1.2.6. Performance Management and Performance Based

Transkript

Decision Making and Performance Management in Public Finance
Kamu Maliyesinde Karar Alma ve Performans Yönetimi
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1.2.6.
Performance Management and Performance Based Budgeting
Performance Management
and Budgeting in Finland
 Panu Kukkonen
 Administrative Governance and
Development
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The Content of the Presentation
 Finnish economy and public sector
 State planning systems in Finland
 Performance budgeting in Finland
 Administrational Branch of Min. of Finance
 Performance management in practise
 The future of performance management in
Finland
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1.2.6.
Finnish Economy
and
Public Sector
 Panu Kukkonen
Development
The General Government of Finland
General
government
finances
Social
security funds
Central
government
finances
on-budget
entities
Local
government
off-budget
entities
4
Where do Tax Euros Derive from?
General government revenue in 2008: EUR 99 bn / 53.5 % of GDP
Other income; 7.9
Capital income; 9.1
Value-added tax and other
indirect taxes; 23.9
Income and wealth taxes; 32.3
Social insurance contribution;
25.5
Source: Statistics Finland, National Accounts5
What are Tax Euros Spent on?
General government expenditure in 2008: EUR 91 bn / 49.3 % of
GDP
General public services and
interest expenses; 12,2
Defence; 2,8
Public order and safety; 2,5
Social security incl. statutory
employee pensions; 37,7
Infrastructure and subsidies
to economic development;
8,7
Environmental protection,
housing and community
amenities; 1,4
Health care; 13,0
Education; 10,9
Recreation, culture and
religion; 2,1
Source: Statistics Finland, National Accounts
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The Central Government of Finland
 The central government finances consist of:
 on-budget entities
The President’s office, the Parliament, 12
ministries
 government agencies (about 100) and
departments; administrated by ministries
 off-budget entities
 11 extra-budgetary government funds

