Using Performance Information for Management and Budgeting - Canada’s Experience Lee McCormack, Executive Director Results-based Management OECD Presentation, May 3, 2006

Overview The Canadian context Problems, priorities and implementation challenges Lessons learned

The Canadian context

32 million citizens in 5 ½ time zones Canada is a big country with relatively few people and a highly decentralized government 32 million citizens in 5 ½ time zones Decentralized federation with 10 provinces and 3 territories Provinces are equal to the federal government and have real power Hundreds of federal-provincial agreements and federal programming is weighted towards transfer payments Over 90 departments and agencies in the federal government 46 Crown corporations 172 000 public servants Eight consecutive federal surpluses New Conservative minority government

The majority of federal expenditures are transfer payments… Total net expenditures in 2004-05 were $172.8 B, of which 56% ($96.8B) were transfer payments (including major transfers & grants and contributions) Total Net Expenditures: $172.8 B Grants and Contributions: $22.5B Transfer payments

The federal expenditure management system is also decentralized Element Responsibility Developing an annual Budget and a multi-year fiscal framework Department of Finance Establishing annual departmental reference levels Treasury Board Secretariat and departments – approved by Treasury Board New policy or program approval phase Privy Council Office supporting Cabinet Allocating and reallocating to ensure alignment with priorities and aggregate expenditure control Departments routinely – plus three central agencies in special cases Seek Parliamentary approval of spending plans Treasury Board Secretariat Reporting to Parliament on spending plans, actual expenditures, and results achieved Treasury Board Secretariat and Departments

Cabinet Review of Priorities Cabinet Review of Budget Strategy The Finance department sets the Fiscal Framework and manages the annual budget process Budget Speech Budget Bill Main Estimates Final Decisions on Budget Cabinet Review of Priorities February Focus on the “increment” No formal mechanism requiring incorporation of performance information into Budget process Not many targets Jan-Feb Aug-Sept Cabinet Review of Budget Strategy Release of Budget Consultation Papers (Fall Update) Budget Consultation Process Dec-Jan October Oct-Dec

Treasury Board Secretariat monitors the ongoing “A-Base” and seeks Parliamentary supply Main Estimates Interim Supply A-Base Perspective Input to Budget Supplementary Estimates and Supply Bill February Jan-Feb Feb-Mar Substantial planning and performance information given to Parliament Much performance information available, especially on G and C programs Room to develop more systematic cyclical review Pressure Management Dept Baseline Funding Reports on Plans and Priorities Full Supply Bill Oct-Jan March-June Supplementary Estimates and Supply Bill A-Base Perspective Input to New Policy Proposals Departmental Performance Reports, Canada’s Performance and Public Accounts Nov-Dec Aug-Nov Aug-Nov

All major departments and agencies Canada has a relatively mature performance measurement and reporting infrastructure All major departments and agencies Have internal audit and evaluation units Publish their audits and evaluations Produce and explain to Parliament upon request their reports on plans and priorities and departmental performance reports Are developing outcome frameworks that are consistently based across government Treasury Board Secretariat Reviews program and management performance, focusing primarily on G and C programs Has a strong policy centre for results based management Produces an annual performance report – Canada’s Performance Assesses management performance across government, including results-based management capacity Office of the Auditor General Produces performance audits of departments and agencies

Although there is long results management history … Management, Resources and Results Structures – regaining detailed program level knowledge Possible Federal Accountability Act 2006 – cyclical evaluation of all transfer payment programs Improved Reporting to Parliament – moving to whole of government planning and reporting Management Accountability Framework – assessing management performance across government Canada’s Performance – linking programs to societal performance Results for Canadians – results-based management as a stated priority of government Transfer Payment Policy – performance frameworks and evaluations reviewed by TBS Modern Comptrollership – investment in management practices and controls Program Review – dealing with a large deficit through major expenditure cuts Departmental Reporting to Parliament – moving to results-based plans and reports on performance Planning Reporting and Accountability Structures – unsuccessful try at linking resources to results First Program Evaluation Policy – government-wide implementation Today’s Agenda 2000 Mid 90s Early to Mid 80s … some real challenges remain

Problems, priorities and implementation challenges

Our agenda focuses on four main problems that are limiting us from getting performance information into our budget and management processes To regain our detailed whole-of-government understanding of the ongoing program base we are implementing the Management, Resources and Results Structure (MRRS) To have better ongoing measurement, periodic evaluation and use of performance information we are renewing the evaluation function To help Parliamentarians fulfil their role of holding the Government to account we are transforming the existing reporting regime through the Improved Reporting to Parliament Project (IRPP) To ensure the right management incentives are in place we are implementing the Management Accountability Framework (MAF) Agenda MRRS Evaluation IRPP MAF

