Management, Resources and Results Structure (MRRS) Policy: Its critical role in expenditure management

Presentation to Financial Management Institute Rohit Samaroo, Acting Senior Director, Results Management Strategies Division

November 25, 2008

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• Historical Context

• Expenditure Management System (EMS) Renewal

• MRRS – Progress and Challenges

• Observations and next steps

OutlineOutline

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• In 1993-94, Canada was dealing with a large fiscal deficit

• Program Review (1994-95) solved the fiscal crisis through major expenditure cuts

1995 Budget announced $16.9B in savings over 3 years, further $2B in savings announced in 1996 Budget

• Overall spending fell by 10% from 1995 to1999, capital spending fell by 35%

By 1997-98 the surplus was $3.5B - and the budget has been in surplus since

Mid-to late 1990’s: Canada achieved an enviable fiscal position (1-2)

Mid-to late 1990’s: Canada achieved an enviable fiscal position (1-2)

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• Program Review left a few issues:

– Reduced capacity in important oversight areas: audit, evaluation, financial

management

– Cabinet time focused almost exclusively on new spending

By late 1990s, budget surpluses led to new spending without any systematic

assessment of direct program spending and whether reallocation was needed

Continued use of ad hoc restraint exercises to control spending as need arises, eg:

• Expenditure Review Committee

• Expenditure and Management Reviews

Mid-to late 1990’s: Canada achieved an enviable fiscal position (2-2)

Mid-to late 1990’s: Canada achieved an enviable fiscal position (2-2)

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• Auditor General Report pointed out a number of significant areas for improvements:

– Spending on existing and new programs were being approved on two separate tracks making comparisons between existing and new spending difficult

– EMS was not fully integrated with program results.

• The current EMS does not require that departments submit data to demonstrate that they have used their funding effectively

• And recommended… – regular expenditure reviews of reference levels to ensure that existing programs are relevant and represent

value-for-money,

– access to and use of performance information in the spending decision process,

– adequate systems and procedures for central agencies to assess new spending proposals and relate them to existing programs

The Expenditure Management System became the focus of an OAG audit

The Expenditure Management System became the focus of an OAG audit

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Budget 2006 set framework for the implementation of EMS renewal

Budget 2006 set framework for the implementation of EMS renewal

• The budget articulated a set of criteria for management and oversight of

federal programs:

– Government programs need to focus on results and value for money

– Government programs must be consistent with federal responsibilities

– Government programs that no longer serve the purpose for which they were

created need to be eliminated

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Expenditure Management System Renewal

Expenditure Management System Renewal

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• Approved by the government in June 2007

• Management Excellence – Allocation and Operational Efficiency- Meet government priorities- Ensure value for money in government spending - Deliver high-performing programs and services to Canadians

• Fiscal Credibility – Aggregate Fiscal Discipline– Control of overall growth of program spending

EMS Renewal – Overarching ObjectivesEMS Renewal – Overarching Objectives

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2. Strategic Reviews Ongoing advice to Cabinet to align spending to government

priorities and ensure performance and value for money

Existing Spending

1. Up-front Discipline Critical information for Cabinet decisions

New Spending

3. Managing for Results Measuring and benchmarking our programs to demonstrate

results for Canadians

All Spending

Three Pillars Supporting EMS RenewalThree Pillars Supporting EMS Renewal

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• Refers to how new spending proposals are approved

• Emphasizes a more disciplined approach to managing new spending by ensuring all new proposals have:

– Clear measures of success

– Solid information about how a proposal fits with existing spending What results are being achieved in related areas? How does the new proposal relate to existing spending? Are there opportunities for realignment? Provide reallocation options for funding

1. Up-Front Discipline (new spending)1. Up-Front Discipline (new spending)

More upfront discipline on spending means more up-front work by analysts at the Memorandum to Cabinet (MC) stage

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• Strategic Reviews:

