Performance-Based Budgeting in France: An Evaluation by Parliament

Posted by Franck Bessette.

 
  
  
In France, the parliament was the initiator and driver of performance-based budgeting, introduced by the organic by-law of  August 1, 2001 (the so-called Loi Organique sur les Finances Publiques -- LOLF) [for more details, see in particular this previous blogpost by Bill Dorotinsky  and its embedded PowerPoint presentation by Phillipe Debrose] and fully applied from January 1, 2006. This was a managerial “big bang” which reorganized completely the budget structure and public accounting (accrual based accounting was introduced), defined new players (program managers), new chains of decision, and for every program a series of objectives and indicators.

After three years of complete implementation, the Economic and Finance Committee of the National Assembly (Assemblée Nationale) has evaluated this performance-driven budgetary reform and made recommendations to further improve implementation. A general report followed by annexes for individual programs was recently published [click here for a copy of the report ]

The lawmakers' report starts by highlighting three encouraging points:

1. Contrary to a general opinion, the mechanisms of performance measurement are not conducive to excessive supplementary burdens for program managers and ministries directorates. Most estimates of the “financial and human cost of performance” for indicator rating and write-up of budgetary documents are considered negligible when they can be measured.
2. Many interviewed officials and program managers consider that performance measurement, in the very specific case of the program they are responsible for, is very difficult if not impossible, because of the nature of the policy, the limitations of the quantitative approach or because some results are not necessarily linked to the program. With some sense of humor, the lawmakers consider that this is an indirect recognition of the validity of the strategic decision to cover the entire budget with the performance approach, unlike other countries which took a more targeted approach. Should performance measurement be applied only to policies that are “adapted” to it, only very few would be using it, which would lessen the benefits of the approach.
3. In spite of its weaknesses, performance measurement appears to be generally useful because its very existence forces managers to have a more reflexive and distanciated view on their own professional practice, their margins of maneuvers, their dependence to other players, the levers they can use to achieve results, the relevance of the objectives and targets assigned to them.

Then, the lawmakers note that the number of objectives and indicators has decreased over time (see table below), owing to the elimination of useless or less adapted indicators. The indicators now tend to focus more on quality of service and efficiency, reflecting the public services users and the taxpayers’ point of view, and less on the social and economic efficacy, which reflects more the citizens’ point of view.

 2006  2007  2008 2009
Objectives       627  569 551  497
Indicators  1284     1173   1151    1057

This change is probably for the better, and reflects a normal learning process. However, lawmakers warn that at the same time the stability of the performance measurement structure is a key element, even more crucial now with the recently introduced medium-term budgetary framework.

Recommendations for the future:

- Indicators need to be more reliable and result from better information systems, involve less manually collected data; 

- Comparison between indicators should be enhanced through the development of more standardized indicators for comparable programs or comparable functions spread over various programs; and

- A better ownership of indicators and objectives should be sought.

More decisively, and more worryingly also, lawmakers note that very often the performance-based approach is disconnected from operational management. For instance, the report develops the argument that human ressources management should take into account performance, in terms of wages and salaries or promotion policies.

Furthermore, there should be a stronger relationship between performance measurement and the budgetary process. Of course, the relationship should not be automatic, with budgetary allocations increasing where performance is high. If objectives are not met, should resources be cut down (to avoid a waste of appropriations), or increased (appropriations were insufficient), or even maintained (corrective measures with the same appropriation)? There is probably a middle way between automaticity and not taking performance into account. As the report states, “even if performance should not command budgetary allocation, it should shed light on the process”. Besides, the Medium-Term Budget Framework approach (2009-2011) could decrease the resources needed to prepare the expenditure part of the annual budget and allow more time for discussing performance.

Lawmakers conclude saying that the involvement of Parliament is necessary to maintain the momentum gathered with performance-based budgeting.