1
RESULTS ORIENTED BUDGETING REFORMSMALAYSIA
SINGAPOREWORLD BANKWashington, DC15 JULY,
1999

• ARUNASELAM RASAPPAN, PhD.
• EXECUTIVE DIRECTOR
• ARTD (Malaysia)
• Management, Evaluation, Research Associates
• Kuala Lumpur

2
THE SOCIO-ECONOMIC ENVIRONMENTinMALAYSIA/SINGAP
ORE
3
BUDGET REFORMS NATIONAL STRATEGIES /
AGENDA_________________________________________
DYNAMIC SOCIO-ECONOMIC ENVIRONMENT
SOCIO-ECONOMIC DEVELOPMENT NATION-BUILDING
GLOBALIZATION COMPETITIVENESS ENABLING
MECHANISMS
4
BUDGET REFORMS OTHER CAUSAL FACTORS____________
_____________________________ RISING
EXPECTATIONS TREND TOWARDS
RIGHTSIZING SCARCE RESOURCES NEW PUBLIC
MANAGEMENTINITIATIVES INCREASING DEMAND
FOR GREATER ACCOUNTABILITY
5
THE ACCOUNTABILITY AGENDA______________________
___________________PROGRAM RESULTSSERVICE
QUALITY MORE WITH LESSVALUE FOR MONEY
RESOURCES OPTIMIZATION IMPROVED
ACCOUNTABILITY
6
FINANCIAL ACCOUNTABILITY

• ENSURING COMPLIANCE WITH FINANCIAL RULES AND
  REGULATIONS

7
MANAGEMENTACCOUNTABILITY

• MANAGEMENT EFFICIENCY
• ENSURING QUALITY
• MINIMIZING WASTAGE
• OPTIMIZING RESOURCES

8
PROGRAMACCOUNTABILITY

• ENSURING PROGRAM
• ACHIEVES OBJECTVES
• PROGRAM PRODUCES
• MANDATED RESULTS
• PROGRAM RESULTS
• FULFILL CLIENTS NEEDS
• BEST OPTIONS ARE
• CHOSEN

9
BUDGET REFORMS
10
BUDGET REFORMS
LINE-ITEM BUDGETING (Pre 60s)
CENTRALIZED DETAILED CONTROL
INCREMENTAL REACTIVE BUDGETS PROGRAM
PERFORMANCE BUDGETING SYSTEM (PPBS)
(1960s TO 1990s) PROGRAM/ACTIVITY BASED
PERFORMANCE FOCUS DETAILED CONTROL
CENTRALIZED
11
BUDGET REFORMS
PERFORMANCE-ORIENTED BUDGETING (1990s)
MODIFICATION TO PPBS PROGRAM / ACTIVITY
BASED AGGREGATE CONTROL GREATER
FLEXIBILITY PERFORMANCE BASED
RESULTS FOCUS PERFORMANCE TOOLS
12
BUDGET REFORM SEQUENCING ISSUES

• STAGE OF SOCIO-ECON DEVT
• RESOURCE AVAILABILITY
• RESOURCE CAPACITIES
• CULTURAL VALUE SYSTEMS
• FOCUSSED STRUCTURED
• PRACTICAL EXAMPLES
• TECHNICAL ASSISTANCE
• LEADERSHIP VISION

13
ASSOCIATED PUBLIC SECTOR REFORMS
14
DRIVERS OF OTHER PUBLIC SECTOR REFORMS FOCUS

• CRITICAL DEVELOPMENT
• MECHANISMS
• CHANGE AGENTS
• DEVT FACILITATORS
• GLOBAL COMPETITIVENESS
• MALAYSIA INC.
• CHANGE AGENTS
• GROWTH FACILITATORS
• CAPACITY CAPABILITY
• BUILDING
• PUBLIC SERVICE FOCUS

