Budgeting for Results:Budgeting for Results:news from the southnews from the south

Jaime Crispi Jaime Crispi Head of Research, Budget Office Head of Research, Budget Office

Ministry of Finance of ChileMinistry of Finance of ChileNovember 2004November 2004

22

General PropositionsGeneral Propositions

Instruments are means towards Instruments are means towards objectives objectives The government budget is a complex The government budget is a complex assembly of public policy instruments assembly of public policy instruments oriented to multidimensional objectivesoriented to multidimensional objectivesObjectives are operationally expressed Objectives are operationally expressed through (measurable) resultsthrough (measurable) resultsBudgeting must be geared towards Budgeting must be geared towards (multidimensional) measurable results(multidimensional) measurable results

33

This PresentationThis Presentation

The Macro Dimension: Chile´s Fiscal RuleThe Macro Dimension: Chile´s Fiscal Rule

The Micro Dimension: Chile´s The Micro Dimension: Chile´s management control systemmanagement control system

News from the South: they can (and News from the South: they can (and should) be integratedshould) be integrated

44

Macro Dimension of the Budget: Macro Dimension of the Budget: Objectives (expected results)Objectives (expected results)

From the macro dimension fiscal policy has From the macro dimension fiscal policy has several complementary objectives:several complementary objectives:Support short term stability of the economySupport short term stability of the economyAssure long term sustainability of public finances Assure long term sustainability of public finances (government´s net worth) (government´s net worth) Support a stable pattern of interannual financing Support a stable pattern of interannual financing for public programsfor public programsProvide stability to different agents of the Provide stability to different agents of the economy (credibility) economy (credibility)

55

Macro Dimension of the Budget:Macro Dimension of the Budget:Instruments and conditionsInstruments and conditions

To obtain these results fiscal instrument To obtain these results fiscal instrument must (at least) be:must (at least) be:

Technically well designedTechnically well designedWell adapted to the normative framework (laws Well adapted to the normative framework (laws and norms) in which they are to operateand norms) in which they are to operatePolitically sustainable Politically sustainable

66

Chilean fiscal policy in the 1990s:Chilean fiscal policy in the 1990s: the standard view the standard view

Conventional balance (PSBR) and central government net debt

(as % of GDP)

-3,0%

-2,0%

-1,0%

0,0%

1,0%

2,0%

3,0%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

-45,0%

-35,0%

-25,0%

-15,0%

-5,0%

5,0%

15,0%

25,0%

35,0%

45,0%

77

Cíclical component of the Cíclical component of the budget 1987-1999budget 1987-1999

0,8

3,2

4,4

2,4

0,7 0,8

-0,2 -0,1

1,4

0,7 0,8

-0,3

-1,4

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

88

Structural balance in ChileStructural balance in ChileThe structural balance reflects the budget balance that would The structural balance reflects the budget balance that would obtain if GDP was at its trend level and copper price is at its long obtain if GDP was at its trend level and copper price is at its long term level. It is thus adjusted by the effect the economic cycle and term level. It is thus adjusted by the effect the economic cycle and the price cycle of Chile´s main commodity ongovernment the price cycle of Chile´s main commodity ongovernment revenues.revenues.Trend GDP is estimated through the standard methodTrend GDP is estimated through the standard method. .

• Production function Y = A KProduction function Y = A KLL

• Trend level of inputs is provided by a comittee of external Trend level of inputs is provided by a comittee of external expertsexperts

Long term copper price is provided by comittee of external expertsLong term copper price is provided by comittee of external expertsTax revenues are adjusted by GDP gapTax revenues are adjusted by GDP gapCopper revenues are adjusted by the price gap Copper revenues are adjusted by the price gap

99

Structural BalanceStructural Balance

tstt

ttttts ICIC

YY

TTBAB ,

*

, *

It doesn’t in itself involve a policy It doesn’t in itself involve a policy rule. It is simply an indicator on rule. It is simply an indicator on which to base itwhich to base it

