The following main conclusions and messages were highlighted and discussed:
1/ Securing the pre-requisites. Based on experiences in France and Canada, several pre-requisites of program budgeting can be identified. They can be summarized under two principles: confidence (trust) and accountability; and four elements: leadership, participation, a sound public financial management (PFM) system, and appropriate tools.
• Confidence (trust): this principle is a cornerstone of program budgeting. Here we are not talking about “blind” trust. In this context, the word confidence implies that an organization trusts its program managers to achieve the results in the most efficient, effective and economical way. This confidence springs from a credible environment: the capacity to attain results is dependant on resources being available to attain those results.
• Accountability: the program manager (the manager having signing authority over a budget) must be clearly accountable for the results achieved with the resources made available. A system of rewards and penalties has to be in place if program budgeting is to be successful. The program manager has to have an incentive to be accountable for his decisions and results.
• Leadership: to implement program budgeting, strong leadership has to be shown and has to come from the highest possible authority. Governments have to make their determination clear and commit fully to the program budget reform. The Department of Finance, typically, has to take the lead in providing a clear vision and resolute direction and senior management in departments and organizations have to demonstrate their unambiguous involvement in the implementation.
• Participation: implementation of program budgeting requires the participation of all public servants, especially program managers. It is more than a system change: it is a paradigm shift from a prioiri control to a trust system and from a “wait-and-see” approach to a creative environment. All of this must take place within a flexible administrative structure which nevertheless issues clear and well-defined policies and directives.
• PFM: In countries where the PFM system is weak, upgrading it should itself be considered a basic step—indeed a pre-condition—of embarking on other reforms such as introducing a medium-term expenditure framework (MTEF), performance budgeting, and a computerized financial information system. Prioirty should be given to develop consistent and comprehensive cash management, public accounting, and fiscal reporting systems. Without these main features, it would become challenging to develop accountability and reach the objectives defined for each program.
• Tools: the introduction of new tools is not always possible but it is always desirable. This requires years of persistent efforts, supported by the necessary capacity, resources, awareness, incentives and organizational realities. Given the high volume of information produced by a program budgeting approach, a reliable and expandable informatics infrastructure is desirable.
2/ Managing expectations. Just as it is important to know what is needed for program budgeting, so have experiences in France and Canada shown that it is important to manage expectations about what it can deliver. Hence, before program budgeting can be practiced fully, there are a number of conceptual issues that should be clarified.
• For instance, the notion of “program manager” (in the sense in which it has recently been introduced in France through their latest budgetary reforms, the "Loi organique relative aux lois de finances", LOLF) is often not well understood, even by those who have been designated as program managers. The roles, responsibilities and accountabilities of a program manager should be introduced through formal training.
• There also seems to be a misunderstanding that program budgeting has to let go completely of the notion of means budget (salary, non-salary, investment, etc…). However, while the objective is to approve a budget by program, it is also important that basic resources required to deliver the program are controlled and reported on. This maintains the emphasis on better cost accounting and better knowledge of program costs. Identifying all relevant costs to a public administration remains a distant goal.
• Two questions are frequently asked when program budgeting is introduced, which suggest that people at least initially do not fully grasp its intent:
o Will this system increase my budget or at least give me better chance to get more resources? Not necessarily. High performing programs can more easily be identified however and resources can more easily be reallocated to such priorities.
o Will this system help me spend my resources faster? No, but it should enable you to spend it more effectively to be more accountable for the results.
• Introducing a new system or management model takes time, and sometimes what valued features of the old system are no longer available. For example, in Canada operating expenditure (salary and non-salary expenditures managed together) was introduced in 1993. The particularity of this approach is the lost of control by the manager over a single number for employees (Full Time Employee or FTE). In fact, when the manager shifts resources either from salary to non-salary or the reverse, the FTE count is completely changed. Nonetheless, senior management, political representatives and even the general public still want to know the number of employees in the organization. However, the only question readily answerable is: How much did you spend on employment?