15
ASSOCIATED PUBLIC SECTOR REFORM INITIATIVES

• PRODUCTIVITY
• IMPROVEMENTS
• TQM
• ISO 9000
• QUALITY IMPROVEMENTS
• CONTINUOUS IMPROVEMENTS
• PERFORMANCE REPORTING
• INNOVATIONS IN
• GOVERNMENT

16
ASSOCIATED PUBLIC SECTOR REFORM INITIATIVES

• ASSET MANAGEMENT
• COSTING OUTPUTS/ACTIVITIES
• CLIENT CHARTERS
• SERVICE RECOVERY
• COUNTER SERVICE
• COMPLAINTS HANDLING
• PERFORMANCE BUDGETING

17
LINKAGE BETWEEN BUDGET REFORMS MANAGEMENT
REFORMS

• CRITICAL ROLE OF
• MANAGEMENT REFORMS
• LINK WITH NATIONAL DEVT
• LINK WITH ECON. GROWTH
• LINK WITH SERVICE QUALITY
• MISSING LINKS WITH
• BUDGET REFORMS
• INTEGRATED PERFORMANCE
• MANAGEMENT FRAMEWORK

18
DIFFICULTIES IN ADOPTING AN INTEGRATED
PERFORMANCE MANAGEMENT FRAMEWORK

• LACK OF PROVEN AND
• WORKABLE MODELS
• INTRICACIES DIFFICULTIES
• INABILITY OF POLICY-MAKERS
• AND PROGRAM MANAGERS
• LACK OF RESOURCES
• LACK OF EXPOSURE AND
• GUIDANCE

19
Program Logic Linkages Model(ProLL Model)?
CLIENTS
NEEDS / PROBLEMS
Needs Fulfillment / Problem alleviation (rate /
level)
POLICIES
PROGRAM/ ACTIVITY
Mission Goals
OBJECTIVE
INPUT (RESOURCES)
Objective Achievement (rate / level )
PROCESS
OUTCOME
OUTPUT
? Arunaselam Rasappan (1992)
20
LINKAGE BETWEEN BUDGET REFORMS RESOURCES
MANAGEMENT
21
NATIONAL BUDGET APPORTIONMENT BETWEEN DEVELOPMENT
OPERATINGBUDGET
22
DEVELOPMENT BUDGET 30OPERATING
BUDGET 70COMPOSITION OF OPERATING
BUDGET?EMOLUMENT 60-70
23
The Results-Oriented Budgeting System(MBS/PBS)
24
THE RBB SYSTEM

• IMPLEMENTED IN 1990 (1996)
• BASED ON THE PPBS (1969)
• NOW INTEGRATED WITH KEY ELEMENTS OF THE PPBS,
  ZBB, AND MBO
• BASED ON THREE MAJOR
• ACCOUNTABILITY TYPES
• LET MANAGERS MANAGE MAKE MANAGERS MANAGE

25
THE RBB SYSTEM

• TRUST EMPOWERMENT
• ACCOUNTABILITY FOR
• FLEXIBILITY
• PERFORMANCE AGREEMENTS BETWEEN CEO MINISTRY
  OF FINANCE
• EXPENDITURE TARGETS BASED ON THREE YEAR BUDGET
  TRENDS BUDGET FORMULA

26
THE RBB SYSTEM

• TREATMENT OF CURRENT
• POLICIES, NEW POLICIES,
• ONE-OFFS
• PERFORMANCE AGREEMENT ANNUAL REPORTING
• VARIANCE ANALYSIS EXCEPTIONS REPORTING
• EFFICIENCY DIVIDEND
• THRESHOLD OR EXCESS
• CLAUSE