– Comprehensive review of each department’s programs

– Ensure all programs are: Aligned to government priorities Are clearly within federal responsibilities Relevant Effective and efficient Managed well

– Are considered by Cabinet as part of Budget preparation

– Identify the lowest-performing 5 per cent of programs and reallocate that funding to higher priorities

– Involve external expert advice on each Review to ensure consistency and objectivity

2. Strategic Reviews – Review of the effectiveness of all existing program spending

2. Strategic Reviews – Review of the effectiveness of all existing program spending

TBS: renewed focus on program performance and advice to TB on integrated budget decision-making on new and existing spending

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• All departments must strive for excellence in the management of all of their programs and spending in order to concrete results for Canadians

• This means all programs must:– Have clear expected results and measures of success

– Have full program costs

– Be formally assessed and evaluated on a regular basis

– Report on results expected and achieved

– Use performance measures and evaluations to adjust resources and strategies based on insights gained

– Develop a culture of focussing on results

3. Managing for Results (all spending)3. Managing for Results (all spending)

Requires focus on program performance, relevance and efficiency, not just dollars spent

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Management, Resources and Results Structure (MRRS)

Management, Resources and Results Structure (MRRS)

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MRRS is the foundation of the renewed EMSMRRS is the foundation of the renewed EMS

• Represents a common approach to the collection, management, and reporting of performance information

– Establishes an inventory of all federal programs

– Links resources to results for each program - planned and actual

– Establishes the same structure for both internal decision-making and external reporting and accountability

– Demonstration of how programs align to each other (relationships);

– Full program costing; and

– eventually,…permits efficient communication between departments, central agencies & Parliament through the use of the common systems and evidence

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Program Activity Architecture + Financial and non-financial information

Planned and Actual Results-all programs

Planned & Actual Financial information

Governance Structure-decision making around program results info

Required for all elements and all levels of the PAA

IT Support: Expenditure Management Information System

Parliamentary Vote Control Level – unchanged

Program Activity Architecture

Sub - Sub – Program Activity(ies)

Sub – Program Activity(ies)

Program Activity(ies)

Strategic Outcome(s)

Department

Accountable Level to TB & Parliament – unchanged

Program Information levels – much more detail

All information is based on similar program structures – the PAA

All information is based on similar program structures – the PAA

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DEPARTMENTSManagement Tool

Reflects full mapping of programsBetter alignment of resources & priorities

More evidence-based reporting Improve program performance

Finance PCO

Budget Plan

TBSInformed decisions on

investment choices based on priorities and value for money

PARLIAMENTReporting Tool

Stronger accountability for spending and results

Common basis for planning

and reporting inside and

outside

More logical and consistent basis for interaction

MRRSPolicy Objective:

Development of a common, government-wide approach to the

collection, management, and reporting of financial and non-financial

performance information - to provide an integrated and modern

expenditures management framework

Well structured information helps communication and decision-making …

Well structured information helps communication and decision-making …

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Implementation of MRRS consists of five stepsImplementation of MRRS consists of five steps

1. Departments develop fully articulated structures for their Program Activity Architectures (PAA) (December 2006 to May 2007)

2. Departments identify/define Performance Measurement Frameworks & Governance Structures for their entire PAAs

(June 2007 - Fall 2007)

3. Departments create, capture and use MRRS information systematically (Jan. 2008 and onwards)

4. TBS develops and rolls out a system to capture the standardized departmental performance information( 2009 and onwards)

5. Embed MRRS information in all expenditure management processes( 2009 and onwards)

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Step 1: Launched December 06 – Fully articulated PAAsStep 1: Launched December 06 – Fully articulated PAAs

• 98 departments and agencies modified their PAAs as part of Step 1

• Step 1 has generated an inventory of the majority of government programs (approximately 2500 programs)

• TBS continues to work with departments to further refine their Strategic Outcomes and PAAs

• Stability is an issue: For 2009-10 change process: – 46 departments and agencies came forward with proposed changes to their

