Final Report Program Budgeting in Malaysia 70223 Implementing the Outcomes-Based Approach in Malaysia March 2010 The World Bank 1 CONTENTS I. Executive Summary ................................................................ 3 II. Background .............................................................................. 4 III. Key Lessons from Emerging Global Practice ...................... 7 IV. Organization and Allocation of Responsibility .................... 8 A. Issues 8 B. Lessons from workshop case studies 9 C. Findings 13 V. Designing Implementation Processes .................................. 17 A. Issues 17 B. Lessons from workshop case studies 18 D. Findings 21 VI. Monitoring and Evaluation Systems ................................... 24 a. Issues 25 b. Lessons from workshop case studies 26 C. Findings 29 VII. Change Management .......................................................... 32 VIII. Risks in the Transition to Program-Based Budgeting ... 35 A. Common risks and pitfalls 35 B. Lessons from workshop case studies 36 C. Findings 38 IX. Summary Recommendations ............................................... 41 X. Appendix ................................................................................ 43 A. Terms of reference for technical assistance 43 B. Workshop Program 47 C. Workshop Participants 49 D. Major Meetings Held 59 The World Bank 2 I. Executive Summary Malaysia has adopted a new approach, which is the outcome-based approach to integrated development planning that identifies national program objectives and outcomes that are then resourced through program-based budgeting. To accomplish this task, the Economic Planning Unit (EPU) has undertaken various reforms/transitional changes to the current development planning process in order to move towards more systematic and structured planning. The current budgetary system of Malaysia will be reviewed and adjusted to meet the requirements of a program-based approach to planning and budgeting. This report summarizes the results of a two-day fact finding mission and a two day workshop conducted by the Economic Planning Unit of the Prime Minister‘s Department in collaboration with the World Bank‘s Public Sector Performance Global Expert Team (PSP-GET) held at the beginning of March in 2010 in Putrajaya, Malaysia. Prior to the workshop, the team held meetings with officials from the EPU, the Ministry of Finance, the Ministry of Transport, and the Ministry of Health to better understand the coordination and implementation challenges facing these entities with regard to adopting an outcomes-based approach (for a summary of the issues discussed please see Appendix). This report covers the critical areas to consider when implementing an outcomes-based approach. These include the organization and allocation of responsibilities, the design of the implementation process, the function of a Monitoring and Evaluation (M&E) system, change management, and the risks associated with such a transition. Each section is then structured in the following way:  Issues identified during the discussions;  Relevant experience from the two main case study countries (Korea and Australia); and  Overall findings of the PSP-GET team. The material in this report was compiled by a team led by Jim Brumby, Sector Manager, Public Sector & Governance, in his role as a core member of the Bank‘s Public Sector Performance Global Expert Team (PSP-GET). Other members of the team were: Dr Nowook Park, Director of the Center for Performance Evaluation & Management (CPEM), Korea Institute of Public Finance (KIPF); Mr Adrian Nye, Director and Consultant, Australia; and Theo Thomas, Senior Public Sector Specialist, World Bank. Additional support was provided by Joanna Watkins, Consultant, PSP-GET. The team would also like to acknowledge the role of the World Bank‘s EAP team, in particular Philip Schellekens, Senior Economist. The work was carried out pursuant to a fee-for-service arrangement with the Economic Planning Unit of the Malaysian Prime Minister‘s department. The total cost of the mission and associated work was about US$42,000. The World Bank 3 II. Background In order to improve development results under the 10th Malaysia Plan 2011-2015 (10MP), a more specific focus will be placed on the outcomes of programmes and projects. This is designed to ensure that programmes and projects produce the desired outcomes and that these will achieve identified national priorities. Towards this end, the Government has committed to introducing an outcome-based approach in the planning, budgeting and implementation of the 10MP. The Economic Planning Unit (EPU) and the Ministry of Finance (MOF) are currently in the midst of preparing the 10MP. Under the 10MP, a National Development Planning Framework is being developed to identify national priorities and targets systematically. At the planning stage, an integrated planning framework has been formulated with five National Mission Thrusts as a basis for planning (see below)1. For each Thrust, Key Result Area (KRAs) or national priority targeted outcomes have been identified, along with related Key Performance Indicators (KPIs), to narrow down policy direction at the national level. Figure 1 (Source: EPU) To ensure that efforts are focused towards achieving outcomes, new programmes are being formulated for each KRA. From the list of National KRAs, Outcomes, Strategies and related KPIs, provided by EPU, individual Ministries will develop their own KRAs (Ministry KRAs), 1 Strategic Directions include: (i) Competitive private sector as engine of growth; (ii) Productivity and innovation through K-Economy; (iii) Creative and innovative human capital with 21st Century skills; (iv) Inclusiveness in bridging the development gap; (v) Quality of life of an advanced nation; and (vi) Government as an effective facilitator with integrity. The World Bank 4 Resultant Outcomes and Strategies and KPIs. Programmes will, for the first time, integrate development expenditure and operating expenditure to reflect total budget requirements by one or more ministry and agency. This integration is designed to eliminate the existing redundancy of funding and promote value-for-money, as well as ensuring that policies and resource allocation are better coordinated. Therefore, it is hoped that the adoption of program-based budgeting will result in increased allocative and technical efficiency in public management by better focusing on performance and improved accountability during the plan period. Outcomes will be measured against key performance indicators to evaluate the effectiveness of programmes and projects implemented by the ministries and agencies. The framework, which comprises KRAs, outcomes, KPIs and programmes at the national level will systematically cascade down to the implementation level. KRAs, outcomes, KPIs, and programmes identified at the ministry level should be in line with the national level framework. This framework will form the basis for the ministries and agencies in planning and implementing their programmes. These programmes comprise a number of projects and activities to be implemented by one or more ministries. Projects and activities will be approved on the basis of their contribution to programme outcomes and budget commitments will be made on the basis of priority. The outcome- based approach is expected to improve overall performance and enhance public sector service delivery towards achieving the objectives of Vision 2020. The move to outcome-based budgeting is expected to:  Clearly align national goals with operational level objectives;  Remove duplication and better manage cross cutting issues among ministries and agencies;  Provide a framework for eliminating overlapping and redundant programmes; and  Provide a basis for better integrating monitoring and evaluation systems. This report highlights some of the key issues that should be addressed in order to ensure the smooth transition to an outcomes-based budgeting approach. In response to questions asked by the government, and drawing on the experience of countries that have implemented similar reforms, the report is divided in to four sections that will focus on the following:  The changes that may be required in the organization and allocation of responsibilities within Government. In particular, this section considers issues faced in integrating the Operating Budget with the Development Budget, in order to develop more comprehensive programs. This section will also highlight the roles different agencies might play in setting, monitoring and evaluating performance measures.  Issues in designing and implementing outcome-based budgeting. This section highlights the implementation issues faced by other countries in pursuing outcome based budgeting (OBB) and how these have been overcome, including some of the main obstacles in the process.  Strengthening the monitoring and evaluation systems has been core to ensuring the success of outcome-based budgeting in many countries. This section considers some of the new approaches for the generation, analysis and presentation of performance information, which are particularly important in ensuring its use in the budget process and by managers.  The need for change management reforms to support outcome-based budgeting. In the long-term the human resource management model is likely to have to change to support a more performance orientation. There will be a need to consider introducing appropriate levers to promote the move toward a more performance orientated management culture. The World Bank 5  The final section will consider some of the risks associated with the transition toward outcome budgeting. There are significant risks that need to be addressed to ensure that progress is made, and maintained, in the move toward outcome-based budgeting. This section highlights some of the key risks experienced by countries, and also some of the more pressing risks that may be faced by Malaysia along with some of the strategies countries have used to mitigate these risks. The World Bank 6 III. Key Lessons from Emerging Global Practice The Malaysian authorities and the PSP GET team identified a number of specific questions of relevance in moving toward effective program based budgeting. These are summarized below: 1) Roles and Responsibilities a) Are there lessons to be learned from the global experience about the division of key roles and responsibilities consistent with achieving higher performance? 2) Implementation issues a) What are the practices used in translating priorities into programs and outcomes? i) How are programs and outcomes which stretch beyond a single ministry organized? ii) How do countries handle the setting of KPIs for outcomes contributed to by more than one line ministry? b) What is the emerging practice on integrating capital and recurrent budgets? c) What are the main processes for identifying high-priority programs and allocating in accordance with these priorities? i) How has the role of the central budget agencies in analyzing budgets changed in support of performance budgeting? ii) How is feedback from implementing agencies and service recipients incorporated into the budgeting process? d) What forms of reporting are needed to support outcome-based budgeting? 3) Monitoring and Evaluation a) What are the appropriate criteria and data systems for program evaluation and impact studies? b) What is the evidence on linkages between increased budget allocation and poverty reduction or other major outcome objectives? c) How long does it take for OBB to be successful in other countries? What does the evidence show? 4) Change management a) What are the approaches used? b) How are the communication issues that need to be addressed? 5) Risks a) What risks are associated with the reform process? b) How do the risks to the budget process change as the process transitions to outcome-based budgeting? The World Bank 7 IV. Organization and Allocation of Responsibility This section considers the organization and allocation of roles and responsibilities of various entities within Government as they relate to Outcome-Based Budgeting. In particular, this section considers issues faced in integrating the Operating Budget with the Development Budget, in order to develop more comprehensive programs. This section also highlights the roles different agencies might play in setting, monitoring and evaluating performance measures. The specific topics covered include:  Lessons from the structural organization of OBB in different countries: programs vs. ministries  Mechanisms for setting KPIs and addressing cross-cutting issues in countries using OBB  Information aggregation at different levels based on strategic alignment _______________________________________________________________________ A. ISSUES The Malaysia economy has made remarkable progress over the past few decades. From an economy depending primarily on production of mineral and agricultural export commodities, it has been transformed into one dominated by manufacturing and services. Malaysia has generally enjoyed quite robust export-lead growth in recent years and has built an economy specialized in high-tech electronics. However, the economy needs to evolve and innovate constantly to maintain its competitive advantage and shield itself from global demand shocks. Malaysia‘s central agencies are adapting to reflect the need for increased resilience and innovation as well as the higher expectations of the public. The Minister for EPU, Tan Sri Nor Mohamed Yakcop, emphasized the importance of this transformation process. The concern of the authorities is clear – without a transformation in the nature of the economy and the role of the public sector in supporting that economy, Malaysia may face extreme challenges in the period ahead. The public sector is under increasing pressure. A slowdown in growth, coupled with ever higher expectations for what government should do, is placing performance expectations on the public sector. This establishes the need to transform the ability of the public sector to meet these challenges. Quite simply, under current arrangements, with current routines and procedures, the public sector will face real difficulty in meeting these challenges. Experience in a number of countries suggests the transformation process from middle to higher income status is associated with a change in role for government. The task for the authorities is to prepare the way to facilitate this change in focus. Government will need to reorient from planner to being a strategist and more of a rule setter than a producer. In this context, it is noted that the authorities are introducing a two year rolling aspect to the capital budget. This is consistent with increased fiscal and economic flexibility in responding to the wider economic environment, and an acceptance of the fact that as an economy develops, government directly accounts for less economic value adding production. The authorities have accurately identified a number of aspects associated with this transformation. The drive to integrate development and operating expenditures, the concern for The World Bank 8 cross-cutting programs, the creation of a delivery unit, as well as the introduction of the rolling component to the five year plan are all signs of government agencies – central and line - trying to adapt. There remain a number of challenges in this area. This appears also backed by a desire to increase a commitment to service delivery, in part by increasing the ‗voice‘ accorded line ministries in taking account of local information about services and client preferences in program design. Together,, these changes represent quite a fundamental alteration in the roles and responsibilities of agencies in Malaysia. B. LESSONS FROM WORKSHOP CASE STUDIES Australia Departments and agencies were rationalized so that there were fewer and bigger departments/agencies. A major issue for OBB in Australia initially was the large number of departments/Ministries in the Government structure. OBB was assisted by constraining the number of departments. In Victoria the number reduced from over 25 to 12 departments. (This does not include non-Budget entities). This rationalization meant that the skills necessary for implementing an outcome, accrual based framework were less diluted across agencies. It also meant that the outcome/program structure for the State was not fragmented into small bundles of outputs. The Government‘s interest was in high level strategic objectives being met, which was not always possible with multiple lower level groups of activities that were usually input based and not always obviously part of a bigger plan. OBB involves realignment or redefinition of central and line agency roles. Many of the existing relationships and ―rules of the budgeting game‖ had been in place for decades. There is a natural resistance by central agencies to let go of their detailed oversight of agency functions. Similarly, the idea of delegating additional authority to agencies is alien to many bureaucratic traditions and practices. The transfer of authority and the conditions under which this might occur took place through:  Legislation  Improved inter-agency communication  Memoranda of understanding  Documented role statements  A strong advisory committee overseeing OBB reform, including independent external parties. Reinforcement of the new arrangements is necessary through the heads of agencies and Ministers to ensure that the old practices do not creep back into the system. Capital and operating elements of a budget must be aligned. In Australia and in the State of Victoria, the distinction between an operating budget and a development budget, as in Malaysia, does not exist. Budgets have three components – payments for outputs (approximately equivalent to recurrent expenditure in