Author Topic: Why Allen Schick is wrong on program budgeting  (Read 451 times)

Marc Robinson

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Why Allen Schick is wrong on program budgeting
« on: July 12, 2011, 14:54:46 GMT »
Program budgeting has many critics. One of the most prominent is Allen Schick, who has advanced the proposition that budgeting by programs is unworkable because it is inconsistent with budgeting by organizational unit. Schick’s argument (2007: 113-6) is based on three propositions ... read more at < http://blog.pfmresults.com/wordpress/ >

Martin Johnson

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Programme and administration structures revisited
« Reply #1 on: May 07, 2012, 14:21:42 GMT »
I know that colleagues have provided advice in the past to ministries when their programme and administrative structures have sometimes clashed. The issue lies close to the heart of moving away from a line item focus based on historical allocations to a policy and outputs focus. To what extent should the administrative structure change to reflect well-specified programmes and to what extent should programme design be modified to meet the constraints of an existing administrative structure? Whilst it is certainly the case that one could ignore the underlying policy basis of the budget and somehow specify outputs (and other planning and performance measures) for the existing administrative structure (whether that structure links well to clearly defined policy areas or not) such an approach would appear to suggest that there is little point in introducing a programme structure in the first place. I was intrigued, therefore, to come across the following piece of guidance recently.

"To the extent possible, the program and performance budget should merge into a single budget presentation, aligned with the organizational structure of the government department or unit. The components of the organizational structure should directly match the programs, subprograms, activities, and projects funded in the Annual Budget Law,
which should directly match the performance structure of the outputs being created and the results being achieved. The manager of an organizational unit is thus responsible for
using the resources identified for his or her program, subprogram, or activities and projects to produce a clearly specified output and achieve clearly specified results. It is
easiest for budget analysts to achieve this synchronization in the budget presentation between organizational structure, program structure, and performance structure by
reorganizing the budget presentation to match the organizational structure and identifying performance goals for each unit in the organizational structure."

So there we have it. The end of the programme budgeting world is nigh.


sybihida

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Re: Why Allen Schick is wrong on program budgeting
« Reply #2 on: May 07, 2012, 23:07:58 GMT »
The IMF just published an interesting paper on budget institutions: 

“This paper assesses the relative strengths and weaknesses of fiscal institutions in ten Southeastern European countries, using recent benchmarking methodologies developed by FAD. The assessment evaluates each country’s understanding of the scale of the fiscal adjustment challenge, its ability to develop a credible consolidation strategy, and its capacity to implement the strategy. Key institutional arrangements, are generally in place, including top-down budgeting and medium-term budget frameworks. Other institutional arrangements require further attention, including macro-fiscal forecasting, fiscal risk analysis, setting fiscal objectives, presence and role of independent fiscal agencies, and top-down parliamentary approval.”

http://www.imf.org/external/pubs/cat/longres.aspx?sk=25893.0 
« Last Edit: May 08, 2012, 07:40:21 GMT by Napodano »

Napodano

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Re: Why Allen Schick is wrong on program budgeting
« Reply #3 on: May 08, 2012, 07:49:26 GMT »
"A recent World Bank study investigated the factors that make a ministry of finance (MoF)—or more broadly defined the finance agencies at the center of government—an effective and crucial instrument for economic development.

One of the key findings is that an effective finance function is less about capacities, the number and quality of staff and systems, and more about the capabilities to use these capacities in the political and bureaucratic environment. Politics often gets in the way of the effective management of government resources.

Another interesting finding is that centralization of powers in the MoF is important in less developed countries, to control expenditure and assure the strategic direction of government expenditures. For middle-income countries, however, decentralization of operations to line ministries is desirable to ensure effective implementation of government programs and avoid inefficient and unnecessary input-based controls."

Read more at http://blog-pfm.imf.org/pfmblog/2012/01/enhancing-the-capability-of-central-finance-agencies.html   


petagny

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Re: Why Allen Schick is wrong on program budgeting
« Reply #4 on: May 08, 2012, 14:33:10 GMT »
At the risk of being labelled a programme budgeting heretic, I have some sympathy for the implications of the perspective given in Martin's quote. Too often it seems like our attempts at developing a programme superstructure look like direct criticism of the way governments have chosen to organise themselves to do business. And it can often appear like we are suggesting that they move towards an organisational structure based around COFOG.

Another approach is to work within the existing organisations, looking closely at the outputs they are delivering, grouping them into classes of similar outputs and identifying related performance measures. This can expose inefficiencies in service delivery and in organisational structure, leading to possible improvements in both. On the negative side, it can also lead to quite complicated structures and hefty budget documents.

Martin Johnson

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Re: Why Allen Schick is wrong on program budgeting
« Reply #5 on: May 08, 2012, 15:39:06 GMT »
As usual, there is much sense in what Petagny says ... this time as a programme budget heretic. But like an atheist that loves god more than an agnostic does, I sense in Petagny's words a return to the discussion of how to reconcile differences between programme structure and administrative structure, for what is organising groups of similar outputs other than specifying a programme by another name? The fact that one might end up with hefty budget documents sounds a bit like having a programme structure without the benefit of a programme dimension. Having noted the above, I think the watchword is to avoid any major changes in administrative structure where this is at all possible (unless major civil service reform is on the agenda of course), propose sensible (and manageable) admin changes where these make sense in terms of management and accountability, but otherwise set up management arrangements to cater for discontinuity between programmes and departments.

But to return to my original post on this, I think the point is either that one is pursuing programme budgeting (hopefully with common sense, but with the organisational implications that go with programme budgeting clearly specified) or one is not. The guidance in the original quote is basically a cost centre approach. If the cost centres map neatly into a policy led programme structure then serendipity delivers a programme budgeting system. If they don't, then you have cost centres but you don't have a programme budget. This is not to say that one should not necessarily take a cost centre approach (this is all a matter of choice after all), it merely states that a cost centre approach will only deliver a programme budget under special circumstances. I just thought that the guidance was unusual given that it was guidance explicitly for programme budgeting.

 

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