirannual objectives compatible with the programme structure during the budget process andprioritise their activities and projects according to this determination.

The component factor of these main relations is “monitoring-evaluation system”. Therefore,the model covers transformation of policy proposals into programmes, degrading of theseprogrammes to the subprogrammes and then, detailing (linkage) this framework withactivities and integrating with business management process for realising annual objectives.The monitoring-evaluation system includes prioritisation of activities related tosubprogrammes in the scope of administration’s responsibility, the achievement of thesepriorities, and allowances with realizations.

3.2.1. Proposal for Better Linkage and Assumptions of the Model

The fundamental factor of the budget is to be a policy instrument. In this framework,programmes in the development plan introduce government’s main targets. Hence, eachadministration in the scope of budget will constitute a linkage among plan, programme andbudget within these targets. This relation is provided as top-down like from general to specificand from macro level to the administration-unit level. Being indicated in plan-programme-budget relation in Turkey with the Law 5018, Plan-Programme-Budget documents at macrolevel are shown in Figure 3:

Figure 3. Plan-Programme-Budget Documents in Macro Level

Development Plan: In the past, development plans were prepared with many differentmethods like sectorial-approach, project approach, and axis approach. However, 10th

Development Plan presents a dual structure. First stage of the plan is built on three mainobjectives:

1. Qualified Individuals, Strong Society

2. Innovative Production, Stable and High Growth

3. Liveable Places, Sustainable Environment

4. International Cooperation for Development

Development Plan

Medium Term Programme

Medium Term Financial Programme

Annual Programme

Budget


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These areas are detailed by sub-areas and for each sub-area, targets and policies arementioned in accordance with situation analysis. A detailed work in the context of MTPshould be conducted for transformation of these objectives and policies into programmes.Hence, the work should include programme names, constitution of justifications andindicators and determination of responsible administrations.

25 transformation programmes are mentioned in “primary transformation programmes”section in the 10th Development Plan. Under these programmes,

Programme name,

Programme objective (reason),

Programme objective,

Indicators,

Components

take place. Programme coordinator and responsible administrations for components are alsoidentified.

Medium Term Programme (MTP): Being prepared for 2013–2015, MTP is based on axistake place in the 9th Development. Although axis and priorities under the axis have thecharacteristics of being considered as programme in many cases, they do not have somecharacteristics of programme such as justification, indicator and responsible administration. Inthis situation, administrations have had problems in reflecting MTP priorities into theirstrategic plans and budgets.

In the model, it is suggested that from now on the MTPs will be prepared programme based asimplemented in the 10th Development Plan and will directly base on the Development Plan. Itwill be appropriate that the programs and components of the development plan which areunder the responsibility of the central public administrations will be reflected in the programand subprogramme template mentioned within this study. Inherently, programs shall includethe Primary Transformation Programs and shall be stated in compatible with the strategicgoals and objectives of the administrations. In brief, from now on, MTP’s scope shall bedeveloped within this scope and it shall be a document in which the programmepriorities are tangible and its leading characteristic shall be in the foreground.Medium Term Financial Programme (MTFP): MTFP is a document having allowanceceilings that the administrations utilise in budget preparation process and also includingdeclaration of macro indicators determined in MTP. MTFP presents budget ceilings of MTPimplementation years at the administration basis and under the titles of personnelexpenditures, social security government subsidy expenditures, goods and servicesprocurement expenditures, investment expenditures, current transfers capital expenditures,capital transfers, loan and reserve allowance. Budget ceilings will be determined based oninstitutional and programme classification instead of institutional and economicclassification to direct programme budgeting implementation. Therefore, the reflection ofpolicy priorities determined in development plans to resource allocation on the basis ofprogrammes will be provided.

Annual Programme: With annual programme, measures which to be implemented within ayear are determined for priorities in MTP. Developed measures are detailed withresponsible/cooperative administrations, time, transactions to be done and explanation.


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Annual programmes will be developed when programme structure is identified in theframe of proposed model since administrations’ annual activities and projects willalready be determined.Budget: Budget is prepared based on ABC system according to the budget ceilingsdetermined for institutional and first level economic code defined in MTFP. Hence, thebudget of administrations composes of budget allocations based on the principle ofinstitutional, functional, financial and economic code structure. ABC provides maininformation related to budget in programme budgeting structure but codes reflectingthis programme structure (prior programme, programme, and subprogramme) shouldalso be added into this coding structure. Administrations should rely on programmestructure when developing their budget proposals. Allowance proposals accumulatedupwards from activities and projects shall constitute budget proposal of administration.Hence, budget law will be published in the level of administration andprogramme/subprogramme diffraction.This macro frame will provide administrations to constitute its Strategic Plan andPerformance Programme.Strategic Plan (SP): SP is defined as a strategic document that mission, vision, objective andtargets of administrations are presented. It is a principle to prepare strategic plans for 5 years.In existing arrangement, it is expected that SPs constitutes a linkage between high levelpolitical documents and budget.

Performance Programme (PP): It shows the annual implementation stage of objectives andtargets take place in the strategic plan. PP composes of performance objective, performanceindicators, activities/projects and resource requirement. PPs just stay as a written documentinstead of being an implementation instrument since the budgeting systematic has notchanged. In existing situation, publication of PP separate from budget generates linkageproblem for budget preparation.

In the scope of the model, SP and PP shall be directly produced based on theprogramme structure, and within the process, they will have an integrated structurewith activity based business management model.The linkage between programme budgeting structure and administration strategies is shown inTable 1. .

Table 1. Programme budgeting Structure and Administration Strategies Linkage

Programmes Objectives of Administration

Subprogrammes Targets of Administration

Annual Objectives Performance Objectives of Administration

Activities Activities/Projects of Administration

General framework to depicting these relations is presented in Figure 4.


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MACRO LEVEL ADMINISTRATION LEVELPL

AN

NIN

GPR

OG

RA

MM

ING

BUD

GE

TIN

GR

ESO

UR

CES

Directive relation: High level policy, plan and programme texts to direct sub-documents.

Determinative relation: Certain factors take part in a document to take part in another documentnecessarily. (for instance, investment programme projects to take part in budget necessarily)Partial relation: Certain factors take part in a document to take part in another documentpartially. (for instance, precautions in annual programme to assist determination of activities)

Figure 4. Plan-Programme-Budget Relation

With these preconditions, the model proposes certain approaches in identifying the maincomponents of the programme budgeting such as the structures of programme, subprogrammeand activity/project and the costing issues.

PERFORMANCE

PROGRAMME

DEVELOPMENT

PLAN

Sectoral /ThematicFields andSubfields

PriorityTransformation

Programmesand

Components

MTP

Programmes

MTFP

ANNUAL

PROGRAMME Policy, Objective and Precautions

STRATEGIC

PLAN

Objectives (Programmes)

Targets (Subprogrammes)

Annual Objectives

Activities

Budget Ceilings

Primary Subprogrammes

Current

Investment

Transfer

INVESTMENT

PROGRAMME Projects

Extra Budgetary Resources

Budget Resources

Nonfinancial Resources


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4. CONSTRUCTION OF THE PROGRAMME STRUCTURE

4.1. Programme

The term, programme, is generally defined as “combining the group of compatible activityand projects to form a significant complement for the purpose of generating a certain publicservice”. Therefore, programmes are related with performing the public services.

4.1.1. Important Topics While Identifying the Programmes

Performing a certain public service may sometimes require the presence of one publicadministration, but also more than one public administration together may perform one publicservice. In this respect, when determining the scope of a programme the preconditions are;

The right definition of the framework of the public services (programme framework)to be performed and the identification of the authorised administrations to offer aprogramme,

The identification of the public administration or administrations that will perform theprogrammes and the identification of the coordination rules among them,

To pay attention to all the activity and projects that will take place under theprogramme are in a meaningful relationship with each other,

To ensure the administration level documents such as the strategy plan and the actionplan definitely reflect the hierarchy of programme, subprogramme and activity/projectto be created in the basis of the high level policy documents (Hata! Başvuru kaynağıbulunamadı.),

The identification of the general framework of the methods to be followed for thebudgeting and costing of the programmes.

a. Main Policy Documents in Determining ProgrammesThe main principal in determining programmes is to provide a connection between all theprogrammes and,

The development axes, policies and the priority programmes declared in the 10th

Development Plan,

The programmes, priorities, procedures and principles take place in the MTP,

The tasks given to the administrations by legislation.

To sum up the previous section; in general the Development Plans have feature ofguidance on development axes, objectives and priorities. In this sense, the development plansare like guidelines for both public sector and the private sector. On the other hand, the MTPis like the texts of drawn roadmaps for concretisation of the policies in the development plans,in particular for the public sector. In this respect, as mentioned previously, the MTP textsshould be indicative in the process of programme development and suggestion,compared to the development plans. Consequently, the conception of preparing MTPmust be changed accordingly. The legislations of the administrations should be taken intoconsideration for being description of tasks from the point of the administrations.


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b. The Types of Programmes and The Principles to be Followed in Determining theResponsibilities

Enacted in 1973, the programme budgeting guidelines, when designing the framework of theprogrammes in the circumstances of those days, probably acted with the principle ofconverting each administration’s objectives to programmes, made each administration be freein determining its programmes according to the objectives and determined the basis that“Programmes cover all the services carried out by the administration and one service takesplace under only one programme” 10 . It is possible to come to a conclusion from thisexpression that administrations (more than one) are not jointly responsible for the executionof a single programme. Here, probably concerns play role such as coordination issues to bearise when more than one administration are responsible for one programme and theaccountability principle to be damaged due to the lack of ownership of the programmeresponsibility.

