In developing this program, the government took account of international experience of spending reviews, as well as lessons learned from its own performance budgeting and medium-term budgeting initiatives, which are still under development. It was decided that spending reviews should be conducted annually, be selective (not comprehensive), focus on the program level, and combine strategic review with analysis of the efficiency of spending. It was also decided that the reviews would be carried out by teams comprising officials from both the central budget office and line ministries, and that most of the savings identified through the reviews should be returned to the line ministries.
To test the methodology and procedures for spending reviews, a pilot project was conducted during 2017. The pilot reviewed the penitentiary services and alternative penal measures program of the Department of Justice. This program received a budget allocation of €402.3 million in 2017, and covers 5,311 employees, 13 penitentiary centers, 8,566 inmates, and 13,763 people on alternative penal measures. To conduct the pilot, more than 62 documents and large data were analyzed, and many meetings were held with program directors and managers. Budget office personnel dedicated more than 1,800 working hours to the project.
The pilot spending review generated 35 recommendations, principally on the general management of the program (comprising more than half of the recommendations) and the efficiency of expenditures. Identified savings amounted to around 5 percent of program expenditures. The government intends to implement the recommendations of the pilot in its next budget. A positive outcome of the exercise for the Department of Justice was to increase their awareness of the benefits to be gained from a detailed evaluation of spending programs, processes, and costs, and the need for robust planning and monitoring systems. The pilot also exposed some data limitations, and the absence of a consistent cost accounting system in the Department of Justice.
The government intends to use the lessons of the pilot project to make improvements in the methodology and procedures for the next round of spending reviews. Additional time will be allowed to undertake the reviews, and better planning, management, and monitoring of the outputs of the exercise will be required. Additional guidance will be provided to staff involved in the exercise, and the role of internal peer review will be enhanced. There is also a need to improve the analytical skills of staff involved in the working groups, the organization of meetings, and internal communications.
Six new spending reviews are planned for fiscal year 2018. These reviews will cover spending programs on general management and administration, the regulation and promotion of tourism, sports, housing, student grants and subsidies, and public transport.
To conclude, the Catalan spending review initiative has demonstrated its potential as a tool to generate fiscal space and improve the value for money of public spending. More work is needed, however, to improve the organization and management of spending reviews, and ensure that the identified savings are realized.
Further information may be found on the following website:
http://economia.gencat.cat/en/70_ambits_actuacio/pressupostos/revisio-despesa/index.html
[1] Jordi Baños-Rovira is Head of Economic Evaluation at the Catalan Government, and a lecturer at the University of Barcelona; Esther Pallarols-Llinàs is Deputy Director of Expenditure Analysis and Monitoring at the Catalan Government; and Anna Tarrach-Colls is the Budget Director of the Catalan Government.
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