The Government’s Employees per
Administrative Branch, April 2010
04/2010
Parliament
President’s office
Prime Minister’s office
915
88
271
Ministry for Foreign Affairs
1 573
Ministry of Justice
9 646
Ministry of the Interior
15 841
Ministry of Defence
16 071
Ministry of Finance
13 180
Ministry of Education and Culture
3 561
Ministry of Agriculture and Forestry
5 323
Ministry of Transport and Communications
2 334
Ministry of Trade and Industry
13 143
Ministry of Social Affairs and Health
3 882
Ministry of the Environment
1 022
In total
86 850
8
Trends in the national economy
GDP at market prices (EUR bn)
GDP, change in volume (%)
Unemployment rate (%)
Employment rate (%)
Consumer price index (%)
Interest rate (10 year bonds) (%)
2007 2008 2009* 2010** 2011**
179,7 184,6 171,3 177,7 186,7
5,3
0,9
-8,0
2,1
2,9
6,9
6,4
8,2
8,6
8,2
69,9 70,6
68,3
68,3
69,2
2,5
4,1
0,0
1,5
2,5
4,3
4,3
3,7
3,3
4,0
9
On-budget Entities' Expenditure by Administrative
Branch in 2011, according to Government’s budget
proposal, EUR bn
President, Parliament, Council of State
Foreign Affairs
Justice
Interior
Defence
Finance
Education and Culture
Agriculture and Forestry
Transport and Communication
Employment and Economy
Social Affairs and Health
Environment
Interest payments on debt
0.2
1.3
0.8
1.3
2.9
15.3
6.6
2.8
2.0
3.3
11.6
0.3
0,0
1.9
5,0
10,0
15,0
20,0
10
On-budget Revenue 2009–2011, EUR bn
Total tax revenue
- earned income and capital income tax
- corporate income tax
- value-added tax
- excise duties
Miscellaneous revenues
Interest income and profit transfers
Total revenue 1)
1)
2009
2010
2011
final
suppl. budget
III
budget
proposal
31,5
7,2
2,2
13,3
5,1
4,6
1,2
37,5
32,7
7,1
3,4
13,4
5,2
4,7
1,4
39,1
35,5
7,4
3,8
14,2
6,0
4,6
1,6
41,9
On-budget revenue excluding net borrowing and the use of accumulated surplus.
11
Central Government Budget Balance
EUR bn
EUR bn
50
5
40
0
30
-5
20
-10
10
-15
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Balance
Revenue excl. net borrowing
Expenditure excl. debt servicing
12
Central
Government
Debt
EUR bn
%
120
80
100
60
80
60
40
EUR bn
40
20
% of GDP
0
20
0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 0810*12*14*
13
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1.2.6.
State Planning Systems
in Finland
 Panu Kukkonen
Development
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Politics in Finland
 Most executive power in Finland is held by the
Government.
 The Government is usually a coalition
government formed by 3–5 parties.
 The government parties usually hold a majority of
the seats in the Parliament.
 The Government Programme, established at the
start of the electoral period is key in guiding the
Government’s activities
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State Planning Systems
 Government Programme: The operational
plan accepted by the government parties,
where the most important government task
areas have been agreed on
 Every Government formulates its own
programme, and there is no standard
structure for it
 The most important planning document
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The Government Programme and the
Budget
 The constitution requires the Government to
establish the Government Programme and to
present it to the Parliament as a report.
 The Government Programme defines the main
lines of fiscal policy.
 In the Government Programme are included the
fiscal policy rules and targets and spending limits
for the electoral period. The budget proposal is
drawn up in accordance with these guidelines.
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The Current Government Programme
and Public Economy
 To secure Public Economy Government is
committed to confirm Central Government
Finances according to current stability pact
 Target is to build budget surplus in Central
Government which is 1 % of GNP in the
end of term of Government (to enhance
measures which improve employment)
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Current Government Programme and
Public Economy
 Reduction in taxes and increasing public
spending can be implemented in Governmental
term only if stable public economy and budget
surplus are not violated
 Even during the severe recession budget deficit
must not exceed 2,5 % of GNP -> to prevent
budget deficit > 2,5 %, Government must enforce
necessary measures to cut public spending
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Other Planning Systems
 Government strategic doc. is accepted after decision of
spending limits for the whole term of government ->
subordinate to the spending limits
 In the middle of the term of Government is compiled a
report how policy programmes and other have progressed
 Medium-term planning: operational and Financial plans
 Short-term planning: annual state budget procedure and
annual performance agreement between ministry and
agencies
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1.2.6.
Performance Budgeting
in Finland
 Panu Kukkonen
Development
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Overview of Constitutional Provisions
 Parliament has full and unlimited budgetary
power.
 Government prepares on the presentation of the
Ministry of Finance the budget proposal and
presents it to the Parliament.
 Parliament is free to modify it and Parliament
publishes adopted Budget in the Collection of
Statutes of Finland.
 Government is responsible for the implementation
of the Budget to the Parliament.
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The Spending Limits Rule, background
 After the 90’s recession Finland needed to assure
international actors that it will take the necessary
measures to bring the public economy back on track
 Now the ageing of the population will put an enormous
pressure on public finances in the coming years, requires
a method to constrain growth in spending
 Finnish targets need to be more ambitious than the criteria
in the Stability and Growth pact
 Reformed spending limits system in place from 2003
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Key features of the Spending Limits
 Expenses in two categories: to those under the binding
spending limit and the others outside
 allows the automatic stabilizers to work
 spending limit confined to expenditure that is relevant to be
controlled
 expenditure outside the limits: e.g. unemployment security
expenditure, financial investments, debt interest payments, VAT
expenditure, technically transmitted payments...
 About ¾ of the budget appropriations are scaled to the
binding spending limits
 Link between central government revenue and
expenditure is cut
On-budget Expenditure and Spending
Limits1) the spending limit rule has held back the increase in
expenditure
but allowed the automatic stabilizers to work
EUR billion
50
40
48,0
12,0
0,00
52,6
50,3
50,8
51,3
15,7
12,3
12,5
12,8
13,1
0,35
0,00
0,00
0,00
0,08
30
20
51,6
Spending limit
36,0
36,8
37,7
38,3
38,5
38,5
2009
2010
2011
2012
2013
2014
10
0
Interest payments and cyclical expenditure
Unallocated reserve and provisions for supplementary budgets
Total expenditure included in the spending limit
1)
Source:Ministry of Finance
Spending limit expenditure for 2011-2014 at 2011 prices and expenditure for 2009 and 2010 at current prices.
Year 2009 according to budgeted, year 2010 according to 3rd supplementary budget proposal and years 2011–2014
according to Spending Limits Decision 30.3.2010.
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The Central Government’s Spending Limits
(according to the government program 19.4.2007 )
 Government decided at the start of its term the spending limits for the
whole electoral period (2008–2011)
 not legally binding, but is based on strong political commitment
 Central government expenditure within the spending limits is by 2011
at most EUR 1.3 bn higher than the technical level set before the
2007 elections
 Spending limits set on administrative branch level
 Unallocated reserve (total of EUR 200 mill) and supplementary budget
provision (annual EUR 300 mill) for unexpected expenditure needs;
note that supplementary budgets are included in the spending limits
 Measures in the government programme will be implemented insofar
as it is possible within the parameters of the spending limits
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 Spending limits contains Government’s most important
guidelines and emphasis relating to state economy
 Budget proposals for every administrative branch and
policy programme are set according to given spending
limits
 Operational and financial plans for every administrative