However, in time, it became impossible to monitor the programmes under one administrationaccording to their objectives, since the variety of the public services made it hard for theadministrations to make cooperation on the same subject and each administration had toallocate resources for the same services. In addition, the programme identification issueshould be discussed with a new approach as a result of some requirements such as somepublic services need to be monitored separately according to the features they contain, bynature these services generally have to be performed by more than one administration, theissue how much resource allocated to these programmes (programme costs) was also wantedto be monitored by public. In this respect, it has been assessed to be appropriate that inthe programme budgeting execution, three types of programme classification have to bemade and the programme responsibility has to be determined according to thisclassification.

i. Priority Transformation Programmes: The 10th Development Plan identified25 programmes, “in general under the responsibility of more than one ministry”under the title “Priority Transformation Programmes”11. The content of eachprogramme, covering which public administration and who will be responsible,general coordinators and the indicators were indicated on the basis of thetransforming programmes. Consequently, the authority of programmeidentification regarding the Priority Transformation Programmes belongs to thegovernment. However, it is suggested that the Priority TransformationProgrammes should be detailed in the MTP and to avoid confusion about theprogramme responsibility, one programme manager should be determinedfor each programme.

ii. Thematic Programmes: As mentioned above, some of the public services wantedto be monitored separately according to their features. Nowadays, how budget isallocated to the issues, named, “gender based budgeting”, “budgeting fordisabled”, “children budgeting” is monitored by both the internationalorganisations and the public, and demand for information about this subject isincreasing. These types of public services generally take place under theresponsibility of more than one administration and should be defined under the

10 MoF (1973) 1973 Fiscal Year Program Budget Implementation Manual, p 1011 10th Development Plan, p 170


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title of thematic programmes. The programme managers and the coordinatorsshould be defined by “government level” like the ones in the PriorityTransformation Programmes. The details of these should be determined inMTP.

iii. Other Programmes: The programmes, apart from the ones mentioned above,mainly to be performed under the responsibility of one public administration (i.e.according to the legislation) should be proposed by the related publicadministration. When preparing their budgets the public administrations shoulddesign these types of programmes within the rules identified in the developmentplans and the MTP and in accordance with the strategic plans generated from theprogramme structure. Within these types of programmes, “General AdministrationProgramme” and “To-be Allocated Expenditures Programme” jointly should takeplace in each administration and these programmes will be discussed in moredetail below. These programmes should take place in the MTP document after theprogramme proposal process.

4.1.2. The Process of Programme Preparation and Proposal

It is possible to analyse the principles that the public administrations will follow in twogroups in the process of programme identification and proposal 12 . The first group ofprinciples is more likely to be general qualifications and the second group is theadministration level.

4.1.2.1. General PrinciplesSome general principles regarding the process of the whole programme proposal aresummarised below:

All the activities, tasks and the units of the administration shall take place in theprogrammes.

Budget proposals shall be prepared on the basis of the programme, subprogramme andactivity/project.

The realisation of the programme, subprogramme, and project/activity shall betraceable in terms of budget execution.

The programme manager regarding the single public administration is the topexecutive of that administration. The subprogramme manager is the spending authorityof the related unit.

One programme manager shall be determined for the programmes having more thanone executor. Under the programme, the areas of responsibility for each of the publicadministration shall be defined under the “subprogramme” title by that publicadministration. In this case, the responsibility of activity/project will coincide with thespending authority.

The programme should have outcome indicators related with the policy goals.

12 The Priority Transformation Programmes and the thematic programs in the development plan shall bedetermined mainly by government level; therefore the listed principles are expected to be related with theprograms determined in the framework of the public administrations’ task areas. However, these principals arevalid for the other types of programs conditionally.


37

The general rules to be considered in programme preparation and development of theprogramme proposals are listed below:

As mentioned before, Priority Transformation Programmes and the thematicprogrammes should be determined by the government and should be published byMTP. All the administrations are obliged to include the related PriorityTransformation and thematic programmes into their budgets.

Apart from these, programmes related with the objectives and policies of thedevelopment plans and the MTP shall be proposed by the public administrations totake place in the MTP. In this sense, the government is the owner of all theprogrammes.

The coordination of the related processes of the proposed programmes and theprogrammes having request for suggestion belongs to HPC. The HPC shall takesupport from the SPECC consist of the representatives of the MoF, MoD, Treasuryand sector related ministries while performing the process of programme relatedevaluations and the approval.

The programme and subprogramme catalogue shall be coordinated centrally by theMoD in consultancy with the MoF on behalf of HPC.

The programmes shall be prepared and proposed with the “Programme ProposalForms”.

The responsible administration (additionally the responsible administrations of thesubprogramme in the programmes cut more than one administration), objectives,outputs and indicators of each programme should be determined in the MTP.

It is expected that the programme structure does not change annually, and it isexpected to be addressed as middle and long term. In principle, it is appropriate thatthe lifetimes of the programmes shall be at least as the duration of the MTP. Themain works to be completed in one year time shall be defined as subprogramme,preferably project of activity.

The primary and thematic programmes determined in the MTP and the programmecodes proposed by the administrations and accepted shall take place in the MTP.

The programme structure of the administrations should not be too fragmented, thus itshould avoid having too many exceptionally small programmes (less than 1 to 3% ofthe total expenditure of the administration) or exceptionally large programmes (above50% of the total expenditure of the administration). In cases where the programmestructure is fragmented and there are many exceptionally small programmes,consideration must be given to including these with other programmes. In cases wherethe programme is too large, consideration must be given to splitting it into smallerprogrammes by focusing on the specific objectives of the expenditure items withinthat programme.

The regulations regarding the programmes to be completed in the year and theprinciples regarding the transfer rules within the programme structure showed in theapproved appropriation bill shall be determined by the MoF with the budget acts andthe execution measures every year.


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In compulsory cases in a financial year, programme changes (new programmeaddition, programme closure, and programme combining-separation) shall beproposed. This case shall occur due to a necessity, change in the policy priorities orlegislation change. If TGNA authorises with the Budget act, the coordination andcontrol of this process shall be performed by the MoD in consultancy with the MoF.In principal, it is recommended that the finance source of the newly proposedprogrammes shall be demonstrated and/or the abandoned programmes shall beindicated.

In similar, with the authorisation of TGNA, the required appropriations and the budgetexecution proceedings as the result of programme changes shall be performed by theMoF in consultancy with the MoD.

In cases that the TGNA does not authorise anybody these processes shall be performedby approval of TGNA.

The general principles regarding the programme monitoring will be discussed in the section“F- Monitoring and Evaluation”.

Accordingly, a Programme Proposal Form shall be developed while proposing theprogramme in the process of the budget preparation and the meetings that contains thecontent, objectives, and indicators of the programme with the information regarding rationaleof the proposal.

In this scope the Programme Proposal Form shall cover information such as;

Programme name

Programme code

Finance source

The administration performing the programme

Programme rationale (With a few words for the programmes in the Development Planand/or MTP, and the detailed reason and the benefits of the programme with theinformation about the relation with the international organisations (if exist EU-TIKA-WB-UN) or the policies) for the newly proposed programmes.

Programme manager

The administrations related with the implementation of the programme

The goals, objectives, and the outcome indicators of the programme.

Main information about the programme cost (programme costs shall be consisted ofthe sum of the totals moving upwards from the costs take part in the subprogrammecards and from the activity and project costs below it. The subprogramme cards shallbe the annex of the programme proposal forms).

The envisaged subprogrammes

The beneficiaries of the programme


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4.1.2.2. Principles to be considered in identifying programmesSome issues should be considered when preparing a programme by administration level. Firstissue is the “Service Programmes”, developed for the service production depending on theadministrations’ organisation and establishment goals as mentioned above and the second is the“General Administration Programme”, that will provide support for the first ones. Thisdistinction was adapted in the previous Programme budgeting execution. In the 1973programme budgeting guidelines, consultancy, audit, administrative works, and etc. types ofservices were mentioned that could support all of the services of each administration13. Thistype of services cannot be linked clearly with one or more than one of the main services of theadministration but provides contribution to all of them. With an overborne administrativequalification, the cost of this type of services shall be evaluated with the cost of the serviceprogrammes, in other words shall be allocated to the service programmes, since the cost of aservice programme includes “direct costs” related with that programme and the “indirectcosts” that can be related indirectly with that programme14.

Figure 5. Programme Hierarchy at Administration Level

The General Administration Programme covers the services with the indirect costs, apartfrom this, the “To-be Allocated Expenditures Programme” is defined for the commonexpenditures related with more than one service programme that cannot be determined to

13 Ministry of Finance (1973) p. 1014 Direct and indirect costs and the general rules and methods of allocating them shall be discussed in detail incosting and coding section. When determining the program rules regarding their own budgets, the readers arerecommended to read this section together with the further one.


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allocate at what rate to which service programme in the planning process and for the transfersoutside the administration.

4.1.3. General Administration Programme

Three underlying subprogrammes are defined under this programme.

Top Management Subprogramme

Consultancy and Audit Services Subprogramme

Support Services Subprogramme

The main point of General Administration Programme is inclusion of the managerial activities(for the general operation of the administration) to the subprogrammes under this programme,on the other hand, apart from the general administration activities, exclusion of the activities(i.e. activities provided for the other administrations) from this programme and thesubprogrammes.

For instance;

Expenditures regarding the top managers and secretariats such as the undersecretary,deputies of undersecretary and provincial police chiefs shall take place under thisprogramme. However, expenditures such as the salary and personal rights of thegeneral directors, travelling allowances shall be allocated to the costs of the serviceprogrammes they manage as spending authority. If the same general director managesmore than one programme in his/her unit, then his/her costs shall be allocated amongthese programmes.