1010

Chilean fiscal policy: Chilean fiscal policy: re-reading the storyre-reading the story

-2,0

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

3,0

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Effective Balance Structural Balance

1111

It allows automatic stabilizers to operate, thus It allows automatic stabilizers to operate, thus softening the economic cycle (supports stability)softening the economic cycle (supports stability)With right target neutral long term effect on With right target neutral long term effect on government’s net worth (sustainability)government’s net worth (sustainability)Limits the need for abrupt expenditure changes Limits the need for abrupt expenditure changes in the extremes of the cycle (stable financing for in the extremes of the cycle (stable financing for government programs)government programs)If transparently implemented, provides a clear If transparently implemented, provides a clear time horizon for other agents (credibility)time horizon for other agents (credibility)

Why a rule targeting Why a rule targeting the Structural Balancethe Structural Balance

1212

Institutional conditionsInstitutional conditionsCentralized fiscal authority: only the Centralized fiscal authority: only the executive power has initiative in fiscal executive power has initiative in fiscal matters; centralized and broad based tax matters; centralized and broad based tax system; only central government can levy system; only central government can levy taxes and issue debt. taxes and issue debt. Constitutional ban for revenue earmarking Constitutional ban for revenue earmarking Mid term fiscal projections incorporated Mid term fiscal projections incorporated into budget process.into budget process.

1313

Political conditionsPolitical conditionsPolitical stability associated to democratic Political stability associated to democratic consolidation.consolidation.Fiscal deterioration in previous years (fiscal deficit Fiscal deterioration in previous years (fiscal deficit of 1,4% of GDO in 1999) of 1,4% of GDO in 1999) As new government assumes (2000) incipient As new government assumes (2000) incipient economic recovery generates political space (short economic recovery generates political space (short period between Asian crisis and posterior global period between Asian crisis and posterior global slowdown)slowdown)Overall: generally broad consensus over fiscal Overall: generally broad consensus over fiscal responsibilityresponsibility

1414

Intermediate ResultsIntermediate Results

1997 1998 1999 2000 2001 2002 2003 2004 (e) 2005 (p)Effective Balance 2,1 0,4 -2,1 -0,6 -0,5 -1,2 -0,4 1,9 1,2Total Cyclical Component

1,2 -0,2 -1,3 -0,8 -1,4 -1,7 -1,2 1,0 0,3

Structural Balance 0,8 0,6 -0,8 0,1 0,9 0,5 0,8 1,0 1,0

(percentage of GDP)

1515

SustainabilitySustainability

Public debt projection under normal cyclePublic debt projection under normal cycle

1616

What the markets say What the markets say (credibility)(credibility)

0

200

400

600

800

1000

1200

1400

EMBI Chile´s Country Risk

1717

Overall macro results:Overall macro results:External crisis and fiscal External crisis and fiscal

policypolicy1975 1982 - 1983 1999 2001-2002

ICE -0,4 -4,7 -5,8 -5,9GDP Growth -13,3 -8,5 -1,1 2,5Unemployment (Average) 15,3 19,1 9,8 9,1Total Public Spending (real growth) -22,8 -2,1 4,7 4,4Public Investment (real growth) -46,8 -13,2 4,7 7,6

Source: Ministry of Finance and Central Bank of Chile,(1)    The Índice de Condiciones Externas is expressed as a porcentage of GDP and incorporate the effects of changes in the exchange terms, export volumes and levels of capital flows.

