Brumby, J., “Budgeting Reforms in OECD Member Countries,” Managing Government Expenditure, ed. by S. Schiavo-Campo and D. Tommasi (Manila: Asian Development Bank).
Diamond, J., 2002a, “Budget System Reform in Transitional Economies: The Experience of Russia”, IMF Working Paper Washington: International Monetary Fund).
Diamond, J., 2002b, The Micro Basis of Budget System Reform: The Case of the Transition Economies, IMF Working Paper (Washington: International Monetary Fund).
Jones, L. and J. McCaffry, 1999 “Implementing the Chief Financial Offices Act and the Government Performance and Results Act in the Federal Government,” Public Budgetary and Finance, Vol. 17, No. 1, (Spring), pp. 35-55.
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Reid, G. J., 1998, “Performance-Oriented Public Sector Modernization in Developing Countries,” World Bank Discussion Paper, (Washington: World Bank).
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A first draft of this paper was presented at the U.N. Workshop on Financial Management and Accountability, November 28–30, 2001, in Rome. I am grateful for the comments received from Messrs. Brumby and Lienert, and other colleagues in the Fiscal Affairs Department of the IMF.
See, for example, OECD (1994, 1995); Davis, Sullivan, and Yeatman (1997). Although it should be recognized that the term has a long history going back at least to the influential Commission on Organization of the Executive Branch of Government (Hoover Commission, 1949). The origins of performance budgeting are fully described in Burkhead, Chapter 6; and (Axelrod 1995, pp. 266 ff.). However, the new approach to performance aims at overcoming some of the disappointments of previous initiatives by adopting a more comprehensive approach that perhaps differentiates it somewhat from the past. See discussion in Diamond (2002).
For some countries, e.g., the United States and France, this already existed for specific categories of spending.
On a somewhat parallel line, some countries have looked at the long-term consequences of present budget policies. For example, Italy, Norway, and the United States, have published intergenerational accounts using the methodology developed by Auerbach, Gokhale, and Kotlikoff. This approach relies on a number of rather difficult assumptions and there appears to be considerable reservation about the clarity of the message that is conveyed.
Outputs are typically physical measures of production: for example, hospital patients treated and miles of roads built. Outcomes refer to measures of policy impact: for example, fewer road accidents after reduction in speed limits.
A useful discussion of OECD experience with performance contracts is contained in PUMA, PAC (99) 2.
Although they supply performance information with their budgets, and all are clear that “performance” is central to it.
An OECD study found that greater managerial flexibility was associated with a positive aggregate fiscal outturn. That allowing managers greater freedom resulted in less emphasis placed on aggregate spending caps and increased the success of spending cutting exercises. See Strauch, (2000).
G. Scott, in his analysis of PEM reforms in New Zealand, emphasized some important elements of this change management process, see Scott (1996, Chapter X).
For a discussion of the importance of the management capacity and ethic in this budget management model, see Schick (1998, p. 130 ff).
For example, the 1989 New Zealand Public Finance Act, which introduced major reforms in fiscal management, developed a set of principles of financial management which began with the clarification of strategic and operational objectives.
Early efforts to introduce state of the art systems in Bolivia’s Financial Administration and Control System (SAFCO), and Venezuela’s integrated FMIS during the late 1980s and early 1990s stalled. On the other hand, Ecuador, in its Modernization of the State reforms, began with more modest “bridging systems” that were developed in a few months in consultation with the end users, and were found effective.
This is discussed more fully in Schick (1997)..
“Global commercial liberalization and the free flow of capital are exerting new pressures on systems of public governance. Recent experience shows starkly that the quality of public institutions and the trust in which they are held by economic players can have very demonstrable effects on the behavior of these markets. Public sector governance systems that induce loss of market trust impose costs not only directly on their domestic economies, but more generally as they reduce global growth rates below potential.” (1999, Chapter 16, p. 343).
See Clinton and Gore (1994).
For a commentary on some of the most recent developments, in this rapidly developing field, see the commentary and references contained in OECD (2001)