branch are compiled according to decided spending limits
(spending limits on administrative branch level)
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 Ministries can make propositions about development
projects (which can exceed spending limits of
administration branch) -> however the central
government’s spending limits should keep constant ->
need for allocation inside Spending limits
 Usually allocation inside spending limits in administration
branch
 The central government’s spending limits are compiled by
Ministry of Finance for a coverage of the Government
 Lot of negositions between Ministry of Finance and other
ministries
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Spending Limits and Productivity
 Government has carried through productivity
programme in 2005-2011 as a part of spending
limits
 Target is to decrease state personnel about 9 600
in 2005-2011 utilising productivity measures ->
equavalent savings in state budget
 New target in period 2012-2015: decrease
personnel 4 800
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Productivity Programme
 Rapid population ageing in Finland will lead enormous
consumption of public services (needs for health and
social services) and might weaken public economy ->
needs to improve productivity and efficiency of public
services
 Productivity programme will accustom demand of labor in
public sector to the supply of labor in private sector:
alleviate the lack of labor in private sector and decrease
the expenditures of central government in the future
 In the end of 2015 savings are about 800-900 mill. euros
per year
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Productivity Programme
 Productivity programme does not save Finnish
public economy alone -> needs for other
measures in the future
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Experiences of Spending Limits
 New system of spending limits adopted in the 2003
government programme
 political commitment is strong (also in the opposition)
 historical experience shows merits of stability oriented, long-term
fiscal policy – a political change
 Positive experience both during an upswing (increase in
revenue didn’t spill over into higher expenditure) and
downswing (automatic stabilizers have been allowed to
work, stimulus measures have been possible but still a
limit to the increase in expenditure growth)
 Last years have been very challenging to keep
expenditure within the frames
 reallocations have been made
 all other fiscal targets have been lost – spending limit rule as an
important source of credibility
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Problems with the Spending Limits
 The limits cover only the central government spending
 local governments provide over 2/3 of public services – cost pressures are
there
 Timing of the infrastructure investments
 PPP’s are handled similarly than the conventional projects (cash based)
 there is a tendency to postpone investments to the next government
period (this ties hands of the next government)
 The rule creates incentives for capital investments and
other off-spending limit items
 bulk of economic stimulus in 2009 and 2010 is off-spending limits
 Creates incentives to use tax-expenditure
 problems with this quite limited
 Inflexibility as regards transfers between administrative
branches
 not due to spending limit rules, but as a consequence of the political
system
Operational and Economic Planning and State Budget Process
January
Negotiations
February
Preparation of
spending limits
March
April
May
June
July
August
September
Preparing
and drafting
of
operational
and economic
plans of the
Ministries
and the
agencies
October
November
December
Summary of
the plan for the
Ministry
Government
negotiations and
decision on spending
limits
Budget proposal
prepared by the
Ministries
Budget proposal
prepared by the
Ministry of
Finance
Parliamentary
handling and
approval of the
Budget
Negotiations
Government Budget
session
Government bill
submitted to
Parliament
34
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The Budget Process
March
 The government’s decision on spending limits for
the coming four years is taken
 It acts as a guideline in the budget preparations
 In the decision the allocation between the
administrative branches is decided upon
 The ministries can in their budget proposals
allocate the expenditure within the spending
limits as they wish
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The Budget Process
(continued)
May
 The ministries submit their budget proposals to
the Ministry of Finance (MoF)
June
 At the MoF the ministries’ proposals are
considered at the level of civil servants (the
officials at the Budget Department, the
management of the Budget Department and the
Secretary of State)
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The Budget Process
(continued)
July
 The Minister of Finance decides on the Ministry of
Finance’s budget proposal and it is published
August
 Each ministry and the MoF hold bilateral
negotiations regarding the budget proposal
 The Government budget negotiations take place
and the contents of the Government’s budget
proposal is decided upon
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The Budget Process
(continued)
September
 The budget proposal is submitted to Parliament
September-December
 Plenary debate, opinions of sectoral committees,
hearings, deliberations of the Finance Committee
December
 Parliament votes on the budget proposal taking into
account the Parliament’s own changes to the budget
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Supplementary Budgets
 Are given if necessary, usually 2–3 each year
 The budgeting of unexpected revenue and
expenditure, usually no active expenditure
increases (recent years have been exceptional
due to stimulus measures in supplementary
budgets)
 Supplementary budgets are included in the
spending limits
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Budgetary Governance Principles
 Guidance and management of government activities are
based on the management by results system which
leaves considerable autonomy to the directors of
government agencies to adopt measures they think
provide the best performance.
 Budgeting is based in principle on the idea of a
performance-informed budgeting in which the
performance is linked to the appropriation in the
explanatory statements of the budget.
 Budgeting of operating expenditure of government
agencies is based on the principle of lump-sum budgeting,
i.e. there is only one budget line available for the current
operating costs of the agency.
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Structure of the Budget Proposal
 General Strategy and Outlook
 Summary Tables
 Budget Statement
 General directives
 Revenue estimates
 Divided into four main titles (e.g. tax revenue)
 Appropriations
 Divided into fifteen main titles (e.g. administrative domain of
Ministry of Social Affairs and Health)
 Appendices
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Classifications in the Budget
 The proposed appropriations and revenue estimates
 main title
 class
 item
 Number code, name and sum
 for example 33.10.51 -> Ministry of Social Affairs and Health /
family living and expenditure equalization / child allowance
(EUR 1.4 bn)
 The appropriations are divided in the budget in items according
to the type of appropriation
consumption expenditure (01–29)
transfers (30–69)
capital expenditure (70–89)
others (90–99)
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1.2.6.
Administrative Branch of
Ministry of Finance
 Panu Kukkonen
Development
Ministry of Finance´s
branch of government
Limited Companies
TRADING HOUSE HANSEL
LTD
central purchasing body for the public
sector
ASSET MANAGEMENT
COMPANY ARSENAL LTD
- in liquidation
Agencies
Business enterprises and funds
THE STATE TREASURY
SENATE PROPERTIES
THE GOVERNMENT
INSTITUTE FOR ECONOMIC
RESEARCH
TAX ADMINISTRATION
STATISTICS FINLAND
- handles ownership functions mainly for
State-owned office, university and other
special premises
THE STATE PENSIONS
FUND
THE GOVERNMENT
GUARANTEE FUND
FINNISH CUSTOMS
STATE PROVINCIAL OFFICES
LOCAL REGISTER OFFICES
POPULATION REGISTER
OFFICES
SHARED SERVICES CENTER
OF STATE GOVERNMENT
(1.1.2010-) *)
HAUS Finnish Institute of
Public Management Ltd
training and consultancy both in Finland
and abroad
Yrityspankki Skop Oyj,
- in liquidation
*) financial administration and human resources management
44
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Ministry of Finance