1818

Micro Dimension of the Budget:Micro Dimension of the Budget: the nature of the problem the nature of the problem

Governments experienced a significant change in the scope of their Governments experienced a significant change in the scope of their activities throughout most of the 20th centuryactivities throughout most of the 20th centurySuch change implied moving from the provision of classical public goods Such change implied moving from the provision of classical public goods to become massive service providersto become massive service providersToday 3/4 of government activity is providing servicesToday 3/4 of government activity is providing servicesYet service provision from governments is supposed to happen in a Yet service provision from governments is supposed to happen in a transparent, objective waytransparent, objective wayThis results in government organizations having:This results in government organizations having: Multiple mandatesMultiple mandates Broad, sometimes diffuse objectivesBroad, sometimes diffuse objectives Free service provisionFree service provision

This involves a peculiar framework for public management, where This involves a peculiar framework for public management, where performance is not a straightforward conceptperformance is not a straightforward concept

1919

Management control in the Management control in the private sectorprivate sector

COMPANY CUSTOMERSRESOURCEPROVIDERS

BALANCE$$$

INPUTS GOODS AND SERVICES

REVENUES

$$$

COSTS

$$$

2020

Management control in the Management control in the public sectorpublic sector

GOVERNMENT

ENTITYCITIZENSRESOURCE

PROVIDERS

INPUTS PUBLIC GOODS AND SERVICES

COSTS

$$$

TREASURY

FUN

DIN

G

TAXES

PERFORMANCEINFORMATION

LINE-ITEMBUDGET

+PERFORMANCE

ASSESMENT=

PERFORMANCE BUDGET

2121

Micro Dimension: Micro Dimension: performance questionsperformance questions

Ex-ante questions:Ex-ante questions: Are programs/policies likely to achieve their aims?Are programs/policies likely to achieve their aims? Have programs/policies been designed cost-effectively?Have programs/policies been designed cost-effectively? Are investment projects socially profitable?Are investment projects socially profitable?

Ongoing:Ongoing: Have programs/policies operated as planned?Have programs/policies operated as planned? Were public goods and services provided transparently?Were public goods and services provided transparently? Did programs/policies achieve their aims?Did programs/policies achieve their aims? Was the set of programs/policies in an area consistent?Was the set of programs/policies in an area consistent? Are things improving?Are things improving? Is contribution of public managers and employees to results Is contribution of public managers and employees to results

properly acknowledged/rewarded?properly acknowledged/rewarded?

2222

Chile´s Management Control Chile´s Management Control System: InstrumentsSystem: Instruments

Performance indicators Performance indicators Bidding FundBidding FundManagement Improvement ProgrammesManagement Improvement ProgrammesProgram EvaluationProgram Evaluation

2323

Performance IndicatorsPerformance IndicatorsAimed at telling how a government organization is performing Aimed at telling how a government organization is performing over timeover timeAgencies compete with their past recordAgencies compete with their past recordOngoing, periodical informationOngoing, periodical informationMeasure performance in different:Measure performance in different:

Dimensions (effectiveness, efficiency, economy, service quality)Dimensions (effectiveness, efficiency, economy, service quality) Delivery levels (process, output, outcome)Delivery levels (process, output, outcome)

Need reliable data collection methodsNeed reliable data collection methodsChilean experience:Chilean experience:

Started 1994Started 1994 Incrementalist approach, starting on voluntary basisIncrementalist approach, starting on voluntary basis Budget-relatedBudget-related Disclosure policy: Congress and general publicDisclosure policy: Congress and general public Subject to growing quality standardsSubject to growing quality standards

2424

Performance IndicatorsPerformance Indicators2005 Budget2005 Budget

Government Functions Process Product Total

Itermediate Final Total

A General functions

85 168 36 19 55 308

B Social Functions

224 436 108 53 161 821

C Economic Functions 87 297 64 11 75 459

Total 396 901 208 83 291 1.588% 25.0% 56.7% 13.1% 5.2% 18.3% 100%

Source: National Budget Office

Result

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CurrentBudget Inertial

spending

Unallocatedpool

Bidding Fund•Started 2000 with preparation of 2001 Budget•Competitive bidding mechanism to improve rationale of budget allocations•Aimed at moving away from incrementalist practices•Inertial spending strictly constrained•From comparison with spending ceilings, unallocated pool of resources