the old language), additions to the capital base of a department and payments made to a department to be on-passed to other third party agencies (e.g. Money from the State directed towards private schools but over which the department plays no role other than as a banker). New initiatives, whether they are output initiatives or capital initiatives are both considered by the one department; in Victoria the Department of Treasury and Finance and at the national level though the Department of Finance. At the national level the Treasury is a separate department and is charged with setting high level policy objectives, such as identifying the need for the release of economic stimulus spending, but the specific outputs that follow and the performance of departments is the responsibility of the Department of Finance. In summary, in the Australian The World Bank 9 context, there has been a strong interest in integrating capital and recurrent operations into the one decision making department, not dividing the accountabilities. In an accrual environment such as Victoria, this is easily done and is unavoidable – asset valuations lead to the recording of depreciation expenses; asset acquisitions lead to the capture of maintenance obligations in the operating statement or at least in the notes to the accounts. But even in a cash system there is a non-negotiable need under OBB to put capital (development) budgets alongside operating budgets to see how the two interact. In Australia this has been especially important to ensure that agencies ―downstream‖ from the capital expenditure in the budgeting process can make an assessment and record (and hopefully budget for) the consequential operating costs. If this is not done, then the government and senior public managers can find themselves short of resources to maintain and refresh vital infrastructure and equipment necessary to the delivery of outputs. This in turn puts the achievement of outcomes at risk. The establishment of KPIs in terms of structure, roles and responsibilities, monitoring of progress, timeline, and reporting occurs at many levels of government. There is no single organization that covers all these elements. There exists at both State and National levels a set of quasi-contracts between the parliament, the Government, Ministers, departments and the Department of Treasury and Finance. These ―contracts‖ govern the agreed outputs, outcomes, KPIs, progress reporting, timelines etc. There are layers of detail involved and the complete structure is not captured in any one place. The Budget papers of the State and national governments set out the overarching policy and outcome framework with indicative KPIs. Between the Government and departments, there exist next level down structures for the outputs that are required to deliver within the timelines that Parliament has agreed. Between Ministers and department heads are even more detailed plans for the delivery of outputs and activities. And between the department and its sections and individual staff are the very base KPIs that drive the system. Management and co-ordination of the system depends on:  Annual and sometimes more frequent reporting to the parliament;  Reporting on departmental performance regularly (quarterly, half yearly) to the Cabinet or a sub-committee of the Cabinet)  Regular (sometimes monthly) reporting by departments to Treasury and Finance;  Regular (usually monthly) reporting of progress against KPIs to the head of each department and business unit head;  Regular (at least half yearly) review of staff performance against KPIs. The development of robust and meaningful KPIs is not necessarily an easy task. The skills necessary have developed over time in Australia. In a mature OBB system KPIs will be similar from year to year. In the early phase of development KPIs may change quite frequently. In these circumstances there is a risk that Ministers may be uncomfortable not being able to compare one year‘s versions of relevant KPIs with the next year‘s KPIs. Therefore, Victoria found it wise to try to establish ongoing and settled KPIs as soon as practicable in the OBB implementation phase. Good documentation helped record the basis on which a KPI was selected and the likelihood that it might change over time as new data sets and expertise developed. KPIs tend to be agreed or negotiated between the relevant parties at each level of government: parliament-Government, Government-departments (via Finance Department), department- business units. It is a process rather than an administrative direction, though sometimes the exercise of The World Bank 10 authority is required to ensure that departments are stretched to achieve the maximum rather than the comfortable degree of effort! KPIs are required to be identified in Budget submissions for all outputs and outcomes. They are initially drafted by the department having regard to the best available data and evidence. The key elements of the KPIs are the well known cost, timeliness, quality and effectiveness measures. Capital projects are easy to describe in these terms – on time and on budget. For more complex social impact activities such as health and education, the responsible department and the Finance function work hard to identify credible reportable measures that indicate achievement. Sometimes, in an outcomes framework, the time period may be years for effective change to be observed, but at a n output level, annual markers of achievement can also be documented, though their limitations have to be agreed by the parties. Ultimately, the Government is responsible for taking the bureaucracies advice and settling on KPIs that will drive the system. Often in technical areas, Australian departments will take expert advice that captures the best international thinking on the causal links between, for example, health education programs and disease prevention. The mechanism used to determine whether the KPIs are working is the annual review of the Budget progress conducted by the relevant committees of Cabinet, the continuous improvement discussions between the Finance department and service provision departments, and the annual Budget settling process during which Ministers and the Government decide whether the KPIs they have been working with are useful and meaningful. In Australia at both a State and national level there are also specific agencies that contribute to the oversight, commentary on and improvement of KPIs and performance generally. These agencies include the Auditors-General of each jurisdiction, the Australian productivity Commission and the Victorian Competition and Efficiency Commission. Monitoring KPIs over time requires a data base or counting system that is also ongoing. It has been important to select data in support of KPIs that is likely to be available into the future in a similar form. For example, if a quality measure is assessed through a survey, ensure that the questions asked over time do not change in a way that limits the comparability of the results. Cross-cutting outputs and programs have been strongly avoided in Australia and Victoria. Cross-cutting outcomes are acceptable but not preferred. The fact is that some socially complex outcomes such as reduced crime rates, do involve many elements of government activity – education, policing, poverty reductions, deterrence etc. In addition, successful achievement of these outcomes involves influences outside government control – natural disasters, global economic trends. Special structures in Victoria have been established to manage cross cutting outcomes – road safety, emergency responses, climate change are three examples. In these areas the relevant Ministers are advised by a committee of senior public officials whose agencies each contribute in one way or another (through their outputs) to the overarching outcomes. Involvement of Ministers is important to ensure that the natural rivalries of agencies are contained and that the focus remains on the common goal – producing an outcome for the public good. The hardest element of OPB is establishing, maintaining and monitoring the incentive system. This is because of the government view that the resources of a department are fundamentally owned by the State and are therefore available for distribution as it sees fit, even if the actions of the State dissuade innovation or better financial behaviors. For this reason it has been important to establish rules that ensure that the efforts of departments and agencies are acknowledged and respected. For example, a reward can be that any surplus/savings generated by a department can be applied to a Ministerially endorsed initiative of its own - e.g. produce more of an output or a higher quality output. Implicit in this type of agreement is the idea that the price for services provided by a The World Bank 11 department for an output/outcome, is not inflated in the first place so as to assure the department of a surplus/saving. The surplus must be generated by the better efficiency and work practices of the department itself, not from super profits built into the base. Because of this risk in the system, Treasuries in Australia now often conduct ―price reviews‖ of departments or parts of their business to ensure that the pricing structure built into the Budget are ―reasonable‖. These are very productive, but sometimes painful, exercises that assist the equivalent of EPU and departments in gaining a deep and commonly shared understanding of the cost drivers of a department‘s business. Another significant incentive is a general freedom built into the Budget rules that provide departments with a license to shift funds within certain categories of expenditure in the course of the year to better meet the achievement of outcomes. For example, having moved away from input budgeting, a department may decide that achieving its outcomes is better pursued by not employing x people as administrators, but by providing grants to locally based initiatives in the community to fix a problem. Again there is a strong rule framework in which this shifting can occur and good reporting structures, but the primary initiative is with the department to manage its business to achieve the government‘s agreed outcomes. Ministers have a key role in overseeing the link between the government as a whole and the department as the managerial unit. Korea It is desirable to locate each program within each ministry. In other words, avoid having cross- cutting programs, if a program will be a unit of budget allocation by the central budget authority. For the purpose of indicative planning, cross-cutting policy areas can be developed and used as a monitoring platform. It is not easy to establish proper accountability and coordination mechanism for cross-cutting programs. In Korea, the program structure has been developed to support the transition from line-item budgeting to program budgeting. The program is supposed to be the unit of budget allocation by the central budget authority. Each program is located within a ministry to avoid accountability and responsibility issues. KPIs are developed by line ministries for their programs and sub-programs. The central budget authority examines them and gives feedback to line ministries. Also the National Audit Office and the National Assembly Budget Office sometimes give their opinion. Despite these efforts, there is still room for improvement of KPI quality. In developing KPIs for programs, the central budget authority’s role is very important if it intends to use KPIs for decision-making purpose. The central budget authority in Korea played a role of gatekeeper to setting standards of performance information. The responsibility of developing performance information is with line ministries because they know their programs better than the central budget authority. The performance information developed by line ministries, however, is examined and approved by the central budget authority. If line ministries do not come up with relevant performance information, they will get bad ratings for their programs. Information aggregation layers are the following in Korea:  Sector: 12 sectors which can contain multiple ministries‘ policy areas.  Sub-sector: Corresponds to each line ministry and is a unit for setting budget ceilings for line ministries.  Program: Usually corresponds to department in each line ministry and there about 600 programs in Korea.  Sub-Program: Usually corresponds to team in each line ministry and there are about 1400 sub-programs in Korea. The World Bank 12  Activities: Typically refers to individual projects. It is desirable not to have separation between operating and development expenditure, because it may hinder budgetary implications on operating expenditure from development expenditure programs. Korea does not have separation of operating and development expenditure. However, in developing its program structure, Korea established a separate administrative support program to avoid the issue of indirect cost allocation problem. At some point it is desirable to implement indirect cost allocation to each program, but the central budget authority in Korea decided not to do this for now, partly because there is not much flexibility in the human resource management area and the central budget authority does not have much control over it. C. FINDINGS (1) It is desirable to integrate consideration of operating and development expenditures. While such an integration could focus in a comprehensive way on aspects such as the structure of appropriation, the presentation of data in the budget documentation, and corporate planning procedures, we regard the most important aspect to be consideration at the point of decision-making about budgets. This means that it is important to bring together in one place information about the fiscal implications of operating and development spending. This will also create an incentive for management in line agencies where responsibility for operating and development budgets is split, to bring together consideration of these two forms of expenditure. Table 1 shows an example of how this can be done through a straightforward template. The World Bank 13 Table 1 Integrated Budgetary Implications of Development and Operating ___________________________________________________________________ 1 Approve the following changes to appropriations to implement Project ABCD, with a corresponding impact on the fiscal balance. $m – increase/(decrease) Year 0 Year 1 Year 2 Year 3 Outyears Vote Name1 Minister of Portfolio1 Program Name Operating Expenditure (Specified items) 0.500 0.750 0.750 0.750 0.750 Development Expenditure: (Project Name ABCD) 1.000 2.000 0.500 - - Total Operating 0.500 0.750 0.750 0.750 0.750 Total Development 1.000 2.000 0.500 - - Fiscal Balance (Cash (1.500) (2.750) (1.250) (0.750) (0.750) basis) (Source: Adapted from practice in New Zealand) (2) Integration of development and operating expenditures has significant implications for the way that MOF and EPU must work together. In the absence of an amalgamation of the functions in one place, as has been done in some countries such as Korea, a specific effort will be required to bring together this joint consideration of the full budgetary implications. It means that MOF will need to be brought in earlier to the planning process, and that EPU may need to be more active in the operating budget process. It will be necessary for MOF and EPU to sign-off on the development and operating implications of any particular initiative, and routines will need to be put in place to make this process as smooth as possible. The World Bank 14 (3) Other aspects of the Public Investment Management (PIM) processes could be strengthened. Such a strengthening would also have implications for the role and responsibilities of the central agencies. While the drive to embrace value Figure 2: Accountability Framework for PIM in Brazil management and the use of BRAZIL’S MANAGEMENT AND MONITORING STRUCTURE gateways are unequivocally positive, there remains a President Follow-up and Decision challenge to strengthen the core economic appraisal of Ministers Managing Committee Follow-up and Decision projects. The current process MP – MF – CC – Sectorial Ministry of seeking vast ‗bids‘ by agencies for projects could be Executive group Monitoring System reshaped to force greater MP- MF CC CC Coordination discipline at the agency level, and reduce the costs of planning by cutting down on Situation Rooms Management MP – MF – CC � and Information the unnecessary Coord: CC � documentation of projects Institutional Highways Harbors and Railroads Airports Water Housing Sanitation Subways Energy Petroleum, Gas and Measures Waterways Resources Fuels that will never see the light of day. According to the line PAC‘s Managing Committee in the Ministries ministries met, only about 30 percent of projects that are bid make it through to being accepted in the development plan. A two-tier prefeasibility assessment process could assist this – with tougher tests provided to agencies so that a smaller quantum of projects comes forward, backed by agreed criteria for application by EPU to cut out projects. Figure 2 details the accountability framework used to guide the PIM process in Brazil. (4) Efforts should be put in place to increase the rate of spending on approved projects. It appears that the rates of spending execution on projects in the ninth plan have been uneven across agencies. Although there was insufficient time to get to the bottom of this issue, it is noted that low rates of spending execution, especially if they are associated with a subset of projects, can be an important and relevant indicator of institutional challenges. Although our data were not comprehensive, the information on different execution rates in transport and health suggested that rates