Performance Based Budgeting in Indonesia

Transcription

1 Go to Modern Budget System : Credible, Transparent, and Accountable Performance Based Budgeting in Indonesia National Medium Term Planning LM/A Strategic Plan PBB MTEF Unified Budget Directorate General of Treasury Ministry of Finance

2 Go to Modern Budget System : Credible, Transparent, and Accountable 1. Framework of Planning and Budgeting Reforms; 2. Development of PBB; 3. Some Challenges. 2

3 1 Planning and Budgeting Reforms Framework a. Reforms Background; b. Legal Framework; c. Planning and Budgeting Framework Concept; d. Reforms Agenda; e. Phases of Implementation. 3

4 a. Reforms Background Based on almost 30 years experience implementing Traditional Budget System (i.e. Line Item, single year, and single entry), we identified at least 5 weaknesses : 1. Lack of Budget Discipline; 2. No Guarantee for Budget Sustainability; 3. Lack of Transparency; 4. Not Efficient; 5. Lack of Accountability. It doesn t reflect good governance 4

5 b. Legal Framework 1. Law No. 17/2003 on State Finances Unified Budget; MTEF; PBB. 2. Law No. 25/2004 on National Development Planning System Long-term National Planning; Medium-term National Planning; Annual Government Work Plan. 3. Joint Letter between Minister of Finance and Minister of National Planning on Guideline for Planning and Budgeting Reforms in 2009 Restructuring Program and Activity; Implementation of PBB; Implementation of MTEF; New RKA-KL Templates; Timeframe of Implementation. 5

6 c. Planning and Budgeting Framework Concept Aggregate Fiscal Discipline MTFF: Medium Term Fiscal Framework - Tax Ratio - Defisit Ratio - Debt Ratio Allocative Efficiency MTEF: Medium Term Expenditure Framework Forward Estimates Allocation based on - Program outcomes - Activity output PBB: Performance Based Budgeting Unified Budget Operational Efficiency External Control Internal Control Management Accountability Culture: Culture on Performance Efficiency market price (Robust Market) - procurement bidding process - apply at cost system *) RPJMN (5 YEAR PLAN, WITH 3 YEAR ROLLING PLAN THROUGH ANNUAL WORK PLAN AND BUDGET) 6

7 d. Reforms Agenda a. Budget System Approaches : Unified Budget; Performance Based Budget (PBB); Medium Term Expenditure Framework (MTEF); b. Budget Classifications : Functions; Organization; Economic/Type of Expenditure; c. IT System : On-line System; Automation; Integration. 7

8 e. Phases of Implementation 1. Phase I : Introduction of Reforms ( ); 2. Phase II : Strengthening Period ( ); 3. Phase III : Improvement Period (2015 beyond). 8

9 Phases of Implementation Milestones Enactment of Law No. 17 Starts the Reform (Introducing Period); Unified Budget; Introduce PBB and MTEF concept. New templates of budget document. Strengthening Period; Develop integrated system; Apply PBB and MTEF to all line ministries; Introduce reward and punishment system. Improvement Period Enactment of Law No. 1; Enactment of Law No. 25; Govt. Regulation No. 21 Issuing Guideline for Planning and Bugeting Reform; Restructure Program and Acitivity; Define Outcome and Output; Determine performance indicators; Formulate MTEF; Develop new templates. Program evaluation; Performance evaluation; Recommendation for improvement. 9

10 2 Development of Performance Based Budgeting (PBB) 1. Objectives and Concepts; 2. PBB Framework; 3. PBB Requirements; 4. PBB Preparation Stages; 5. Budget Allocation Structure and Mechanism. 10

11 PBB : Objectives and Concepts a. Directly linkages between performance and budget; Objectives b. To improve transparency and operational efficiency; c. More flexibility and accountability. Concepts a. Output and Outcome oriented; b. Let the manager manages; c. Money follow function. 11

12 Budget allocation structure and units PBB : Framework Echelon I Program Focus Government Work Plan Line Ministry/Agency Echelon I Program Focus Echelon I Program Focus Nasional Outcomes Outcome Outcome Outcome Outcome Outcome Outcome Output Output Output Performance information structure Spending unit act. S U S U Output 12