In similar, the intra-administration consultancy and audit activities of the consultancyand audit units shall take place under this programme but the expenditures of theservices for the other administrations shall not be included under this programme.These expenditures shall be considered to be in the coverage of the appropriatesubprogramme. For example, a separate service programme shall be defined for thePrime Ministry Inspection Board regarding the inspection and audit activities in theother administrations.

The activities shall take place under the support services subprogramme if they are forintra-administration such as staff/human resources, general informatics services(services for the administration operations such as general computer, joint networkusage, internet, etc.) known as support services. Accordingly, the construction of thecentral administration building shall be monitored under this subprogramme. On theother hand, if a similar service is provided for the other administrations then thisservice shall not take place under the Support Services Subprogramme of theadministration; instead the service shall take place under another related servicesubprogramme. Domestic and overseas postgraduate trainings, seminars, etc. toimprove the institutional capacity shall take place within the Support ServicesSubprogramme under the General Administration Programme. On the contrary, if anadministration gives training service for another administration, then this service shallnot be in this subprogramme. Instead, as mentioned in the example above, a separateservice programme shall be defined for this type of services.


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The activities for improving the institutional capacity are defined under the Consultancy andAudit Services Subprogramme and the Support Services Subprogramme according to theirqualifications. The objectives for improving the institutional capacity should be definedamong the objectives of the General Administration Programme.

As a general rule, the cost of the general administration services added in this wayshould be allocated to the service programmes by the end of the year, via previouslydefined cost allocation tables in line with the above principles. The cost allocation isrecommended to be done preferably by semi-annually in a fiscal reporting period. Thedetailed information regarding the general principles of cost allocation tables and theadministration responsible for developing the tables is given in the section of service costing.

4.1.4. To-be Allocated Expenditures Programme

This programme serves for more than one (sub)programme excluded from the GeneralAdministration Programme. In addition to that; also transfers can be made from oneadministration’s budget to other administrations in terms of economic classification. This typeof expenditures can be defined by separating to two subprogrammes under this title.

Common Service Expenditures Subprogramme: The activities/projects that is directlyrelated to more than one service programmes, but whose costs cannot be allocated tothe related service programmes during the planning as the allocation tables are notclearly defined at the beginning shall take place under this subprogramme. Forexample; in case of delivering both primary and secondary education services in oneschool building being constructed; during the planning of construction, if the numberof the students in the related education stages is unknown, then the allocation ratios ofthe construction cost of the service building to the related subprogrammes shall beunknown. In similar, in an active hospital, if both therapeutic and protective healthservices are delivered, as the number of the patients that the service delivered isunknown at the beginning, then the hospital costs cannot be allocated at the beginningof the planning period. Likewise, because e-School software developed in MoNE isbeing used by every education stage it is impossible that the related cost is allocated tothe service programmes/subprogrammes at the beginning of the planning period. Asexplained in the examples, the costs counted as the direct expenditures of more thanone service programme shall be monitored under the Common Service ExpendituresSubprogramme. The expenditures, whose costs shall be monitored under the title ofthis subprogramme, shall be allocated to the other related subprogrammes by using theallocation tables to be developed on the basis of the service area at the end of the fiscalyear. As a result of the dissemination of the usage of the proposed model (with thesoftware) and stored data of previous years, all the common expenditures shall takeplace under the related service programmes gradually because a healthier estimationcan be done; therefore in time there will be no need for this subprogramme.

Transfers to the Other Administrations Subprogramme: Transfers can sometimes befor certain sectors. In this case, it is appropriate that these transfers shall be linked withthe related function at least on the basis of functional classification and/or take placeunder the title of a related programme or a related subprogramme if exist (for examplein the budget of the Treasury, the link of the capital transfers for the State OwnedEnterprises with the Service Programmes related with the economic and financepolicy).


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In this type of programmes, in the process of budget execution and reporting of finalaccounts, the following main principles are expected to be respected:

By the fiscal reporting year (at least by the end of the year or preferably by six monthsperiod) the total amount appearing in these subprogrammes should be allocated to theservice programmes.

To-be Allocated Expenditures Programme can only be used as a memorandumprogramme. In other words, in cases of hesitation that the expenditures cannot beplaced under a related programme, no expenditure is allowed to be placed under thissubprogramme.

However, the items that the administration acts as an intermediary in the transfer oftransfers and the items such as payments made against the expenditures related toprior years shall be monitored under the title of this programme.

In case of hesitation, the expenditure shall be monitored under the related programmecode by taking the opinion of related SPECC.

Apart from these, especially, there shall be situations like assigning personnel in morethan one programme. In this case, the personnel cost shall be allocated to theprogrammes that he/she is assigned by the cost allocation tables. On the contrary, inparticular, in the situation of paying the salary to those personnel the issue of who willbe the spending authority shall cause a debate. Some recommendations about thissubject are given in Section 5.4.

It is particularly important that the process of the programme preparation be defined withinthe framework of these principles and be integrated into the process of the current budgetpreparation.

4.2. Subprogramme

4.2.1. Identification and Definition of Subprogrammes

Subprogramme is the narrow scoped part of the services included in a specific programmeand it is directly related with the spending authority. Subprogrammes are designed mainly bythe public administrations to support the programmes for achieving their purposes. In otherwords, subprogrammes are parts of the programmes. Some special themes wanted to bemonitored by the high level policy documents are added in the plans and the budgets of theadministrations to be placed under the programmes (thematic programmes). In general, theenvisaged process for the programmes is also valid for the subprogrammes. As programmesare related with the spending unit authority, then subprogrammes shall be under theresponsibility of the same spending unit authority.

The main principles of identification of subprogrammes are listed below:

As being a part of a programme, subprogrammes should consist of the activities andthe projects forming a meaningful complement with each other which will ensure theprogramme achieve its goals.

The activities and projects to be placed under subprogrammes should be considered tocomplete and/or substitute each other.


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The authorised unit for preparing subprogrammes is the administration/unit authorisedfor the programme.

Programme manager can also be responsible for the execution of the subprogrammes,and can authorise one subprogramme manager for each subprogramme (if the numberof subprogramme is more than one, then for two or three subprogrammes)

Subprogrammes shall correspond to the objectives in the strategic plan of theadministration which will be generated when the programme structure is completed.

Subprogrammes should be based on the administration’s organisation structure as faras possible.

The components within the scope of the Priority Transformation Programmes in the10th Development Plan mainly correspond to subprogrammes.

If a programme is identified in the high level policy papers concerning more than oneadministration, then a responsible administration for each of the subprogrammes ofthat programme should be identified. In this case, the top manager of the responsibleadministration can give the responsibility of the subprogramme to a spending authorityin his/her administration.

In similar, if an administration is responsible for the programme according to highlevel policy papers, and then the top manager of that administration should identifyeach subprogramme to be corresponded with the spending authorities in theresponsible administration.

In the subprogrammes concerning more than one unit (particularly the ones under theGeneral Administration Programme), the subprogramme unit manager shall beassigned by the top manager. The appropriations of unit authorities cannot be seenseparately in the document of the Budget Act even they are presented on the basis ofthe spending unit during the proposal. In this case, they shall be distributed viaDetailed Expenditure Programme to be prepared by the administration at thebeginning of the fiscal year.

Subprogrammes should be avoided from exaggerations in terms of numbering. Thenumber of subprogrammes is recommended to be between 2 and 10 although it maychange according to the qualification of the service.

Subprogrammes should have a special name that can define the activities and theprojects constituting those subprogrammes.

If a unit in the administration, as a part of its own subprogramme, delivers a service(i.e. a special computer technology service) to contribute to a programme or asubprogramme belonging to another unit, then the costs of this service should bepresented separately in the subprogramme

The principles mentioned in the programme section are valid for the subprogrammesto be developed regarding the expenditures to cannot be allocated to the serviceprogrammes

When identifying the subprogrammes, there should not be any tasks left outside thatare mentioned in the legislation for that administration. In similar, there should not beany spending unit left outside in the organisation scheme, every unit should be ensuredto correspond with at least one subprogramme. The linking with the spending unit will


44

ensure the separation of the spending signature responsibility. Spending, responsibilityand authority of the liability shall be operated at the subprogramme level.

Within each service programme a subprogramme regarding the administration of theservice should be defined. This subprogramme is not for monitoring the outputs andoutcomes but for monitoring the costs of the programme.

Subprogrammes are also monitored as a part of the Programme Catalogue.

The implementation rules of subprogrammes (authorisation of transferring variousappropriations of subprogrammes) are identified in the Budget Act and the implementationinstructions.

4.2.2. Preparation and Proposal Process of Subprogramme

Subprogrammes are prepared via Subprogramme Proposal Forms developed in line withthe high level policy papers for this purpose.

Subprogramme Proposal Form shall cover information areas such as;

Programme name

Subprogramme name

Responsible spending unit

Duration

Rationale of subprogramme

o The costs and benefits of the subprogramme

o The assumptions and risks/intervention methods

Subprogramme objective/output and performance indicators

List of the main activities and projects included in the subprogramme and theestimated costs

It is particularly important that the preparation process of subprogramme is identified withinthe framework of these principles and be integrated into the current process of budgetpreparation.

4.3. Activity

4.3.1. Definition and Scope of Activity

As a general definition, activities are the measurable group of tasks performed to transforminputs to outputs in the process of producing goods and services. More precisely, activities arecomposed of tasks given by the organisation law to the administration and unit; and of mainservices and steps delivered to the other administrations. In the budget systematic, activitiesare the manageable and costable production and services of the administration undertakesat the programme level for performing the public related services that can be managed andcosted. In this framework, the main criterion is that the activity serves for previously definedobjectives and goals related with the public service.

