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					      Fabián David Quirós Alvarez
General Sub-Director of the National Budget

           Ministry of the Treasury
                 Costa Rica

             December, 2008

I. The budgetary process in Costa Rica

II. Primary innovations and advances in Financial
      - result-oriented Budget : Methodology for
        planning and evaluation.
     - National system of Public Investment
     - Multi-year Budget and Base-Line Budget
     - Follow-up on budget execution

III. Over-all View: The challenges.
I. The Budgetary Process in Costa Rica
              The Budgetary Process in Costa Rica

Levels of Approval

 Central Government         Budgetary Law approved by the
                    Legislative Assembly
 Decentralized Entities   Budgets approved by the General
                           Comptroller’s Office of the Republic


FORMULATION                    EXECUTION

              AND ASSESSMENT
II. Primary Innovations and Advances
     in Financial Management
New Methodology for Budget
        Changes in Budgeting: Orientation toward Results

• Advances in the strategic analysis of planning and in orientation
  toward results:
   – Setting institutional priorities
   – Strategic objectives
                                            BID/PRODEV –
   – Indicators of results, and
   – Multi-year goals.

• Pilot plans for strengthening the budget process toward results:
  synergy and complementarity of international technical
  cooperation (BID-PRODEV and Treasury Deparatment of the
  United States of America)
                             National Development
            COMPONENTS                Plan
                              Planning by Sectors
                             Budgetary Planning
I.     Budgetary Planning    with focus on results

II.    Monitoring and       System of Management
                             indicators and results
                            Assessment of Results

III.   Accountability        Report on the Annual
                              Assessment of the
                            Results of Management
•Planning 2007                                          •Planning 2008 onward

                                     •Instituctonal                                         •Institucional

•Mission                                                •Mission


•Institutional Policies                                 •Institutional Priorities

                                                        •Budgetary Programs

                                                        •Amount                      %

•Goals for Institutional Improvement                    •Strategic Institutional Goals

                                                        •Indicators of Results

                                          •Program                                            •Program

•Mission                                                •Mission

•Products                                               •Products

•I Half.                  II Half.                      •Users       Beneficiaries

• Product Goals.          Product Goals

•Goals for Improvement                                  •Strategic Goals of the Program

•Relevant Management Goals

                              •Performance Indicators                     •Indicors of Performance and Management

•Type Formula Real         Projected Goal               •Type Formula         Result    Source of Data
According to the latest Statement of the General Comptroller’s
Office of the Republic:
  •Improvements in budgetary planning and assessment after
  •Technical and methodological approaches for strategic
  sectorial and institutional planning (May, 2008), establish a
  gradual process of defining indicators of management and
  results of public agencies.”

   Año      Tipo de Indicador                                Institución
   2008     Eficiencia, eficacia, economía, calidad          MAG, MEP, MINSA, MSP, MINHAC, MOPT
                                                             CONAVI, PANI, IDA, AYA, INA
   2009     De resultados                                    MAG, MEP, MINSA, MSP, MINHAC, MOPT
                                                             CONAVI, PANI, IDA, AYA, INA
 2009-2010 Dos indicadores de cada tipo excepto resultados   Todas las instituciones

   2011     Todos los tipos de indicadores                   Todas las instituciones
    The General Comptroller’s Office of the Republic in its Technical
    Report on the Budget for 2009 recognizes that:

•   Dynamism is seen in the number of indicators from
    the different ministries, suggesting a process of
•   There are indicators of efficiency, effectiveness,
    economy, quality, and management.
•   A tendency remains favoring indicators of
    effectiveness at the cost of indicators of economy
    (.7%), quality (2.4%) and efficiency (1.2%).

                  “LA GACETA No. 162 of Friday, August 22, 2008
                                   Nº 34694-PLAN-H
            Regulation for the Constitution and Functioning of the National
                              System of Public Investment
Artícle 1—On Location. The National System of Public Investment is part of the National System for Planning
and its implementation and operation will be the responsibility of the Ministry of National Planning and Economic
Policy, with the objective of achieving optimum utilization of public funds for meeting government objectives, tied
to the principles of economy, efficiency, effectiveness, gradualness and quality of the investment. El Sistema