27
BUDGET FORMULA
3-YEAR AVERAGE TO ESTABLISH EXPENDITURE
TARGET PLUS INCREMENTS PLUS INFLATION PLUS
CURRENCY LOSS MINUS ONE-OFFS MINUS EFFICIENCY
DIVIDEND
28
THE PERFORMANCE MANAGEMENT FRAMEWORK
29
? THE MISSION PiL ? STRATEGIC PLAN ?
GOALS OBJECTIVES ? PERFORMANCE PLAN ?
PERFORMANCE MANAGEMENT ELEMENTS ?
PERFORMANCE REPORTING ? PERFORMANCE
EVALUATION ? USE OF PROGRAM LOGIC
30
Program Logic Linkages Model
(ProLL Model)?
CLIENTS
NEEDS / PROBLEMS
Needs Fulfillment / Problem alleviation (rate /
level)
POLICIES
PROGRAM/ ACTIVITY
Mission Goals
OBJECTIVE
INPUT (RESOURCES)
Objective Achievement (rate / level )
PROCESS
OUTCOME
OUTPUT
? Arunaselam Rasappan (1992)
31
STRATEGIC PERFORMANCE MANAGEMENT
GREATER FOCUS ON

• CONSCIOUS EFFORT AT
• MEASUREMENT
• VALUE FOR MONEY
• PROGRAM OUTPUTS OUTCOMES
• RESOURCES AND RESULTS
• LINKAGES
• IMPROVED EFFICIENCY EFFECTIVENESS
• REDUCED WASTAGE (ECONOMY)
• APPROPRIATENESS / RELEVANCE
• KEY RESULT AREAS
• GET YOUR BASICS RIGHT FIRST!

32
THE PROGRAM LOGIC APPROACH

• BASIC FUNDAMENTAL
• QUESTIONS FIRST!
• PURPOSE-IN-LIFE (PiL)
• TERMS OF REFERENCE (ToR)
• DOING THERIGHT THINGS,
• THE RIGHT WAY, FOR THE
• RIGHT BENEFICIARIES!

33
PROCESSMEASUREMENT

• EFFICIENCY
• TIME
• LABOR
• COST
• EFFECTIVENESS
• QUALITY
• RELEVANCE
• APPROPRIATENESS

34
IMPACTMEASUREMENT

• POSITIVE
• NEGATIVE
• INTENDED
• UNINTENDED

35
IMPACTMEASUREMENT

• DIRECT
• INDIRECT
• SHORT TERM
• LONG TERM

36
OUTCOMES LOGICAL LINKAGES
INTERNAL
EXTERNAL
POSITIVE
NEGATIVE
O B J E C T I V E S
INTENDED
CLIENTS NEEDS PROBLEMS
OUTCOME
UNINTENDED
POSITIVE
NEGATIVE
INTERNAL
EXTERNAL
37
Program Logic Linkages Model
(ProLL Model)?
CLIENTS
NEEDS / PROBLEMS
Needs Fulfillment / Problem alleviation (rate /
level)
POLICIES
PROGRAM/ ACTIVITY
Mission Goals
OBJECTIVE
INPUT (RESOURCES)
Objective Achievement (rate / level )
PROCESS
OUTCOME
OUTPUT
? Arunaselam Rasappan (1992)
38
PERFORMANCE EVALUATION
SYSTEMATIC DETAILED REVIEW OF THE
ACTIVITY TO ASSEESS TO WHAT EXTENT IT HAS
MET WITH PREDETERMINED GOALS AND OBJECTIVES
EXAMINE ISSUES OF EFFICIENCY, ECONOMY, AND
APPROPRIATENESS OF THE ACTIVITY.
39
PERFORMANCE EVALUATION
FORMATIVE EVALUATION SUMMATIVE
EVALUATION META EVALUATION EVALUATION
OF 3Es A
40
PERFORMANCE EVALUATION

• FORMATIVE EVALUATION -
• LINKED WITH KAIZEN
• CONTINUOUS IMPROVEMENT
• ANNUAL EVALUATIONS
• - LINKED WITH BUDGET
• - EVALUATION ACTION PLAN
• SUMMATIVE EVALUATIONS
• - ONCE IN 5 YEARS