Project, resulting with a unique service or product is a complement of organised and plannedprocesses and is for one-time.


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A project should have all the qualifications mentioned below:15

1. A specific objective,

2. Clearly defined beneficiaries, stakeholders and target group,

3. Clearly defined coordination, administration and fiscal regulations,

4. Monitoring and evaluation system,

5. Estimated cost of completion; fiscal and economic analysis mentioning that thebenefits are over the costs,16

6. Start and finish date, a plan for achieving the objectives,

7. The planned inception before starting the business, stages and a controlledtermination.

In practice, activity and project are usually used as separate terms in budget because of havingcurrent and capital features, respectively. While activity is defined as homogeneous andrepetitive actions for realizing a certain objective, project is defined as the combination of for-once actions organized to achieve results aimed with three major factors: target, time andresource.

In the scope of the model, project is perceived as an activity performed for once, havingcertain start and closure dates, therefore activity is perceived as a term which covers bothactivities and projects. While activities cover projects for constituting integrity, a projectdirectly related to thematic subjects is also considered as an activity. Activities can be dividedinto sub-activities until the business management level that the administration approves. Inthe model, “activities compose of sub-activities under them” approach is adopted instead ofusing activity and sub-activity, project and subproject terms. Activity (Proposal) Form will beused both for activity and project proposals. If type of the activity is chosen as “project” in theform, then fulfilment of additional fields will be required.

Activities should be developed for realizing subprogrammes. Targets envisaged bysubprogrammes will be realized through activities.Achievement of outcomes envisaged by activities requires usage of human resources andphysical resources at the institutional level that can be defined as input. In this sense, thebudget resources of activities and their level of funding will be presented through costing.

As a result, main factors determining activities can be listed as follows:

To be based on specific subprogramme objective,

To be defined for realizing subprogrammes,

To be composed of similar structural organized works,

To achieve outputs by using inputs,

To be costable based on unit and output,

15 Technical Assistance for Decision Making and Performance Management in Public FinanceEuropeAid/129067/D/SER/TR, Preliminary Analysis Report, Annex 3 - Key Terms, 26/09/2013.16 Technical Assistance for Decision Making and Performance Management in Public FinanceEuropeAid/129067/D/SER/TR, Program Budget – Business Management Model. E2. COST-BENEFITANALYSIS GUIDE, 31/07/2013.


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If it is a project, in addition to the factors above, to be performed for-once and havingcertain start and closure dates.

Relations between activities and management responsibility areas can be shown as inFigure 6:

Figure 6. Activity - Project Relation and Responsibility Areas

4.3.2. Preparation and Proposal Process of Activity

Activities will be principally identified by administrations according to the criteria determinedby MoF. Besides, in order to ensure standardisation in implementation, a mutual activity poolshould be improved firstly in coordination of administration and then of MoF. Activitiesinside this pool should be gathered under two subtitles:

First list covers general activities that all administrations can use (generaladministration, consultancy and audit, security, cleaning services, in-serviceeducation, civil defense, etc.)

Second one covers categorizing administrations according to their service areas andmain activities related to these areas (Health, transportation, energy, education, childcrime, poverty, social welfares, etc.)

When identifying the activities, administrations will offer the activities and add theseactivities to their own pools. In this situation, administration will take a new code after


47

confirmation of activity under its own administration through applying to the MoF. In thisprocess, it is suggested that ministry and administration to come together as much as possibleand to work for standardising activities.

If the projects have investment characteristics they are reflected to the annual InvestmentProgramme. In the justifications related to projects that require investment-type expenditures,apart from the importance of project, size of the project, completion time, annual expenditurerequirement, labour capacity, current expenditures and savings which will be required in thefollowing three years after the project is completed and other benefits should be mentioned. Ifthe project is an ongoing one, it is important that planned and realised expenditures in the pastyears and numeric information describing predicted and achieved physical results should takepart in justifications.

Expense items under each service subprogramme and related to more than one activity butcannot be allocated into these activities directly will be shown under the “To-be AllocatedActivity Expenditures” title. To be allocated activity expenditures in the frame of allowanceusage in the budget implementation in a year will be zeroed out by allocating them to theactivities under the related subprogramme.

During the budget preparation process, an Activity Form will be prepared for each activitywhich will be used mutually with project. Activity Form is also important for calculatingservice cost through linking activity with subprogramme at output - outcome level.

Activity Form should have the below information:

Programme name

Subprogramme name

Activity name

Responsible expenditure unit

Activity target/output and indicators

Resource structure related to activity Cost of used inputs and their justification at economic level (additional increases,

changes in factors that affect cost, etc.)

Explanations (description, target, justification, legal base, expected outputs, etc.)

If it is project type, start and end dates.

If it is investment type, other characteristics to be determined by MoD.


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5. PROGRAMME BUDGETING PROCESS

5.1. Budget Preparation Process

In the programme budgeting implementation, budget preparation and submission to the TGNAwill be handled in a different way than existing budget preparation process. This process is theprocess that administrations are preparing programme, subprogramme and activity/projectproposals. This process should be designed in the manner of both supporting preparationprocess of high level policy documents (DP, MTP, and MTFP) and preparing budgetestimations in consideration of parameters obtained from them. In this respect, handling theprocess in an iterative way between central administrations (MoF, MoD and Undersecretariat ofTreasury) and spending administrations and giving enough time to the administrations toprepare and defend their budget should be the main approach.

1. Proposal Process of Programmes: Programme budgeting preparation process startswith preparation of Programme Proposal Lists, Programme and SubprogrammeProposal Forms in the context of DP and MTP by administrations, taking into accountthe administration strategies, with multi annual budgeting approach namely “futurefinancial year + 2 years” perspective in period of January-March and sending it to theHPC. It is suggested that main steps should be as follows:

a. Each spending unit will send the proposal list of programmes that they areresponsible for or will be responsible for to the Strategy Development Unit(SDU) by revising, adding new programmes or removing some programmesthrough making required queries. In this process, Programme Proposal Formsare used (January-15 February).

b. SDU, after controlling programme proposals according to the Control Listswill submit the consolidated programme proposals to the top managementapproval. Then, SDU will send the approved Programme Proposal List ofAdministration by top management to the HPC (end of February).

c. HPC will direct the Programme Proposal List sent by administrations to theSPECC according to its sector and the administration who proposed.

d. SPECC, by evaluating proposals, will send its opinion and suggestions as aconsolidated programme list (General Administration Programme List) to theHPC until March 15th.

e. Cabinet will confirm the General Administration Programme List containingapproved programmes by HPC until March 31th and will announce it bypublishing in the Official Gazette.

2. Subprogramme Proposal Process: Administrations will prepare subprogrammeproposals under the coordination of SDU for the programmes related to them andwhich are in Cabinet Decision since April 1st. It is suggested that the process to becompleted within April. According to this,

a. Spending units of each administration will fulfil the Subprogramme ProposalForms and send them to the SDU. SDU submits the subprogrammes to the topmanagement’s approve by consolidating them after making necessary controlsaccording to the Control List (April 15th).


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b. SDU will send the approved Subprogramme List by top management to theHPC (April 30th).

c. HPC will send subprogramme lists to the SPECC for evaluation.

d. HPC will approve the subprogrammes according to the opinion andsuggestions, thus the Programme/Subprogramme Catalogue to be published inMTP will have been prepared.

3. Budget Process: After the completion of programme and subprogramme proposalprocesses in this way, budget process starts with publication of MTP and MTFP. Inthe scope of model, some changes are suggested in the existing process. First of all,MTP will have the characteristics of being a broader document which contains moredetailed programmes and subprogrammes, and more clearly mentioned policies relatedto them compared to old one. In parallel, MTFP will be a document in which macrovariables to become base for budget estimations and programme based allowanceceilings are determined.

According to this, budget process is suggested to be designed as following (June 1st –October 17th);

a. MoD will publish MTP which contains programmes and subprogrammes byHPC decision until at the very latest May 30th,

b. MoF will publish MTFP until the same date (May 30th),

c. MoF will publish budget call (June 15th),

d. Spending units will start the process of activity/project proposal (June 15th –July 30th). In this process, firstly, Annual Objectives corresponding to thebudget year of targets determined in subprogrammes are identified (Title 5.2).Annual Objectives express the indicator values determined according toallowance ceilings. The important thing is to prepare the activities according tothe indicator values and the allowance proposals to the Annual Objectives.This approach will provide the performance programmes to be produced in thisperiod,

e. Administrations will send their budget proposals (therefore the performanceprogramme obtained from programme structure) to the MoF (August 1st),

f. Budget negotiations will start iteratively with the administrations and will beconcluded (August 1st - September 30th). The important issue in here isnegotiating one more time with MoF whether achieving process ofprogramme/subprogramme objectives will be provided by available allowanceceilings or not and whether additional allowance will be required or not.According to this, in case of not getting additional allowance, the necessity ofchanging programme objectives shall be discussed in this stage,

g. MoF will submit budgets proposed by administrations to the Plan and BudgetCommittee of TGNA by consolidating them based on programmes andsubprogrammes (October 17th). Activity forms are presented in annexes forinformation purpose.

Brief process table is as follows (Table 2):


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Table 2. Programme Budget Preparation Process

January February March April May June July August September October

Programme PreparationProcessSubprogramme PreparationProcessBudget Preparation ProcessProgramme List being approvedin Cabinet is declared toadministrations.

March31th

MTP being approved in HPCand which contains programmeand subprogramme lists ispublished.

End ofMay

MoF publishes MTFP. End ofMay

MoF makes budget call. June15th

Administrations startactivity/Project process.

June15th

July30th

Administrations send budgetproposals to the MoF.

