1. PERFORMANCE BUDGETING IN THAILAND
GEOFF DIXON
FORMER CONSULTANT, THAI BUREAU OF THE BUDGET

2. Thai budgeting has been very centralized
very detailed budget categories
cash allotments within each budget year
pre-audit of spending transactions (soft)

3. This results in
strong control of the budget bottom line
but
weak control of budget composition and efficiency

4. The challenge is to improve the TRADE-OFF between
macro fiscal control, and
compositional and operational efficiency
How? By introducing performance budgeting

5. PERFORMANCE BUDGETING MEANS
1. Output driven budgeting
identifying agency outputs
costing those outputs
basing budget allocations on this information
In the Thai case this meant identifying and costing output classes

6. PERFORMANCE BUDGETING MEANS
2. Empowering program agencies to manage
internalizing control of inputs
providing a predictable funding environment
In the Thai case this meant broader budget categories & MTEF

7. PERFORMANCE BUDGETING MEANS
3. Replacing external control over inputs with external control over outputs
reporting budget-year outputs against budget preparation assumptions
introducing broader performance indicators for policy management
In the Thai case this meant sector experts helping develop performance indicators

8. Input control
Output control
External control
Internal control

9. Internal versus external control
(agency autonomy)
New Zealand
Aust pre ’90s
Thailand
Cambodia
Output versus input control
(performance focus)

10. Transitioning to performance budgeting
1. How to manage change in program agencies?

11. The chicken/egg problem in moving program agencies from external to internal control
agency skills are in obtaining resources rather than internally allocating them
the Budget Bureau argues that reducing its controls is therefore dangerous
The result: HIATUS

12. The 7 hurdles attempted to break the impasse by making BOB concessions to an agency conditional on hurdle standards in 7 areas
¨    budget planning
¨    output costing
¨    procurement management
¨    budget/funds control
¨    financial and performance reporting
¨    asset management
¨    internal audit

13. The reform process is formalized for each of six pilot agencies by
a memorandum of understanding with BOB at the start of the reform process
a resource agreement with BOB when the seven hurdles are met

14. Transitioning to performance budgeting
2. How to manage change in the budget agency?

15. The focus of BOB control should shift FROM
whether actual spending is consistent with very detailed pre-specified categories and conditions TO
whether agencies’ use of budget funds in a freer operating environment is effective

16. The challenge for the Bureau of the Budget
refocus from agency control to agency analysis
refocus from amounts of inputs to amounts of outputs and input- output links

17. The Bureau of the Budget must change from
an enforcer of rules to
an evaluator of performance
It is already familiar with this role in budget preparation
The role will need to extend through to budget execution

18. Transitioning to performance budgeting
3. Is the hurdle approach ‘migratable’?

19. There are two approaches to managing budget reform in change resistant environments
sequence the STAGES OF REFORM - output identification/perf. indicators/devolution /MTEF
sequence the AGENCIES TO BE REFORMED, with multi-stage package for each agency upon meeting hurdle standards
The Thais adopted the second approach

20. This reflected the Budget Bureau’s difficulty in quickly providing technical leadership
spearhead for reform was six reform focused agencies
each had an integrated package of reform
budgetary freedoms would be granted by BOB conditional on meeting 7 hurdles

21. The hurdle approach is well suited to Thailand
progress is possible in program agencies even though progress is slow in BOB
hurdle approach is failsafe for BOB and more likely to win its acceptance
there is a stronger incentive package for individual agencies to reform due to hurdle conditionality
it provides an integrating framework for different reforms required in budget and program agencies

22. In countries in which the budget bureau itself has achieved critical reform momentum the alternative of
sequencing by reform stages (each stage simultaneously introduced across all agencies) rather than
reform agencies (each of which is offered a multi-stage reform package when hurdles are met)
should be considered