Danish experiences with Performance and Results Rikke Ginnerup, Ministry of Finance

1
Danish experiences with Performance and Results
Rikke Ginnerup, Ministry of Finance Niels
Refslund, Agency for Governmental Management

• Presentation to SBO Network on Performance and
  Results
• 2-3 May 2006

2
Agenda

• Brief background
• Outline of the Danish performance system
• Efficiency Strategies and Performance Contracts
• Reporting on performance information (Annual
  Reports)
• Accrual Accounting and Budgeting Reform
• Performance information in the budget
• Key challenges

3
Background

• 1980s Budget reform and introduction of
  framework budgeting
• 1990s Introduction of performance contracts
• After a 10-year period a number of weaknesses
  were identified
• Too many targets and objectives, few measurable
• Targets directed internally at the organization
• Targets and objectives were not prioritized
• Lack of linkage between directors contracts and
  performance contracts

4
Introduction of Efficiency Strategies in 2003

• Mandatory policies in the efficiency strategies
• Performance management
• Clear targets for citizens oriented services
• Contracting out
• Procurement
• Voluntary
• Mission and vision
• Organisation and structure
• Key areas of action

5
New outline of performance contracts

• Focus on outputs and outcomes (external targets
  and objectives)
• Merging performance contracts with director
  contracts
• A limited number of output targets (5-10) but
  many measures
• Analysis of the hierarchy of tasks and
  activities as a condition
• Focus on distribution of costs (ABC)
• Review of targets and objectives in yearly
  reports

6
Hierarchy of tasks and activities
Outcomes
Results
Outputs
Tasks
Activities
Resources
Processes
Funds
7
Performance contractsAn example of a hierarchy
of tasks and activities
Sustainable agriculture
Outcome
Research
Payment of grants
Advise
Output
Task
Financial support to ecological agriculture
-
Administration
Management
Activity
Cleaning
Personel
Material
Resources
Money
Appropriations
Fees
8
Review of performance contracts in the Danish
central government (2004)Table showing
aggregate measures of the performance
contracts percentage of all targets
Total number of contracts Total number of objectives Total number of targets Total number of measurable targets Total number of quantitative targets No. of external and internal targets No. of external and internal targets
Total number of contracts Total number of objectives Total number of targets Total number of measurable targets Total number of quantitative targets Internal targets External targets
119 853 3701 3508 1472 1060 2641
119 853 3701 94,8 39,8 28,6 71,4
9
Examples of output and outcome targets

• The Danish Medical Agency
• It is satisfactory if time of case processing
  for new composite drugs and vaccinations is 210
  days in 95 of the cases.
• The Danish Competition Authority
• For 2004 the target is that the agency's
  productivity for running services rises with at
  least 2 compared to 2003
• Danish Commerce and Companies Agency
• In 2004 it is expected that the company portal
  gets 600 users on average per month. This should
  give 7.200 new registered users in 2004 adding up
  to a total of 11.200 users by the end of 2004.
  
• Statistics Denmark
• The level of user satisfaction is 4,3 (on a
  scale from 1 to 5).

10
Reporting on results in Annual Reports

• Introduction to mission and organisation
• Performance report
• Statement of output performance
• Statement of general financial performance
• Financial account
• Profit and loss account and balance sheet
• Cash flow statement
• Various financial key figures
• Approval and attachments

11
Accrual Accounting and Budgetting Reform

• Applying private sector accounting principles to
  the public sector
• From cash to accruals focus on the use of
  resources (depreciation) rather than payments
• All departments and agencies must prepare
  financial statements with balance sheet, income
  statement etc.
• More focus on cost distribution
• A better basis for substitution of factors of
  production
• A precondition for performance based budgeting

12
Performance information in the budget

• The performance information is only to a limited
  extent linked to the budget
• However, taximeter-budgeting links the
  allocated budget to the output (productivity) of
  the institution
• Primarily used on the education sector eg. 30-50
  pct. of the university budgets depend on the
  amount of students passing the exam
• Is presently considered in new areas as a
  follow-up on the accrual accounting and budgeting
  reform

13
Management of expenditure frames
Performance management
Tools to compare costs, activities results
MoF Budgetary framework Budget proposals
Planning Budgetting
Performance objectives Performance contracts

• long-range budgets
• investment planning
• consolidated budgets
• guidance for corporate governance

Quarterly approval of accounts Framework
statement
Periodic control follow-up
Day-to-day management using various information
systems

• speedy procedures
• key figures (MIS)
• cash management
• activity based costing
• task hierarchy

Annual report National annual account
Annual report Performance reporting

• approval of accounts
• surplus reserves
• performance reporting

Accounting
14
Key challenges performance contracts

• Measurement of targets
• Risk of goal distortion
• Cross-cutting targets
• Fragmented performance information
• Resistance against a very centralized and
  systematic program approach
• Transparency can create pressure for more
  resources
• No direct integration between the performance
  information and the budgets

15
Key challenges Taximeter-budgetting

• Perverse effects
• Expenditure control
• Need to fine-tune the grants and simplify the
  model