August1st

Budget proposals are conferred. August1st

September30th

MoF consolidates budgetproposals based on programmesand subprogrammes andsubmits to Plan BudgetCommittee.

October17th

5.2. Annual Objectives and Indicators

Annual objective is the main factor that links budget process with programme/subprogrammeprocess. Annual objectives link two processes by expressing planned outputs to be realised inprogramme period to achieve programme/subprogramme objectives on one hand and outputsto be achieved as the result of activities on the other hand.

Annual objectives are constituted together by top managers and spending authorities of publicadministrations in the determined framework of priorities and under the coordination of SDU.In this process, spending units related to the annual objectives of the administration are alsoidentified. Main constraint in the phase of identifying annual objectives is the resources thatthe administration can have in the programme period. Resource limits according to the publicadministrations in the scope of centralized management are determined by allowance proposalceilings identified by MTFP and other resources that administrations can provide out of thebudget.

Other public administrations in the scope of general administration also determine theirannual objectives according to budget and off-budget resources they own. Annual objectivesare determined at the institutional level and are related to one or more than one spending unit.If the subprogramme targets are output-based then they can be used as annual objectives.

In this scope, conditions concerning annual objectives of the administrations are as follows:

To be realized with activities,

To be determined by considering the limitation of resources,


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To be specific, accessible, realistic and measurable with performance indicators,

To be output-oriented,

To be determined in limited numbers.

Performance indicators are determined to measure and evaluate the achievement level to theannual objectives. Performance indicators;

Can measure whether annual objectives are achieved or not,

Shall be measurable, accessible, provide reliable data,

Shall be comparable with indicators of both past periods and similar administrations,

Achievement and evaluation costs of data shall be at acceptable level.

5.2.1. Performance Indicators

Value dimension in performance measurement means to formulate the indicators of input,output, and outcome as “ratio indicators”. This formulation shows us some numeric relationsbetween outcomes and outputs achieved by inputs, and measuring this requires us to know theinput and output costs. Hence, information provided about cost of service programmes canensure us to have idea about whether the resources are used “economic, efficient andeffective” or not through these rational indicators. Explanations below can give idea aboutwhat these indicators can be. Spending administrations can calculate costs of programme,subprogramme and activity/project by output and outcomes through this base and also canhave idea about how they use resources by comparing it with their own past outcomes and/orwith performance of similar administrations.

Obtained outputs shall be reflected as quantity and quality. For example, if the outputdefinition is “number of trained unemployed”, then the indicator section must show the exactnumber of this study. If there is no tangible plans, administrations shall provide estimatednumbers based on previous years’ trends and experience analysis. Two different kinds ofindicators can be implemented such as Quantity (quantitative) and Quality (qualitative)indicators.

While quantitative indicators focus on data such as work load, production amount, number oftransactions, number of registration, usage rate, consumption, frequency which can becompiled directly from operational systems; qualitative targets focus on values liketimeliness, being out-off service, failure rates, fullness of stocks, citizen satisfaction whichcan be obtained through qualitative analysis methods.

Indicators should be as follows:

1. Simple, clearly mentioned and specific. Should give message which can be clearlyunderstood by policy makers, decision makers and public.

2. Reliable: Chosen indicator should strongly be related to the objective desired to bemeasured. For example, if the objective is to decrease the criminal activities related todrugs, the indicator shall be case numbers concerning drugs; if the objective is toincrease the life standard, the indicator shall be the percentage of individuals who havedisposable income more than 20.000 TL; if the objective is to increase the foreign


52

direct investment, the indicator shall be the foreign direct capital investment capacitydone by Turkish Liras in our country.17

3. Measurable: The data to be used for the indicator should be updated regularly andeasily accessible.

4. Controllable: Instead of choosing many indicators, choosing few traceable indicatorswould be better to monitor.

5. Accountable: It should be clear that which subprogramme or which unit ofadministration will be responsible for obtaining output and reporting to the identifiedtargets.

Indicators can also be categorised related to the production process of service:

- INPUT INDICATORS: Provides information about allocated resources to provideservice. These are indicators concerning economy. For example, number of employee,used goods and services, heating, illumination, square measure of used property orland, number of used machine (for vaccination), vaccine, number of injectors are suchindicators.

- OUTPUT INDICATORS: it gives information about performance of goods/serviceproduced as a result of a process with regard to service level and generated job. In onesense, it is quantitative, and provides us to have information about the physical workproduction level. Number of hours, road length for maintenance in transportationservice, number of books in library, number of educated people and number ofvaccinated children can be examples for output indicators.

Auditees, delivered mail in Operational Aspect; signed contracts, submitted demandsin Intermediate Outputs Aspect; updated accounts, maintained machines in SupportServices Aspect can be examples for output indicators.

- OUTCOME INDICATORS: Provides us information about the effect of providedservice on beneficiaries and even on large society layers. Outcome indicators can becategorised as intermediate outcome, final outcome depending upon time dimension.If outcomes to be achieved are affected from external factors substantially togetherwith performed activities, these can be called as impact. Decrease in number of crimecommitted by juveniles, decrease in long term unemployment, increase in illiteracy,decrease in children’s disease, improvement in infant mortality ratios are outcomeindicators.

Outcome indicators are used to measure to what extent the delivered service achievedthe determined standards and targets. In other words, it tests whether the service hasreached the excepted outcomes or not. These indicators include consumer satisfactionand citizen participation indicators, because perception is measured. These can bedetermined rather by surveys. Quality indicators can be determined by using qualitystandards as a base. Outcome indicators are related to Effectiveness.

It is also possible to mention about the efficiency (or Productivity) indicators whichdescribe the relation between input and output, and relative transaction or production cost.As an example;

17 Examples are just imaginary and prepared to give idea to the users about how to use program budget cost termtogether with evaluation system.


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- Number of vehicles controlled in speed control per officer (In the scope of DecreasingTraffic Accidents Programme of Turkish National Police),

- Number of inspected enterprise per inspection (In the scope of Healthy FoodSubprogramme),

- Number of patients accepted per doctor (500 patients/10 doctosr= 50 patients perdoctor – in the scope of optimising the length of Treatments in HospitalsSubprogramme of Ministry of Health),

- Hospital expenditures per discharged patient,

- Cost per audit,

- Tax administration cost per tax-payer.

The important thing is having a good accounting and finance system to propound costwholesomely by administration.

Below list can be mentioned for efficiency growth:

- Decreasing input for targeted output (it does not seem possible in public because ofexisting personnel regime) or

- Increasing targeted output with existing input.

Detailed information about determination of output and indicator is presented inDetermination of Outcome Output and Indicator (31/07/2013) document as Annex 03 ofTechnical Assistance for Decision Making and Performance Management in Public FinanceEurope Aid/129067/D/SER/TR, Model Report.

As it seems, budget expenditures and cost of provided services will be effective onmanagement’s decisions about economy, productivity and quality of provided services, andthey also provide useful information about reviewing, ending or changing the implementedprogrammes. Moreover, knowing target/performance indicators in programme budgetingtogether with their costs and achieved outcomes by allocation of costs to the relatedprogramme and subprogrammes and related reporting provide an important functionaccording to the accountability.

5.3. Linking Programmes and Subprogrammes with Institutional Strategic Plans

Strategic Plan is defined as “a plan which contains public administrations’ medium and longterm targets, main principles and policies, objectives and priorities, performance criterions,methods to achieve them and resources allocation” in PFMCL.

In the proposed model, together with the forming of service programme structure,programmes are corresponded to strategic objectives and subprogrammes are corresponded tostrategic targets in this structure. In this approach, forming process of strategic plan will becoincided with determination process of programme and subprogramme (Figure 7).

Moreover, administrations can have institutional progress targets for supporting the efficientand effective performance of service programmes by improving current structures ordeveloping new ones. Mentioned institutional progress (development of capacity) activitiesshall be under Supporting Services Subprogrammes which is discussed in the model.


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Figure 7. Programme Structure and Macro and Institutional Planning Relation

5.4. Activity Costing

5.4.1. Conceptual Framework

Costing subject has been mentioned in previous sections especially while handlingprogramme determination essentials and some initial explanations have been mentioned abouthow different cost terms can be linked with administration’s activities and how to allocatethem.

It was mentioned that “cost” term can be defined as expenditures for inputs being used forgoods and services production in a corporation. Similarly in public administrations, costexpresses expenditures on different inputs used to produce a public service. In this sense, costis considerably linked in particular with current expenditures in expense items under“economic classification” in ABC (Adopted from Government Final Statistics).

Possible costing of services produced in public sector provides useful information formanagers, TGNA and public opinion when considered with proper performance targets.Performance system is beneficial for the evaluation whether the determined targets areachieved or not as well as to interrogate whether public resources are used properly or notwhen achieving these targets. Adopting “effective, economic and efficient usage of publicresources” is possible only by linking the cost with the achieved outcomes and the work done.In this way, TGNA, public and the managers of spending administration can have idea about


55

whether the money spent is useful or not (public benefit achieved in return of public resourcesspent – Value for Money).

The principal of cost calculation is an important issue about programme budgeting. Fullcosting means calculation and allocation of a program cost in detail and by considering all thecost factors and being valid of accrual accounting in public accounts as it is in a privatecorporation. In this aspect, principles listed below reflect this kind of costing approach.Factors below shall be paid attention for costing. Costs are calculated by the budget year. Thecosts paid for services produced in the previous year do not take part in the cost calculation ofthis year.

Every budget expenditure is not a cost.o For example, transfers from budget because of legal obligations or public

policies are classified as budget expenditures but do not take part in publicservice cost provided by that administration.

o Although payments for debit interests taken for general purpose (budgetfinancing) are budget expenditures, they do not take part in cost of producedservice.