may be slower for on-budget items than for off-budget items. Certainly an execution rate of less than 70 percent in health suggests that there are implementation issues which need to be addressed. (5) It is important to protect the integrity of the development budget. There is always pressure, especially in tougher fiscal times, to move expenditures from operating to development. While there is no doubt that creation of some human resource capabilities through initiatives such as training may have some of the economic characteristics of an asset, it is more prudent to treat them as operating expenditures. To the extent possible, the development concept should map closely to a notion of capital, so that the issue is clearly the relationship between expenditures which add directly to the (notional) balance sheet and can rightly be classified as capital, and those which are immediate costs and thus operating items. (6) Where possible, cross agency programs are to be avoided. While there is no doubt that an outcomes based approach leads correctly to the identification that many government outcomes are supported by more than one agency, there is rarely little management benefit to be gained by The World Bank 15 constructing programs in that manner. A program should act as a fund head – accordingly, if a program were to stretch beyond one organization, it would need to have clear authority for reallocating within this program, across organizations. If this becomes complex, then the pureness of the program design may actually act as an impediment to efficiency. This is seen in a number of countries – as referred to in the workshop. However, if having cross agency programs is seen as unavoidable, then it is important that the mechanisms put in place are not complex, and do not undermine the notions of accountability that are at the heart of the reforms. (7) Where cross agency programs remain, it is important to detail precisely the accountability mechanisms. In some countries, such as France, this has resulted in a rule that ‗missions‘ may extend beyond agencies, but that programs stay within single agencies. In Slovenia, the rule of thumb is that while programs may extend beyond single agencies, subprograms cannot. (8) Evaluation and budget formulation are useful ways to address duplication. The creation of cross-agency programs is not likely to be the best tool for dealing with overlapping service provision and duplication in agency functions. This is more likely to come through having a vibrant second opinion role executed in the ministry of finance, and a strong evaluation and monitoring function. While an outcome based approach may make a useful contribution to addressing this issue, it is also likely that conducting rigorous evaluations will do just as much. Both EPU in the context of preparing plans and MOF in the context of preparing budgets need to be vigilant in placing the onus on agencies to demonstrate that their services do not duplicate those provided by others in government. The World Bank 16 V. Designing Implementation Processes This section addresses the main implementation issues faced by countries pursuing outcome based budgeting and ways in which they overcome them. In particular, it considers the main sticking points in the process. These include:  The practices used to translate priorities into programs and outcomes through strategic alignment.  How programs and outcomes which stretch beyond a single ministry are organized and how the setting of KPIs for outcomes contributed to by more than one line ministry are done.  The role of the central budget agencies in analyzing budgets and performance information.  The reporting, incentives, and guidelines needed to successful implement outcome based budgeting. _______________________________________________________________________ A. ISSUES In considering the approach to reforms, experience shows that reform is typically an evolutionary process, not a revolution. Successful experiences commonly started with small and concrete steps on which other parts of the system can be built over time. Different parts of the reform may require different approaches; for example the introduction of program budget classification may need to be implemented across all ministries at once, while the development of high quality performance measures might focus at first on a set of priority ministries. An important part of implementing performance-based mechanisms lies in processes that allow for a planned approach, but with space for innovation and trial-and-error. Malaysia has a sound base for offering performance information to the major players in the budget cycle. Under the Modified Budgeting System (MBS), first introduced in 1990, an Integrated Planning Framework called the Program Agreements that monitored the level of performance for each Activity and the proposed mix of resources to be used by the Activity. At the end of the financial year, ministries are required to provide Treasury with Exceptions Reports on areas where actual performance was inconsistent with what was agreed upon in the Program Agreements with Treasury. These provide the trigger for ministries to take steps to address emerging problems and for the conduct of more in- depth Program Evaluations. The MBS helped to improve the identification of priority expenditures in budget submissions, provided better information on program performance and increased the opportunity for departments to use strategic planning as the basis for budget preparation. However, the mid-term review of the 9MP concluded that to improve development results, there needs to be greater focus on the outcomes of programs and projects in addition to the traditional focus on inputs and outputs. The authorities have identified some of the key challenges identified under this move to OBA as including:  Integrating all expenditures within a single budget based on programs (discussed above). Projects at the implementation level will need to be assigned to a program with clear identification of the project‘s contribution to the program outcomes. The World Bank 17  Strengthening the focus on the relationships between and among program outcomes, cascading national program outcomes to contributions to specific sub-sectors and implementation entities. At the same time, link the outcomes of implementation entities to higher level sub sector and national outcomes and priorities;  Developing outcome frameworks at the national, sub sector and implementation levels describing relevant program descriptions, outcomes, indicators, targets and baselines at each level; and  Clearly distinguishing between programs and their outcomes and projects whose outputs contribute to the achievement of program outcomes. Other technical reforms being implemented include:  Introducing a rolling two year budgeting framework for projects to complement the current four year national development plans;  Plans to introduce more robust integrated management information systems to incorporate performance information;  Strengthening the role of performance audit, and monitoring and evaluation; and  Quality assurance of performance information. In addition to the technical reforms, consideration is appropriately being given to the institutional characteristics that promote OBA. The authorities have established a range of new institutions to help bolster oversight and coordination, including a National Steering Committee (NSC) to guide OBA at the policy level, chaired by Secretary General of MoF; a Central Agency Steering Committee to oversee the application of the five major principles of IRBM; ministry level Steering Committees responsible for implementation; and departmental/Agency Steering Committees for all programs and projects. B. LESSONS FROM WORKSHOP CASE STUDIES Australia Budget papers can provide one of the most effective means of connecting goals (Thrusts), outcomes, programs, output, activities and resources is of Cabinet budget submissions and published budget papers. In Australia OBB has produced some simple techniques to discipline the process of documenting the desires of government to achieve very large strategic goals and have those very large pieces of work broken down at various levels into outcomes, programs outputs etc. This ensures that the language and the aspirations of different parts of the system are consistent or common. It assists in the assignment of accountabilities for the delivery of components of the system. It also helps identify any duplication of outputs or activities in the system between agencies. The Budget papers and the process that goes with it is also a marker of the changes from year to year as the OBB process is implemented. It is the one place where all parties can track how minor reforms to processes have been introduced or reprioritized. Developing a strong OBB practice in Victoria has required the addition of many new capabilities and skills into budgeting. These include the techniques of business case writing, economic assessments of projects and project management tools. These are now essential to translating priorities into action because they form the empirical basis for the selection of initiatives. As in Malaysia, political interests sometimes affect the order of priorities in the list, but even these non-quantifiable elements in decision –making can be given a weighting in a system that may take The World Bank 18 years to embed but are now commonplace. These techniques are now required in any proposal that wants serious attention by the central agencies and Cabinet for consideration. Central agencies and their budget units play a fundamental role in communicating the policy and budget settings for the forthcoming budget and, where relevant in the out years, for capital expenditure. This includes the major thrusts coming from the government and the indicative movement in the aggregate for expansion/contraction of State outlays. Agencies prepare business cases and submissions for ongoing and new initiatives, both operating and capital. Agencies prepare the draft monitoring and KPI regimes for existing and proposed initiatives for the relevant budget period and out years if required. At this point it is important to note that in Australia, the amount of detail required for the first consideration of a budget bid is not onerous. The budget process is a multi-stage one with increasing demands made on agencies the closer a bid gets to being a real contender for resources. A bid has to get through the first Cabinet gateway before an agency is asked to undertake the very detailed, time consuming and after expensive research into KPIs, business impacts and the like. The central agency‘s role is at all stages to check for quality, completeness appropriate to the stage of Cabinet consideration Central agencies help to ensure that ministries adhere to the rules and guidelines when requesting a budget. In situations of non-compliance, the ―punishment‖ systems are reasonably subtle recognizing that mechanisms such as those that operate in the private sector could unreasonably hurt the public e.g. withdrawal of service provision funding in year 2 for reckless overspending in year 1. The main constraints on departments are:  reputational – funding is harder to get in the event that there is evidence that a department has not performed well in discharging its responsibilities;  performance plans and rewards for the head of the department and the senior executive – as the responsible senior managers, jobs may be a risk for serious non-observance of the rules. Similarly bonuses may be at risk;  public disclosure through the Auditor-General and the parliamentary process – again a reputational risk;  intervention by the Department of Treasury and Finance (Victoria) or the Finance Department (national) to conduct a price review and potentially the imposition of new rules, or the withdrawal of previous freedoms, where non-compliance has been detected. Agencies have the primary role for delivering on the promises set out in the budget. The system is designed to ensure that the failure of an agency to deliver takes account of the factors that are outside its control or influence. These factors are usually set out in the budget process documentation approved by Cabinet. Agencies carry the main responsibility for establishing that public resources are being well used and that projects are being delivered. As a result Australia tends to operate large agencies that retain strong support functions in the areas of evaluations, project management and reporting. These functions are in the main not carried out through central agencies. Agencies may also play a role as lead agency for cross cutting outcomes. Some agencies, such as health, have developed methodologies for some activities that they then share with the remainder of the bureaucracy. This is encouraged to ensure that the central agencies appreciate that not all planning competence resides in the centre. In the event of budget cuts or the identification of redundant activities, the preferred approach is that agencies themselves notify these activities or savings. The incentive scheme to encourage this is still in development. The World Bank 19 A special Cabinet Committee, the Expenditure Review Committee (ERC) is the key and most powerful entity in determining the form and content of the State Budget in Victoria. It meets throughout the year to establish the standards for budget submission, set the criteria against which bids will be judged, assess the performance in delivery by agencies and Ministers. It has a highly structure review program culminating in the determination of the final annual budget. Along the way it interviews Ministers, agencies and the Treasury on the nature of proposals, the business case for them, their ―fit‖ with the objectives (thrusts) of the government etc. Korea In implementing OBB, the roles of the central budget authority needed to be changed. In Korea, the strategic planning bureau and the performance evaluation unit have been established to reinforce planning and evaluation capacity within the central budget authority. It even introduced a new organizational motto, ―think tomorrow‖ to emphasize that its mission moves beyond traditional budgeting. In developing program structure, the central budget authority also played a central role in setting standards and monitoring the process although there had been extensive involvement of line ministries. There can be a centralized approach where the central budget authority‘s role is pivotal and a decentralized approach where program structure is developed by line ministries. If you want to use program structure for the purpose of priority setting and resource allocation, the central budget authority should play a role of developing guidelines and communicating with line ministries to ensure each line ministries program structure layers are comparable. Central agencies play an important role in ensuring that ministries adhere to the rules and guidelines at the time they request a budget. In Korea, line ministries usually follow the guidelines issued by the central budget authority, but there are strong efforts to circumvent them. For example, for the budget ceiling agreed at the cabinet meeting, line ministries sometimes strategically behave by underestimating expected costs of new entitlement programs and they force the central budget authority to allow budget increase over the ceiling. In this situation, Korean central budget authority‘s hands are tied. However, usually line ministries observe guidelines issued by the central budget authority. Priority setting at the macro-level, which is at sector level in Korea, is done by the working groups consisting of the central budget authority relevant ministry and experts. Policy agendas are developed by the working groups and necessary cost estimates are done by the central budget authority to implement them. Based on the estimates, budget ceilings for each line ministry are discussed at the cabinet meeting and decided. At the micro-level of budget allocation, which is a program and sub-program level, performance information is more directly used by using evaluation results. For example, if particular programs are rated as ―ineffective‖ through program review process, they are more likely to be subject to a budget-cut. For the purpose of outcome-based budgeting, strategic plan, annual performance plan and report are basic reporting forms. Strategic plan explains each line ministry‘s medium-term strategy, annual performance plan specifies specific goals each line ministry plans to achieve next fiscal year, and annual performance report explains what each line ministry achieved and important factors to consider interpreting the outcomes. In Korea these reporting forms became mandatory with the enactment of the National Finance Law in 2006. The World Bank 20 D. FINDINGS (1) Consider using output indicators in some areas. Determining the link between program outputs and outcomes is often difficult and the pursuit of outcomes should not slow the process of strengthening the transition toward a more performance orientation. Particularly if the link between outputs and outcomes is viewed to be very close, output indicator can be a good proxy for outcome. In addition, if the quality of services can be properly controlled, output-based budgeting can also be useful. In some areas, where these conditions can be met, then, consider using output measures for the selected areas, such as public health, education, social welfare and so on. An important consideration might be to try to establish, even loosely, the hierarchy (i.e. a line of site) between the program outputs and the national level KRAs and KPIs. (2) Focus on selective areas/programs that are important and easily subject to performance budgeting at the initial stage of reforms. Since producing meaningful performance information for every program takes time, it may be a good strategy to start with selective areas/programs to demonstrate the impact of performance budgeting. In order to promote the adoption of OBB, the effort could focus both on programs that are of significant political priority and programs where there is a reasonable foundation, or existing systems and practices, for the production of performance information. Pilots might be conducted in several ministries while the framework is still under development or being refined. ―Outcome indicators need interpretation to be used for (3) Decide which type of link between performance decision-making purpose, due to information and budget allocation is needed. It will be external factors. By definition, the important to establish the basis for using performance information at an early stage, to provide both incentives attribution of agency performance to and a clear strategy to the units and managers tasked with outcomes, particularly at the providing and managing the performance information. In national level, is not straightforward theory, performance information should be used as one of and immediate.