Strategic Outcomes and/or PAAs

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Step 2: Launched June 07 – Development of Performance Measurement Frameworks (PMF)

Step 2: Launched June 07 – Development of Performance Measurement Frameworks (PMF)

• PMFs set out the Strategic Outcome(s) and expected results and outputs associated with PAA programs, including:

– Performance indicators – Data sources – Frequency of data collection– Target(s)– Planned program spending

• All departments now have PMFs, however quality varies substantially

• Currently in Step 3

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PMF Quality to date shows the need to improve PMF Quality to date shows the need to improve

PMF Four Point Scale: 1= Poor ( major adjustment required), 2= Weak ( needs substantial improvement), 3 = Satisfactory, (requires some improvement), 4= Very Good (may require some refinement)

PMF Scores for PMF of Record

02468

101214161820

0.0-0.4 0.5-0.9 1.0-1.4 1.5-1.9 2.0-2.4 2.5-2.9 3.0-3.4 3.5-3.9

Scores

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MRRS has become the the foundation of the renewed EMS

MRRS has become the the foundation of the renewed EMS

Regulatory Policy

Strategic Reviews

MCs to Cabinet

TB Submissions for funding

Evaluation Policy

Service Policy

TPP Policy

HorizontalManagement

Policy on FinancialCoding

DPR/RPPReporting

MRRS

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Internal ServicesInternal Services

• We need to be able to capture the true cost for internal services

• The Profile of GC Internal Services established standard categories for internal services within PAAs

• Developed with a Senior Financial Officer working group

• Consists of 1 Program Activity, 3 Sub-Activity and 11 Sub-Sub-A categories for Internal Services

• Different reporting requirements established for different size organizations

– Micro, small and large

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Revised Profile of GC Internal Services and associated PAA levels

Revised Profile of GC Internal Services and associated PAA levels

Internal Services

• Governance & Management Support– Management & Oversight– Communications– Legal

• Resource Management Services– Human Resource Management– Financial Management– Information Management– Information Technology – Travel and Other Administrative Services

• Asset Management Services– Real Property– Materiel– Acquisition

Program Activity

Sub-Activity

Sub-Sub Activity

Sub-Sub Activity

Sub-Sub Activity

Sub-Activity

Sub-Sub Activity

Sub-Sub Activity

Sub-Sub Activity

Sub-Sub Activity

Sub-Sub Activity

Sub-Activity

Sub-Sub Activity

Sub-Sub Activity

Sub-Sub Activity

PAA Levels

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MRRS: Status and some key observationsMRRS: Status and some key observations

• MRRS has become critical to departmental management

• The federal government has the best inventory of programs it has ever had

• MRRS is increasingly enabling the operationalisation of EMS renewal in:– Upfront discipline – review of MCs

– Strategic Reviews and

– Managing for results, however…

• Challenges still exist – Substantial level of effort and capacity is still required to improve PMF quality

– Aligning financial systems to capture relevant planned and actual expenditures for each program still to be done in all departments

– Fundamental cultural change requiring persistence, patience and commitment

– Ultimately, an iterative process

• In general, however, significant progress has been made

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Moving Forward…Moving Forward…

• Step up the implementation of Step 3: Departments create,capture and use MRRS information systematically

• Strengthen the review of MCs in context of on-going spending

• Significantly strengthen the quality of departmental PMFs

• Ensure data collection and use of performance information in departments

• Embed performance information in all EMS processes (e.g. Memorandums to Cabinet, Treasury Board Submissions, Strategic Reviews, program renewals)

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Contact usContact us

• For more information or assistance on MRRS, do not hesitate to contact:

– Rohit Samaroo, A/Senior Director, Results Management Strategies at (613) 957-7053, or

– By sending an e-mail to Rohit.Samaroo@tbs-sct.gc.ca

• MRRS website at: http://publiservice.tbs-sct.gc.ca/pubs_pol/dcgpubs/mrrsp-psgrr/siglist_e.asp

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