Every cost is not a budget expenditure.o For example, even cost of real estate or machine takes part in budget of the

year that they are bought; annual depreciation cost rises from usage throughuseful life of real estate or machine take part in cost of service producing.However, depreciation does not take part in budget as expenditure.

o In a similar way, huge construction investment expenditures do not take part inproduction cost of administration’s programme until the construction is done.After the investment enters into service, annual depreciation value is evaluatedas cost factor.

Consumable material which was bought but not put into production process yet (notused) is included into cost after started to be used.

Loan interests used for programme and subprogramme implementation are includedinto cost of related programme in payment period.

As it is known, existing accounting system in our country is not compatible with this kind ofcosting because of accrual based financial accounts and cash based budget accounts. Hence, itis suggested that principles which are not applicable for our country shall not be paid attention(for instance, depreciation etc.). Instead of this, calculating service costs by using existingcost items is suggested to be a more practical approach.

5.4.2. Direct and Indirect Costs

After determination of which budget expenditure of spending unit will be included into cost inthe abovementioned way, second issue to be handled is determining which of these costsdirectly belong to related programme-subprogramme and/or activity and project. Because,although some of these costs can be associated directly with implemented programmes someof them cannot be attributed to just one programme and can be used mutually by more thanone programme. In this situation, these costs must be allocated to all programmes in certain


56

rules. According to this, it was mentioned before that costs can be divided into two groupslike direct and indirect costs.

Direct Costs: As it can be understood from the title these costs can be attributed to a serviceprogramme or to an activity directly and these are the costs that can be taken in productionprocess for implementation of that programme and for production of service. As an exampleof these costs:

Salary and wages,

Purchase of goods and services which are used directly for related programme andactivities (consumable materials),

Hire charge for renting a vehicle, machine, equipment and similar items for a certainactivity,

Per diems, travelling expenses,

Depreciation of machine, equipment.

Indirect Costs: These are the costs of activities which help to more than one serviceprogrammes. In the model, costs in the scope of General Administration Programmecorrespond to indirect costs. It is suggested that allocating these costs to the programmes atleast at the end of the year, preferably every six months and zeroing out them shall beadopted. Some titles of these costs are;

High level management expenditures (including executive support unit),

Common used phone, fax, internet services,

Audit expenditures,

Insurance expenditures,

General operating expenditures (heating, fuel, electricity, cleaning etc.) in buildingswhich are used by more than one department (like ministry buildings),

Fixed asset depreciations even there is no possibility for implementation in ourcountry.

As it can be understood from the explanations about programme structure, it is possible toseparate direct costs in themselves. How to separate these costs is an important issue forprogramme structure in public financial management. As it was mentioned in the previoussections, some activities cannot be separated to service programmes directly and in practice itis possible to prevent seeing real costs thoroughly by including various costs under theseitems by means of taking the easy way out. In addition to this, separation of costs is importantfor identifying the responsible staff for spending in administrations. Explanations mentioneduntil here can be seen clearly in the table below.


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Table 3. Cost Programme Relation in Programme Budgeting System

ProgrammeType

CostType

ServiceProgrammes

GeneralAdministrationProgrammes

To-be AllocatedExpendituresProgramme(Common ServiceExpendituresSubprogramme)

To-be AllocatedExpendituresProgramme(Off-AdministrationOriented transfersSubprogramme)

Direct Costs Yes. Personnelsalary thatprovides service tomore than oneprogramme isincluded.

No Yes. Aforesaidexpenditures are notallocated in planningperiod they are in thedirect cost scope becauseof being allocated toother serviceprogrammes during yearor at the end of the year.

No Do not involveany service costfactor.

Indirect Costs Yes No. It is not a direct costfactor, either.

Function of allocation table system in costing is being mentioned below which has beenreferred in general terms up to now.

5.4.3. Programme Allocation Tables

As a general principle, cost factors are suggested to follow a bottom-up hierarchy towardsdifferent activities and then to subprogrammes and programmes. In other words, costs shallstart from activity and projects, and shall generate sub totals towards to subprogrammesgenerated by them and then shall reach to total cost of programme from total costs ofsubprogrammes.

During the calculation of direct costs, following the method in Figure 8 shall be useful.

Figure 8. Programme Costing

On the other hand, numbers of items listed above for direct costs, which correspond toeconomic classification in budget shall be allocated to the service programmes by usingcertain allocation tables.

As a principle, MoF will be responsible “to determine general bases” for how to allocatedifferent cost items to service programmes and allocation tables will be generated proper tothe general principles. Besides, each administration is expected that to generate its owncriteria by using general principles considering the service delivery characteristics. Because,

Costing Programmes

Costing Subprogrammes

Costing Activity and Projects


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administration has the information of cost allocation in its internal structure more than anyoneelse.

From this point of view, cost allocation principles are just indicators, and administrations candevelop them according to their own requirements.

First of all, it is useful to mention some allocation principles.

Costs which are related to just one activity shall be allocated to that activity and to therelated subprogramme and programme.

Direct costs related to more than one programme (for example, personnel salary in thesituation of General Directorate to manage more than programme) shall be allocated inproportion to working hours if working hours can be followed by a schedule if not inproportion to surveys conducted to personnel, if none of them are possible it shall beallocated equivalently. In this situation strategy development units can be charged forsurvey, time schedule development and for pursuing.

Indirect costs like general administration expenditures which cannot be attributed tojust one programme shall be allocated fairly by using some main allocation criterions.Examples below can provide idea about these allocation criterions.

o Number of telephone lines/numbers of total line

o Number of computers/number of total computers

o Occupied office zone/total office zone

o Number of personnel/number of total personnel (ratio of paid salary)

o Indirect costs of programmes/total costs (Example 1)

The below examples are given for better understanding of the subject:

Example 1. Allocation of Cost of Personnel assigned to More Than One ProgrammeFor example, 2 personnel of MoF in Budget and Financial Control General Directorate servedin two programmes of the ministry, simultaneously. At the end of the year costs are going tobe allocated to programmes. Personnel mentioned their time ratio as % in interviews withSDU. It is possible to calculate cost allocation as in table below.Table 4. Allocation of Cost of Personnel assigned to More Than One Programme

Name ofPersonnel

MonthlyGrossSalary

+Other

Payments

Number ofWorkedMonths

Total Salary Time Spent Cost AllocationProg. 1 Prog. 2 Prog. 1 Prog. 2

A 3000 12 36000 0, 60 0, 40 21600 14400B 5000 8 40000 0, 35 0, 65 14000 26000Total 76000 35600 40400


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Example 2. Allocation of Expenditures for Natural Gas Heating to ProgrammesThree General Directorates are conducting all programmes of Ministry of Energy andNatural Resources and the number of these programmes is 6. Natural Gas Due price paidfrom Administrative and Financial Affairs Department’s budget is 100.000 TL. It isindicated that the volume (m3) as allocation table is declared before and it is known thathow much volume is hold by each department. According to this, while heatingexpenditures are allocated, not just General Directorates’ cost but also heating cost ofauxiliary service units (Administrative Financial Affairs, personnel etc.) which do notconduct any programme will also be distributed to programmes. In here, units whichconduct the service will undertake the volume of high level management and supportservices in proportion to the volume which they occupy and natural gas cost will bedistributed to programmes according to the new volume proportions that occur concerningwith this process.Table 5. Allocation of Indirect Expenditures to Programmes

NaturalGasInvoice 200000 TL

Volume ofAllocation table(m3)

ProgrammeGeneralDirectorate/Dep.

Volume

All Units%

% ExceptUnits notHaveServicePrg.

Volume Dist. OfUnits not HaveService Prg.

TotalVolumeAllocation

Total %Allocation

Allocation ofcosts to theServicesPrograms

1 ABC/1 300 17,14 25,00 137,50 437,50 25,00 500002 ABC/2 200 11,43 16,67 91,67 291,67 16,67 333333 XYZ/1 250 14,29 20,83 114,58 364,58 20,83 416674 XYZ/2 150 8,57 12,50 68,75 218,75 12,50 250005 MNO/1 150 8,57 12,50 68,75 218,75 12,50 250006 MNO/2 150 8, 57 12,50 68,75 218,75 12,50 25000

Total 1200 100,00 550,00 1750,00 100,00 200000Units nothaveServicePrg.

Personnel/HighLevelManagement/Auditetc. 550 31,43

Total 1750 100,00

Example 3. Allocation of Expenditures of High Level Management Personnel etc. toService ProgrammesPurchase of annual personnel, other current goods and service of high level management,executive support unit, consultancy and audit unit of the same ministry is 300000 TL. Thereare 6 programmes conducted by ministry. Allocation table is determined as the ratio ofindirect costs of programmes to total cost of programme. An alternative to this can be toallocate equally.Table 6. Allocation of Expenditures of High Level Management to Service Programmes

Expenditure of High LevelManagement

Allocation table According toShare of Indirect Costs of

Programmes Measure

ProgrammeGeneral Directorate /

Department Indirect Costs of Programmes % Share Allocation of costs1 ABC/1 150000 6,59 197802 ABC/2 325000 14,29 428573 XYZ/1 250000 10,99 329674 XYZ/2 450000 19,78 59341


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5 MNO/1 600000 26,37 791216 MNO/2 500000 21,98 65934

Total 2275000 100,00 300000

As it is mentioned, calculations are mostly done to be a base for activity report after finalaccounts are reported at the end of the year and done by assumption of linking costs withperformance indicators published in budget related to that year. Even the same method canbe used in the beginning of budget preparation and costs can be distributed, theexpenditures in particular cannot be allocated to the service programs can be deceptivewhen take part in budget according to these principals. Instead of this, calculating theservice programmes cost (as direct + direct/indirect costs distributed by allocation tables) atthe end of the year or in every six month (when the realisation data is obtained) might bebetter because seeing whether the targets have been achieved or not and seeing real costs ofprogrammes at the end of service production process shall be more realistic.