3/ Ensuring effectiveness. There are several factors which, based on the French and Canadian experience, make the implementation and operation of program budgeting much more effective.
• Of paramount importance is the involvement of Members of Parliament, particularly on finance committees, even if the government or administration is reluctant to cede them a role. This importance derives from two facts: 1) the Members of Parliament represent the electorate and they should be well informed of departments’ performance; 2) Parliament is the final decision body for the appropriation of resources.
• Performance evaluation of all programs is essential, even though some program managers are somewhat reluctant to subject their programs to regular and rigorous objective evaluation. Formal performance evaluation mechanism is paramount in the program budgeting system. Not only does formal program evaluation permit performance oversight, it provides information feedback to improve future program design and delivery, it enables accountability and it facilitates effective resource allocation.
• Widespread support for program budgeting is important, although only attained once the system has proven itself useful to both managers and parliamentarians. Where the penetration of the program budgeting is supported by only a few, there is not the critical mass required to overcome the institutional inertia and build credibility for the new system.
4/ Learning from “best practices”. Countries that have recently embarked on implementing program budgeting may benefit from studying the recent French and Canadian budgetary reforms (see respectively below).
5/ Mali: A case study of implementing program budgeting
While parliamentarians and finance officials quickly understand the objective of program budgeting (results-based management), it is sometimes more difficult to convince program managers of the actual and practical benefit of moving over to program budgeting. Observations on Mali’s experience with implementing program budgeting can help underline the practical benefits, as well as identify some of the challenges.
France - Experience in Program Budgeting
France has undertaken a global reform of its PFM since 2001, when both chambers of Parliament adopted the Constitutional Bylaw on Budget Acts ("Loi organique relative aux lois de finances"), which reformed the national budget procedures and oversight mechanisms, and made public policies’ funding performance-based. The new Act was fully implemented in 2006.
Since that time, Budget Acts have been presented according to a new budgetary architecture: the general budget is now structured by public policies, which are now called “missions”) instead of by type of expenditures, each being monitored through performance objectives and indicators.
All appropriations, regardless of the type of expenditure concerned, are voted on in the form of commitment authorisations (i.e., capacity to commit legally the government) and cash-limit appropriations (i.e., cash requirements for the year to cover the commitments made or to be made). The appropriations are presented on a zero-based budgeting basis, which allows members of Parliament and the general public to get a more transparent and sustained overview of public expenditures.
From 2001 on, a series of reforms have been implemented to enhance the benefits of this new framework on public spending efficiency and transparency in France: (1) a new classification of credits and a new form of the budget documentation; (2) a comprehensive programming of public expenditures and yields over the medium term (i.e., three years); (3) the implementation of an actual control of the efficiency of public services through performance reporting, which is part of the budget act; (4) a new financial mapping of public expenditures and the organisation of the local policies and budgets (budgets opérationnels de programme), crossing the authority of the ministers and the supervision of the local governors (Préfets); and (5) the progressive building and implementation of three complementary matching accountings : budget, patrimonial, cost accountings.
Further work is being undertaken by the French administration to refine and improve the new program budgeting system. For example: (1) the development of a financial information system embracing the whole of government expenditures and yields (which is close to completion) and the implementation of this new tool (currently deploying); (2) subsequently, the reorganisation of the processes and structures of services at the local level that are devoted to public financial management, in order to gain a return on investment in the new system; and (3) the improvement of the quality of the financial processes and accountability in order to comply with the recommendations of the French National Audit Office (the “Cour des comptes”), which is responsible for certifying the government’s accounting.
