PUBLIC GOVERNANCE AND TERRITORIAL DEVELOPMENT DIRECTORATE
PUBLIC GOVERNANCE COMMITTEE
Working Party of Senior Budget Officials
7th ANNUAL MEETING OF OECD PARLIAMENTARY BUDGET OFFICIALS
AND INDEPENDENT FISCAL INSTITUTIONS
Austrian Parliament, Vienna
16-17 April 2015
HAND OUT
PERFORMANCE BUDGETING: THE CHILEAN EXPERIENCE
Roberto Bustos Latorre
Secretary Budget Committee
Chilean Senate
PERFORMANCE BUDGETING: THE CHILEAN EXPERIENCE
Introduction
In our view a results-based budget aims to improve the efficiency and effectiveness of public
spending, linking the allocation and use of resources to the results of the institutional management,
the focus is on using performance information for management learning and decision-making
processes about budget.
We understand that the countries OCDE use a definition similar to this one, and by means of
the use of different tools they tend to integrate performance information in the budgetary process.
While there is a variety of models for this integration, the stage of modeling most basic is to make
available information to the relevant actors about institutions performance s it could be useful in the
decision making and during the process of budgetary formulation. At this point there is a diversity
of approaches regarding what is meant by performance information which in turn include
monitoring tools as well as more complex evaluation tools, as it is the case of the evaluation of
programs.
Chile has opted for a results-based budget as "informed budget" understood such as "The main
objective of the incorporation of performance information in the budget process is to improve
resource allocation. In this case there is a direct and explicit link between resources and
performance measures, overall product units. It can take the form of resources allocated based on
contractual forms including performance or activity indicators.” 1
I.
Gradual development
The Chilean experience has been a process of a wider series of initiatives to improve public
sector management. The Ministry of Finances has been introducing gradually and systematically a
set of tools, using this process to create a system of management control.
The process begun in Chile after the reinstatement of the democratic system, efforts was
developed in order to be laying the foundation of a system of management control. Initially, the idea
to incorporate performance indicators in the budget was part of a pilot plan to modernize public
management focused in few institutions and simple tools that gradually were extended and being
improved.
Stages:
1993 Strategic planning was a pilot project based on practices of the United Kingdom, aimed
to generate performance information, introducing management best practices of expenditure and
transparency by means of indicators.
1997 Evaluation of Government Programs (ex-post) began with and now forms part of a
protocol agreement signed between the Congress and the Ministry of Finance. Its aim is to generate
information to support management and analysis about social and institutional and productive
programs.
1
“Presupuesto por Resultados y la Consolidación del Sistema de Evaluación y Control de Gestión del
Gobierno Central”. Dirección de Presupuestos. http://www.dipres.gob.cl/594/articles-60578_doc_pdf.pdf
(March 2015)
2
1998 Performance Bonus Scheme: This year was implemented an institutional incentive of
wages called for the Improvement of the Management (PMG in Spanish), was reformulated due to
96% of institutions were perceiving bonuses for improvement in their performance without a clear
progress in their management. Also, did not meet with essential principles of a wage incentive
system, lacking for example: participation, simplicity, relevance and means of verification. Since
the 2001 targets and goals and commitments were set in a program called “Programa Marco
Básico” (Framework Basic Program). It has ten basic systems in the areas: human resources;
service quality; planning, control and management of land and financial management.
In the later years adaptations were carried out to add or to eliminate areas or stages to the
system, this process concluded in 2012 with the enactment of the Decree 334 Ministry of Finance,
which approves the regulation referred into law N° 19.553 article 6°2, so called Program Marco de
los Programas de Mejoramiento de la Gestión, document “in which is recorded the set of common
priority areas for all the institutions of the public sector (…)”. “These areas and systems are
oriented to the improvement of public management”3.
As a result of this experience, in 2000’s it created a system of evaluation and management
control, which has become an essential part of the Chilean experience in the management of public
expenditures, according to the Budgets Division of the Ministry of Finance (DIPRES in Spanish),
the function of this system: "is to contribute to make public resource allocation to programs,
projects and agencies more efficient, while at the same time helping them improve their
management, promoting transparency in the use of public resources and accountability” 4
Other changes introduced in the budget law process are the Strategic Definitions and
performance indicators5 by institutions or agencies in the background that accompany each year the
Draft Budget Law. Also, those documents are published on the DIPRES web page. In addition, at
the end of the execution of the Budget Bill, the resulting performance indicators are published in the
same web site.