2626

Bidding FundBidding Fund

Ministries submit bids for resources from poolMinistries submit bids for resources from poolBids require submission based on logical Bids require submission based on logical framework matrix (aims, goals, expected framework matrix (aims, goals, expected results, components, indicators, target results, components, indicators, target population)population)Many programs with sunset clausesMany programs with sunset clausesFinance makes proposal on basis of quality, Finance makes proposal on basis of quality, consistency with government priorities and consistency with government priorities and strategies, President makes final decisionstrategies, President makes final decisionProvides benchmark for future assessmentProvides benchmark for future assessment

2727

Management improvement Management improvement programsprograms

Started 1998, from agreement with public sector unionsStarted 1998, from agreement with public sector unionsReward mechanism for central government employeesReward mechanism for central government employees

PUBLIC SECTOR PAY STRUCTURE

70%

22%

8%Grade basesalaryPersonalallowancesPerformance-related

• Bonus determined by organizational performance

2828

Management improvement Management improvement programsprograms

First two years: performance against quantitative goals, 1,200 indicatorsFirst two years: performance against quantitative goals, 1,200 indicatorsBudget unable to assess relevance and accuracy, 99.5% received Budget unable to assess relevance and accuracy, 99.5% received maximum benefitmaximum benefitIn 2000 focus changed towards assessing progress in managerial systems In 2000 focus changed towards assessing progress in managerial systems developmentdevelopmentManagerial systems in 7 areas:Managerial systems in 7 areas:

Human resourcesHuman resources Customer serviceCustomer service Strategic planning and management controlStrategic planning and management control Internal auditingInternal auditing DecentralizationDecentralization Financial managementFinancial management Gender focusGender focus

For each of the above, previous regulations, directives, but little complianceFor each of the above, previous regulations, directives, but little compliance

2929

Program evaluationProgram evaluationAssesses ongoing programs against their stated aims and Assesses ongoing programs against their stated aims and expected resultsexpected resultsRequirements: relevance, independence, timeliness, transparencyRequirements: relevance, independence, timeliness, transparencyStarted 1997Started 1997Budget-relatedBudget-relatedPrograms selected with CongressPrograms selected with CongressPerformed by independent evaluators selected by public tenderingPerformed by independent evaluators selected by public tenderingEvaluators with authority to request information, commission Evaluators with authority to request information, commission studiesstudiesCounterpart in ministries/agencies in charge of programsCounterpart in ministries/agencies in charge of programsReports to Budget, full disclosure to Congress and the publicReports to Budget, full disclosure to Congress and the publicFollowed by formal agreements between Budget and AgencyFollowed by formal agreements between Budget and Agency

3030

Types of EvaluationsTypes of EvaluationsProgram reviewsProgram reviews

Review consistency in design, execution and reportingReview consistency in design, execution and reporting Based on logical framework methodologyBased on logical framework methodology Performed by panels of 3 independent experts, selected by public tenderingPerformed by panels of 3 independent experts, selected by public tendering Final reports in 6 monthsFinal reports in 6 months

Program evaluationsProgram evaluations Assess program effectiveness on basis of impact measuresAssess program effectiveness on basis of impact measures Methodology includes extensive data collection, more sophisticated Methodology includes extensive data collection, more sophisticated

evaluations techniques (CBA, CEA), control groupsevaluations techniques (CBA, CEA), control groups Performed by consulting firms, universities, selected by public tenderingPerformed by consulting firms, universities, selected by public tendering Final reports in 1-11/2 yearsFinal reports in 1-11/2 years

Comprehensive expenditure reviewsComprehensive expenditure reviews Assess consistent of ministry/agency portfolio of programsAssess consistent of ministry/agency portfolio of programs Search for duplications, inconsistencies, opportunities to generate sinergies Search for duplications, inconsistencies, opportunities to generate sinergies

and savingsand savings

3131

EVALUACIÓN – PROCESO

Evaluación.• Resultados• Recomendaciones

Compromisos Institución / Ministerio de Hacienda• Acciones Específicas• Plazos

Seguimiento

• Selección de Programas• Selección de Evaluadores• Preparación de Antecedentes• Capacitación y Preparación Marcos Lógicos Preliminares