Source: IMF
Initial steps where taken in 1997 to implement program budgeting in Mali. Prior to that time, budgeting procedures in Mali drew their inspiration from the processes in place within the former French administration. The general framework for the budget process (the 1959 Constitutional Bylaw or “Ordonnance Organique”) was based on two main pillars: a budget of means presented by “type of expenditures” and a “cash basis accounting”. This traditional PFM showed weaknesses, despite some advantages:
• Strengths: the traditional distinction between the “current services appropriation” (expenditures that were carried over from a given year to the next virtually automatically) and “new measures” used for the parliamentary budget vote, made it easier to organize the vote of Budget Acts by Parliament as well as to deal operational Departments when discussing appropriations with the Budget Office;
• Weaknesses: reporting mechanisms on public performance were non-existent, and Budget Acts were voted on a fiscal year basis (with the exception of National Defence, National Security and Justice Appropriation bills, which could be voted on a multi-year basis); hence a comprehensive view of the effectiveness of public spending was difficult to grasp.
Since, the government of Mali has made substantial progress in introducing program budgeting. Experience has been accumulated in familiarizing staff in the ministry of finance and in line ministries with program budgeting concepts including program classification and objectives, as well as performance indicators. Spending has been presented under a program structure as an appendix to the draft budget document since 1998, and further progress has been made since 2002–03 with the establishment of a quarterly process to monitor program implementation (in terms of the payments order.)
Nevertheless, the public financial management (PFM) has not yet fully benefited from these advances in terms of budget credibility, transparency, and accountability. This is due primarily to the following factors: (1) budget presentation, allocation, execution and reporting still continue to be on a line item budget basis, in accordance with the existing WAEMU directives on PFM; (2) the structure of programs is largely copied from the administrative organization, and the program directors are neither accountable for the achievement of program objectives nor sufficiently involved in their preparation; (3) program data are occasionally not fully consistent with line item data and are generally not well integrated with the line ministries’medium-term strategic planning; (4) some elements of the program budgeting, such as program structure, classification, and presentation, are in need of further strengthening; (5) the pertinence and consistency of performance indicators would need to be reviewed; (6) there is little evidence that program performance is used in budget decisions; and (7) remaining weaknesses in other key areas of the PFM system (e.g., public accounting, internal and external control, and cash management) do need to be addressed in parallel with further developing program budgeting.
Mali now faces a new challenge: installing budget programming at the heart of the administration’s public management and using it as a key asset to optimize the design and control of public policies. During the discussions, the mission advised that the authorities adopt a strategy to make program budgeting fully operational over the medium to long term, and formulated a number of recommendations to address the above factors. More specifically, the mission recommended to: (1) adapt the legal and regulatory framework (in line with the new WAEMU directives being finalized); (2) increase credibility and consistency between line ministries sectoral plans and the overall budget and MTBF process; (3) redefine the role and responsibilities of the various actors involved in program budgeting; (4) further improve implementation of program budgeting concepts (program structure; program design and review; program classification, and control); (5) further strengthen public financial management, in particular accounting and reporting, cash management, and information systems; and (6) undertake training activities to gradually overcome capacity constraints.
Canada - Experience in Program Budgeting
In Canada, steps to improve performance management in general and program budgeting in particular have been underway for over a decade. In the late 1990s and up to 2000, a number of steps were taken to ensure budgets were simplified and made more transparent to parliamentarians. This included the introduction of two-year forecasts for overall expenditures as well as increased carry-forward allowances. Major changes were made to the annual key reports to parliament on plans and performance.
Increasingly, program managers were given increased responsibility for financial and human resources under their control, with the capacity to transfer funds between goods and services and personnel budgets. In 2003 the Treasury Board Secretariat introduced the Management Accountability Framework, which identifies the 10 key areas of public sector management and sets out performance indicators against all of them. The Secretariat, working with operational departments, assesses performance against these indicators each year and senior managers are held to account for the performance of their department’s. The reports are published on the Internet.
Steps to identify clear program objectives for all programs across government have resulted in the new Management, Resources and Results structures, with its Program Activity Architecture, in 2005, which sets precise strategic objectives and associated program activities. About 2500 program activities have been identified in the 119 departments and agencies that report annually to parliament on their performance. This architecture is used in the annual reports to parliament on plans and priorities and on departmental performance. It is not yet used for the annual budget, which is approved each spring. A government expenditure management information system has been put in place to track financial and non-financial performance data.