A significant aspect of the system of evaluation and management control is pushed the
evaluation of financial management beyond budget execution, incorporating performance indicators
which subsequently are reflected in the Balance Sheets of Integral Management of the institutions,
that is become part of the "annual report" of these.
Three areas of management are modified their tools: follow-up and monitoring; program and
agency evaluations (including Comprehensive Spending Reviews) and institutional performance
program linked to performance bonuses.
2
3
4
5
Source: http://www.dipres.gob.cl/594/articles-86526_doc_pdf.pdf (March 2015)
Source: http://www.dipres.gob.cl/594/articles-86526_doc_pdf.pdf (March 2015)
Source: http://www.dipres.gob.cl/594/articles-86526_doc_pdf.pdf (March 2015)
Mayores antecedentes disponibles en: http://www.dipres.gob.cl/594/w3-propertyvalue-15219.html (March
2015)
3
1.
Follow-up and monitoring instruments
a.
b.
c.
d.
2.
Strategic definitions
Performance indicators
Balance Sheets of Integral Management
Bidding fund for public programs (resources for government priorities). Since 2003 was
replaced by a standardized format (includes a set of basic data for analyzing the relevance
of the project). The aim was obtain better information during the budget process in order to
improve resource allocation to new, amplified or reformulated programs.
Agency and Program Evaluations
Since 1997 Ministry of Finance has been incorporating program evaluation into a protocol
agreement signed between the legislative power (all or almost all members of the Special Joint
Budget Committee) and the Executive (Finance Minister), it is a set of agreements including a
list of programs or agencies will be evaluated during budget execution. In 2001 was the first
time ex-ante program evaluation was incorporated in the budget formulation and to date has
experienced various changes to arrive at to its current form. Ministry of Social Development
(MDS in Spanish) was created en 2012 a mission of MDS is evaluate new or reformulated
social programs. Non social programs must be evaluated by Ministry of Finance.
Ex-ante evaluation is compulsory for all governmental programs. Also copy the results of these
evaluations have to be sent to the Special Joint Budget Committee.
Tools applied:
a. Evaluation of government programs (EPG) its aim is to evaluate the design,
management and results of public programs providing information that supports the
management of the programs and resource allocation process6.
b. Program impact evaluation its purpose is to assess the impact of public programs on its
beneficiaries7.
c. Comprehensive Spending Reviews its aim is to evaluate the set of programs and
procedures administered by the organization, the institutional framework and functions
distributed between the various agencies which depend on a same Ministry, also to
assess the effectiveness, efficiency and economy in the use of institutional resources8.
As a result of the measures mentioned three reports are available. The reports provide general
information and form the basis for the Ministry of Finance’s program and agency evaluations.
The reports provide information about areas that have unacceptable performance. It is used to
identify technical recommendations to have in mind and can contribute to improving the
program or agency.
6
7
8
Para información más detallada ver DIPRES. Source: http://www.dipres.gob.cl/594/w3-propertyvalue15221.html (March 2015).
Para información más detallada ver DIPRES. Source: http://www.dipres.gob.cl/594/w3-propertyvalue15223.html (March 2015).
Para información más detallada ver DIPRES. Source: http://www.dipres.gob.cl/594/w3-propertyvalue15222.htmlhttp://www.dipres.gob.cl/594/w3-propertyvalue-15223.html (March 2015).
4
3.
Performance Bonus Scheme
a. Management improvement programs have their origin in accordance with the provisions of
Law No. 19.553 of 19989, and associated with the fulfillment of the management objectives
with a monetary incentive for the staff.
b. Law No. 19.664 article 37 10 sets out special rules for the officials of the Health Services.
Since 2005 the system was expanded and more innovations in the types of evaluations were
introduced, i.e.
 Technical advice for programs
 Redesign of programs
 Expand in terms of evaluations conducted
 Evaluation of new programs
 Reinforcing management improvement program and Programa Marco de Calidad
 6 new performance bonus schemes
 Bidding fund for public programs
With the enactment of Decree 334 of the Ministry of Finance in 2012, public officials have a
performance bonus scheme embodied in a document called Management Improvement Program, is
an annual plan that is composed of priority and common areas of agencies; goals, indicator targets,
multiple weighted for which there is a compliance framework in which the Public Services establish
commitments that are later evaluated. Must be proposed by a Technical Committee (it is composed
of the representatives of the Ministers of Interior, Finance and the General Secretariat of the
Presidency) and approved annually by the Interministerial Committee (composed of the Ministry of
Interior, Finance and General Secretariat of the Presidency).