41
ProLLEVALUATIONPOINTS
Clients Target Group/s Stakeholders
FE
CLIENTS
Relevance Validity Applicability
SE
BASIC NEEDS/ PROBLEMS
FE
Relevance Appropriateness Scope Coverage
Needs Fulfillment/ Problem Alleviation (Degree/Lev
el)
SE
POLICY
SE
FE
Relevance Appropriateness Scope Coverage
Mission Goals
PROGRAM/ ACTIVITY
SE
OBJECTIVES
Efficiency Effectiveness Economy
Funds Manpower Materials Equipment
SE
INPUT (RESOURCES)
FE
Clients Charter Performance Targets Micro
Accounting TQM Quality Productivity
Measures Service Recovery Counter Service Zero
Defect ISO 9000
Efficiency Effectiveness Economy
Objective Achievement (rate/level)
FE
SE
PROCESS
FE
OUTPUT (SERVICES/ PRODUCTS
OUTCOME/ IMPACT/ CHANGES
SE
Quantity /Quality Timeliness /Cost Appropriateness
FE
Efficiency Effectiveness Economy
Positive Negative Unintended Derivative
SE
SE
FE
Summative Evaluation Points Formative Evaluation
Points
FE
42
PERFORMANCE EVALUATION

• EVALUATION ISSUES
• EFFECTIVENESS ISSUES
• EFFICIENCY ISSUES
• ECONOMY ISSUES
• APPROPRIATENESS
• ISSUES

43
PERFORMANCE MEASUREMENT - DANGERS AND FALLACIES
GOAL DISPLACEMENT QUANTITATIVE DRIVEN PROCESS
OUTPUT DRIVEN FOCUS ON TANGIBLE
OUTPUTS INDICATORS AS THE END OUTCOME
OBSESSION COMPARTMENTATION
44
GUIDELINES FOR EFFECTIVE PERFORMANCE MANAGEMENT

• USE PROGRAM LOGIC APPROACH
• CORRECT CLIENT IDENTIFICATION
• CORRECT NEEDS/PROBLEMS I.D.
• PiL ToR ALIGNMENT
• STRATEGIC PLAN, CLEAR GOALS
• OBJECTIVES
• INPUT-OUTPUT-OUTCOME LINK
• INTEGRATION WITH NPM EFFORT

45
GUIDELINES FOR EFFECTIVE PERFORMANCE MANAGEMENT
PRIORITZE ALL PERFORMANCE MEASURES
CLEAR PERFORMANCE STANDARDS
RESPONSIBILITY QUANTITATIVE QUALITATIVE
COMPARE PERFORMANCE EVALUATION CONTINUOUS
IMPROVEMENT INTEGRATE INPUTS OUTPUTS
WITH OUTCOMES
46
BUDGET REFORM IMPLEMENTATON STRATEGIES
STRATEGIC PLANNING PREPARATORY WORK
INTER-AGENCYCOORDINATION ENABLING
MECHANISMS PILOT TESTING STAGGERED
IMPLEMENTATION STAGGERED INTENSITY
47
BUDGET REFORM IMPLEMENTATON - MISSING LINKS
OWNERSHIP COMMITMENT FROM ALL LEVELS
PERFORMANCE MEASUREMENT SYSTEM PERFORMANCE
INFORMATIONSYSTEM INTEGRATION WITH OTHER
MANAGEMENT REFORMS INTER-AGENCYCOORDINATION
48
BUDGET REFORM POLICY-MAKING MAJOR MISSING
LINK INTRICACIES OF POLITICAL
CONSIDERATIONS POLITICAL V/S ADMINISTRATIVE
DRIVEN POLICY CONSIDERATIONS AS KEY COMPONENT
OF BUDGETING NEED FOR INTEGRATION BETWEEN
PERF. MNGT, PERF. EVALUATION POLICY-MAKING
49
BUDGETING, FISCAL DISCIPLINE, ALLOCATIVE
EFFICIENCYOPERATIONAL EFFICIENCY
50
BUDGETING, FISCAL DISCIPLINE, ALLOCATIVE
EFFICIENCY OPERATIONAL EFFICIENCY IMPROVED
FISCAL DISCIPLINE Budget Discipline
Resource Predictability Improved Planning
Reduced Supplementaries IMPROVED OPERATIONAL
DISCIPLINE Improved financial mngt Less
budget overruns Focused Expenditures Better
value-for-money Reduced Wastage
51
BUDGETING, FISCAL DISCIPLINE, ALLOCATIVE
EFFICIENCY OPERATIONAL EFFICIENCY LIMITED
ALLOCATIVE EFFICIENCY Reasonable success at
agency levels Limited success at politiical
levels Room for improvement
52
BUDGETING EFFORTS TOWARDSIMPROVING
EFFICIENCYGOVERNMENT COMMITED TOWARDS IMPROVING
EFFICIENCY ENHANCED STRATEGIC PLANNING
PERFORMANCE PLANNING MINIMIZING AD-HOC
BUDGETS LINKING RESOURCES POLICY MINIMIZE
ONE-OFFS EXPENDITURE CAPS BALANCED BUDGET
APPROACH REDUCED ENTITLEMENTS CHARGED
EXPENDITURES EXCEPTIONS REPORTING COST
CONSCIOUSNESS FLEXIBILITY FOR ACCOUNTABILITY
53
ACCOUNTING REFORMS
54
ACCOUNTING REFORMS