Artícle 5—On specific objectives.. The SNIP has the following specific objectives:
a) Succeed in assuring that public monies intended for public investment yield the greatest economic-social and
environmental benefit to the country.
b) Implementation of an integral system of analysis, follow-up, and assessment of public investment, following the
life cycle of projects.
c) Plan public investment and manage it efficiently.
d) Provide sufficient quality information for making decisions about investments.
e) Strengthen the ability of the entire public sector in the formulation and planning of public investment, as well as
in the socio-economic, environmental, and risk management for disasters, and physical and financial execution of
investment projects.
f) Facilitate annual and multi-year planning of public investment.
g) Mantain an up-to-date inventory of all public investment projects.”
      Multi-Year Fiscal Scenarios

 In the 2008 budget, for first time, there were multi-year
  fiscal scenarios → with different projections of expenditures
  and income for the central government.
                 Multi-Year Fiscal Scenarios

•   The Ministry of the Treasury has developed a model of macro-economic
    consistency among the different variables associated with the Costa Rican
    economy, in order to be able to have an analysis structure at the time of
    generating multi-year scenario indicators.


     – Mid-term trends of the real sector.              BID/PRODEV –
     – Monetary and Exchange Aspects.

     – Fiscal Performance and Debt Dynamics.

     – Consistency of the External Sector.
                                                              Scenario 1*
                 Multi-annual Budgetary Scenarios, 2009-2012
                                              Millions of colons and percentages
Other Income                                          93,664             83,580           106,525            121,677        138,154
% PIB                                                   0.58%                0.5%               0.5%               0.5%            0.5%

% Crec                                                                      -10.8%             27.5%              14.2%           13.5%

TOTAL EXPENDITURES                                 2,584,971         3,231,110          3,690,702           4,205,688      4,746,158
% PIB                                                   16.1%               17.5%              17.3%              17.3%           17.2%

 M inistry of Education                           830,169            1,116,042          1,278,299           1,460,119      1,657,844
 Pensions                                         374,745              463,468            528,354             602,323        686,648
Remunerations (excludes MEP and the Judicial Branch)                   352,302            413,517             471,409        532,692
  Salares                                         220,286             300,904            346,039             394,485        445,768
  Social Contributions                             41,273               51,399             67,478              76,925         86,925
 Judicial Branch                                  168,392              209,798            228,110             265,416        309,522
 CCSS                                               41,054              54,239             63,915              73,006         82,892
 CONAVI                                             89,432             101,796            116,111             129,689        143,776
 M unicipalities and IFAM                           53,111              35,530             41,188              47,046         53,417
 PANI                                                6,319               7,982              8,700               9,396         10,054
 FODESAF                                            10,908              12,570             18,030              20,594         23,383
Non-contributory Regimen                            40,439              46,785             50,996              55,075         58,931
 Others                                           349,992              439,436            519,430             581,252        639,700

PRIMARY EXPENDITURES                               2,226,119         2,839,949          3,266,648           3,715,326      4,198,859
% PIB                                                   13.8%               15.4%              15.3%              15.3%           15.2%

% Crec                                                                      27.6%              15.0%              13.7%           13.0%

PRIMARY RES ULTS                                    283,197              93,290           120,843            153,990        194,428
% PIB                                                      1.8%              0.5%               0.6%               0.6%            0.7%

% Crec                                                     2.3%              1.8%               1.5%               1.2%            1.1%

 Internal Debt                                      266,561            311,696            350,586            422,033        484,867
 External Debt                                       92,291             79,465             73,468             68,329         62,432
Total                                               358,852            391,162            424,054            490,362        547,299
% PIB                                                      2.2%              2.1%               2.0%               2.0%            2.0%

FINANCIAL RES ULT                                    -75,655          -297,871            -303,211           -336,372      -352,871
% PIB                                                   -0.5%               -1.6%              -1.4%              -1.4%           -1.3%

* Scenario 1 supposes maintaining a similar trend in income growth, without any variation in assignment of expenses.

C alculation of the Blanchard Primary Gap           2008            2009               2010               2011            2012

Implicit interest rate                                 9.7%                 9.5%               9.2%               9.6%           10.0%
Rate of inflation                                     14.2%                10.0%               9.0%               8.0%            7.0%
Implicit real interest rate                           -4.0%                -0.4%               0.2%               1.5%            2.8%
Rate of potential growth                               4.5%                 4.5%               4.5%               4.5%            4.5%
Debt / GDP (%)                                        23.0%                22.3%              21.5%              20.9%           19.9%
Primary Surplus to stabilize the debt (PS)*           -1.9%                -1.1%              -0.9%              -0.6%           -0.3%
Primary Surplus (PS)                                   1.8%                 0.5%               0.6%               0.6%            0.7%
Primary Gap                                           -3.7%                -1.6%              -1.5%              -1.3%           -1.0%
        Multi-Year Fiscal Scenarios