prepares economic and fiscal policy
drafts the annual Budget
offers experience in tax policy matters
is responsible for drafting policy on the financial markets
prepares State employer and human resources policy
is responsible for the overall development of public
administration
 is in charge of the legislative and financial requirements of
local government functions
 participates in the work of the European Union and many
international organizations
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Tax Administration
 Description of work: to safeguard the society’s tax revenue
 Number of Staff: 5,595 (in full-time equivalents)
 Taxes collected: 57.5 billion € in 2009
 Costs: 377 million € in 2009
 Strategy and basic performance targets:
 To ensure the tax revenue by providing proactive guidance and good
service as well as by conducting credible tax control
 Customers can contribute to their tax issues with as little cost and
inconvenience as possible
 Operations are both productive and economic
 Tax organisation has innovative potential
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Finnish Customs
 Description of Work:
 contributes to ensuring an undisturbed operation of the
internal market of the EU
 facilitates international goods trade and ensures
compliance with provisions
 collects the duties, taxes and charges on foreign trade
and on the production of goods correctly
 combats customs crime and threats to health and
safety as well as to the economic interests of Finland
and the EU
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Finnish Customs
 State of vill and basic performance targets:
 International operator
 Finnish Customs is an important operator within the EU and in the




World Customs Organization, as well as a central operator in
facilitating the economic cooperation between the EU and Russia
Promotes foreign trade
Customs facilitates the foreign trade conducted by companies
through customer cooperation and application of electronic data
transmission in managing logistics chains
Collects taxes on goods efficiently
Customs collects the duties, taxes and charges on foreign trade
and on the production of goods efficiently and correctly, using
electronic systems
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Finnish Customs
 Protects society
 Expert competence on cross-border traffic and taxation is the basis of the