I.
Data at 2014
The evaluation results each year are provided consolidated reports with the number of
evaluations, their results and the major improvement made to indicators. They are published in the
web site of DIPRES.
Tables 1 to 5 show the results for year 2014 carried out by DIPRES corresponding to program
evaluations (ex – ante and ex – post).
1.
Ex -ante Evaluation Program
It aim is to determine if the program has clear and defined goals, a diagnosis linked with the
problem to be solved, and it has a set of performance indicators useful for a subsequent evaluation
and monitoring. These assessments are based on standards criteria for social programs: a direct
interest, coherence and consistency. In the case of not social programs criteria are: have to a
diagnosis, target population, goals and monitoring system, strategy and planning of resources.
Table 1 shows the evolution of the number of evaluated programs (social and not social), in
period 2008-2014, by type existing reformulated or new programs.
9
10
Source Ley Chile: http://www.leychile.cl/Navegar?idLey=19553 (March 2015).
Source Ley Chile: http://www.leychile.cl/Navegar?idNorma=1057049 (March 2015).
5
Table 1: Evaluated public programs. 2008-2014
Program
Social
 new
 reformulated
Non social
 new
 reformulated
Total
2008
75
48
27
24
14
10
99
2009
54
18
36
40
16
24
94
2010
85
20
65
50
17
33
135
2011
55
26
29
22
7
15
77
2012
44
30
14
30
21
9
74
2013
49
24
25
24
13
11
73
2014
123
84
39
62
48
14
185
Total
485
250
235
252
136
116
737
Source: Informe de Finanzas Públicas, Proyecto de Ley de Presupuestos del Sector Público para el año 2015. DIPRES.
11
Based in new rules established by DIPRES in 2012, every program with insufficient
performance should be presented for evaluation ex-ante the following year which meant it had to
justify its continuity. For instance in 2013, 7 programs were classified with insufficient performance
5 of them were presented to evaluation ex – ante (3 were recommended and 2 objected).
185 programs were presented for financing in 2015, from these 152 has financing in 2015.
147 of them had favorable evaluation and 5 were objected technically (see table 3).
Information presented to DIPRES into the Budget process 2015
a. Ex ante Evaluation
1. New programs, reformulations or extensions to existing programs: applications presented
by each Ministry to DIPRES (table 2). 354 programs evaluated, 33 % were new programs,
17% reformulation and 50 % enlargement.
Table 2: Applications presented by Ministry to DIPRES
Source: Informe de Finanzas Públicas, Proyecto de Ley de Presupuestos del Sector Público para el año 2015. DIPRES.
11
12
12
Source: http://www.dipres.gob.cl/594/articles-121592_IFP_2015.pdf (March 2015)
Source: http://www.dipres.gob.cl/594/articles-121592_IFP_2015.pdf (March 2015)
6
2. Programs under consideration in the budget 2015
Table 3 shows the result of the ex ante evaluation, where 68% were new programs and 32%
reformulation of programs. 3% of the programs evaluated were rejected technically. Also
programs with insufficient performance should receive technical support in order to improve
their weakness.
Table 3: Programs financed in Budget 2015
Source: Informe de Finanzas Públicas, Proyecto de Ley de Presupuestos del Sector Público para el año 2015. DIPRES. 13
b.
Ex post Evaluation
At September 2014, the ex post evaluation system carried out 499 evaluations: 445 of public
projects and 54 evaluations of agencies, including 21 programs in evaluation process and 6 agencies
in evaluating management expenditure.
Table 4: Evaluations in period 1997 - 2014.
Source: Informe de Finanzas Públicas, Proyecto de Ley de Presupuestos del Sector Público para el año 2015. DIPRES.
13
14
14
Source: http://www.dipres.gob.cl/594/articles-121592_IFP_2015.pdf (March 2015)
Source: http://www.dipres.gob.cl/594/articles-121592_IFP_2015.pdf (March 2015)
7
d.
Management Improvement Programs
The program has established for current year the following 5 management systems 15:
1.
2.
3.
4.
5.