Envío al Congreso

3232

Program evaluations 1997-2004Program evaluations 1997-2004  1997-

19992000 2001 2002 2003 2004 Total

Program reviews80 20 18 14 13 13 158

Impact Evaluations    2 4 4 (4) 14

Comprehensive Expenditure Reviews

      1 2 (2) 5

Total 80 20 20 19 19 19 177

( ) = Under progress

Program reviews+impact evaluations: US$ 3.1 bn in govt. expenditure; 61% of program spending

3333

Evaluation Evaluation effects of program reviews effects of program reviews and and eevaluations valuations 202000-200400-2004

Effects Percentage of Programs

1.- Minor adjustments 24%

2.- Important changes on program design and management processes

39%

3.- Major program re-design 21%

4.- Institutional re-location 6%

5.- Program ending 10%

Total 100%

3434

Compliance with corporate agreements Compliance with corporate agreements Evaluated programs and institutions 1999-2003Evaluated programs and institutions 1999-2003

Partially Not Total N° of CommitmentsAchieved Achieved Valid by 30/06/2004

MINISTRY OF AGRICULTURE 74% 25% 1% 134MINISTRY OF NATIONAL RESOURCES 100% 0% 0% 15MINISTRY OF NATIONAL DEFENSE 57% 43% 0% 14MINISTRY OF ECONOMY, DEVELOPMENT AND RECONSTRUCTION 80% 20% 0% 64MINISTRY OF EDUCATION 70% 20% 10% 205MINISTRY OF FINANCE 92% 8% 0% 24MINISTRY OF JUSTICE 88% 12% 0% 33MINISTRY OF MINING 54% 41% 5% 22MINISTRY OF PUBLIC WORKS 85% 15% 0% 33MINISTRY OF PLANNING AND COOPERATION 77% 16% 7% 206MINISTRY OF FOREING AFFAIRS 45% 44% 11% 54MINISTRY OF HEALTH 74% 23% 3% 66MINISTRY OF TRANSPORT AND TELECOMMUNICATIONS 64% 26% 10% 39MINISTRY OF HOUSING 90% 9% 1% 76MINISTRY OF INTERNAL AFFAIRS 72% 18% 10% 102MINISTRY OF LABOR AND SOCIAL SECURITY 52% 44% 4% 54GOVERNMENT GENERAL SECRETARIAT MINISTRY 39% 26% 35% 188PRESIDENTIAL GENERAL SECRETARIAT MINISTRY 82% 16% 2% 49 Average/Total 69% 22% 9% 1378

Ministry Achieved

Percentage of achievement of commitments Qualification

Note: The current commitments correspond to a universe of 77 evaluated programs and 8 evaluated institutions.

3535

Uses of Evaluations at the Public Agencies (Period 2000 – 2003)

Survey results

Use of evaluation results in resource allocation

  Agency level Ministry level

Managers of the Program

56% -

Head of Planning Unit 61% 60%

Ministerial Coordinators - 47%

3636

Use of evaluation results in budget preparation at agency level

- Justifying existing allocation. 30%

(Head of Planning Unit and Managers of the program)

- Allocating resources within the program.

32%

(Head of Planning Unit)

- Compelling or pushing change of work processes in the program.