successful and target-oriented crime prevention of Customs.
Customs promotes internal security with other security authorities,
especially in the PCB cooperation (PCB = Police, Customs and Border
Guard).
Customs protects the consumers and the environment
by controlling imported foodstuffs and consumer goods
by enforcing import and export restriction
 Number of Staff: 2 443 (in full-time equivalent) in 2009
 Costs: 167,3 million euros in 2009
 Total revenues collected (VAT, excise duties, car tax,
customs): 8,6 billion euros in 2009
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Statistics Finland
 Statistics Finland's mission is to combine collected data with its
expertise to produce statistics and information services for the needs
of society, promote the use of statistics and develop national official
statistics
 Statistics Finland's task is to
 Compile statistics and reports concerning social conditions
 Collect and maintain data files on society
 Provide information service and promote the use of statistics
 Develop statistical methods and conduct studies supporting the
development of statistics
 Develop the national statistical service in co-operation with other
Government officials
 Co-ordinate the national statistical service
 Participate in and co-ordinate Finland's international statistical co-
operation
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Statistics Finland
 Number of Staff: 876 (full-time equivalents) in
2009
 Cost: 57,7 million euros
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The Population Register Centre
 The basic task is to enable usage of the data contained in the
Population Information System and the PRC's certified electronic
services to support society's functions and information services and
management
 the PRC promotes the protection of privacy and personal data as well
as information security and the development of and compliance with
good data processing and data management practices
 Together with the local register offices, the PRC is the data controller
for the Finnish Population Information System. The PRC maintains
and develops the Population Information System, its data and data
quality as well as certified electronic services. The PRC offers
Population Information System information services and certificate
services
 The Population Register Centre also develops and maintains the
Public Sector Contact Directory (JULHA) and performs duties related
to elections
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The Population Register Centre
 Number of Staff: 121(full-time equivalents) in
2009
 Cost: 21,2 million euros
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The State Treasury
 State Treasury runs the State’s internal financial and fiscal
administration, pension and damage compensation plans as well as
military injury and veterans’ affairs. It develops general government
control systems, produce financial and personnel management
support services for the government and, for our part, take care of the
government’s employees’ ability to work. The Government IT Shared
Service Centre and the Government Human resource Services -unit
offer services for the whole state administration
 Very broad client base: besides government units, clients include
municipalities, state-aided institutions, etc. State Treasury’s individual
clients include the personnel of the above-mentioned agencies,
beneficiaries of Treasure lending activities and persons entitled to
receive military injury compensation or various other types of
compensation
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The State Treasury’s Organisation
 operates under the Ministry of Finance, is a service bureau that is run on
quality management principles. It operates in three divisions:
 Administrative Management serves the State corporation as the
financial and personnel administration expert by generating Grouplevel information on a centralized basis, guiding the production of
administrative information and the use of procedures in
administration, and by directing the use of purchased services
 The Finance division manages the central government’s debt and
liquidity. The Finance division also administers most of the loans
and interest-rate subsidies granted from central government funds,
some of the State guarantees, State inheritances and payment
exemptions
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The State Treasury’s Organisation
 The Insurance division is the State’s insurance
institution. It promotes risk management in the entire
central government. The division handles statutory
employment pensions, accident, rehabilitation and
liability insurance for State bureaus and institutions. It
also provides the stipulated compensation services for
war veterans and other beneficiaries.
 The Government IT Shared Service Centre is an
internal Government service unit, the functions of which
are development, procurement and organisation of
shared Government IT services.
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The State Treasury
 Number of Staff: 822 (full-time equivalents) in
2009
 Cost: 86,5 million euros in 2009
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Regional State Administrative Agencies
 Six regional state administrative agencies started operating on 1st
January 2010.
 The agencies’ tasks consist of those of the former state provincial
offices, occupational health and safety districts, environmental permit
agencies and regional environmental centres. The agencies work in
close collaboration with local authorities.
 The agencies foster regional parity by executing all legislative
implementation, steering and supervision functions in the regions. The
agencies strengthen implementation of basic rights and legal
protection, access to basic public services, environmental protection,
environmental sustainability, public safety and a safe and healthy
living and working environment in the regions.
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 Areas of responsibility:
 Base public services, legal rights and
permits
 Occupational safety and health
 Environmental permits
 Fire and rescue services and preparedness
 Police.
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 Number of Staff: 1 200 (full-time
equivalents) in 2010
 Cost: 150 million euros in 2010
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Local Register Offices
 Local register offices are local state administrative authorities. There
are 24 local register offices in Finland.
 The Local Register Offices are responsible for maintaining their
regional Population Information System and their local information
services, as well as for acting as both the local authority handling
Trade Register and the Register of Associations matters and the
guardianship authority. Other services offered by the local register
offices include the maintenance of the boat register, notary public
services, the investigation of impediments to marriage and
performances of civil marriages, name changes and the confirmation
of the list of parties to estate inventories.
 Number of staff in 2009: 650
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Government Institute for Economic Research
 Government Institute for Economic Research analyses public finances
in Finland and evaluates economic reforms. Other research areas
include the labour market and the long-term prospects of the
economy.
 The purpose of VATT research is to support informed decision-making
and its focus is on policy-relevant topics. The Institute has complete
independence in conducting its research, which meets high standards
of scientific quality. It has invested special effort in developing a sound
modelling infrastructure, upgrading methods of impact assessment
and improving its knowledge base on public finance institutions. For
these reasons, VATT is a well-respected partner in numerous
research projects.
 VATT currently has a staff of 60 persons. Its researchers are in high
demand by various economic policy working groups.
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Government Institute for Economic
Research
 VATT research covers three main areas:
the effectiveness of public services,
taxation and social transfers, and the labour
market and policies promoting growth. The
policy analysis and modelling unit is
charged with maintaining and developing
economic models and promoting their wider
use.
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1.2.6.
in Practise
 Panu Kukkonen
Development
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Main Principles of Performance
Management
 To find balance between resources and
targets, efficiency and quality
 To ensure the desired effects are costefficiently achieved
 Accountability: responsibility to report and
give true and fair view of the operational
performance of the agency -> annual report
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Main Principles of Performance Management:
The Hierarchy of The Targets
 Social/policy effectiveness (outcomes)
 Based on the Government Programme and the
Government Strategy Document
 Operational performance (outputs)
 Agreements on performance targets between line
ministries and agencies
 Targets for:
 Operational efficiency (economic efficiency,
productivity and profitability)
 Outputs and quality management
 Management and development of human resources
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The performance prism
Societal impact
targets (outcomes)
Operational
performance targets
(outputs)
Societal
effectiveness
Operational
efficiency
•
economy
•
productivity
•
profitability
•
costrecovery rate
Outputs and quality
management
•
commodities and
public goods
•
service ability and
quality
Human resources development
Policy effectiveness:
Societal impacts
(outcomes)
How operations and use of
finances have influenced the
societal impacts
Operational results
(outputs)
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Responsability of Performance Management in
Administrative Branch of Ministry of Finance
 The minister (a head of the ministry) has an
overall responsability of performance
management on his ministry’s administrative
branch
 The main strategic lines and decisions relating to
performance management are made in the
ministry’s steering committee of administrative
sector (leading by undersecretary)
 The departments of Min. has a responsibility to
steer agencies which are part of department’s
branch/substance (like Tax dept. -> National
Board of Taxation, Nat. Board of Customs)
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Responsability of Performance Management in
Administrative Branch of Ministry of Finance
 Each agencies (Nat. Board of Tax, Statistics
Finland etc.) belong to administrative branch has
an so called accountable person (expert) in
ministry
 These experts with financial manager and
development expert of min. form so called
steering group
 practises, problems
 Other participants: IT-expert, acquisitions,
estates, human resources
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Roles of Performance Management
 Policy effectiveness: ministers
 Strategic steering:
 State secretary: meetings of general directors of
agencies which are part of ministerial administrative
sector
 Under state secretary: steering committee of ministerial
administrative sector
 Development expert/Administration unit: co-ordination
and development of strategic procedure
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 Performance management in practise (substance
steering):
 Tax dept.: National Board of Taxes and National Board
of Customs
 Economics dept.: Government Institute for Econ.
Research
 Public Management dept.: Statistics Finland, local
government (county adm.), Population Register Centre,
Public IT management
 Financial Market dept. and Office for the Government
as an employer: State treasury
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 General steering:
 Administration unit: financial administration, IT-
administration in ministerial admin. sector, personnel
administration (human resources)
 Subjects:
 good leadership
 productivity programme
 regional programme (public services from capital region
to the provinces -> maintain activities in all over
Finland)
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 Subjects (continue):
 Financial- and personnel administration
 Readiness for change in environment
(permanent and perpetual state of
change)
 IT
 Acquisitions
 Premises
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Ministry and it’s depts as a Performance
Manager
 To act as a performance manager on it’s
administration branch (tax dept.- > Finnish
Customs and Tax administration)
 Main tasks in Performance management
 to prepaire annual budget proposal (April-May)
 Depts give a comment to Administration dept. on
budget proposals (tax. dept comments Nat. Board of
Tax and Nat. Board of Customs)
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Ministry as a Performance Manager
 Management dept. pulls together the comments and
prepaire the budget proposal of all ministerial administrative
sector
 Half-year review (August):
 Discussion with agencies on implementation of ongoing
year’s operational performance targets
 Compiling process of operational and financial
plan of agencies and performance agreement
 Strategy discussions in September are the starting point for
operational and financial planning
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The Ministry as a Performance
Manager
 Operational and financial plans of agencies are
send to Ministry in the beginning of October 2010
 Min. departments scrutinize them and gives
comments to Administ. dept. which gather all
comments together and compile operational and
financial plan of whole ministerial administrative
sector
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Legislation
 Constitution
 State Budget Act
 principles of operational and financial planning and reporting
 http://www.finlex.fi/en/laki/kaannokset/1988/en19880423.pdf
 State Budget Decree
 defines the contents of the budget proposals and operational
and financial plans
 Ministry of Finance’s regulations on operational
and financial planning and compilation of the
proposals for budget and central government
spending limits
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Legislation
 Government and Min. of Finance can give
more orders or regulations concerning
content or procedure of spending limits,
budget proposals or operation and
economic plans
 Ministries business is to give more accurate
orders to their administration branch ->duty
to inform agencies and offices
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The Purpose of Operational and Financial
Planning
 to support profitability, productivity, efficiency and quality