– For 2009 an update is presented of the scenarios for
  projected fiscal income and expenditures, first presented
  in 2008 and include projections. This document
  includes projections up to 2012.
– The Ministry of the Treasury has continued working on
  the study of this topic through on-going work in
  assessment and improvment, and has reviewed the
  experiences and orientations that other countries have
  carried out and within the legal structure that governs
              Multi-Year Fiscal Scenarios

 Budget estimates are published for the medium term by the CentralGovernment, which
   will be developed through the “Base-Line” Concept

“Base-Line” will reflect future income and expenditures and the results in terms of
deficit/surplus by continuing existing government policies and programs and applicable

The “Base-Line” is a technical exercise and a neutral measure to determine the fiscal
path of the government and measure the impact of alternate policy proposals.
Base-Line: It is an automatic pilot that sets the fiscal path
Follow-up and Oversight of Budget Execution

• New program of oversight for the year 2008, which
  includes aspects of operational audit as well as
• Better coordination and communication between the
  areas of budgetary execution and formulation.
• Greater openness on the part of the ministers and
  oversight entities.
III. Overall Vision: The Challenges
           Countries According to their GpR Development

Level of Development                Countries

Advanced                            Brazil, Chile, Colombia, Mexico

Medium                              Argentina, Bolivia, Barbados,
                                    Costa Rica, Ecuador, El Salvador, Guatemala,
                                    Honduras, Nicaragua, Panama, Peru,
                                    Dominican Republic, Trinidad and Tobago,
Low                                 Beliz, Haiti, Paraguay, Surinam
     PRODEV Pentagon for COSTA RICA

                            Planificación estratégica

                                      3 2,4

Monitoreo y                           2                               Presupuesto
              5                                                 2
Evaluación        3,0                 1                              por resultados
                            1,7                     1,5

                             2,4                   2,5
       Gestión                                       3,2       G. Financiera,
      Programas                                                  Auditoría,
                        4                                  3   Adquisiciones
                   Puntaje País            Promedio Región     Max

• Assure support from above, participation from below o

• Generate demand (A two-way street)

• Determine realistic expectations and understand the
  necessary complementary gradualness and know how
  to wait

• Coordinate and bring the actors into agreement:
  improving conversation with other actors in the
  process: external control and political control

• Attempt to make the assessment go beyond the
  retelling of achieved physical goals and management,
  and reflect the substantial results of institutional
  management, especially benefits to the population.
• Few and simple rules: Report in a simple way to
  citizens on the use and application of funds,
  respecting the committed goals and results obtained.
• Continue working directly with those responsible for
  programs and formalize commitments with work
• Expand assistance to other ministeries and go beyond
  performance indicators.

•   MIDEPLAN has information on the public investment
    projects of 69 institutions.

•   Up to the present date, it has not issued a National Plan
    of Public Investment for 2008-2010.

•   It is important that the allocation of resources in the
    budget for investment projects be available before
    2011, but it is also necessary to refine SNIP and make it
    more precise.
Follow-up and Oversight of Budget Execution

•Strengthen the competence of human resources
assigned to management and to the agencies.
•Need to have an oversight manual that documents its
policies and procedures and a program of oversight.
•Exchange reports on oversight with auditing units
and the General Comptroller’s Office: implement
oversight software applications.
   Multi-Year Budget and Base-Line

• Advance to a fiscal strategy document that will discuss the macro-
  economic situation and fiscal direction for the medium term and will
  include an analysis on the sustainability of the debt.
• The document will include base-line estimates of income,
  expenditures, and the deficit/surplus for the budget year (2010) and
  the following three years of planning.
• Periodical publications on multi-year estimates for each ministry of
  the central government in accordance with the programmatic
  classification of the budget.
• Guarantee, so far as possible, its simplicity and transparency
Need for a Cost System for Goods and Public

 •Accountability of public servants and politicians
 •Control (to prevent abuses and fraud)
 •Correct use of funds
 •Continuous improvement
Need for a Cost System for Goods and Public

   Information about costs – necessary for:
   •Detailed knowledge to meet goals
   •Financial information
   •Budget preparation (study of alternatives)
   •Surveillance of efficiency
   •Control and assessment
      Fabián David Quirós Alvarez
General Sub-Director of the National Budget

           Ministry of the Treasury
                 Costa Rica

             December, 2008

Description: Result Oriented Management document sample