31%

(Managers of the program)

3737

AssessmentAssessment

Strong integration into decisionmakingStrong integration into decisionmakingMostly due to link with budgetingMostly due to link with budgetingBut also due to openess, availability to But also due to openess, availability to CongressCongressTimeliness and independence as key featuresTimeliness and independence as key featuresExtensive training, development of Extensive training, development of evaluations community inside and outside evaluations community inside and outside governmentgovernment

3838

Assessment by World Bank team Assessment by World Bank team (forthcoming)(forthcoming)

Seeks to generate useful information on programs for Seeks to generate useful information on programs for budget process even comprising abstract standardsbudget process even comprising abstract standardsExternal evaluators guarantee objective, transparent External evaluators guarantee objective, transparent evaluationsevaluations““Factory” of evaluations, generates value added for Factory” of evaluations, generates value added for policy decisions at low costpolicy decisions at low costQuality of some evaluations is compromised by Quality of some evaluations is compromised by shortcomings in program design more than by shortcomings in program design more than by evaluation methodsevaluation methodsAdvantages of centralization outweight disadvantagesAdvantages of centralization outweight disadvantagesNeed to further stregthen ownership of evaluations by Need to further stregthen ownership of evaluations by ministries and agenciesministries and agencies

3939

Quest for complementarity, Quest for complementarity, consistencyconsistency

BUDGETMANAGEMENTIMPROVEMENT

PROGRAMS

COMPREHENSIVEPERFORMANCE

REPORTSPERFORMANCE

INDICATORSPROGRAM

EVALUATIONS

BUDGET BIDDING FUND

PERFORMANCEPAY

PUBLICREPORTING

4040

PREPARATION

APPROVAL

EXECUTION

EVALUATION

Integration into Budget cyclePerformancetargets

Programs

for evaluation

Performance pay

Indicators

Comprehensive

performance reports

Performance indicators and targets

Program evaluations

Project appraisal

New requirements

to PMS

4141

Keys To “Success”Keys To “Success”Chile’s experience shows that it is possible to build and operate a Chile’s experience shows that it is possible to build and operate a performance monitoring system in a developing country.performance monitoring system in a developing country.The Chilean reform process was motivated not by crisis, but by The Chilean reform process was motivated not by crisis, but by frustrationfrustrationBut, be aware of enabling factors:But, be aware of enabling factors: Strong public institutionsStrong public institutions Honest civil servantsHonest civil servants Long tradition of strong executive agenciesLong tradition of strong executive agencies Streamlined public sector: privatization, decentralization, Streamlined public sector: privatization, decentralization,

contracting outcontracting out Healthy public finances, growth environmentHealthy public finances, growth environment Hierarchical budget institutions provide drive to Finance over Hierarchical budget institutions provide drive to Finance over

other ministriesother ministries Budget process, procedures and tight schedules link with public Budget process, procedures and tight schedules link with public

sector culturesector culture Performance information and budget decision-making, Performance information and budget decision-making,

adaptation of budget preparation proceduresadaptation of budget preparation procedures

4242

STAGES INBUDGET

PREPARATION

CONVENTIONALPROCEDURE

CURRENTPROCEDURE

Evaluation Done by budget officials Done by budget officials withministries

Performance indicators, MIPs,and evaluations analyzed

Exploratory budget Funding ceiling Inertial spending

Analysis of budget bids Agencies bid foradditional funding

Proposals analyzed attechnical committee

Inertial spending estimatesreviewed with ministries

Performance goals proposedand analyzed

Proposals to bidding fundsubmitted for technicalassesment to MIDEPLAN,prioritized by line ministers

Draft budget fromFinance

Based on budget officials’opinion

Inertial spending plusallocation of bidding fund

Budget proposal Negotiated with lineministers

Includes only revenue andspending data

BF allocation approved byPresident

Minor adjustments proposedby line ministers

Includes corporate statement,performance goals, indicators,evaluations

4343

Recap: Performance-related Budgeting Recap: Performance-related Budgeting and implementation Strategyand implementation Strategy

Rationale of performance control systemRationale of performance control system There is no single instrument that would respond to all questionsThere is no single instrument that would respond to all questions Instead, a monitoring and evaluation systemInstead, a monitoring and evaluation system Feedback from citizens is not an issue of marketing but of democracyFeedback from citizens is not an issue of marketing but of democracy