5.5. Budget Coding

Another subject, as important as costing is, re-identification of budget code system reflectingcost information to the programme structure, namely, if we consider the implementation inour country, main idea is to extend ABC by reflecting the programme structure. In thissection, the principles regarding two important subjects expected to be obeyed will behandled.

It is necessary to categorise different transactions in budget according to various objectives.Budget requires classification of budget information as being a document that is submitted toTGNA, informing public and providing information to executors about how much servicethey have produced with how much resources within their spending liability and authority,and thus to develop policies.

According to the general accepted method, budget expenditure classifications are divided intovarious categories under the title of ABC. ABC is not a budget technique and not a budgettype. It has to conclude these classifications no matter what the type of the budget is (classic,zero based, programme or performance based budgeting etc.)

Four different types of classifications are still being implemented in budget system.

Economic Classification: This classification shows how much resources are usedfrom budget. It is called economic classification since it requires knowing the effectson economy. Personnel, current investment and transfer expenditures are main subtitles of this classification. Economic classification also gives information about“inputs” used by public administrations during service production. It gives answer toquestions like “How much salary has been paid? How many cleaning materials havebeen bought? What happened to electricity, water invoices?

Institutional Classification: This classification is based on classification of theexpenditures based on administration that is responsible for spending. For example,budget can be classified according to various ministries and administrations likeMinistry of Environment and Urban Planning, General Directorate of Highways,Ministry of National Defence, and Ministry of Education. In the new institutionalclassification, main purpose in the context of spending flexibility is to help the to see


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the administrative and performance responsibility in return for flexibility provided tomanagers in the administrative structure and hierarchy of the administration.

Functional Classification: The main innovation included into our budget system byABC is functional classification. Functional classification gives information aboutresults and direction of intervention to economy by government. For instance, thegovernment can make policies regarding arranging income distribution, decreasingpoverty in society by looking at the shares of health, education and social securityexpenditures to the total expenditures in the functional classification of the budgettables or/and via making comparisons with the tables of other similar countries.Functional classification is divided into 10 categories by considering internationalpractices.

1. General Public Services (economic policy, legislation, debt management,customs)

2. Defense Services (Turkish Armed Force, civil defense)

3. Public Order and Safety (police, coast guard, court, justice)

4. Economic Affairs (agriculture, energy, foreign trade, transportation)

5. Environmental Protection

6. Housing and Community Amenities

7. Health

8. Recreation, Culture and Religion

9. Education

10. Social Protection

Unfortunately this classification is entangled because of having institutional and economiccodes. This is the first answer to the question “why functional classification is not being usedfor programme classification”. Another reason is the removal of the possibility of definingprogramme that serves for more than one function.

Financial Classification: This classification is special for our country. It consists ofone digit code and divided into 8 categories. These categories are:

1. General Budget Administrations

2. Special Budget Administrations

3. Regulatory and Supervisory Authorities

4. Social Security Institutions

5. Local Administrations

6. Private Allowances

7. External Project Credits

8. Conditional Grants and Aids

The purpose here is to see the resources of these expenditures through inter-institutional fundtransfers that is very complex in our country come from. The benefit of this is primarily the


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prevention of duplication during the consolidation of general government accounts. Second isto assist seeing whether the activity of an administration is provided by its own budget or bycontribution of another administration.

Programme Budgeting Classification: In our country, the economic classificationhas been implemented together by the programme budgeting approach for many years.The main issue here is making classification for the objectives to be achievedaccording to plans and programmes on the basis of administration. However, as it ismentioned before, programme budgeting failed because objectives have not been setrelated to performance and of many other reasons. Hence, the classification system hasturned into allowance-based budgeting on the basis of economic division. An examplefrom that period in which the system was implemented is being shown below to givean idea about code division.

Administration Code: 82 …Undersecretariat of Treasury101. Programme Code: Government Debts Information System

101. xxx 01.99 Subprogramme: Internal Debt Information System

1…Economic Classification: Current Expenditures (Allowance Type)

001 Activity Code: Education Project

100 Expenditure Code: Personnel Expenditures-Salaries

200 Expenditure Code: Personnel Expenditures-TravellingAllowances

300 Expenditure Code: Service Procurement

102…Programme Code: Support for Agricultural Activities

…02. 05. Subprogramme: Direct Income Support

2…Allowance Type: Investment Expenditure

001 Activity Code: Farmer Registration System

600 Computer Procurement

This system, despite providing detailed budget information together with other classifications,as it mentioned in the beginning, has become inapplicable in time because of not having aquestioning system about the achievement of objectives and of both institutional resistanceand system focusing only on input usage. Central Budget and accounting system have notbeen designed to compile this kind of information.

Here, thinking of “Functional classification might do the same function partly withoutprogramme budgeting code system” can be possible. However, because of the reasons listedbelow it was thought that including programme budgeting code system to the ABC as a fifthclassification will contribute to actualize objectives expected from programme budgetingsystem.

In the 10th Development Plan, a range of programmes have been determined under thename of “Priority Transformation Programmes”. Defining them in functionalclassification can make difficulty for pursuing programme costs.


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Similarly, for seeing the thematic programmes covering more than one administrationat a single glance, monitoring them in separate titles under the programmeclassification can be a more practical method.

Although programmes are parallel with organizational classification, they are actuallynot similar. If the organisation chart is formed in functional-based, it is possible to seeparallelism between programmes and spending units. For example; Private EducationProgramme of Directorate General of Private Education in MoNE. However, GeneralDirectorate of Basic Education is responsible for both Pre-school Programme andPrimary Education Programme. Hence, separate programme coding shall providefacility to monitor two different programme of the same unit.

Encountering economic codes in existing ABC functional 4th stage, identifyingfunctions at high level according to whole public and thus necessity of going to lowerlevels for catching the institutional requirements, and the flexibility of program orsubprogram to be linked with more than one function (for instance teaching hospital)increase the necessity of separate programme coding system.

As a result, it will be more beneficial to arrange programme budgeting system in a manner ofProgramme Classification as an addition to organizational, functional, financial and economicclassifications in the scope of ABC and as xxx. xxx. xxx. xxx coding structure. The importantpoint here is to determine Priority Transformation Programmes and thematic programmecodes in MTP and that the administrations responsible for the components of theseprogrammes can use these codes commonly, and therefore while on one hand spendingresponsibility is separated it also provides the possibility of achieving the integrated outcomesrelated to programme objectives and costs on the other hand.

By benefiting from the pilot studies and the names of the primary transfer programmes in the10th Development Plan, the programme 102 in the abovementioned example, according tomodel structure, will be designed as following when the coding is presented in detail in MTP.

015. Rationalization Programme of Public Expenditures 18

015.002. Providing Effectiveness in Agricultural Supports19

015.002.001. Direct Income Support

Programme Classification, will be defined as a new classification list in addition to existingquartet classification lists (economic, functional, institutional and financial). First two levels(Programme and Subprogramme) will be managed centrally and common on a country basis.Activity/project level will be detailed according to administration’s decision. Administrationwill prepare budget proposal by filling the activity forms. However will;

make budget discussions with MoF through 3rd level (for the routine activities and currentprojects) activity forms, and

make investment discussions with MoD through the activity forms filling as investmentproject regardless of level.

18 Development Plan 1.5. Primary Transformation Program19 Development Plan 1.5. Primary Transformation Program, 2nd Component


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In the framework of the abovementioned subject, the budget proposal will be submitted toTGNA at programmes levels that administration benefits from and as an integrated one. Forinformation purpose, Subprogramme and first level Activity Forms will be included to thebudget submission. Main physical data will also take part in addition to the objectives,activities and projects related to the administration in the submitted programme budgeting.

The first year of draft budget will be voted in TGNA which is submitted for three-yearframework. In the submission phase of budget format, it will be submitted for five-yearframework that covers previous two years, following two years and the current year of budgetperiod.

TGNA vote level will be realised by programmes. Each programme shall have one or moreprogramme objective. For each programme objective one or more indicator shall be presentedwith their expected values.Table 7. Budget Presentation - TGNA Voting Level

Code Programme (P)

Objective(O)

Indicator(I)

T-1 T T+1 T+2 T+3

KBÖ* Expenditure KBÖ End ofAugust

Exp.

Year-endExp. Est.

Proposal Est. Est.

xxx P1 P1O1 P1O1I1

P1O1I2

xxx P2 P2O1 P2O1I1

P2O1I2

P2O2 P2O2I1

P2O2I2

* KBÖ: Total allowance measure given in financial year beginning together with appropriation bill

TGNA votes the budget by seeing table/schedule B and clear financial tables for the relatedadministrations. Hence, TGNA votes the revenue and financing by voting at programme levelwhich is the main items.

The budget will cover the approved subprogramme texts in the phase of appropriation billwhen approved at the programme level. In this way, the TGNA will have approved theperformance indicators with the objectives of the programme and subprogramme.


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Table 8. Budget Submission – Appropriation Bill Level

Code Prog.(P)

Subprog.(SP)

Objective(O)

Indicator(I)

T-1 T T+1 T+2 T+3

KBÖ Exp. KBÖ End ofAugustExp.