‖ important factors for budget allocation, along with other factors such as political and external considerations.2 In practice, consider setting specific targets for budget reshuffling, in order to secure fiscal space, and signal intent, where performance information can be more directly used. 3 (4) Consider moving beyond performance indicators and targets, particularly if outcome indicators are used. It is therefore important to take this into account in determining how to respond to outcome information. Consider developing formal program review processes to have a more systematic review of performance information, also within the context of the budget (see Box 1). This process can, along with other monitoring and evaluation processes (see next section), help to refine and focus performance information and management on government priorities and outcomes. However, this process will take time and a sustained commitment—for example, in the 2 This recognizes the limitations of performance indicators and also the perverse outcomes this approach might generate, e.g. cutting funding in a poor performing but priority area, or the creation of incentives to ‗game‘ the system by focusing on often imperfect indicators rather and outcomes. Alternatively, sanctions for poor performance often involve tighter central oversight or program/management restructuring. 3 For example, reshuffling up to 5% of the budget, i.e. demanding savings that may be allocated based on performance information, may not cause serious unintended problems and may provide a strong signal and incentive to promote the better system-wide use of outcomes. The World Bank 21 UK it has taken almost 10 years for the system of Public Sector Agreements to move from one primarily focused on program outputs to one focused on outcomes (this might be viewed as typical of many countries). Box 1 Improving Prioritization through Spending Reviews Spending Reviews are centrally driven exercises focused on ways to improve the efficiency of spending across government (i.e. between sectors/programs) and in consideration of differing funding levels. They also serve to help identify and prioritize high priority programs. Thus, they go beyond the typical program evaluations. Amongst OECD countries the development of spending reviews, and the institutional mechanisms that support them, have tended to be driven both by the need to tackle fiscal stress (Canada, Australia, Netherlands) or to better manage a fiscal upturn (UK, France, Korea). The design of spending reviews has varied greatly—being ad hoc or systemic, comprehensive or narrow—to suit both their primary objectives and the country specific institutional arrangements. Spending Reviews have emphasized the use of performance criteria on program effectiveness and efficiency. The link to performance-informed budget reforms is strong as expenditure prioritization is concerned with clarifying governments‘ key objectives and priorities and directing resources toward high priority areas and away from low ones. It includes the institutionalization of processes to ensure that spending cuts or additions are as rational as possible and that programs that best maintain developmental gains are prioritized. It is thus little surprise that fiscal stress or expansion have been the impetus for the introduction of OBB reforms aimed at improving expenditure prioritization in many countries. For example:  The 1994 Canadian Program Review was a one off exercise, which established a high level special committee under the Prime Minister. The Committee set the performance based guidelines and managed the review process that helped to generate substantial cuts (averaging 21.5 percent across departmental budgets). The process (recently institutionalized) helped lay the foundations for the fiscal management framework that has bolstered the Canadian economy ever since.  In the Australia the sub-Cabinet Expenditure Review Committee (ERC) was established to consider major new policy and savings proposals, and recommend to the Cabinet those proposals that it wants included in the Budget. The ERC uses performance information from Portfolio Budget Submissions and was particularly successful in reducing and re- orientating spending to high priority areas in the mid-1990s.  At the heart of the UK‘s performance management system is the Departmental Spending Reviews (SR) agreed between the Treasury and line ministries. Introduced in 1998, the aim of the SR is to review current government priorities, the outcomes being achieved and at what cost. One important outcome of the UK SR is an agreed set of budget forward estimates for the next three years. SRs occur every three years, with three Comprehensive Spending Reviews being conducted across all spending ministries over the last decade. These have looked at the allocation between programs—i.e. allocative as well as technical efficiency—that can create fiscal space for new or higher priority initiatives by cutting lower priority or ineffective programs. 4 (5) Try to define early on the roles that the key actors can play in the budget process so that performance information, and systems, can be developed to meet their needs. This would 4 For a detailed description of the UK‘s 2007 Comprehensive Spending Review, see http://blog- pfm.imf.org/pfmblog/2008/05/united-kingdom.html The World Bank 22 include for the Prime Minister, EPU, MOF, line ministers, the Legislature, external audit, and the public. Information should be provided in a manner that allows policy-makers to connect it, generally loosely, with planning and managerial actions, with decisions informed by performance measurement and with other sources of information such as affordability, experience, qualitative information and political priorities. Having access to such information—which enhances budgetary transparency by linking the use of public resources with the results—can also help to promote a broader participation by policy-makers, interested civil society groups or individuals if it is delivered in an appropriate form. The authorities could consider introducing regular user surveys or other mechanisms to gain feedback on the process, particularly with regard to the type, timing, and delivery of performance information. The Open Budget Index, which ranks countries according to the accessibility and comprehensiveness of key budget documents, finds that France, New Zealand, South Africa, the UK, and the UK score relatively high on this index ( in 2008). 5 5 Open Budget Index Homepage: http://www.openbudgetindex.org/index.cfm?fa=about The World Bank 23 VI. Monitoring and Evaluation Systems This section considers the specifics of the Monitoring and Evaluation (M&E) system needed to support outcomes-based budgeting. The development of a range of evaluation methods including program evaluation and impact studies based on clear criteria are critical, in addition to the development of data management systems to support effective evaluation. With adequate processes and systems in place to monitor and measure progress, various linkages can then be made to the budget allocation process. _________________________________________________________________________ Performance informed budgeting has commonly required the strengthening of approaches for the generation, analysis and presentation of performance information. There is currently a new wave of international interest in evaluation—such as, for example, in Canada, the UK and Australia and South Korea—adopting evaluation systems more closely linked to policy-makers needs, without being too resource-consuming. This requires that many evaluations be carried out quickly, focusing on conclusions of specific value to managers and budgeters, and should not set unrealistically high ―scientific‖ standards of proof in drawing these conclusions. The common thread of the various approaches and models of performance budgeting across countries is the use of the whole range of different methods to gauge nonfinancial performance. This includes performance measures, benchmarking, program evaluations, expenditure reviews, and more formal methodologies such as data development analysis and cost-benefit analysis (Curristine, 2005; Robinson and Brumby, 2005). According to a 2007 OECD Survey of OECD countries and 8 non-OECD countries, nearly 95 percent of countries use performance measures and evaluations in assessing their nonfinancial performance. A selected range of monitoring and evaluation methods are described below. The use of these different types of monitoring or evaluation methods tends to vary depending on the purpose of the review. The various types of monitoring, review and evaluation are commonly conducted by different agencies within government. Careful consideration must be given to defining the units best suited to which type of review or evaluation (see Figure 3). For example, line ministries tend to manage programs and have access to most information, so are likely to lead program reviews for management purposes. However, line ministries may not be best placed to conduct efficiency reviews, where there is the threat of a spending cut. Impact evaluations may require more complex methods and might be contracted out. Summary measures and spending reviews are commonly coordinated by the central budget agencies, with the information provided mainly by the line ministries. The World Bank 24 Figure 3 Different Tools for Monitoring and Evaluation Summary measures incorporate a wide range of performance information into one or more overall performance ratings for a program, e.g. US PART. Typically collated by central agencies Program reviews Impact evaluations Spending reviews Review consistency Assess program Assess consistency of in design, execution effectiveness on basis of portfolio of programs and reporting impact measures within and across sectors Methodology includes Based on logical extensive data Set ex-ante (multi-year) framework collection, sophisticated nominal expenditure evaluation techniques ceilings Often performed Often coordinated at internally within Often performed by the centre, but with line ministries experts - consulting strong input from firms, universities etc departments/ programs Value-for money /efficiency reviews – consider the scope for efficiency savings across public expenditure. Often centrally driven, but may use ‘independent’ resources, while supreme audit agency also considers on a case-by-case basis However, a key issue in performance budgeting is whether this information is used in the budget process and especially in resource allocation. Performance information is linked to funding in two ways: through expected targets and actual results achieved in the previous budget cycle. As Curristine (2007) points out, in the majority of OECD countries there is no systematic approach to linking public expenditure to performance targets. Similar to earlier surveys, only about one third of OECD countries report that 50 or more percent of the allocated resources take into account the determined output or outcome targets. Although half of the non-OECD countries appear to link funding to some targets, this number should be treated with caution because the sample size is quite small. A. ISSUES The Government has established, or is in the process of establishing, a number of mechanisms to promote better delivery.6 These include:  Flash reports to update Cabinet on the progress of each National KPI (NKPI) against targets;  The formation of a Delivery Task Forces (one for each NKRA), to be chaired by the Prime Minister and attended by the lead minister, relevant ministers and senior civil servants, to approve delivery plans, monitor progress and refine implementation strategies as required;  Holding PM-Minister reviews to assess each minister‘s achievements every six months. These reviews are expected to consider the progress being made toward stretch targets; 6 See Malaysia Government Transformation Program, The Roadmap at: http://www.transformation.gov.my/ The World Bank 25  Publishing Annual Reports in the first quarter of every year to report on progress– what was achieved and not achieved – and demonstrate accountability. To accelerate delivery, the Government has created a Performance Management and Delivery Unit (PEMANDU) within the Prime Minister’s Department. While the responsibility for end-to- end delivery of NKRA and MKRA outcomes ultimately rests with the respective ministries, PEMANDU has been mandated to catalyze bold changes in public sector delivery, support the ministries in the delivery planning process and provide an independent view of performance and progress to the PM and ministers. However, the Government has recognized the need for strengthening the monitoring and evaluation of performance information to support the reforms, notably through:  The establishment of a more structured & systematic program monitoring & evaluation system focusing on program outcomes;  The monitoring & evaluation system will enable decision makers to access the performance of programs in achieving identified outcomes at different levels; and  This system should also provide timely, accurate & reliable information that allows decision makers to adjust policies & implementation strategies on a regular basis. B. LESSONS FROM WORKSHOP CASE STUDIES Australia The Victoria experience suggests that embedding evaluation can take over 10 years. The initial phase of introducing the key elements of OBB took about 3 years. The system has evolved and as recently as 2009 fresh proposals for modification have come from the Parliament. This development over time is due in part to the fact that good data collection, monitoring systems and evaluation frameworks were not in place from the start. The complexity of these support systems means that time is needed to fund, test, review and implement ongoing monitoring and evaluation processes. In the early days output measures and evaluations were considered a good proxy for some outcome assessments. Not every output and outcome was rigorously subjected to evaluation in the first years. Even now evaluation is selective but there is a program to increase the number and depth of evaluations over time. Australia uses many forms of evaluation depending on the nature of the issue under discussion. For instance:  Price reviews specifically focus on the economic efficiency of an agency‘s outputs and the price of those activities;  High level specialist evaluations are often conducted by independent bodies (consultants, academics etc) to assess the impact of programs/outputs on outcomes and their contribution to the government identified goals (thrusts). Examples include whether road safety programs have an effect on reducing the rate and severity of road accident trauma;  Cyclical evaluations (roughly every 3 years) test whether outputs and programs are still relevant to the purpose for which they were originally designed. Sometimes of course the original rationale has been forgotten – even a greater need for review; and The World Bank 26  Internal agency evaluations are often generated to test whether the monitoring and KPI setting for a particular program are still in place and properly aligned to service delivery activities and outputs. This suite of approaches reflects the reality that public management involves a large range of complexity and type of work, and that the specific evaluative technique needs to reflect that. Complex evaluations of outcomes require a high degree of science. They should be sensitive to (but not undermined by) the existence of factors over which and agency or the government has limited or no control. In Australia these factors should be identified before a commitment is made to fund an outcome. The reason for this is that it is inappropriate to fund an agency to achieve an outcome if, on analysis, the agency‘s capacity to effect the desired change is way out of its grasp. The identification of these issues are part of the risk assessment that is completed as part of the overall budget submission. Risk assessments are an increasingly important part of the budget consideration process. Examples of these external factors include sudden financial shocks, disruption of supplies essential to a program (e.g. vaccines) or unanticipated demographic changes (higher than foreseeable birth rates). Monitoring and evaluation in Australia tend to be done selectively or periodically at the central level. There has not been an attempt to establish a single online monitoring IT system that capture at a central level all data relating to all agencies. Having a capacity to get a system wide snapshot of outputs and outcomes has not been an aspiration. This says a lot about the nature of public management work – it is not as easily captured as say a manufacturing process. Memoranda of understanding between central agencies and line agencies set out the data, monitoring and evaluation expectations and roles. The key question is -―what data does the central agency need to have to meet its obligations to its Minister and Cabinet?