Performance-related budgetingPerformance-related budgeting Avoid mechanical association of budget allocations to performance Avoid mechanical association of budget allocations to performance

measuresmeasures Ability to carry out a “smart” discussion of budgets, supported by Ability to carry out a “smart” discussion of budgets, supported by

performance information. Opposite to incrementalismperformance information. Opposite to incrementalismImplementation strategyImplementation strategy

Build trustBuild trust Voluntary introduction, improving standardsVoluntary introduction, improving standards Pragmatic, sequenced approach to prevent “reform fatigue”Pragmatic, sequenced approach to prevent “reform fatigue” Consistent, self-enforcing set of tools to avoid “pigeonholing” of initiativesConsistent, self-enforcing set of tools to avoid “pigeonholing” of initiatives

4444

PREPARATION

EVALUATION

EXECUTION

APPROVAL-Strong MoF

-Comprehensive budget

-Earmarked taxes forbidden

-Copper fund

--Project appraisal

--Unified pay scale

-MoF statement

-Limited power of Congress to ammend

-Constitutional deadline, Executive’s proposal by default

-Special quorum for borrowing

-Congress Joint Budget Committtee

-Strong limitations to overspend

-Pre-approval by Comptroler General

-Approval of investments by Budget Office

-Borrowing from Central Bank forbidden

-Budget flexibility

-Cash allotments-descentralized payments

-Decentralized procurement

-Centralized contingency reserve

-Monthly execution reports to CG and BO

-Govt accounting by CG

-Bilateral technical committees

-Overall spending limits

-Fisal statistics program

-Reporting on specific operations

-Performance indicators

-Structural surplus rule

-MTEF

-Bidding fund

-GFS2001-compatible classifier

-Comprehensive budget documentation with: indicators, evaluations, MIP

-Public finance report, with MTEF, contingent liabilities

-Budget Protocol, with studies, evaluation program, transparency, reform commitments

-Fiscal statistics yearbook

-GFS2001 accruals-based accounting

-Arrears funding prohibited

-Integrated financial management system

-Electronic procurement

-Transfers to municipalities, public enterprises only by law

-Permanent budget committee

-Management Improvement Programs

-Program evaluations

-Financial management report and estimates update

-Comprehensive performance reports

-Departmental evaluation by Budget

-Recommendations and commitments from program evaluations

-Performance pay

PRE-1990

1990-95

1996-2004

BUDGET SYSTEM IN CHILE

4545

Overall assessmentOverall assessmentContribution of government expenditure to growth depends not Contribution of government expenditure to growth depends not only on investment but on the whole arrange of programs, only on investment but on the whole arrange of programs, policies, regulation, and the way they are managedpolicies, regulation, and the way they are managedDistinction between public investment and current expenditure Distinction between public investment and current expenditure is artificial; social or fiscal returns to education higher than to is artificial; social or fiscal returns to education higher than to roadsroadsPerformance monitoring and evaluation should be as Performance monitoring and evaluation should be as comprehensive as possible, answer to fungibility issuescomprehensive as possible, answer to fungibility issuesNo one methodology can answer everything, variety of tools No one methodology can answer everything, variety of tools and methodologies may be neededand methodologies may be neededIn Chile, new methods are not displacing old ones but In Chile, new methods are not displacing old ones but supplementing themsupplementing them60% of government expenditure subject to some sort of 60% of government expenditure subject to some sort of evaluationevaluation

4646

Overall assessmentOverall assessmentSome information is always preferrable to none as long as it Some information is always preferrable to none as long as it ensures:ensures: ConsistencyConsistency Transparency and independenceTransparency and independence Impact on government decisionmakingImpact on government decisionmaking Follow-upFollow-up

Chile’s choice: budget processChile’s choice: budget processChile’s experience demonstrates that:Chile’s experience demonstrates that: Government-wide systems can be built and applied at Government-wide systems can be built and applied at

relatively low costrelatively low cost Requires discipline and persistence over long periods of timeRequires discipline and persistence over long periods of time Hierarchical budget institutions help a lotHierarchical budget institutions help a lot