of public services
to give basis and arguments to compilation of spending
limits and annual state budget
to give basis and arguments to management and steering
of state administration
to give basis and arguments for annual performance
targets
to secure the consistency between state units to operation
and financial plans are included the most important
descriptions relating to agency’s activity and performance
targets
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The Operational and Financial Plans
 A tool of planning in every administration branch
 Incl. all significant plans in administration branch
(policy programmes, performance targets,
resources)
 Coming financial concequenses and decisions
(made by government) are anticipated in plans
 Ministries should take account spending limits
and other government’s decisions and emphasis
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The Operational and Financial Plans
 Operation and financial for next four years
 March 2010: Decision of spending limits for years 2011-
2014
 August-September 2010: Budget proposal 2011
 January 2011: Operational and financial plans 20122015 from the line ministries to Ministry of Finance
 March 2011: Dec. of spending limits for years 20122015
 Annual procedure
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The Structure of Operational and
Financial Plans
 Basic calculation (for four year period): sizing according to last
spending limits. Take account impacts of made pol. decisions and
automatic factors. Presented in the first year price-level.
 Ministries can make propositions about development projects (which
can exceed spending limits of administration branch) -> however the
central government’s spending limits should be kept constant -> need
for allocation inside Spending limits
 Usually allocation inside spending limits in administration branch
 Operational and financial plans comprises calculations (financial
frames) for every item level
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The Operational and Financial Plan
 The agencies submitted their operational and
financial plan to ministry in October 2010
 for years 2012-2015:




Changes in operational environment
Policy effectiveness
Main operational targets for years 2012-2015
Operational efficiency




economy
productivity
profitability
cost-equivalence
 Financial plan for years 2012-2015
 Personnel
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The Ministry as a Performance
Manager
 Performance agreement in 2011 were compiled
with agencies in November-December 2010
 Discussions about financial plan for years 2012-
2015 continue till February 2011 -> political
decision of State Financial frame in March 2011
 Ministry’s comments on agencies’ annual reports
and financial statements 2010 in May 2011
 How agencies manage to fullfil performance targets set up
year 2010
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Current subjects
 The progress of productivity programme
 The progress of regional programme
 Strategy projects for example development
of IT
 Strategy meetings twice a year (February
and September)
 Planning days of ministerial administrative
sector
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Performance Targets Document
 Ministry set performance targets to its’ agencies
in administration branch
 Written agreement between ministry and agency,
verified after acceptance of budget proposal
 Performance targets concerning:
 Output and services -> quality, service capacity
 Operational efficiency-> economy, productivity,
profitability, cost-equivalence
 Development
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The Content and the Structure of
Performance Agreements
 The guiding principle: to carry out the
statutory duties of public bodies as
efficiently and effectively as possible
 The performance agreement is a control
tool whose use is based on a new kind of
co-operation between a ministry and an
agency -> the parties have arrived at an
agreed result and consensus in their talks
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The Content and the Structure of
Performance Agreements
 The strategic approach of ministry’s
administrative sector should be manifested
in the performance targets of agencies and
institutions so that their operations would
contribute to the attainment of the strategic
targets of the operational branch as a whole
 Performance targets apply to both agency’s
basic operations and its development
measures
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The Model of Performance Agreement in 2011
1. The strategy of the agency in years 2012-2015:
policy effectiveness
•
•
•
summary of main outlines and point of emphasis ->
strategic targets
application to common strategy of the ministry’s
administrative sector
changes in operational environment
2. Operational targets and measures to improve
productivity
•
economy and productivity
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 productivity in auxiliary function/activity




IT
financial and personnel management
acquisition
premises
 outputs and quality

goods and services -> service capacity and quality
 personnel management and development
 leadership
 regeneration
 point of view of equality (between men and women or
between different occupational groups)
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the promotion of sustainable development
3.
Resources
•
incomes and outcomes
•
amount of personnel
•
main investments
4.
Term (validity) of a performance agreement
•
follow-up meetings
•
Signatures

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Basic Performance Criteria
1. Policy effectiveness (outcome targets)
2. Operational performance (output targets)
•
•
•
Operational efficiency
Outputs and quality management
Human resource management
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Operational Performance Targets
 Operational performance targets are
emphasized in the performance targets of
agencies and institutions.
 The targets should be connected with
operations and resources as closely as
possible, whereby their attainment depends
directly on what the agency does and how it
is managed.
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The Operational Performance Targets
 Alongside positive performance targets and
outcome targets, targets conserning
unintended effects or side effects should
also be set
 Performance targets are set primarily as
indicators and only secondarily as verbal
targets.
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Good Performance Targets
 Targets are:
 connected with and derived from the basic tasks of a









government agency
strategic, essential from the point of view of operations
clear, understandable for everybody
concrete and operational
evaluable, measurable and time-dependent
preferably comparable
such that the government agency itself can influence them
ambitious and challenging, but attainable and realistic
acceptable, jointly outlined and agreed
such that they cover as large a part of the operations as
possible while on the other hand determining priotities
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Performance Reporting and Accounting
 Performance management obliges agencies to report on
the attainment of performance targets -> annual report
 Not only evaluating the attainment of targets but also how
much resources have been used to attain those targets
 Ministries receive monitoring information at the variety of
meeting over the year
 Other reports during the year:
 The biannual report, usually prepaired in early autumn
 Economy monitoring data and statistics
 Annual report submitted together with the final accounts
 Separate reports on the progress of major projects
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The Annual Report and Reporting of
Results
 Every year, each ministry and agency prepaires
final account -> the most important report in the
accountability, content:
Annual report, detailing operational performance
and its development, and policy effectiveness
2. Actual figures illustrating how well the budget has
been implemented, in the central government
budget implementation statement
1.
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The Final Accounts
3. Statement of revenue and expenditure
illustrating revenue and costs
4. Blance sheet showing the financial situation
on the date of the final accounts
5. Additional information, or financial statement
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The Annual Report
 The annual report, included in final accounts,
details operational performance and presents an
analysis of the final accounts and performance ->
covers accountability requirements
 Public document ->submitted to the ministry, to
the State Audit Office and to the State Treasury
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The Content of the Annual Report
(true and fair information)
1. Management review
2. Performance description
2.1. Policy effectiveness
2.2. Operational performance
2.2.1. Operational efficiency and its development
2.2.2. Outputs and quality management
2.2.3. Control and development of human resources
2.3. Results analysis and conclusion
3. Analysis of financial statement
4. Evaluation statement and confirmation statement on
internal control
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The Content of the Annual Report
(true and fair information)
5. Results of regular overall evaluation
6. Summary of malpractices
7. Signatures and deadlines
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The Annual Report and Ministry’s
Feedback
 The description of the performance of the
operational branch of the ministry forms part of
the Central Government Final Accounts Report
 In Central Government final accounts report
ministries describe their own operational
performance
 Government submits the report to Parliament
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Public Statement of the Ministry and
feedback to the Agency