‘ Rarely is the answer to this question ―nearly everything‖. It is for the agency minister to negotiate with the agency what a prudent level of data and reporting to him or her is necessary to discharge that more local accountability. This does not mean that in Victoria there are not circumstances when a central agency cannot require the provision of additional data or assert a right to conduct a special review. Australia has made significant efforts to calculate the price of its outputs and programs. As a result a major monitoring technique is the tracking of prices/full costs in special cases. This allow for price benchmarking against other private and public sector suppliers. It also keeps fresh the idea that certain outputs and programs could be delivered on a less costly, better quality, more timely and efficient basis through another provider - private or NGO. When this happens, the monitoring and evaluation requirements for the output or program are identified in the contract between the agency and the service provider. In these cases the skill of the agency moves from delivering a service to managing a contract. This skill was not at the time of moving services out of the public sector in great supply within our workforce. Korea Korea took a gradual approach in developing its performance monitoring and evaluation system. In 2000, it started a pilot project with selected departments in some line ministries which requires annual performance plans and reports. In 2003, it was extended to all ministries. In 2005, the program review process was introduced by benchmarking the program assessment rating tool in the US to have more systematic and comprehensive information on the performance of spending programs. In 2006, an in-depth evaluation process was introduced which is conducted on selected programs each year. As a result, Korea has three layers of monitoring and evaluation system: monitoring, review and in-depth evaluation. Among the systems, evaluation results from the program review process The World Bank 27 is more systematically and actively used in the budget allocation process. Table 2 summarizes the criteria of program review process. Table 2 Criteria of Program Review in Korea ______________________________________________________________________ Design and Planning • Program purpose (30) • Rationale for government spending • Duplication with other programs • Efficiency of program design • Relevance of performance objectives and indicators • Relevance of performance targets Management • Monitoring efforts (20) • Obstacles of program implementation • Implementation as planned • Efficiency improvement or budget saving Results and accountability • Independent program evaluation (50) • Results • Utilization of evaluation results ___________________________________________________________________ Ineffective programs have their budgets cut. In Korea the program review process, named the ―Self-Assessment of Budgetary Programs (SABP),‖ tries to make a link between evaluation results and budget allocation. The annual guidelines of budget formulation issued to line ministries by the central budget authority states that line ministries should consider at least a 10% budget cut to the programs rated as ―ineffective‖ by the SABP. There are exceptions to this rule, but usually more than a 10% budget cut occurs with ―ineffective‖ programs. The results of SABP are used not only for budget formulation but also for personnel evaluation in some line ministries. In fact, it is reflected in the actual budget allocation and, for example, in 2005, on average a 14% of budget cut was enforced for ―ineffective‖ programs. Box 2 illustrates how the SABP process is integrated into the overall budget cycle in Korea. The World Bank 28 It takes time to have quality performance information to act on and Korea is no exception. Particularly, developing outcome information requires expertise and investment in data Box 2: Budget Cycle in Korea management. Since there are variations in the � January – February: Macroeconomic forecasting difficulties of developing outcome information, & Updated cost estimates for coming years by it is desirable to focus on the favorable areas to Ministry of Strategy and Finance (MOSF) performance measurement to make the impact � March: Draft National Fiscal Management Plan of OBB and gain the momentum of the reform. by MOSF � March – May: Program review process (SABP) is implemented by MOSF C. FINDINGS � April: Cabinet meeting to decide ceilings for line ministries (1) Monitoring and evaluation tools should � End of April: Issue budget request guidelines to be clearly linked to budget processes. For line ministries � End of June: Budget requests by line ministries this purpose various countries have introduced � July – September: National Fiscal Management new tools for monitoring and evaluation, such Plan is announced and budget draft is finalized as spending reviews, performance auditing and � Oct 2: Submit the budget draft to the National other comparative performance tools (see Assembly previous section for a Box on Spending � Oct – December: Budget is finalized by the Reviews and Box 2). These tend to focus on National Assembly providing relevant, appropriate input into the decision making processes, such as the cabinet expenditure review committee. (2) Leaving the monitoring and evaluation solely to the line ministry may result in self- justifying evaluations. While there is a wide variation in practice, typically the spending agencies are best placed to identify relevant information and be chiefly responsible for its collection, and often also for conducting certain types of evaluations. The central budget agencies, such as the finance ministry and/or EPU, can jointly promote consistency and best practice, facilitate capacity building and agree key indicators and help to share expertise throughout the system.7 This often involves the development of networks of practitioners, termed a community of practice in the UK that, in this case, involves the central budget agencies, the national audit office, the national statistics agency and the line ministries. Box 3 illustrates the role of the central evaluation unit in Ireland. Box 3 Role of a Central Evaluation Unit—the Case of Ireland Ireland established a Central Expenditure Evaluation unit in 2006. The unit is located within the finance ministry with the mandate for the following:  To promote best practice in evaluation and project appraisal across government, notably through the use of guidelines, the promotion of common approaches and the development of networks of practitioners.  To ensure compliance with the Department of Finance‘s Value-for-Money Framework, including through spot checks for compliance.  Provides a Secretariat to the Value-for-Money Central Steering Committee.  Provides technical advice to Departments and Agencies and facilitates capacity building.  Oversees evaluation of the National Development Plan (NDP). Source: see European Commission Sourcebook: Capacity Building, available on www.er.europa/regional_policy/sources/docgener/evaluation/evalsed/sourcebooks/ 7 Some evaluations, such as the value-for-money reviews in the UK, are commonly not conducted by the line ministries due to concerns that there is little incentive to ‗find‘ savings within ones own department. The World Bank 29 (3) Be prepared to play a ―Gatekeeper‖ role to improve the quality of performance information over time. This must be backed by a system to ensure quality assurance mechanism, for through compliance against centrally issued guidelines or audits of the performance measurement systems and indicators. A key consideration in determining the amount and type of performance information to be collected includes the cost relative to benefits, the risks of overload and gaming, capacity constraints and the relevance to decision-making for different budget actors. Additional capacity building is likely to be needed to help strengthen such information systems. See Box 4 for how the UK has sought to improve the quality of performance information over time. Box 4 Improving the quality of performance information—the Case of the UK At the heart of the UK‘s performance management system are Public Service Agreements (PSAs), agreed between the Finance Ministry and line ministries. Introduced in 1998, their aim is to focus resources on improving outcomes for the public and to strengthen accountability for cost effective service delivery. Published alongside departments‘ three-year budget allocations, PSAs specify: i) the department‘s aim; ii) five to 10 supporting objectives; iii) performance targets, including a value-for-money target; and iv) standards to be maintained, monitored and reported. PSA targets have been refined gradually to focus on outcomes rather than the inputs or processes. The number of targets has been reduced, from around 400 in 1998 to 30 in the 2008-11 Spending Review. Biannual reports are published, which provide information on spending and performance against PSA targets. While the public and parliamentary oversight of performance has generally been weak, there has been a great deal of emphasis on quality assurance of the performance measures. The Office for National Statistics provides advice to ministries and agencies on methods, and on quality assurance for statistical systems through central government, certifying appropriate indicators. The National Audit Office, who has created a Directorate of Performance Measurement to co- ordinate work on performance measurement in financial audits, provides advice, training and reviews of central government bodies‘ governance (and performance) arrangements, including in value-for-money studies. Source: http://www.hm-treasury.gov.uk (4) Improving the value and effectiveness of development spending appears to be a major concern, but money is often not the only (or main) constraint. Even where funding is readily available, this may not be the most important constraint. The lack of institutional capacity for appraisal, implementation and evaluation of public investment projects continues to be a major obstacle for the enhancement of the efficiency.8 (5) Stronger economic appraisal capacity and processes could be backed by a quick review of the entire investment management cycle. While the systemic reform referred to earlier will take some time, a rapid assessment of the performance orientation of investment management might help to identify bottlenecks and ―quick wins‖ that could be addressed in the near-term.9 This might include an independent review process, particularly for large projects, which might help to constrain bids to more reasonable levels during the budgeting process. While capacity probably needs to be 8 For example see: World Bank, Brazil, Improving Fiscal Circumstances for Growth, 2007. 9 See Note prepared by Anand Rajaram, Jim Brumby, Tuan Minh Le and Nataliya Biletska, Framework for Reviewing Public Investment Efficiency, World Bank, 2008. The World Bank 30 strengthened to conduct (and review) appraisals effort should also be placed on both the supply of, and demand, for quality appraisals and evaluations working with a range of potentially interested parties (e.g. central agencies, the legislature etc) Box 5 Lessons from the World Bank’s experience with evaluation  Promote systematic self-evaluation, so as to develop an evaluation culture among staffing operations, and as one of the pillars of the evaluation system.  Attest the quality of self-evaluation through independent evaluation.  Use explicit criteria for evaluation.  Combine multiple data sources and methods to minimize biases.  Promote the active dissemination of evaluation results, ensuring that the evaluation products are user-friendly.  Develop feedback mechanisms for using lessons learned for future projects, programs, and policies. ________________________________ 1 See http://www.worldbank.org/ieg/ The World Bank 31 VII. Change Management The previous sections outlined a number of findings and recommendations. This section considers how to prioritize, how to effectively time OBB implementation, the critical vs. desirable components of the reform agenda, and how to address risks from the perspective of change management. The focus here is on the various approaches to tackle the issues and how to effectively communicate across various actors. ___________________________________________________________________ In the past two decades, the budget management systems in a significant number of developed and middle income countries have been reformed so as to increase the focus on performance. There has been a shift from a highly centralized mode of budget management focusing on input control and compliance to a more decentralized budget management approach emphasizing budget outputs associated with policy objectives. In this transformed budgeting system, inputs are still important but in a different way; they are assessed with respect to how they contribute to reaching stated policy goals. This model of budget management has various forms depending on the specific characteristics of the country setting, but is essentially focused on ―performance‖ and hence is generically called ―performance budgeting‖. Experience across these countries suggests the following five lessons associated with the implementation of performance-informed budgeting:10 A. Move in stages, and use building blocks. B. Refocus and strengthen the central budget and related functions. C. Ensure a commitment to good basic financial management, as this will always help. D. Be prepared to begin modestly. E. Continued effort will be required to make adjustments and to keep ahead of the forces of the status quo. These are discussed in turn: Move in stages, and use building blocks. Since performance-informed budgeting - as any institutional reform - is an evolving process, the most important implication is that it should be recognized that performance-informed budgeting moves in stages and usually takes a significant amount of time. Performance-informed budgeting reform strategies in low- and middle-income countries should be designed as building blocks that may need to be piloted in a few sectors and then gradually applied to the rest of the public sector, provided that sufficient progress is achieved by the pilot agencies. Building blocks have to allow for a moderate progression from simple to more sophisticated practices and techniques of performance-informed budgeting, allowing necessary capability to develop. The success of Singapore underscores the importance of this principle (Roberts, 2003; Schick, 1998). Refocus and strengthen the central budget and planning function. The second major implication is that to take forward this budget reform, the central administrative units responsible for budgeting and planning have to be a driving force in its implementation. The central agencies have to be 10 See J. Brumby and N. Biletska, Implementing Performance Informed Budgeting: Guide for Practitioners, World Bank group, Forthcoming. The World Bank 32 entrusted with the new task of overseeing and directing the development of performance information management for the new budget model to take root. This responsibility can also assist central budgeters in managing their natural reluctance to give up their traditional input controls and delegate some budget management and operational responsibilities down to the level of agency and program managers. Ensure a commitment to good basic financial management, as this will always help. The third important implication is that without good basic financial management competencies and accountability, the delegation of budget controls and operational responsibilities risks weakening financial control with resultant misuse of public funds and even corruption. Consequently, an upgrade of at least basic financial management skills in pilot ministries and agencies should be addressed prior to increasing flexibility for public expenditure management at the agency level. Be prepared to begin modestly. The development of performance information has to move from testing a small set of indicators to the creation of output and outcome measures that adequately reflect government policy priorities and the efficiency and quality of service delivery. This is a complex process that takes time. Continued effort will be required to make adjustments and to keep ahead of the forces of the status quo. The authorities need to recognize that institutionalizing the use of performance information in decision-making is an ongoing reform process. It involves trialing different public management mechanisms and techniques, some of which may prove useful soon and take hold, and some may fall short of desired results and need to be replaced with new institutional arrangements. Those who argue against change often set an impossible test for budget reform – that the design of the reforms needs to be perfect, with no obvious risk or error. This is an unreasonable test – the true test is whether the reforms are likely to support more efficient and effective budgetary management than the status quo arrangements. In many countries, there should be little difficulty in making such a case. The process of change has technical and organic elements. Over reliance on one element rather than the other may induce some failures. One way of considering this is with reference to a change space approach.11 In this approach, three factors affect the quantum of space that exists for reform. These blend management and political economy concepts:  Acceptance - combining belief and commitment;  Authority - focusing on formal laws, procedures, informal political and relational influences; and  Ability - emphasizing financial, personnel, information, infrastructure and time limits. This approach suggests that reform space is likely to emerge where reforms are introduced to solve specific challenges-not just to introduce best practice solutions. 