Sequencing Budgetary Sequencing Budgetary Reforms:Reforms:Lessons from SingaporeLessons from Singapore

26 May 2000

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Briefing OutlineBriefing Outline

• Mission

• Budgeting Policy

• Evolution of Budgeting System

• The Future of Budgeting

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MissionMission

To Advance the Well-being and Development of Singapore

through FINANCE

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MissionMission

• We will accomplish this with:– Superior Stewardship and Prudent

Investment of Public Funds– A Financial Environment Conducive to

Business and Enterprise– Policies and Frameworks which Enhance

Excellence in the Public Sector– Practices and Results which distinguish

MOF as a World Class Organisation.

Budgeting PolicyBudgeting Policy

What we want to do and Why...

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Budgeting PolicyBudgeting Policy

• Promote sustained and non-inflationary economic growth

• Foster growth in the private sector

• Live within our means

• Invest in the future

• Safeguard our Reserves

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People at operations

are in the best position to decide

on the most effective andefficient use of resources

to obtain the best value for money

Budgeting PhilosophyBudgeting Philosophy

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• Are they allowed to do it?

• Are they capable of doing it?

• Are they doing it?

Key QuestionsKey Questions

Evolution ofEvolution ofBudgeting SystemsBudgeting Systems

How did we get from There to Here?

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Budgeting SystemsBudgeting Systems

• Past:– Up to 31 Mar 78 Line Item Budgeting– From 1 Apr 78 Programme Budgeting– From 1 Apr 89 Block Vote Budgeting

• Present:– From 1 Apr 96 Budgeting For Results

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Evolutionary TrendsEvolutionary Trends

• General trends:– More flexibility and autonomy– Greater accountability– More focus on outputs, objectives and

outcomes– Greater overall fiscal discipline

Line Item BudgetingLine Item Budgeting

How many paper clips do you need?

Line Item BudgetingLine Item Budgeting

• Budget of each department of a Ministry expressed in terms of the kinds and quantities of goods and services to be purchased

• Ministries had to keep expenditure within the amounts approved for each object

Line Item BudgetingLine Item Budgeting

Strengths:

• Effective in ensuring financial control

• Adequate basis for allocating limited resources at a time when Government activities were limited

Line Item BudgetingLine Item Budgeting

Limitations:

• Rigid, unable to cope with – rapidly changing priorities and

circumstances– creation of new government services

• Budget evaluation mechanism difficult without mechanism to link “things to be bought” with “things to be done”

Line Item BudgetingLine Item Budgeting

Limitations:

• New budgets based on previous budget with increments for price increases– no evaluation of whether objectives are still

met or cost-effective

Programme BudgetingProgramme Budgeting

How much money do you need?

Programme BudgetingProgramme Budgeting

Programme Budgeting from 1 Apr 78:• Emphasizes things to be done• Adopted from the US “Planning,

Programming and Performance Budgeting System” (PPPBS)

• Systematically identify the programmes and activities necessary to achieve the goals and objectives of each Ministry

Programme BudgetingProgramme Budgeting

Programme Budgeting from 1 Apr 78:

• Funding based on resources required to undertake each programme

Programme BudgetingProgramme Budgeting

Strengths:

• Greater awareness of goals to be achieved

• More flexible than Line Item Budgeting– gradually relaxed transfer of budgets

between objects of expenditures and between activities/programmes

Programme BudgetingProgramme Budgeting

Limitations:

• With the expansion of existing programmes and the introduction of new ones, there was no mechanism to ensure that the overall expenditure would not outgrow revenue collection.

Block Vote BudgetingBlock Vote Budgeting

How much money can we give you?

Block Vote BudgetingBlock Vote Budgeting

Block Vote Budgeting• Top-down approach• Cabinet approval of budget priorities and

aggregate allocations• Ministries given flexibility in managing

allocations (transfers between programmes, activities and line-items)

• Control through published workload and performance indicators

Block Vote BudgetingBlock Vote Budgeting

Set Targets for:

• Government Expenditure as percentage of GDP such that– Total expenditure < Operating Revenue– Expenditure to GDP by Sectors and

Ministries

Block Vote BudgetingBlock Vote Budgeting

• Strengths– Better ensure a balanced budget– Contain Government expenditure as a proportion

of GDP– Help Ministries respond speedily to changing

priorities– Improve the effectiveness and efficiency of

Government operations– Make senior civil servants responsible and

accountable for expenditure budget

Block Vote BudgetingBlock Vote Budgeting

Limitations

• Less emphasis on outputs and deliverables– Ministries only required to budget the

amount of inputs needed to fund their operations.

• Inadequate incentives to achieve greater operational efficiency

Budgeting For ResultsBudgeting For Results

What results can you produce?

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Budgeting For ResultsBudgeting For Results

• Key elements:– Pre-specification of outputs and

performance targets– Output-based funding allocations– Granting financial and personnel

management flexibility– Ministries and departments operated as

Autonomous Agencies

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Budgeting For ResultsBudgeting For Results

• Strengths:– Budget based on outputs– Emphasis on performance and results– Greater autonomy and flexibility– Greater accountability– Departments more aware of outputs and cost

of producing outputs– Puts decisions on deployment of resources in

the hands of people at operations

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Budgeting For ResultsBudgeting For Results

• Shortcomings:– No clear link to desired outcomes– Lack of focus on processes– Does not address need for sustained

superior performance and results– With tighter fiscal position, need for greater

emphasis on inter-ministry allocations

The Future of BudgetingThe Future of Budgeting

How do we get from Here to There?

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The Future of BudgetingThe Future of Budgeting

• Moving ahead:– Budgeting 21– Managing For Excellence– Resource Management

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To build an excellent Public Sector through harnessing the creativity

of our people and superior management of our resources

Managing For ExcellenceManaging For Excellence

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Managing For ExcellenceManaging For Excellence

• MFE is about:– Superior leadership and development of

staff– Superior management through results-

oriented processes– Sustained organisational excellence

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Managing For ExcellenceManaging For Excellence

• Scope of MFE:– People-Centred Management– Systems-Oriented Approach– Customer-Focussed Culture– Networked Government

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Resource ManagementResource Management

• Management, deployment and utilisation of resources for maximal results– Resource Accounting & Budgeting

• Based on Accrual Accounting

– Accurate Costing & Pricing– Enhanced Inter-Departmental Charging– Net Economic Value

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Budgeting 21Budgeting 21

• Future envisaged– Proposals outrun resources– Beyond least for output to most from input– Expenditures grow at GDP rate– MOF focuses on outcomes; ministries

manage outputs for those outcomes

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Budgeting 21Budgeting 21

• Key features– Predetermined overall and sectoral budget

ceilings– “Guaranteed” baseline operating budgets for

ministries– Project worthiness distinct from funding– “Productivity dividend” creates fund for inter-

ministry bidding– Funding by prioritisation within ministry and across

ministries

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SummarySummary

• Line Item Programme Block Vote– Focus on greater management autonomy– Addresses “Are they allowed to do it?”

• Budgeting for Results, Managing For Excellence & Resource Management– Focus on outputs and results-oriented processes and best

practices– Addresses “Are they capable of doing it?”

• Budgeting 21– Focus on outcomes and national priorities– Addresses “Are they doing it?”

Thank you!Thank you!