Proposal Est. Est.

xxxP 1

P1O1 P1O1I1

P1O1I2

P1SP1P1SP1O1 P1SP1O1I1

P1SP1O1I2P1SP1O2 P1SP1O2I1

P1SP1O2I2

xxx P2

P2O1 P2O1I1

P2O1I2P2O2 P2O2I1

P2O2I2P2SP1 P2SP1O1 P2SP1O1I1

P2SP1O1I2P2SP2 P2SP2O1 P2SP2O1I1

P2SP202 P2SP2O1I2

If it is considered that performance programme is combined with the budget when submittingthe budget to the TGNA as a package, the annual objectives and the annual performanceindicators will take place in the draft budget in detail information tables.Table 9. Budget Annual Objective and Indicators

Code Programme(P)

Subprogramme(SP)

Objective

(O)

Annual

Objective

(AO)

Annual Performance

Indicator

(API)

xxx P 1

P1O1

P1SP1

P1SP1O1 P1SP1O1AO1 P1AP1H1YH1API1

P1SP1O1AO2 P1AP1H1YH2API1


P1SP1O2AO2 P1AP1H2YH2API1

xxx P 2

P2O1

P2O2

P2SP1


P2AP1H1YH1API2

P2SP2



In the framework of the abovementioned subjects, the Activity Based Business ManagementModel will reflect the relation among the macro planning/programming – institutionalplanning/programming, and performance – budget. Discussed relations and levels in the scopeof this model are summarized in Figure 9.


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Figure 9. Activity Based Business Management Model


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6. BUDGET IMPLEMENTATION

Budget will be submitted to TGNA by programme, subprogramme, objective, indicator andallowance levels. Before the submission to the TGNA, MoD will evaluate programme andinvestment budgets and MoF will evaluate the whole budget. That is the reason whyadministrations will submit their budget proposals at activity level and linking with budgetrealisations. After the evaluation of consistency of the submitted budget with the programmeobjectives on the basis of objectives and indicators, meetings regarding budget details will becarried out between central administrations and spending ministries.

After the budget approval in TGNA, the administrations will prepare their operationalprogrammes for budget implementation and sent it to the MoF in January. In theimplementation programme, budgets will be allocated at activity level, annual performanceindicators related to subprogramme and programme indicators will be allocated by quarterlyperiods in the framework of the determined Detailed Expenditure Programme.

This allocation will be set up on principles and calculation method envisaged in GeneralCommunique to be published by MoF. MoF will do the estimated allocation of main budgettotals in the meetings related to budget financing with Undersecretariat of Treasury andaccording to this will determine the expenditure and financing totals related to periods withUndersecretariat of Treasury.

Arrangements related to programmes to be completed within the year and the principlesrelated to transfer rules in the legalized programme structure will be determined by MoF withbudget laws and implementation precautions every year. As a main principle, transfersbetween programs, subprogrammes and activities will be within the responsibility of TGNA,MoF and the Administration, respectively. It is predicted that transfer authority betweenprogrammes which belong to different administrations will be within the authority of TGNAor MoF until the determined limit by delegation of authority. Transfer authority betweenprogrammes belong to same administration will be implemented with the proposal of theadministration and the approval of MoF.

In mandatory conditions, programmes amendments within the year (adding a new programme,programme termination, and programme combination-separation) may be offered. This situationmay occur because of any requirement, changes in policy priorities or legislative amendment. Ifauthorized with Budget Law by the TGNA, the coordination and control of this process will becarried out by MoD in consultancy with the MoF. It is important to show financial resource ofprogrammes to be proposed as a principle and/or to mention existing programmes to beabandoned.

Similarly, the allowances and the budget implementation to be performed at the end of theprogramme amendment, within the authority provided by TGNA, will be carried out by MoF inconsultancy with the MoD.

If TGNA do not authorize with Budget Law, these processes will be actualized by TGNA’sapproval.

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Table 10. Budget Year and Implementation Programme

Programme(P)

Subprogramme(AP)

Annual Objective(AO)

Annual PerformanceIndicator

(API)

AnnualAllowance

Q1 Q2 Q3 Q4

P 1 P1SP1

P1SP1O1AO1 P1SP1A1O1AO1API1




…

Q: Quarters

Table 11. Budget Year and Implementation Programme (for Activity)

Subprogramme(SP)

Activity (A) Annual Objective(AO)

Annual PerformanceIndicator

(API)

AnnualAllowance

Q1 Q2 Q3 Q4

P1SP1 P1SP1A1

P1SP1A1O1AO1 P1SP1A1O1AO1API1



P1SP1F1O2AO2 P1SP1A1O2AO2API1

…

Q: Quarters

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7. MONITORING AND EVALUATION SYSTEM

One of the main goals of programme budgeting implementation is to determine theachievement of public service programmes. In order to illustrate the success of theprogrammes, it should be identified whether objectives are achieved or not and the resourcesused for achieving objectives should be linked. The monitoring and evaluation structureshould be developed for presenting the transformation of the public resources to socialoutcomes.

Monitoring is a continuous process for gathering information and analysis to see the progressof the project, programme or a policy in comparison with the expected outcomes. It is acontinuous function based on systematic gathering of data regarding certain indicators,ensuring the administration and the stakeholders to intervene with the findings related to theusage of resources and achievement of objectives 20 . On the other hand, Evaluation isanalysing the convenience, effectiveness, efficiency, effect and sustainability of the planned,ongoing or completed programme. While monitoring has the characteristic of continuousactivity and evaluation has the characteristic of “project” studies to be performed at certaintimes. Evaluation studies assist to come to a conclusion in terms of effect, efficiency,effectiveness, sustainability and correlation of programmes by benefiting from the outputs ofthe monitoring activity.

Indicators are the milestones of monitoring and evaluation system in the programmebudgeting system. As it is mentioned in the previous sections, result oriented indicatorsshould be developed at the programme and subprogramme level. At the activity level,performance indicators should be determined to show the outputs produced annually.

7.1. Monitoring in Programme budgeting system

Monitoring is actualized via indicators which are previously determined;

Monitoring of programme, subprogramme and activities is actualized by responsibleadministrations;

Administrations prepare forms in Figure 8 and 9 for all programmes andsubprogrammes;

In the programmes which are in the coverage of more than one administration, theprogrammes and subprogrammes are monitored by the responsible administration/unitand the activities are monitored by the responsible administration/unit;

Existence, sustainability, validity and reliability of monitoring data are observed byresponsible administration/unit and for this reason the required data system isprovided;

Monitoring results are published in the reports of the responsible administration/unitannually and they are reported to MoF and MoD;

In the activity reports, planned values and realised values are shown based ondetermined indicators, reasons of deviations are explained and necessary correctionsare defined if any;

20 OECD/DAC Glossary of Key Terms in Evaluation and Results-Based Management, 2002.

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SPECC publishes monitoring results by consolidating them at programme andsubprogramme level.

7.2. Evaluation in Programme Budgeting System

It is essential to evaluate programmes annually. At the same time, it is suggested toevaluate the programme when it is completed;

Evaluations shall be analytical, systematic, reliable and focused on the subject and thebeneficiary;

Evaluation is conducted by responsible administration or independent experts carryout the evaluation on behalf of the administration;

Evaluation reports are sent to MoD, MoF, Court of Accounts and SPECC and they arealso announced to public.

SPECC may demand an evaluation concerning programmes and subprogrammes fromresponsible administrations or it can make an evaluation itself or can have independentexperts to evaluate.

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8. FURTHER STUDY

It is important to evaluate the model and all the sub processes determining the model in the frameworkof the issues below and to be tested in the pilot administrations with ex-ante practices. In this scope, itis suggested to make the studies below:

Evaluating the proposed model according to macro planning process and institutional planningprocess together with the ministries and discussing the practicability;

Carrying out pilot practices of the model at three main institutions having differentcharacteristics, within the period of 10th Development Plan based on a joint study of MoD andMoF;

Realising ex-ante practices of the proposed structure and budget preparation, implementationand monitoring-evaluation processes in detail at the pilot administrations;

o Revision and simplification of the budget forms to produce more structuralinformation,

o Making a systematic way of collecting data related to business, physical and financialinventory, shifting the rationale to a structural format from a text structure as far aspossible,

o Carrying out studies concerning costing and cost accounting model during thisprocess,

• Determination of cost (and revenue) units,

• Development of cost form approach regarding each programme,subprogramme and activity/project,

• Standardisation of the allocation tables regarding the common programmes inparticular,

Reviewing the processes proposed during the pilot implementation process in terms of currentlegislation and determination of to do arrangements,

Completing studies about the level of integration with the internal control system,

After the pilot studies and evaluations, sharing the model with the line ministries together withthe first findings, making the revisions in particular for implementation according to thefeedbacks,

Carrying out intensive information and training studies regarding the general overview of themodel and critical subjects.

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9. LINKS WITH THE NEW STRATEGIC PLANNING GUIDELINES

The New Guidelines for Strategic Planning developed within the scope of the TR2010/0136.01-01/001-Technical Assistance for Improved Strategic Management Capacity project suggests that theadministrations should prepare their Strategic Plans based on the 10th Development Plan and PrimaryTransformation Programs. In other words, when preparing their Strategic Plans, administrations willtake into account their strategic goals and activities. In addition to that, administrations will reflecttheir goals, objectives and activities related to their routine works given by legislations to thePerformance Programme.

In this respect, “New Activities” mentioned in this model are suggested to be the activities related tostrategic objectives; in short they are suggested to be reflected in the budget in parallel with thePerformance Programme and the strategic objectives that take place in the Strategic Plan of theadministration.

In the newly designed Guidelines for Strategic Planning, “general administration expenditures”correspond to the expenditures under “General Administration Programme” and the “UnallocatedExpenditures” correspond to the expenditures under “To-be Allocated Expenditures Programme” inthe FEYS model. What matters is to decide whether all the projects and activities or strategicobjectives related projects and activities will take part in the Strategic Plan.

activity based business management model (feys)

Government & Nonprofit