11 Matthew Andrews, ―Authority, Acceptance, Ability, and Performance-Based Budgeting Reforms,‖ The International Journal of Public Sector Management, vol. 17, no, 4, 2004 (332-344) The World Bank 33 Box 6 Communication The details of the reforms need to be discussed in depth and supported by high quality guidelines from the budget and planning offices. Although an evolution, rather than a revolution, the introduction of such concepts as performance management and heightened accountability can cause considerable uncertainty and even some tension for government agencies. This can be moderated to a degree by the production of high quality explanatory material and accompanying training courses. The production of these materials needs to be planned and staged to ensure that all participants in the change can feel reasonably abreast of latest developments. Communication goes hand in hand with training, and putting together a comprehensive and coherent strategy for enhancing capacities has been identified by practitioners is a must. The development of a program for capacity building for performance inform budgeting should extend beyond a small number of central agencies to include all line ministries and agencies, audit and evaluation units. Successful cases include those where communities of practices were created around the theme of performance informed budgeting that allowed all players to share experiences and undertake joint learning. Successful reforms generally involve more than just adding performance information to a current budget structure; they involve making changes to the budget structure to support the development and use of such measures. Aspects to be considered as part of the communication plan, include the following:  The framework and guidance material will need to cover the why, what, when and how of moving to performance budgeting. This framework needs to be fully developed, with clear specification of the different types of performance information required for different aspects of the budgeting system.  In many cases, countries instigate pilots in several ministries, while the framework is still under development. This may not be a viable option in Malaysia.  Present the framework to the relevant parliamentary committee on budget supervision, and other major players, such as the supreme audit institution.  Prepare a budget and planning office resource plan, so that capacity can support this change. This should provide for training of all relevant staff in the use of outcome, output and efficiency indicators for detailed budget analysis and negotiation.  Encourage line ministries to prepare resource plans to support the changes, and establish their own project teams to implement performance budgeting.  Generate training materials for the budget office and line ministries. The World Bank 34 VIII. Risks in the Transition to Program-Based Budgeting There are a number of common risks and pitfalls that many countries experience in the transition to outcome based budgeting. This section covers the risks faced by countries using Outcome-Based Budgeting (OBB), mechanisms for tackling them, and lessons learned from the implementation process. In addition, this section also addresses the inherent shortcomings associated with implementing OBB. _________________________________________________________________________ A. COMMON RISKS AND PITFALLS Experience in many countries, including Malaysia to date, suggests that intended PFM transformations can fall short of meeting intended expectations for a number of reasons. Experience suggests that each transformation has to be designed with the specifics of the country situation in mind, and the risks that need to be dealt with, are those risks of relevance in that country. Participants at the workshop were asked to identify the risks associated with the introduction of OBB in Malaysia. At the break out session on day one, two groups identified risks. These are shown in Box 7. In summary, there are three main risks that need to be dealt with:  Expectations risks: Risks associated with unrealistic expectations about the time required to implement and institutionalize the reforms, and the accruing of benefits from the reforms.  Design risks: Risks associated with designing aspects of the reform package which are not mutually consistent with other aspects of the reforms or other aspects of the PFM system, or create confusion and uncertainty about the package of measures.  Implementation risks: Risks associated with the inability of agencies to implement the reforms in the manner intended, or to manage some unintended consequences or behaviors once put in place. The World Bank 35 Box 7 Identification of Issues by Workshop Participants In the breakout exercise on Day One of the Workshop, two groups identified a number of risks that would need to be considered in mounting the PBB reforms. These focused on the following:  Whether there was a sufficient level of acceptance by stakeholders and political will behind the reforms;  Whether the available resources would be sufficient to implement the reforms and sustain them through time;  Whether the design would prove appropriate;  Whether the technological base was sufficient; and  Whether the timeframe was too demanding. Workshop participants indicated that sequencing implementation and change management were two of the main issues to be considered in the experience of other countries. The participants were also asked to identify strengths and weaknesses of the current system. The two groups identified both identified the following main areas for strengthening:  Identification and use of KRAs and KPIs;  Integration of development and operating budgets; and  Managing outputs and outcomes across agencies. B. LESSONS FROM WORKSHOP CASE STUDIES Australia Do not try to do all elements of OBB at once. OBB is complex in its implementation. It may take 3-4 years initially to get the basics right. Victoria chose very specific things to do first (accrual accounting and budgeting) and has delayed other key parts of OBB (incentive systems). A significant risk is not thinking through the sequence of things to implement and the order in which they ought to be introduced. This varies for jurisdiction to jurisdiction. An associated risk is not having a plan or a system that allow the central planning unit for OBB to keep track of its priorities and be in a position to chart progress over time. This progress mapping and priority setting should be shared widely with agencies to avoid another risk, that of uneven development. In Victoria OBB did not go out to all agencies in exactly the same timetable due to the differences in competencies and enthusiasm of some parts of the bureaucracy. This uneven development is fine, so long as the central agency keeps track of where progress is being made and how it will all come together at a particular time. OBB needs many support systems. Systems required to support OBB include IT, accounting and human resource systems. In Australia a major risk has been thinking that implementing new or revamped systems was sufficient to implement OBB. It is not. There is a risk that the policy intentions of OBB – transparency, outcomes, accountability, role clarity – are lost in the machinery of IT, accounting and other systems. Good project planning for OBB itself will ensure that the policy imperatives set the architecture for any technical modifications that are necessary. In The World Bank 36 designing systems and their modifications it is essential that a long term view be taken to ensure that changes in outcome structures, outputs, costing methodologies etc can be accommodate in subsequent years as the OBB framework matures. Otherwise technical lock-in will occur and the systems will constrain the policy flexibility that OBB is supposed to be all about. OBB involves many human elements – communication, training, human resource management. It is easy to forget the importance of frequent, simple and authoritative communications pitched at the relevant level and staff during the years of implementation. It has been necessary in Australia to train and retrain all participants from Ministers through to operational agency personnel in the elements of OBB and their roles. For new staff, induction programs had to be reworked to introduce OBB/outcomes thinking. Human resource activities had to be re- engineered to ensure that performance plans now include references to the outcomes and outputs that the agency is delivering. The risk is that these elements may be overlooked. OBB is a comprehensive long term change program, and may involve a risk of change fatigue. There is a risk of change fatigue affecting the team assignment to the task of implementation. It also affects those in agencies managing the change process while also delivering services. Agencies also have to prepare budgets in the interim years between where the OBB system is now, to where it wants to get to. Frequent (6 monthly) reviews of morale and progress across the system and a monitoring of agency resilience are useful tools to avoid the risk of losing momentum or of lapsing back into well known and comfortable ways. Central agencies in other places have kept a reserve support team on standby able to move into an agency that is have trouble or is at risk of causing systemic disruption. The benefits of OBB can take a few years to become apparent. A risk of central agencies is to over promise and under deliver what politicians and heads of agencies will get out of the system in the short term i.e. in the first 3-4 years. This risk can be managed by identifying a few pilot agencies, outcomes, programs and outputs that can show year on year how the systems is put together and managed. Though full blown robust data may not be available early on, such an approach can demonstrate the KPI formation process, the data set underpinning the emerging evaluation, the monitoring of key element of the program and the research that is going into understanding a solid longer run evaluation of outcomes. The advantage of this approach is that year on year the growth in the number of outcomes/program/outputs subjected to this process can be tracked and the achievement of OBB itself be subjected to evaluation and measurement. Korea Korea’s experience has also shown that in introducing the performance system, decision makers should be patient about reaping any benefits. Lack of patience may have forced the Ministry of Planning and Budget (MPB) to take excessive measures in order to show quick results— it was partly because of this kind of pressure that the MPB felt forced to quickly implement a 10% budget cut for ineffective programs. Interestingly, however, setting specific targets of budget reshuffling or budget cuts in terms of a certain proportion of total budget is adopted in other countries, too. For example, Canada recently aims to reshuffle 5% of each agency‘s budget after reviewing performance of spending programs. It appears that setting rules of budget reshuffling 3-5% of budget size is acceptable without causing significant side effects among some countries. There is also a concern that decision makers may be more interested in introducing the performance system than in monitoring or improving it. If a country is accustomed to getting quick results from reforms, it may not be easy to develop and improve the system gradually over the longer term. The World Bank 37 A further issue relates to the regular rotation of assignments that occurs in the Korean civil service. This may work against the capacity development of ministries/agencies. There needs to be proper understanding of the goals as well as the operational aspects of performance-based budgeting among the civil service, otherwise, wasteful and distorting behavior may proliferate. Korea’s experience highlights that proper cost accounting and a solid program budget structure will greatly help to maximize the benefits of the performance system. Recently, Korea has put in additional effort at improving both issues. Accrual accounting was introduced in 2009 and financial statements on this basis will be available from 2010. Since, from the view point of performance budgeting, allocating indirect costs to each program is more useful than accrual accounting, the issue of developing full cost information is still unresolved. However, given rigidities on human resource management in Korea, introducing full costing may not have much impact on decision-making. A new clause has been added to the National Finance Law requiring program structures and performance goal structures in annual performance plans to be consistent and identifiable, in principle. This issue has been raised because different organizational units are responsible for developing the program structure and performance goal structure and there was lack of coordination between them. As a result, sometimes it is hard to match programs from given annual performance plan and report and it hinders decision makers from using performance information in budget formulation and deliberation process. It is important that the structure of the performance information should be consistent to the program structure to facilitate use of performance information in budget process. Broadly, Korea’s experience confirms that a performance system evolves over time and raises different challenges at each stage. At the initial stage, merely developing relevant information is the main challenge. As the performance system evolves, other changes become more important, namely behavioral change, such as how to get various actors to use performance information in the decision-making process, and how to monitor the performance of the performance system itself. Looking forward, the major ongoing problem for Korea is the quality of performance information. More training and research is needed, along with a greater commitment to invest in collecting and organizing the information. Specifically, the analytical and administrative capacities of the central budget authority and ministries/agencies need to improve. This may require reinforcement of units specializing in analysis and assessment in both the MOSF and ministries/agencies. C. FINDINGS (1) There are clearly very high expectations for the benefits that may be generated from the reforms in Malaysia.12 These expectations could be managed down a little. Experience across many countries suggests that it is only truly extraordinary cases where such expectations can be met. The reality is that even when systems change dramatically, the behaviors of those operating in the system may take quite some time longer to change. If expectations are hyped too high, and the perception is that the reforms do not deliver, then the reform process itself becomes controversial and submerged in doubt. This is a high price for not managing expectations. For instance, the 12 The DG of EPU, Y. Bhg. Dato‘ Noriyah Ahmad, said at the workshop that the reforms would see a clear alignment of national goals to operational levels, remove cross-cutting issues among agencies and ministries, eliminate overlapping and redundant programs, and integrate monitoring and evaluation systems. The World Bank 38 experience of Canada suggests that even when great efforts have been made to improve the oversight and management of inter-agency programs, there are still concerns about issues such as efficiency and accountability. (2) The focus of the reforms could be on a more gradual improvement to the quality of government policy and service provision in Malaysia. The figure below shows that improvements in the quality of execution are unambiguously beneficial; a communication of bold reforms runs the risk of ending up in the ‗controversy without impact‘ quadrant. Figure 4 The Map of Delivery (M. Barber) (3) The reforms being proposed in Malaysia are complex, and would benefit from some simplification. Aspects such as the language of the reforms and the conceptual basis represent significant design changes in the operation of budgeting in Malaysia. Further, as identified in the workshop, it is highly likely that some consequential changes for the management of resources in Malaysia will need to be thought through – most obviously, the management of human resources both in volume (number of staff) and price terms (emoluments). Until this is done, the notion of accountability for outcomes cannot truly be made fully operational. (4) The implementation of the reforms in Malaysia already involves considerable investment by staff in operating and central agencies. There is a great deal to be done in a short period of time. For instance, the circulars associated with the development of the 10th five year plan involve close to 90 fields for each project. The meaningful consideration and associated organization of projects and operating expenditures is a large task, always involving at least two central agencies as well as the line ministry involved. While there is no reason to question the professional commitment of staff in agencies to the measures being proposed, the reality is that much of this is new work, involving new routines. As such, it does contain significant risks that should be managed. This should include a very extensive program of training and sensitization. (5) There will be unintended consequences in some quarters. The whole idea of the reforms is to change behavior. When behavior changes, it does not always change precisely in the way expected. In this area of risk management, it is very important to keep sight of the fact that risks for unintended consequences occur in all systems, but the visibility may be higher in the new program budgeting system. The visibility of an unintended consequence can cause difficulty. The following figure highlights some of the risks associated with this area. The World Bank 39 Figure 5 The Different Nature of Risks in Traditional and Performance Budgeting (6) The central agencies will need to invest in quality processes to protect the integrity of the reforms through their implementation, and to back these processes with a gate-keeper role. While there may be some tolerance in early stages for less good quality indicators, it is important to put in place mechanisms that assist in improving the indicators, otherwise poor indicators at the implementation level have the potential to undermine confidence in the overall design and usefulness of the reforms. Useful data on performance will take some time to develop. To manage this risk, the central authorities may wish to consider establishing:  An officials‘ group which reviews indicators (the gate-keeper role) – this should include representation from line agencies and central agencies;  An outreach program of capacity building in line agencies; and  A designated resource at the central agency level that can assist in providing feedback and direction to agencies as they attempt to operationalize these reforms. (7) The stakeholder groups may provide an appropriate vehicle for further improvement of design and implementation issues. There remains a need to put a lot of flesh on the bones of these reforms. Detailed workshops will be necessary to work through the approaches being developed. This needs to include central and line agencies, and be conducted in an open manner so that a variety of staff from a variety of perspectives can provide serious input to the details of the change agenda. The World Bank 40 IX. Summary Recommendations The preceding sections outlined a number of recommendations for Malaysia in moving forward. This section summarizes these recommendations for quick reference. 