In 2006, the head of each department and several key agencies where designated “accounting officers”, are and required to account before parliamentary committees on the way in which their departments have managed resources under their authority.
The government introduced comprehensive strategic expenditure reviews in the budget of 2007. All spending must be managed in a transparent manner, with demonstrable results. This requires clear measures, which are assessed and evaluated systematically and regularly and which demonstrate value for money.
Up-front discipline is applied to new spending proposals to manage spending growth. Requests for new funds from operational departments must include clear measures of success, demonstrate how the proposal fits with existing spending and results and provide reallocation options for funding.
Strategic Reviews assess existing spending over a four-year cycle (25 per cent each year) to ensure alignment with priorities, and effectiveness, efficiency and economy. Programs are expected to demonstrate results in support of priorities and decisions on allocating resources will be based on objective, evidence-based information. All government departments, over a four year cycle, will assess all of their expenditures against a specific set of criteria and reallocate 5 per cent of their expenditures towards new priorities or high-performing programs, either within the department or elsewhere.
Enhancements are underway on the Treasury Board policy on program evaluation, which will result in a more rigorous review of all direct program spending over a 5 year cycle and the use of this information on results in resource allocation decisions.
Source: IMF
The mission elaborated a road map that would result in the effective adoption and implementation of the budget within a program structure by 2014 or so. The mission recommended a cautious approach targeting a simple and robust program budgeting process, leaving aside for the longer run more complex aspects, such as accrual accounting. The mission advised the authorities that over the next months, it would be appropriate to develop a concept paper aimed at establishing full ownership of the reform program among all the stakeholders, including the decision makers and parliament; it also recommended to establish a steering structure to manage the reforms.
Conclusion
The benefits of program budgeting are well documented:
1. Permitting a budget focused on clear objectives;
2. Developing a coherent strategy for longer term strategic planning as well as short term performance;
3. Ensuring program managers are responsible for resources under their control and increasing their marge de manoeuvre in how those resources are spend to improve efficacy and performance;
4. Using performance information to improve program delivery and reallocating resources to high-performing programs and emerging priorities; and
5. Simplifying the budget structure and making it more transparent and accessible to all, notably parliamentarians.
To move forward with program budget reforms, and position the government to reap these benefits, it is important that these reforms are:
1. Sponsored politically and championed at the highest level;
2. Overseen closely at both the central and local levels ;
3. Carefully prepared and prudently implemented to ensure their sustainability;
4. When necessary, focused in priority on developing a sound PFM system.
Properly implemented, budgetary reforms can become key tools to overhaul the design and implementation of public policies, and can lever the larger modernization of public management.
Owing to the significant challenges in implementing a robust program budget and of convincing all program managers of its practical utility, the technical support of organizations such as the World Bank, IMF and the Financial and Technical Partners is often critical. In addition, countries going through the experience themselves can often benefit enormously from sharing best practices (e.g., a large “colloque” on program budgeting could be organized to first take stock of who is where with program budgeting and to provide a forum for sharing success stories and failures).
*An FAD technical assistance mission visited Bamako during the period February 25 – March 10, 2009, to assist the authorities in developing program budgeting. The mission comprised Michel Lazare (head) and Jean Luc Helis (both FAD), and Mr. Gérard Séguin (FAD expert). An AFW mission composed of Félicienne Padonou and Nicolas Nganze (AFW resident advisors), and Benoît Taiclet and Robert Scott Douglas (FAD experts) joined the FAD mission.
The mission held two seminars, one in Bamako and one in Tombouctou, for the various actors of the budget process at the central and regional level. Representatives of the parliamentary finance committee, and of the development partners, participated in the seminar in Bamako.
The presentation (in French) is attached.
Download MALI-atelier budget de programmes-05.03.2009
An FAD mission to Mali in March 2009 made a presentation on the French and Canadian experiences in developing program budgeting(*). The purpose of the presentation was to familiarize the authorities with international practices related to this topic, and to provide inputs to their future discussions. The presentation focused on general developments across the two countries and provide some specific assessments or proposals related to Mali. 