In its statement on the final account is a
performance management tool which can
address at least the following:
A. Performance development
•
•
a direct assessment of how the performance of an
agency has evolved, using essential effectiveness,
economy and quality factors and indicators or
evaluation data
an assessment of how an agency’s performance
capacity has evolved
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Feedback to the Agency
B. Estimates of operational performance
•
•
•
a direct assessment of how well the major
performance targets of the budget year have been
attained
an assessment of noncorformities and of the
credibility of the reasons given for them
an assessment of separately agreed or selected
points such as how well the management system
functions, how systematic the development efforts
are, how high customer satisfaction is, and so on
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C. Quality of the reporting
•
•
•
scope of reporting concerning the attainment of
performance targets: does it cover the attainment of
all the agreed performance targets?
have any nonconformities been clearly presented,
with reason given for them?
has the significance of any nonconformities been
analysed(e.g. whether the nonconformities are
random and occasional or a symptom of a more
permanent decline in performance)?
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D. Adequacy and reliability of performance data
and basic material
•
•
•
•
•
quality and reliability of the accounting system
assessment of the adequacy and relevance of the
indicators used in relation to the performance targets set
how true and fair are the data in the performance report
reliability of the financial statements
have the appropriate analyses and conclusions been
made from the basic material (i.e. are the conclusions
consistent and clearly documented)
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Public Statement of the Ministry
 Ministry submits a feedback of agency’s annual
report to the agency and State Audit Office
 State Audit Office feedback to ministry and
agency
 Parliament feedback on the Central Government
Final Report
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Managerial Agreement
 Ministry and top managers of agency can make an
agreement to evaluate the management of agency and
performance management inside agency
 The agreement offers a foundation of profit sharing
 Ministry and head of agency agreed on targets for
management for a long term period
 Targets can be to improve productivity in agency and
commit top management to achieve targets
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Publicity
 Operational and financial plans,
performance targets agreements and final
accounts and annual reports are public
(normally presented in web site of agency)
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1.2.6.
Briefly and
the Future of Performance
Management
 Panu Kukkonen
Development
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Background
 Introduced in the beginning of 90’s in phases
 Aim was to make production of public services
and functioning of the offices more efficient
 Started with a budget reform
 Lump sum budgeting for agencies
 More freedom but also more responsibility for the state
agencies
Further information: Handbook on Performance Management
http://www.vm.fi/vm/en/04_publications_and_documents/01_publications/10_
governance_and_accountability/20050913Handbo/Handbook.pdf
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The Process and Roles
Main document is the State budget:
 The parliament sets performance targets in the
annual budgets and gives the financing
 After the approval of the budget the line ministries
make an agreement on performance targets with
agencies
 Agencies and ministries report on the outcomes
in State Final Accounts Report to the parliament
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Legislation
 Constitution
 State Budget Act
 principles of operational and financial planning and reporting
 State Budget Decree
 defines the contents of the budget proposals and operational
and financial plans
 Ministry of finance’s regulations on operational
and financial planning and compilation of the
proposals for budget and central government
spending limits
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Lessons learned
 Precise targets – concreteness
 Clear roles – clear responsibilities
 Length of reporting period
 Reporting based on indicators
 Has not shifted attention from inputs to outcomes
 Budgeting still focuses on inputs!
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The Future of Performance
Management
 More closely linked to the Government
Programme -> checking and updating the
strategy (ministry’s, agencies’, administrational
branch’s) after new Government (Government
programme and new spending limits)
 More horizontal aspects -> concern many
administration
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Group task for Wednesday
 Split up to 4-5 working groups according your
organisation
 A task is to compile a short Performance
agreement for your organisation
 A structure of your Performance agreement:
1. Depict possible changes in operational environment
of your organisation

Positive changes, potential, risks, threats….political,
economical, international aspects….what can affect an
operation of your organisation.
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1.2.6.
Thank You

1.2.6. Performance Management and Performance Based

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