1. Recommendations on the organization and allocation of roles and responsibilities within Government: a) Integrate consideration of operating and development expenditures. b) Improve coordination between the MOF and EPU in analyzing the budget. c) Strengthen aspects of the Public Investment Management process. d) Increase the rate of spending on approved projects. e) Protect the integrity of the development budget. f) Avoid cross agency programs and where cross agency programs remain, it is important to detail precisely the accountability mechanisms. g) Improve the monitoring and evaluation function as it feeds into budget formulation. 2. Recommendations on designing the implementation process: a) Consider using output indicators in some areas. b) Focus on selective areas/programs that are important and easily subject to performance budgeting at the initial stage of reforms. c) Decide what type of link between performance information and budget allocation is needed. d) Consider moving beyond performance indicators and targets, particularly if outcome indicators are used. e) Try to define early on the roles that the key actors can play in the budget process so that performance information, and systems, can be developed to meet their needs. 3. Recommendations on strengthening Monitoring and Evaluation Systems: a) Clearly link monitoring and evaluation tools to budget processes. b) Ensure multiple stakeholder involvement in monitoring and evaluation to avoid self- justifying evaluations by line ministries. c) Play a ―Gatekeeper‖ role to improve the quality of performance information over time. d) Consider multiple dimensions of effectiveness. Improving the value and effectiveness of development spending appears to be a major concern, but money is often not the only (or main) constraint. e) Stronger economic appraisal capacity and processes could be supported by a quick review of the entire investment management cycle. 4. Recommendations on change management: a) Move in stages, and use building blocks. b) Refocus and strengthen the central budget and planning function. c) Ensure a commitment to good basic financial management. d) Be prepared to begin modestly. e) Make continual adjustments to keep ahead of the forces of the status quo. The World Bank 41 5. Recommendations on mitigating risks: a) Manage high expectations. There are clearly very high expectations for the benefits that may be generated from the reforms in Malaysia. b) Refocus the reforms on a more gradual improvement to the quality of government policy and service provision in Malaysia. c) Simplify the reform processes. d) Recognize that the implementation of the reforms in Malaysia involves considerable investment by staff in operating and central agencies and should include an extensive program of training and sensitization. e) Understand that there will be unintended consequences in some quarters. f) Central agencies will need to invest in quality processes to protect the integrity of the reforms (particularly in the design of indicators) through their implementation, and to back these processes with a gate-keeper role. g) Consider conducting open workshops with stakeholders for further improvement of the design and to confront implementation issues. The World Bank 42 X. Appendix A. TERMS OF REFERENCE FOR TECHNICAL ASSISTANCE Terms of Reference for World Bank Technical Assistance to the Economic Planning Unit (EPU), Prime Minister’s Department, Malaysia13 Background During the mid-term review of the 9th Malaysia Plan in 2008, certain weaknesses in the manner in which development programs and projects were planned and implemented during the Malaysia Plan period were identified. In the planning and implementation of the development projects during the 9th Malaysia Plan (as with the earlier plans), the main emphasis was on resource inputs (what was spent), activities (what was done) and outputs (what was produced). The public sector investment program in the Malaysia Plans focused on the planning and implementation of development projects that were mainly physical projects and these were funded through the development budget. Their selection and approval was done by the Economic Planning Unit (EPU). All other non-physical projects and programs were funded through the operations budget and their approval was done through the Ministry of Finance (MOF). As a result, the implementation of development projects concentrated on achieving outputs with the hope that the desired outcomes would be achieved at higher levels, namely the Ministry and National levels. This was because the funds for the operations and maintenance of these development projects were dealt with during the annual budget exercise and they were treated as normal annual operating costs of the relevant agency/ministry. The results of this practice of planning and implementing development activities were: 1) The implementation of development projects focused on achieving outputs rather than outcomes 2) There was no direct or formal link between implementation outcomes and higher-level outcomes at the Ministry and National levels 3) There were no standard key performance indicators that were used to indicate the achievement of outcomes 4) There was no guarantee that sufficient operations and maintenance funds would be available for the capital expenditures projects to ensure sustainability of the outcomes as planned Starting with the 10th Malaysia Plan (2011-2015), an outcome-based approach to development planning will be adopted. Prior to the planning of a Malaysia plan, the EPU will identify the MP Key Result Areas (MPKRAs) that the government will focus its development efforts for the particular plan period on. For each of the KRAs, EPU will also identify the National Outcomes to be achieved together with the strategies to be adopted and the achievements will be measured by Key Performance Indicators (KPIs) that have also been identified. In order to do this, an integrated 13 Supported by PSP GET and the PRMPS anchor The World Bank 43 framework has been developed to relate policy implementation and Malaysia plan programs with desired outcomes for the MPKRAs in line with the policy thrusts of the National Mission. From the list of MPKRAs, Outcomes, Strategies and related KPIs given by EPU, individual Ministries will develop their own KRAs (Ministry KRAs), Resultant Outcomes and Strategies. These will form the basis for the identification and formulation of programs for the relevant Malaysia Plan and their implementation will contribute to achieving the Ministry‘s Outcomes in the KRAs. Based on the programs identified by Ministries, the Ministries and constituent agencies will then identify projects to be implemented to achieve the desired outcomes at the project, program, ministry and national levels. The Logical Framework Approach (LFA) methodology will be used to identify and formulate programs and projects and this will ensure that the KPIs will be identified for the achievement of outputs, outcomes and these will be measured to determine if they have been achieved through the implementation of the projects. However, there are still some issues that should be addressed in order to ensure that the focus on program outcomes will be sustained once the development phase of the projects/programs has been completed. There are some reasons for this and these are: 1) The allocation of the annual budget is by two separate budgets—the Development Budget for physical projects and Operating Budget for annual operation and maintenance and other non-physical activities. 2) Although the development activities are being planned as programs starting with the 10th Malaysia Plan, the activities under the programs need also to relate to projects, since the public sector investment program is submitted as projects for approval by Parliament. If the outcome-based approach to development is to be effectively implemented to achieve the desired outcome, there is a need to adopt outcome budgeting to effectively plan and implement development programs. Objective and Scope of Work The objective of this engagement is twofold: (i) the World Bank team will conduct a workshop on program budgeting to be held on March 4-5 2010 in Kuala Lumpur, and (ii) based on the findings of the workshop, interviews with relevant authorities and the team‘s experience in other countries (particularly South Korea and Australia), the team will present recommendations on the viability and modality of implementing program budgeting in Malaysia. The following tasks will be undertaken: 1) The expert team will study any material sent by the authorities on the institutional structure and impediments ahead of their travel to Malaysia. 2) The expert team will engage with the authorities during two days of fact-finding immediately preceding the workshop. This should assist in informing the team on the current institutional structure, challenges and constraints. 3) The expert team will deliver a two-day workshop to the authorities for senior Malaysian government officials from the central agencies (EPU and MOF) and selected line ministries. The World Bank 44 4) The expert team will prepare and present a 10-15 page report after the workshop, which will summarize the proceedings of the workshop and lay out the key policy recommendations. Through the workshop and the accompanying discussions with EPU and MOF representatives, the World Bank team is expected to share their experience on the following questions of interest to the authorities: Organization and implementation  Actual implementation issues faced by countries using Outcome Based Budgeting (OBB), mechanisms for tackling these issues and lessons learned from through the implementation process  Shortcomings and risk factors in implementing the OBB  Lessons from the structural organization of OBB in different countries: programs vs. ministries  Mechanisms for setting KPIs and addressing cross-cutting issues in countries using OBB  Strategic alignment of national priorities, the recommended layers; meaning national, sector, sub-sector, etc  Information aggregation at different levels based on the strategic alignment layers above  Clarification on program approach and its linkages to outcomes  Issues of integrating Operating Expenditures and Development Expenditures using the program approach above  Program costing for budgeting purposes  Examples of integrated budget (capital budget and recurring cost) forms/formats Budget Allocation  Mechanisms practiced by different countries for identifying high priority programs and allocating the appropriate budget  Accessing the relative value of programs Impact, monitoring and evaluation  Program evaluation and impact studies: time-based and other criteria, developing data management systems for effective evaluation  Evidence on linkages between increased budget allocation and poverty reduction  How long does it take for the OBB to be successful/achieve its intended objectives and how it has improved the ability of counties to tackle issues at hand Reporting and enforcement of good practices  Issuance and implementation of budget rules? Sharing of actual guidelines from central agencies (e.g. MOF) to ministries by other countries on OBB;  Types of incentives used by other countries to ensure that rules are enforced continuously The World Bank 45  Reporting: Should Malaysia be explicit about its fiscal situation and compile a budget that includes only what it actually intends to spend Expected outputs The following are the expected outputs of the technical co-operation: 1) A two-day workshop for senior Malaysian government officials from the central agencies (EPU and MOF) and selected line ministries. 2) Report on the findings of the Workshop held to assess the feasibility of implementing Program Budgeting in Malaysia. 3) Recommendations on implementing the outcome-based approach, based on findings of the one-day interviews with senior government officials and the workshop discussions. The World Bank 46 B. WORKSHOP PROGRAM 4th March 2010 Time Programme 8.15 – 8.45am Registration and Breakfast Opening Remarks and Introduction by: 9.00 – 9.30am Y.Bhg. Dato‘ Noriyah Ahmad, Director General, Economic Planning Unit Presentation 1: Jim Brumby, World Bank 9.30 – 10.30am Global Issues In Performance Budgeting Jim Brumby, World Bank 10.30 – 11.00am Refreshment Break Presentation 2: Contemporary Resource Management: The Case of 11.00 – 12.30pm South Korea Dr. Nowook Park 12.30 – 2.00pm Lunch Break Presentation 3: Contemporary Resource Management: The Case of 2.00 – 3.30pm Australia Adrian Nye 3.30 – 3.45pm Refreshment Break Breakout Session 1 3.45 – 5.30pm Group Presentation The World Bank 47 5th March 2010 Time Programme 8.00 – 8.25am Breakfast Presentation 4: 8.30 – 9.15am Investment Budgeting and Management: Lessons From Case Studies and Emerging Practice In Advanced Countries Jim Brumby, World Bank Presentation 5: Managing Resource Management Reform: The Case of 9.15 – 10.00am United Kingdom Theo Thomas, World Bank 10.00 – 10.15am Refreshment Break Presentation 6: Issues and Challenges In Middle-Income Countries –The 10.15 – 11.15am Case of Brazil Theo Thomas, World Bank Presentation 7: Managing Resource Management Reform: The Case of 11.15 – 12.30pm South Korea Dr. Nowook Park 12.30 – 2.45pm Lunch Break Presentation 8: Managing Resource Management Reform: The Case of 2.45 – 4.00pm Australia Adrian Nye 4.00 – 5.00pm Discussion 5.00 – 5.30pm Workshop Wrap-up The World Bank 48 C. WORKSHOP PARTICIPANTS EPU Attendance List NAME SECTION DESIGNATION Y. BHG. DATO' NORIYAH BT. EPU DIRECTOR GENERAL OF EPU AHMAD EN. HIMMAT SINGH A/L RALLA DEPUTY DIRECTOR GENERAL DEPUTY DIRECTOR GENERAL SINGH OF EPU 2 PN. AINI BT. SANUSI INFRASTRUCTURE DIRECTOR EN. SELVARAJOO A/L MANIKAM INFRASTRUCTURE DEPUTY DIRECTOR PN. ROSMAYUZI BT. MUSA INFRASTRUCTURE PRINCIPAL ASSISTANT EN. RAVI MUTHAYAH AGRICULTURE DIRECTOR DEPUTY DIRECTOR 1 PN. SUHAILA BT. ALANG MAHAT AGRICULTURE PRINCIPAL ASSISTANT PN. JUZIANA BT. MAT ZAIN AGRICULTURE DIRECTOR ASSISTANT PRINCIPAL PN. NOOR ZAIDAH BT. DAHALAN BUDGET DEVELOPMENT DIRECTOR DIRECTOR EN. ADAM B. SULONG BUDGET DEVELOPMENT DEPUTY DIRECTOR 1 EN. HUSAIN B. YAACOB BUDGET DEVELOPMENT DEPUTY DIRECTOR 2 EN. NOOR IHSAN B. CHE MAT BUDGET DEVELOPMENT DEPUTY DIRECTOR 3 PN. NORISAM BT. A. AZIZ BUDGET DEVELOPMENT DEPUTY DIRECTOR 4 PN. KALAWATHY A/P BUDGET DEVELOPMENT PRINCIPAL ASSISTANT KATHIRAVELOO DIRECTOR CIK KAREN ANG HUAY MEIN BUDGET DEVELOPMENT PRINCIPAL ASSISTANT CIK LATIFAH NURONIAH BT. BUDGET DEVELOPMENT DIRECTOR ASSISTANT PRINCIPAL SELAMAT DIRECTOR EN. FAIRUZ IZHA B. AHMAD BUDGET DEVELOPMENT ASSISTANT DIRECTOR RUSDAN EN. ROSTAM ARIFF B. KAMARUDIN BUDGET DEVELOPMENT ASSISTANT DIRECTOR CIK NUR SALEHA BT. MOHD BUDGET DEVELOPMENT ASSISTANT DIRECTOR ZULIADDIN CIK SITI NORLIZA BT. RAMLI BUDGET DEVELOPMENT ASSISTANT DIRECTOR CIK ZURRIYATI BT. ABDUL HALIM BUDGET DEVELOPMENT ASSISTANT DIRECTOR EN. SYAMSUL ISTAR B. IBRAHIM BUDGET DEVELOPMENT ASSISTANT DIRECTOR ISTAR PN. NUR ASMAH BT. MOHD. IDRIS BUDGET DEVELOPMENT ASSISTANT DIRECTOR EN ANSARY B. AHMAD IHSAN BUDGET DEVELOPMENT ASSISTANT DIRECTOR DR. CHUA HONG TECK SOCIAL SERVICES DIRECTOR PN. SUDHA A/P SIVADAS SOCIAL SERVICES PRINCIPAL ASSISTANT EN. MAHYUDDIN B. SOCIAL SERVICES DIRECTOR ASSISTANT PRINCIPAL MUSA@HUSSAIN DIRECTOR EN. AB. ALIM B. ZAKARIAH SECURITY AND PUBLIC ORDER DIRECTOR EN. AHMAD B. ALI SECURITY AND PUBLIC ORDER PRINCIPAL ASSISTANT CIK SA'ODAH BT. HJ. JUNIT INDUSTRY SERVICES DIRECTOR