13 Budget allocation structure PBB Framework at National Level Government Work Plan Nasional Outcomes Activity Focus Activity Focus Activity Activity Focus Activity Activity Outcome Outcome of some LM/A Performance information structure Line Ministry Agency Other Entity Outcome LM/A 13

14 PBB Framework at Line Ministry/Agency Level Department/ Agency Functions Vision, Missions, Strategic and Annual Work Plan Strategic Outcome (LM level) Broken down into To support achievement Unit Echelon I Unit Echelon I Core business Program KPI Outcome KPI KPI Eselon II/ Satker Eselon II/ Satker Eselon II/ Satker Core business Broken down into Activity To Support achievement PI Output PI PI 14

15 PBB : Requirements or Instruments Performance Indicator Tools or instruments to measure how far the performance target can be achieved output and outcome level; Approaches/methodology quantity, quality, efficiency, costumer satisfaction, effectiveness; As instruments for performance evaluation. Cost Standard Reflects all budget needed to produce an output; Consist of all items/input components; In determining unit cost economic price but good quality. Performance Evaluation To compare between performance target and the actual/realization refer to performance indicator; To analyze the gap and find out alternative solutions; To improve performance indicator for next period; To recommend whether the policy should be continued or terminated. As input for next budget allocation. 15

16 PBB : Preparation Stages No. Activities Source of Document 1. Defining Vision and Mission of LM/A LM/A Strategic Plan and Function 2. Determining LM/A Strategic Outcomes (LM/A Outcomes) Strategic Plan 3. Program Restructuring Core business of Echelon I 4. Determining Program Outcome Vision & Mission of Echelon I 5. Defining Program KPI Output indicators or other approaches 6. Determining Activity Core business of Echelon II/Spending Unit 7. Determining Output Output reflects core business unit 8. Determining Performance Indicator for Activity Approaches : quantity, quality and price; Sub output Indicator. 16

17 PBB : Budget Allocation Structure and Mechanism National Level Budget allocation refers to performance target in line with national priority and focus priority and any other obligation as mandated by constitution; All performance targets above are broken down into priority activities. Line Ministry Level Budget allocation refers to Program and Activity for each unit in accordance with function and core business including baseline and national priority activity as additional assignment; Total budget derives from performance targets and cost standard applied; Distribution of the budget (Economic classification) refers to type expenditure level only (2 digits). 17

18 PBB : Relationship between Performance and Budget NATIONAL LEVEL LM/AGENCY Program Performance Target PRIORITY Total Rp National Performance Indicator ECHELON I Outcome KPI Performance Target Total Rp FOCUS PRIORITY PRIORITY ACTIVITY Total Rp National Performance Indicator ECHELON II/SATKER PRIORITY ACTIVITY FUCTIONAL ACTIVITY Function and Sub Functions; or Non. Output and Volume Output Total Rp Performance Indicator Output and Volume Output Total Rp Performance Indicator 18

19 Budget Structure within Line Ministry PROGRAM Outcome; KPI; Total budget. Unit responsible. Volume ; Total cost. ACTIVITY Types and units of Output; Performance Indicators; Total budget. Unit responsible. OUTPUT SUB OUTPUT Budget document COMPONENT SUB COMPONENT Reflects steps or part of the activity conduct to produce an output; Total cost. worksheet ACCOUNT Shows type of expenditure; Detail of transaction; Total cost per transaction. 19

20 5 Some Challenges 1. PBB Implementation; 2. IT System Development. 20

21 a. PBB Implementation 1. Performance measurement and evaluation; 2. Output and Outcome Review; 3. Develop costing methodology (financial model); 4. Simplify the operational/running cost components; 5. Improve standard cost or indexation; 6. Flexibility arrangements; 7. Reward and Punishment System; 8. Efficiency Dividend. 21

22 How the System Works? Integrated Financial Management Information System (IFMIS) Govt. Working Plan To formulate : Temporary ceiling RKA-KL To formulate : Definitive ceiling DIPA To performs To produce Work Sheet To produce Renja K/L Financial Notes The Bills Compilation of RKA-KL SP-RKAKL Presidential Decree SP-DIPA Payment system Cash management Accounting and reporting Consolidated Financial Report SERVER DATABASE (MOF) 22

23 Indonesia Archipelago 23