How do you regain a detailed understanding of the program base? MRRS Evaluation IRPP MAF How do you regain a detailed understanding of the program base? To manage its programs, the government needs to know: What they are How they align to intended outcomes What they cost What results they achieve This should support more informed decisions on value for money, program effectiveness and possible ways of improving Treasury Board approved the Management, Resources and Results Structure policy (MRRS) to remedy this situation The policy is mandatory for appropriated organizations and entering the second year of implementation

MRRS Evaluation IRPP MAF The approach requires consistent, structured information for every department and agency Program Activity Architecture (PAA) + Financial and non financial information Program Activity Architecture D - 1 D - 2 D - 3 D - 4 D Sub - Sub – Sub – Program Activity Sub - Sub – Program Activity Sub – Program Activity Program Activity Departmental Strategic Outcome M Department or Agency Planned and Actual Results Planned & Actual Financial information Governance Required for all elements and all levels of the PAA Required for the highest or “program activity” level Recoding of departmental information systems will be necessary Central Expenditure Management Information System (under development)

Budget Office Function MRRS Evaluation IRPP MAF MRRS is the basis for planning, resource allocation and reporting across the government DEPARTMENTS Management Tool Improve program performance Better alignment of resources & priorities Easier reallocation More evidence based reporting More logical & consistent basis for interaction PARLIAMENT Reporting Tool Stronger accountability on spending and results Common basis for planning & reporting inside & outside Finance Privy Council Office Budget Plan Budget Office Function Informed decisions and investment choices based on priorities and value for money MRRS

Implementation faces four main challenges MRRS Evaluation IRPP MAF Implementation faces four main challenges Cultural Some departments have had difficulty in adopting a performance measurement culture Many tend to identify too many measures and actually measure too few Transparency leads to accountability and that can be scary Estimate it will take 3 – 5 years to establish a government wide performance measurement framework Institutional Departments are managed in vertical, organizational silos and some are having difficulty converting to logic based program structures Over the last 2 years 30% of departments have made changes to the basic program activity architecture – not unexpected Performance measurement capacity – demographic concerns 3-5 years to stabilize to long term and enduring structures

Implementation faces four main challenges MRRS Evaluation IRPP MAF Implementation faces four main challenges Definitional What is a program? How do you measure the effectiveness of corporate services? How do you treat overheads consistently? What is the lexicon of program descriptions? (dozens of other questions) Technical Developing a system capable of collecting, sorting and linking information Making sure it talks to other systems – annual budget, public accounts and others Recoding of departmental systems is a large job – pilot projects

… and this will put a strain on evaluation capacity MRRS Evaluation IRPP MAF The Federal Accountability Act, if passed, will increase scrutiny of program performance … Auditor General to inquire into the use of funds by third parties under any funding agreement with the federal department Parliamentary Budget Office to provide analysis to Parliament about the nation’s finances and trends in the national economy Departments to evaluate, at least once every five years, the relevance and effectiveness of its grants and contributions programs … and this will put a strain on evaluation capacity

There are some real challenges for the evaluation function MRRS Evaluation IRPP MAF There are some real challenges for the evaluation function Quality, timeliness and strategic focus issues make it difficult to use evaluation to support decision-making: often focused on small programs and not strategic can take too long to complete and are difficult to understand can be self serving when funded by program managers Government wide capacity issues have made it difficult to deliver Lack of trained evaluators No consistent competencies for those who lead the evaluation function Definition of the evaluation “product” hasn’t changed much in 20 years

Step #1 is to renew our policy so that evaluation is… MRRS Evaluation IRPP MAF Step #1 is to renew our policy so that evaluation is… Better recognized as a core function of public management Embedded in the decision-making process Linked to budgeting and expenditure management A neutral and independent function, aligned to government management priorities Timely in its production of a quality product

Step #2 is to zone in on implementation MRRS Evaluation IRPP MAF Step #2 is to zone in on implementation Make sure the function is properly resourced Build capacity by re-establishing training and recruitment programs and partnering with universities on certification Ensure objectivity – evaluators fund evaluations, period Redefine the “product” to promote relevance and better coverage: Strategic policy evaluation Impact evaluation Value-for-money assessments Implementation evaluation Treasury Board Secretariat to assess quality and set out clear competencies for Heads of evaluation and evaluators Introduce a Government wide evaluation plan

Workload – Will be difficult to manage without a realistic plan MRRS Evaluation IRPP MAF Canadian evaluators are ready for change but they will face real implementation challenges Demographic - High turnover rates will need to be met with targeted whole of government recruitment Workload – Will be difficult to manage without a realistic plan Skills – Will take time to rebuild training programs and partner with universities Jurisdictional – Continually reinforcing the distinction between internal audit and evaluation Relevance – Good quality, timely products need to be used to inform allocation and reallocation decisions