DEPUTY DIRECTOR PN. PUTRI ZHARIFA BT. AMDUN INDUSTRY SERVICES PRINCIPAL ASSISTANT EN. RAZALI B. CHE MAT REGIONAL DEVELOPMENT DIRECTOR DIRECTOR EN. WAN HANAFI B. WAN MAT REGIONAL DEVELOPMENT DEPUTY DIRECTOR EN. MOHD. RAZALI B. ISMAIL REGIONAL DEVELOPMENT PRINCIPAL ASSISTANT EN. NIK AZMAN B. NIK ABDUL MACRO ECONOMY DIRECTOR MAJID EN. ALLAUDDIN B. HJ. ANUAR MACRO ECONOMY DEPUTY DIRECTOR The World Bank 49 PN. NORAINI BT. AHMAD MACRO ECONOMY PRINCIPAL ASSISTANT PN. LIEW SIEW LEE MANUFACTURING INDUSTRY, DIRECTOR DIRECTOR SCIENCE AND TECHNOLOGY EN. IDI FAZLUL B. ZANUDDIN MANUFACTURING INDUSTRY, PRINCIPAL ASSISTANT SCIENCE AND TECHNOLOGY DIRECTOR PN. NURHAWANI BT. ZAMIN MANUFACTURING INDUSTRY, PRINCIPAL ASSISTANT SCIENCE AND TECHNOLOGY DIRECTOR EN. ASDIRHYME B. ABDUL RASIB MANUFACTURING INDUSTRY, PRINCIPAL ASSISTANT SCIENCE AND TECHNOLOGY DIRECTOR Y. BHG. DATIN IR. HJH MARIYAM STANDARD AND COST DIRECTOR BT. ISMAIL IR. KHAIRAZAN B. MANSOOR STANDARD AND COST DEPUTY DIRECTOR ROOSNAM –DAMHA EN. MOHD. HADZIN B. AHMAD STANDARD AND COST DEPUTY DIRECTOR PN. RAUDATIL JANNAH BT. ABDUL K-ECONOMY PRINCIPAL ASSISTANT WAHAB ZEN DIRECTOR CIK ES ZEMILA BT. ABDULLAH K-ECONOMY PRINCIPAL ASSISTANT PN. NORANI BT. IBRAHIM CORPORATE DIRECTOR DIRECTOR EN. ABDUL HALIM B. ABDUL CORPORATE DEPUTY DIRECTOR RAHMAN GHANI B. BOTOK EN. ABDUL CORPORATE DEPUTY DIRECTOR Y. BHG. DATUK ABDUL RAHMAN B. CORPORATE DEPUTY DIRECTOR SULAIMAN PN. HIDAH BT. MISRAN CORPORATE DEPUTY DIRECTOR EN. ATAN B. SAPIAN CORPORATE PRINCIPAL ASSISTANT PN. AZLINA BT. HJ. ZAINAL ABIDIN CORPORATE DIRECTOR ASSISTANT PRINCIPAL PUAN EIRNA YANI BT. MOHD. ARIP CORPORATE DIRECTOR DIRECTOR ASSISTANT EN. MOHD. FIRDAUS B. CORPORATE ASSISTANT DIRECTOR CIK SURIANI ALI MUHAMMADBT. SANIP CORPORATE ASSISTANT DIRECTOR DR. ROSLI B. MOHAMED ENERGY DIRECTOR EN. NIK ADNAN B. NIK ABDULLAH ENERGY DEPUTY DIRECTOR EN. MOHD SUKRI B. MAT JUSOH ENERGY DEPUTY DIRECTOR EN. LUQMAN AHMAD HUMAN CAPITAL DEPUTY DIRECTOR CIK. FADZILAH BT. MOHD. SAAID DEVELOPMENT HUMAN CAPITAL DEPUTY DIRECTOR PN. NURUL MARHA BT. MOHAMED DEVELOPMENT HUMAN CAPITAL PRINCIPAL ASSISTANT EN. KAMARUL ARIFFIN B. UJANG DEVELOPMENT DISTRIBUTION DIRECTOR PN. SUHANA BT. MD. SALEH DISTRIBUTION DEPUTY DIRECTOR EN. MUHAMMAD B. IDRIS DISTRIBUTION DEPUTY DIRECTOR PN. ROKIAH BT. HARON DISTRIBUTION DEPUTY DIRECTOR ENCIK AZHAR BIN NORAINI ENVIRONMENT (SEASSA) DIRECTOR CIK ZARINA BT. ALI MERICAN ENVIRONMENT(SEASSA) DEPUTY DIRECTOR DR. KAMARIAH BT. NORUDDIN MALAYSIAN DEVELOPMENT DEPUTY DIRECTOR DR. MAZALAN B. KAMIS INSTITUTE DEVELOPMENT MALAYSIAN PRINCIPAL ASSISTANT PN. YATIMAH BT. SARJIMAN INSTITUTE DEVELOPMENT MALAYSIAN DIRECTOR ASSISTANT PRINCIPAL DR. SOH CHEE SENG INSTITUTE COUNCIL ECONOMIC DIRECTOR DEPUTY DIRECTOR EN. MAHUSSIN B. JUSOH ECONOMIC COUNCIL PRINCIPAL ASSISTANT DIRECTOR The World Bank 50 Ministries Attendance list NAME MINISTRY DESIGNATION EN. SHAMSUNI B. PRIME MINISTER‘S UNDER SECRETARY MOHD NOR DEPARTMENT (DEVELOPMENT & FINANCE DIVISION) EN. GHAZALI B. HIZAM PRIME MINISTER‘S PRINCIPAL ASSISTANT DEPARTMENT SECRETARY (FINANCE DIVISION) EN. AMIR B. HJ ABD PUBLIC SERVICE DIRECTOR HAMID DEPARTMENT OF (MANAGEMENT SERVICE MALAYSIA DIVISION) EN. SUHAIMI B. PUBLIC SERVICE DEPUTY DIRECTOR ALI@AHMAD DEPARTMENT OF (MANAGEMENT SERVICE MALAYSIA DIVISION) EN. NOOR MOHD PUBLIC SERVICE PRINCIPAL ASSISTANT HUZAILA ABDUL DEPARTMENT OF DIRECTOR MAJID MALAYSIA (FINANCE DIVISION) EN. SAHARUDIN B. PUBLIC SERVICE PRINCIPAL ASSISTANT SARWAN DEPARTMENT OF DIRECTOR MALAYSIA (ACQUISITION MANAGEMENT DIVISION) DR. SUNDRAN MINISTRY OF FINANCE DEPUTY UNDER SECRETARY ANNAMALAI (ECONOMY & INTERNATIONAL DIVISION) CIK. G. THURGHA MINISTRY OF FINANCE HEAD OF FISCAL SECTION (ECONOMY & INTERNATIONAL DIVISION) EN. NIK MOHD. MINISTRY OF FINANCE PRINCIPAL ASSISTANT SHARIFFUDIN B. NIK DIRECTOR HASSAN (BUDGET MANAGEMENT DIVISION) Y.BHG. DATUK DR. MINISTRY OF FINANCE DIRECTOR RAHAMAT BIVI BT. (BUDGET MANAGEMENT YUSOFF DIVISION) EN. K.GIVANANADAM MINISTRY OF FINANCE DEPUTY DIRECTOR (BUDGET MANAGEMENT DIVISION) EN. AB. RAHMAN B. MINISTRY OF FINANCE DEPUTY DIRECTOR MAT (BUDGET MANAGEMENT DIVISION) EN. YUSOFF B. YAHYA MINISTRY OF FINANCE DEPUTY DIRECTOR (BUDGET MANAGEMENT DIVISION) EN. NIK AB. KADIR B. MINISTRY OF FINANCE DEPUTY DIRECTOR NIK MAT (BUDGET MANAGEMENT DIVISION) The World Bank 51 EN. AFIZAL B. KASA MINISTRY OF FINANCE DEPUTY DIRECTOR (BUDGET MANAGEMENT DIVISION) EN. S. KUMARAN MINISTRY OF FINANCE UNDER SECRETARY (STRATEGIC FINANCIAL MANAGEMENT DIVISION) EN. KOSHY THOMAS MINISTRY OF FINANCE DEPUTY UNDER SECRETARY (STRATEGIC FINANCIAL MANAGEMENT DIVISION) PN. MARIAMAH ISMAIL MINISTRY OF FINANCE PRINCIPAL ASSISTANT SECRETARY (STRATEGIC FINANCIAL MANAGEMENT DIVISION) EN. MOHD NASIR MINISTRY OF FINANCE PRINCIPAL ASSISTANT JA‘AFAR SECRETARY (STRATEGIC FINANCIAL MANAGEMENT DIVISION) PN. ZAMZARINA ABU MINISTRY OF FINANCE PRINCIPAL ASSISTANT BAKAR SECRETARY (STRATEGIC FINANCIAL MANAGEMENT DIVISION) PN. SYARIPAH MINISTRY OF FINANCE PRINCIPAL ASSISTANT NURZALILIE SYED SECRETARY KAMARZAMAN (STRATEGIC FINANCIAL MANAGEMENT DIVISION) EN. AZRAL IZWAN MINISTRY OF FINANCE PRINCIPAL ASSISTANT MAZLAN SECRETARY (STRATEGIC FINANCIAL MANAGEMENT DIVISION) EN. NASARUDDIN ABD. MINISTRY OF FINANCE PRINCIPAL ASSISTANT MUTTALIB SECRETARY EN. RICHARD BARAHIM MINISTRY OF FINANCE PRINCIPAL ASSISTANT SECRETARY (STRATEGIC FINANCIAL MANAGEMENT DIVISION) CIK NUR HAFIZAH MINISTRY OF FINANCE ASSISTANT SECRETARY ABDULLAH (STRATEGIC FINANCIAL MANAGEMENT DIVISION) CIK SITI SUHAILA MINISTRY OF FINANCE ASSISTANT SECRETARY BAHUDIN (STRATEGIC FINANCIAL MANAGEMENT DIVISION) CIK SITI HAJARAISHAH MINISTRY OF FINANCE ASSISTANT SECRETARY MOHEMOD (STRATEGIC FINANCIAL MANAGEMENT DIVISION) ENCIK VICKUM KPMG DIRECTOR OF BUSINESS NAMAWAGAME PERFORMANCE SERVICES DR. CHIN YOONG KPMG PARTNER OF KPMG KHEONG EN. JAMAL HASSAN UNDER SECRETARY MINISTRY OF FOREIGN (FINANCE & ACCOUNT AFFAIRS DIVISION) The World Bank 52 EN. ZAMSHARI PRINCIPAL ASSISTANT SHAHARAN SECRETARY MINISTRY OF FOREIGN (DEVELOPMENT DIVISION) AFFAIRS PN. NORHALILAH MINISTRY OF FOREIGN ASSISTANT SECRETARY ABDUL JALIL AFFAIRS (DEVELOPMENT DIVISION) DATUK HAJI NORDIN MINISTRY OF DEFENCE UNDER SECRETARY HAJI AHMAD (DEVELOPMENT DIVISION) EN. TAUFIAK BIN HJ. MINISTRY OF DEFENCE UNDER SECRETARY MOHD KASSIM (ADMINISTRATION DIVISION) TN. SYED RAMLI SYED MINISTRY OF DEFENCE UNDER SECRETARY SHAARI (FINANCE DIVISION) EN. MOHD SALLIH MINISTRY OF WOMEN, DEPUTY UNDER SECRETARY SALIMIN FAMILY AND (DEVELOPMENT DIVISION) COMMUNITY DEVELOPMENT CIK NOORHASLENDA MINISTRY OF WOMEN, PRINCIPAL ASSISTANT BT ABDULLAH FAMILY AND SECRETARY COMMUNITY (FINANCE DIVISION) DEVELOPMENT EN. NORDIN B. SHAFIE MINISTRY OF HIGHER DEPUTY UNDER SECRETARY EDUCATION (FINANCE DIVISION) EN. WONG SU HING @ MINISTRY OF HIGHER PRINCIPAL ASSISTANT HAIRY WONG EDUCATION SECRETARY (FINANCE DIVISION) MOHAMMED NAZIR B. MINISTRY OF HIGHER ASSISTANT SECRETARY ABD RAHIM EDUCATION (DEVELOPMENT DIVISION) DR. SITI ZAHARAH HJ MINISTRY OF HEALTH DEPUTY DIRECTOR SEMAN (PLANNING AND DEVELOPMENT DIVISION) DATO‘ NG. SWEE TING MINISTRY OF HEALTH UNDER SECRETARY (FINANCE DIVISION) EN. IBRAHIM B. ISMAIL MINISTRY OF DOMESTIC UNDER SECRETARY TRADE, CO-OPERATIVES (FINANCE DIVISION) AND CONSUMERISM EN. NUR ISKANDAR B. MINISTRY OF DOMESTIC PRINCIPAL ASSISTANT NUR DZAINUDDIN TRADE, CO-OPERATIVES SECRETARY AND CONSUMERISM (MANAGEMENT & FINANCE DIVISION) EN. CHUA KOK CHING MINISTRY OF UNDER SECRETARY TRANSPORT (FINANCE DIVISION) TN. HAJI ABDUL RAHIM MINISTRY OF UNDER SECRETARY DAUD TRANSPORT (DEVELOPMENT DIVISION) EN. M.ESPARAN MINISTRY OF DEPUTY UNDER SECRETARY TRANSPORT (DEVELOPMENT DIVISION) EN. HAZLAN ABDUL MINISTRY OF PRINCIPAL ASSISTANT AZIZ TRANSPORT SECRETARY (BUDGET) The World Bank 53 FAKHRUNROZI MINISTRY OF PRINCIPAL ASSISTANT JAMALUDIN TRANSPORT SECRETARY (DEVELOPMENT DIVISION) PN. ROSINI BT. ABD ACCOUNTANT DEPUTY NATIONAL SAMAD GENERAL‘S ACCOUNTANT DEPARTMENT TN. HAJI MOHD RADZI ACCOUNTANT DIRECTOR B. HUSSEIN GENERAL‘S (INFORMATION TECHNOLOGY DEPARTMENT MANAGEMENT DIVISION) PN. DEVANTRI KAUR ACCOUNTANT DEPUTY DIRECTOR A/P SANTA SINGH GENERAL‘S (FEDERAL ACCOUNTING DEPARTMENT SECTION) EN. HARUN OTHMAN IMPLEMENTATION DEPUTY DIRECTOR COORDINATION (INFORMATION TECHNOLOGY) UNIT,PRIME MINISTER‘S DEPARTMENT (ICU) EN. ISMAIL HAMAD IMPLEMENTATION DIRECTOR COORDINATION ( EVALUATION DIVISION) UNIT,PRIME MINISTER‘S DEPARTMENT (ICU) EN. MAHD ISHAK B. IMPLEMENTATION DIRECTOR ABDUL AZIZ COORDINATION (STATUTORY BODIES) UNIT,PRIME MINISTER‘S DEPARTMENT (ICU) EN. ARIPIN HJ. YAHYA MINISTRY OF SECRETARY PLANTATION (DEVELOPMENT, INDUSTRIES & MANAGEMENT AND FINANCE COMMODITIES DIVISION) EN. SARIFF HJ. AYOB MINISTRY OF PRINCIPAL ASSISTANT PLANTATION SECRETARY INDUSTRIES & (DEVELOPMENT, COMMODITIES MANAGEMENT AND FINANCE I ) EN. WAN ABDUL HADI MINISTRY OF PRINCIPAL ASSISTANT WAN MOHD SHAFIE PLANTATION SECRETARY (DEVELOPMENT, INDUSTRIES & MANAGEMENT AND FINANCE II COMMODITIES ) EN. KAMARUDIN B. MINISTRY OF YOUTH PRINCIPAL ASSISTANT ABDUL RANI AND SPORTS SECRETARY (DEVELOPMENT, MANAGEMENT AND FINANCE) EN. NORHISHAM B. MINISTRY OF YOUTH ASSISTANT SECRETARY RAMLI AND SPORTS (DEVELOPMENT, MANAGEMENT AND FINANCE DIVISION) MOHD NORHAZAEIN B. MINISTRY OF YOUTH ASSISTANT SECRETARY MOHD HANIP AND SPORTS (FINANCE DIVISION) CIK CHRISTIANA MINISTRY OF TOURISM UNDER SECRETARY THARSIS (DEVELOPMENT DIVISION) MOHAMAD HAFIZ B. MINISTRY OF TOURISM ASSISTANT SECRETARY MOHAMAD AZMI (DEVELOPMENT DIVISION) EN. AHMAD MINISTRY OF PRINCIPAL ASSISTANT HASSANUDDIN INFORMATION SECRETARY AFENDY B. RIDZUAN COMMUNICATION & (DEVELOPMENT DIVISION) CULTURE The World Bank 54 PN. SITI ZUBAIDAH BT. MINISTRY OF PRINCIPAL ASSISTANT ABDUL LATIF INFORMATION SECRETARY COMMUNICATION & (DEVELOPMENT DIVISION) CULTURE PN. MALATHY A/P MINISTRY OF ASSISTANT SECRETARY NARAYAN INFORMATION (DEVELOPMENT DIVISION) COMMUNICATION & CULTURE EN. MOHD NORZAM B. MINISTRY OF MUSTAPA INFORMATION UNDER SECRETARY COMMUNICATION & (DEVELOPMENT DIVISION) CULTURE EN. MHD. ADNAN B. MD MINISTRY OF DEPUTY UNDER SECRETARY YAZID AGRICULTURE (FINANCE DIVISION) EN. AZMI B. OMAR MINISTRY OF PRINCIPAL ASSISTANT INTERNATIONAL TRADE DIRECTOR AND INDUSTRY (DEVELOPMENT DIVISION) EN. MOHD PAUZI MINISTRY OF DIRECTOR HUSSIN INTERNATIONAL TRADE (FINANCE DIVISION) AND INDUSTRY EN. MOHD AZLAN ABU MINISTRY OF ASSISTANT DIRECTOR BAKAR INTERNATIONAL TRADE (FINANCE DIVISION) AND INDUSTRY DATO‘ NOR ASHIKIN MINISTRY OF HOME UNDER SECRETARY BT. HJ. MD. SALIM AFFAIRS (FINANCE DIVISION) TN. HJ. MOHAMAD MINISTRY OF HOME DEPUTY UNDER SECRETARY HIDAYAT B. ALI OMAR AFFAIRS (DEVELOPMENT DIVISION) CIK. FAZLIN REHAINI MINISTRY OF HOME ASSISTANT SECRETARY MOHAMAAD NORDIN AFFAIRS (DEVELOPMENT DIVISION) PN. SURIATI BT. MINISTRY OF HOME ASSISTANT SECRETARY HASHIM AFFAIRS (DEVELOPMENT DIVISION) EN. MOHAMAD FAUZI MINISTRY OF HOME ASSISTANT SECRETARY ISKANDAR AFFAIRS (BUDGET) DATO' R. SEGARAJAH MINISTRY OF HUMAN SECRETARY GENERAL RESOURCE EN. MOHD ARIFFIN B. MINISTRY OF HUMAN UNDER SECRETARY ABDUL AZIZ RESOURCE (FINANCE DIVISION) EN. RAHIMI B. ISMAIL MINISTRY OF HUMAN PRINCIPAL ASSISTANT RESOURCE SECRETARY (DEVELOPMENT DIVISION) EN. FAIZAL AZMIR B. MINISTRY OF HUMAN PRINCIPAL ASSISTANT ABD. RASHID RESOURCE SECRETARY (FINANCE DIVISION) PN. SANDA KUMAR MINISTRY OF HUMAN PRINCIPAL ASSISTANT RESOURCE SECRETARY EN. SAIFUL ANUAR B. PUBLIC PRIVATE DIRECTOR The World Bank 55 LEBAI HUSSEIN PARTNERSHIP UNIT (CORRIDOR DEVELOPMENT DIVISION) TN. HJ. MOHAMAD NOR PUBLIC PRIVATE DEPUTY DIRECTOR TAIB PARTNERSHIP UNIT (PART PRIVATIZATION DIVISION) EN. AHMAD ZAMBRI B. PUBLIC PRIVATE DEPUTY DIRECTOR KHAIRUDIN PARTNERSHIP UNIT (PFI DIVISION) PN. ROSNI BT. JULIS PUBLIC PRIVATE PRINCIPAL ASSISTANT PARTNERSHIP UNIT DIRECTOR (PFI DIVISION) PN ROHANA BT. ABDUL PUBLIC PRIVATE PRINCIPAL ASSISTANT HAMID PARTNERSHIP UNIT DIRECTOR (CORPORATE SERVICES) PN. NOOR AISAH BT. PUBLIC PRIVATE EXPERT OFFICER TAWAB PARTNERSHIP UNIT CORRIDOR DEVELOPMENT DIVISION PN. FADZILAH PUBLIC PRIVATE EXPERT OFFICER BT.SHAMSUDIN PARTNERSHIP UNIT CORRIDOR DEVELOPMENT DIVISION CIK WAHIDAH BT. AB PUBLIC PRIVATE ASSISTANT DIRECTOR WAHAB PARTNERSHIP UNIT CORRIDOR DEVELOPMENT DIVISION CIK NURMUNYATI BT. PUBLIC PRIVATE ASSISTANT DIRECTOR MOKHTAR PARTNERSHIP UNIT CORRIDOR DEVELOPMENT DIVISION EN. IR.MOHD PUBLIC WORKS DIRECTOR AMINUDDIN MD AMIN DEPARTMENT (COMPLEX PROJECT MANAGEMENT DIVISION) EN. BAHARUDIN B. PUBLIC WORKS DIRECTOR ABD JALIL DEPARTMENT (DEVELOPMENT DIVISION) EN. ABD RAHMAN B. PUBLIC WORKS KPPK (GENERAL) SHAMSUDDIN DEPARTMENT EN. OMAR B. TAIB MINISTRY OF DEPUTY UNDER SECRETARY EDUCATION (DEVELOPMENT DIVISION) KHAMIS MOHD DERUS MINISTRY OF UNDER SECRETARY EDUCATION (FINANCE DIVISION) EN. MOHD KHAIRUL B. MINISTRY OF PRINCIPAL ASSISTANT KASSIM EDUCATION SECRETARY (DEVELOPMENT DIVISION) EN. NIK HUSNI B. NIK MINISTRY OF PRINCIPAL ASSISTANT SOH EDUCATION SECRETARY (FINANCE DIVISION) CIK CHANG LEE KIM MINISTRY OF ENERGY, UNDER SECRETARY GREEN TECHNOLOGY (FINANCE DIVISION) AND WATER EN. PRAKASH MINISTRY OF ENERGY, UNDER SECRETARY NAGALINGAM GREEN TECHNOLOGY (DEVELOPMENT DIVISION) AND WATER The World Bank 56 PN. SHARIANA BT. MINISTRY OF NATURAL PRINCIPAL ASSISTANT ABD.RAHMAN RESOURCES AND SECRETARY ENVIRONMENT NUR IKRAM AZIZ MINISTRY OF NATURAL PRINCIPAL ASSISTANT RESOURCES AND SECRETARY ENVIRONMENT EN. AHMAD SHAFEI B. MINISTRY OF NATURAL UNDER SECRETARY JAMAL RESOURCES AND (DEVELOPMENT DIVISION) ENVIRONMENT UNDER SECRETARY EN. CHOONG KOK ENG MINISTRY OF (DEVELOPMENT DIVISION) SCIENCE,TECHNOLOGY AND INNOVATION HEAD EN. MOHANRAJ A/L MINISTRY OF (BUDGET UNIT) GOVINDARAJU SCIENCE,TECHNOLOGY AND INNOVATION EN. OMAR YAAKOP MALAYSIAN DEPUTY DIRECTOR ADMINISTRATIVE (ICT POLICY AND PLANNING MODERNISATION AND DIVISION) MANAGEMENT PLANNING UNIT EN. HAMDAN B. SAID MALAYSIAN PRINCIPAL ASSISTANT ADMINISTRATIVE DIRECTOR - ACCOUNTANT MODERNISATION AND (MANAGEMENT SERVICES MANAGEMENT DIVISION OF HUMAN PLANNING UNIT RESOURCES) MANORAHLITHAM MINISTRY OF RURAL PRINCIPAL ASSISTANT RATHNUM AND REGIONAL (STRATEGIC PLANNING DEVELOPMENT DIVISION) EN. NORAZMAN B. MINISTRY OF RURAL UNDER SECRETARY OTHMAN AND REGIONAL (FINANCE DIVISION, BUDGET DEVELOPMENT AND ACCOUNTS DIVISION) PN. MINISTRY OF HOUSING DEPUTY UNDER SECRETARY MASHITAH@SUHAILAH AND LOCAL (FINANCE DIVISION) BT. SUID GOVERNMENT PN. ZAIFALAILA MINISTRY OF HOUSING ASSISTANT SECRETARY ZAKARIA AND LOCAL (FINANCE DIVISION) GOVERNMENT PN. ROSIDA BT. JAAFAR MINISTRY OF FEDERAL SENIOR PRINCIPAL ASSISTANT TERRITORIES AND SECRETARY WELFARE CITY (DEVELOPMENT MANAGEMENT DIVISION) MOHAMAD FAIZAL B. MINISTRY OF FEDERAL PRINCIPAL ASSISTANT MANSOR TERRITORIESAND SECRETARY WELFARE CITY (FINANCE DIVISION) EN. ZAINUDIN B. MINISTRY OF WORKS ZAKARIA UNDER SECRETARY (DEVELOPMENT DIVISION) EN. KAMARUL AZNAN MINISTRY OF WORKS The World Bank 57 B. RASHED PRINCIPAL ASSISTANT SECRETARY (FINANCE DIVISION) EN. HAFIZ B. MINISTRY OF WORKS SYAFUDDIN ASSISTANT SECRETARY (DEVELOPMENT DIVISION) The World Bank 58 D. MAJOR Agency Date & Section/Person to Meet Venue Purpose of Meeting MEETINGS Time HELD 1. EPU 2nd EPU Directors of Budget Main Meeting Room of  critical issues being faced in implementing the March Development; Transport; Industry; outcome-based approach/development planning; Budget Development 2010 Human Capital Development; Macro  discussion on progress achieved in implementing & Knowledge Economy. Section, outcome-based approach/development planning; & 9.00 –  coordination challenges between the EPU and MOF Level 2, Block B6 11.00 on the capital and recurrent budgets. am EPU, Prime Minister's Department Federal Government Administrative Centre 62502 Putrajaya 2nd Minister of EPU - Minister‘s Office  courtesy call March Level 6, Block B5 2010 Tan Sri Nor Mohamed Yakcop EPU, Prime Minister's Department 12.00 – Federal Government 12.30 Administrative Centre pm 62502 Putrajaya 2. Ministry of 2nd Ms. Rahamat Bivi, Director of Director of Budget Unit  Discussion on the implementation challenges facing Finance March Budget Development Unit & Meeting Room the MOF in moving to an outcomes-based 2010 Director of Strategic Finance Level 6, North, management system; Management Unit with their officers Ministry Of Finance  Sequencing of activities to introduce new budget 3.00 - Complex, classification and relationship to core accounting 5.00 pm No. 5, Persiaran classification; Perdana, Precinct 2  Relationship between other aspects of the The World Bank 59 Federal Government management system, including personnel Administrative Centre management; 62592 Putrajaya  Relationship between MOF, EPU and line ministries during integrated planning, budget formulation, budget execution and ex post; &  Issues with capital budgeting 3. Ministry of 3rd Mr.Abdul Rahim Bin Daud, Level 5 Meeting Room  Understanding the project cycle and major control Transport March points; Under Secretary of Ministry of Transport 2010  Coordination between the capital and recurrent Development Division and Under Block D5, Complex D, budgets; 9.00 -  Classification issues; & Secretary of Finance Division with Federal Government 11.00 their officers Administrative Centre  Communication between the MOF/EPU and am 62510 Putrajaya Ministries.  Capacity of the Ministry to handle increased autonomy in setting performance objectives, indicators and in executing major public investment projects. 4. Ministry of 3rd Mr. Jagjit Singh s/o Nashatar Singh Level 9 Meeting Room  discussion on the understanding and development of Health March Ministry Key Result Areas, Outcomes, and Strategies 2010 Senior Deputy Director of Ministry of Health and available capacity to handle increased autonomy Development Division to follow through on these commitments; 2.30 – Block E6, Complex E  perceptions on the adoption of a Logical Framework and Deputy Director of Finance 4.30 pm Approach to design projects and programs; Division with their officers Federal Government  classification issues; & Administrative Centre  communication issues between the MOF/EPU and 62590 Putrajaya Ministries. The World Bank 60