• MINIMAL LINKS WITH BUDGET
• REFORMS
• ACCOUNTING REFORMS FROM 1960s
• MAJOR REFORMS LINKED BUT
• OTHERS WERE PIECEMEAL
• MAJOR ACCOUNTING REFORMS
• LINKED TO BUDGETS
• MODIFIED CASH ACCOUNTING
• COST INFORMATION
• DECENTRALIZED ACCOUNTING
• INTEGRATED INFORMATION

55
ACCOUNTING REFORMS

• CASH ACCOUNTING
• MODIFIED CASH ACCOUNTING
• SELF-ACCOUNTING AGENCIES
• DECENTRALIZATION TO
• STATES AND AGENCIES
• INTEGRATED REPORTING
• MICRO-ACCOUNTING
• ELECTRONIC GOVERNMENT

56
BUDGETING, FISCAL RISKS CONTINGENT LIABILITIES

• SPECIAL CIRCUMSTANCES
• OF DEVELOPING COUNTRIES
• TRANSPARENCY ISSUES IN
• BUDGETING
• COMPLIANCE WITH
• ACCOUNTING PRINCIPLES
• LINKAGE WITH BUDGETING
• PRACTICES

57
TIME FRAMEWORK FOR BUDGETING
58
TIME FRAMEWORK FOR BUDGETING

• ANNUAL BUDGETING
• PERFORMANCE BUDGETS
• MULTI-YEAR FOCUS
• ELEMENTS OF MULTI-YEAR
• PLANNING CEILINGS
• MODIFIED MULTI-YEAR
• BUDGETING WITH ESTIMATED
• RESOURCE CERTAINTY
• FORWARD ESTIMATES - DEVT
• V/S OPERATING BUDGETS

59
IMPACT OF BUDGET REFORMS -MAJOR REFORM FEATURES
IMPACT

• ACCOUNTABILITY FOR FLEXIBILITY
• ANNUAL BUDGET CEILINGS
• PROGRAM AGREEMENTS
• PERFORMANCE FRAMEWORKS
• FUNDS TRANSFER FLEXIBILITY
• EFFICIENCY DIVIDENDS
• PERFORMANCE MEASUREMENT
• PROGRAM EVALUATION
• POLICY-MAKING PROCESSES

60
RESULTS ORIENTED BUDGETING REFORMSMALAYSIA
SINGAPOREWORLD BANKWashington, DC15 JULY,
1999

• ARUNASELAM RASAPPAN, PhD.
• EXECUTIVE DIRECTOR
• ARTD (Malaysia)
• Management, Evaluation, Research Associates
• Kuala Lumpur