Parliamentarians want better public performance reporting, ideally … MRRS Evaluation IRPP MAF Parliamentarians want better public performance reporting, ideally … Simpler, more integrated information More context and analysis (trends, graphs, including reporting on horizontal issues) High level overviews with the ability to drill-down to more detail Clearer logic between planning and performance reporting documents More balanced reporting Better links between programs, resources and results More clarity between parliamentary reports and estimates votes

Whole of Government planning and reporting is part of the solution … MRRS Evaluation IRPP MAF Whole of Government planning and reporting is part of the solution … Government could better communicate its overall “strategic plan” This “strategic plan” could be akin to a whole of Government Report on Plans and Priorities: Outlining plans and priorities for the coming fiscal year Linking planned results to planned expenditures Electronic, in every parliamentary office Logically, a fall whole of Government performance report could present the results and actual spending vis-à-vis such a Plan … but this solution depends on a stable, whole of Government framework

MRRS Evaluation IRPP MAF This framework has been tested in Canada’s Performance over the past few years

MRRS Evaluation IRPP MAF This agenda depends on better management overall: the Management Accountability Framework Public Service Values By their actions departmental leaders continually reinforce the importance of PS Values and Ethics in the delivery of results to Canadians (e.g.: democratic, professional, ethical and people values). Learning, Innovation and Change Management The department manages through continuous innovation and transformation, promotes organizational learning, values corporate knowledge, and learns from its performance. Results and Performance Relevant information on results (internal, service & program) is gathered and used to make departmental decisions, and public reporting is balanced, transparent, and easy to understand. Stewardship The departmental control regime (assets, money, people, services, etc.) is integrated and effective, and its underlying principles are clear to all staff. Policy and Programs Departmental research and analytic capacity is developed and sustained to assure high quality policy options, program design and advice to Ministers. Accountability Accountabilities for results are clearly assigned and consistent with resources, and delegations are appropriate to capabilities. Citizen Focused Service Services are citizen-centred, policies and programs are developed from the ‘outside in’, and partnerships are encouraged and effectively managed. People The department has the people, work environment and focus on building capacity and leadership to assure its success and a confident future for the Public Service of Canada. Risk Management The executive team clearly defines the corporate context and practices for managing organizational and strategic risks proactively. Governance & Strategic Direction The essential conditions – internal coherence, corporate discipline and alignment to outcomes -- are in place for providing effective strategic direction, support to the Minister and Parliament, and the delivery of results.

So far, so good but there are some implementation issues: MRRS Evaluation IRPP MAF The Management Accountability Framework is results based and demands attention All departments are assessed against a set of indicators including the quality of Management, Resources and Results Structures, program evaluation and reports to Parliament Discussions with senior officials identify management improvement priorities Treasury Board Secretariat feeds this input into performance appraisals for the most senior officials So far, so good but there are some implementation issues: Process takes time Resource intensive Debates on ratings with departments

Lessons Learned

There are several lessons learned from recent Canadian experience There is no end point on results based management – persistence over many years is required and you never get it “right” You need central leadership to build capacity – someone with authority must set the game plan, make and enforce policies and invest A detailed understanding of the program base is essential – it is very easy to lose and not easy to get back Everybody knows about cultural barriers but don’t underestimate the challenges with systems You need a common whole of government planning and reporting framework if you want to do real strategic planning and reporting There is no substitute for evaluation but you need to give it some backbone and support Parliamentarians and the external auditor demand better public performance information and this is good There is no managing for results without sound management practices period – you need clear expectations and annual assessment

Useful resources Government of Canada - http://canada.gc.ca/main_e.html Treasury Board Secretariat - http://www.tbs-sct.gc.ca/index_e.asp Finance (Budget) - http://www.fin.gc.ca/fin-eng.html Reports on Plans and Priorities (2005-06) - http://www.tbs-sct.gc.ca/est-pre/20052006/deptlist_e.asp Departmental Performance Reports (2004-05) - http://www.tbs-sct.gc.ca/rma/dpr1/04-05/0405dpr-rmr_e.asp Canada’s Performance - http://www.tbs-sct.gc.ca/report/govrev/05/cp-rc_e.asp Results-Based Management (MRRS, Evaluation, Improved Reporting to Parliament) http://www.tbs-sct.gc.ca/rma/rbm-gar_e.asp Management Accountability Framework - http://www.tbs-sct.gc.ca/maf-crg/index_e.asp EMIS - http://www.tbs-sct.gc.ca/emis-sigd/index_e.asp