Monitoring of performance
Planning and management control
Safety information
Quality management
Excellence Management System
As the current regulations establishes a weighting for each of these systems taking into account
the priorities defined by the current year. In 2015 the processes linked to the provision of goods and
services continues to be empowering at least 80% weighting for the Monitoring System. For
monitoring system were established 3 mandatory targets and each with a weighting and indicators
for evaluating the compliance of these. Figure 1 illustrates the processes, systems and indicators of
the framework program by 2015.
Figure 1: Framework Program for year 2015
Source: Informe de Finanzas Públicas, Proyecto de Ley de Presupuestos del Sector Público para el año 2015. DIPRES.
16
II. Remarks
The most important implication of Chile’s management and control system is the contribution
in decision making sending periodic information linked to the budgetary cycle to stakeholders
(Congress, public, press). La figura 2 siguiente, ejemplifica la relación de algunos mecanismos que
son parte del Sistema de Evaluación y Control y su relación con las etapas del ciclo presupuestario.
Figure 2 shows the relationship of mechanisms that are part of the management and control
system linked to the budgetary cycle.
15
16
Source: http://www.dipres.gob.cl/594/articles-121592_IFP_2015.pdf (March 2015)
Source: http://www.dipres.gob.cl/594/articles-121592_IFP_2015.pdf (March 2015)
8
Figure 2: Budget Cycle -- Monitoring and Evaluation System
Source: A. Arenas y H. Berner, Dipres
17
During the later annual budget discussion DIPRES, as each year and as established in law
N° 19.896 article 6, presents the document "Report of public finance, budget bill for Public Sector
by the year 2015", which contains valuable information on the performance of public institutions
and programs. However, from the point of view budget office of the Congress there are lags in
information flows of budget execution through the Congress. The quantity and volume of print
information without a digital support have constituted an obstacle to access better and deeper
analysis during budgetary discussion which is concentrated in October and November of each year.
This is especially critical in the case of evaluation reports of programs, which finally become a
history that fails to be analyzed in depth by the Special Joint Budgets Committee. This point is
shared by the DIPRES.
Performing the system DIPRES during 2015 will design a new evaluation line to measure the
cost - effectiveness of the initiatives and programs, which also will complement the current
evaluations (impact evaluations, institutional evaluations and program evaluations).
As was noted by the DIPRES "This new approach to assessment is in line with the
recommendations of the OECD.” In order to deliver information more timely and relevant and
standardized during the formulation process of budget. Evaluations of this type took care of the
dynamic nature of public policies, where a fundamental requirement for cost-effective decisionmaking incorporating background information at the Congress meetings during the discussion of
budget. Measurement and interpretation of indicators have to be easy which do not demand
extended periods of time to be generated and allow looking for opportunities for optimization that
serve as a guide, for decision-making about redesign of programs and reallocation of resources."
Considering this new instrument, DIPRES planned to evaluate 130 programs in period 2015 - 2018.
Until today this Unit concentrated its action in
a) Carrying out a updated repository with the flow of information from the Central
Government institutions target to send reports and background information to the Congress,
during Budget Law implementation.
17
“Presupuesto por Resultados y la Consolidación del Sistema de Evaluación y Control de Gestión del
Gobierno Central”. Dirección de Presupuestos. http://www.dipres.gob.cl/594/articles-60578_doc_pdf.pdf
(March 2015)
9
b) Doing the reports about budget execution available in web site of Congress.
c) Producing reports on budgetary matters and public policies and public finances according to
requirement of the Special Joint Budget Committee.
d) Writing and distributing to the Special Joint Budget Committee reports on topics as:
compliance of protocol agreement, budget execution monthly, quarterly and annual reports;
descriptive reports based on public sources; and
e) Providing technical support to the Joint budget Subcommittees, especially monitoring
monthly expenditures of each Ministry.
The main obstacle faced is the asymmetry of information with the Executive due to this is the
source of information for the Congress. Also, at this moment DIPRES staff is composed about 187
professionals and analysts with great experience, opposite to the capacities of information
processing that has the Congress in this matter, 4 professionals in the Senate and 1 professional in
the House of Representatives
Concluding, next phase of this Unit is to prepare more depth analysis of public expenditures
and evaluation results informed by DIPRES. In order to the flows of information established in the
Budget Law contribute effectively on discussion process of it. Accurate and at time information and
their implications for a better informed decision making should empower members of Special Joint
Budget Committee.
10