1. Managing for Development Results MARRAKECH 2004 Two years on: Chile’s Experience in Public Sector Management Processes Mario Marcel, Budget Director Ministry of Finance of Chile Plenary Session: How the Global Context Shapes Country Approaches to Managing for Development Results Managing for Development Results, Second International Roundtable Marrakech 2004

2. Managing for Development Results MARRAKECH 2004 2 2002 Roundtable Chile’s experience presented Performance monitoring system comprised of five tools: –Performance indicators (1994) –Program evaluations (1997) –Management improvement programs (1998) –Comprehensive performance reports (1997) –Budget bidding fund (2000)

3. Managing for Development Results MARRAKECH 2004 3 PREPARATION APPROVAL EXECUTION EVALUATION Main feature: PMS related to budgeting Performance targets Programs for evaluation Performance pay Indicators Comprehensive performance reports Performance indicators and targets Program evaluations New requirements to PMS

4. Managing for Development Results MARRAKECH 2004 4 Main conclusions in 2002 All instruments in working order Chile’s experience proves that it is possible to build and operate a performance monitoring system in an emerging country PMS development motivated by frustration with value for money rather than by a crisis System helped in reallocating resources in the face of tighter budget contraints 2000-2002 Be aware of enabling factors (transparency, fiscal discipline, hierarchical budget institutions)

5. Managing for Development Results MARRAKECH 2004 5...and some pending issues Consolidation of reforms and political support Balance between effectiveness and transparency difficult to obtain Different views of PS modernisation in people´s minds Citizens’ participation and role of Legislature Performance, trust and devolution High centralization discussed

6. Managing for Development Results MARRAKECH 2004 6 TWO YEARS LATER: TOOLS HAVE DEVELOPED TOOLDESCRIPTION20022004 Performance indicators Indicators of effectiveness, economy, efficiency, quality of service with goals in budget process -537 indicators -Limited coverage -Performance against targets still not reported -1,684 indicators -Number appropriate, still need to diversify -Performance reported to Budget and Congress in budget process and CPRs Program evaluation Programs selected annually for evaluation by independent panels, conclusions ans recommendations reported to Congress -120 evaluations performed, 48% of gov program spending -All desk evaluations -Ministry-Budget agreements signed -170 evaluations performed or in progress, 75% of gov program spending -Growing share ofImpact and comprehensive evaluations -Ministry-Budget agreements assessed and reported to Congress in CPRs Management Improvement Programs (MIP) Annual bonus paid on basis of agency’s progress against goals in seven key management areas, benchmark-based approach -Bonus 2%-4% -96% of staff on maximum bonus -Bonus 2,5%-5% -Team performance bonus, max 3% -MIP results reported to Congress in CPRs -75% of staff on maximum bonus -External ISO 9000-type certification -Devolution of financial authority to top performers Comprehensive Performance Reports (CPR) Annual report prepared by every agency on performance against budget, targets, institutional commitments -200 agencies send CPRs to Finance Committes of Congress -200 agencies send CPRs to permanent Budget Committee of Congress -CPRs basis for President’s report and review by permanent Budget Committee of Congress Bidding Fund (BF) Pool of funds allocated to innovative programs on basis of quality and consistency of bids from ministries - 4% of gov expenditure allocated through BF -10% of gov expenditure allocated through BF -BF suspended for last half of administration

7. Managing for Development Results MARRAKECH 2004 7 Three key reforms 1.Accountability. Reform of Congress Regulations (March 2003): Joint Budget Committee of Congress made permanent (from 2-month to year-round work) JBC to hear, analyze and give guidance on basis of reporting from Performance Monitoring System ahead of budget discussion 2.Consolidation of Performance Monitoring System. Reform of Financial Management Law (June 2003): Permanent authority to Ministry of Finance to request and provide performance information with Budget Further reporting mandates: medium-term expenditure framework 3.Human resource management. Reform of Statute of Public Employees (May 2003): Performance-based pay doubles share of wage bill to 7% Seniority-based career changes to merit-based career Political appointees reduced from 4,000 to 400 Chief executives to be selected by President from short list provided by independent commission after professional screening of candidates Chief executives to sign performance agreements with ministers Civil Service Agency created

8. Managing for Development Results MARRAKECH 2004 8 Not a coincidence - How PMS became a political winner In November 2002 allegations of irregularities in Public Works Ministry, followed by financial scandal in development agency Politicians, business leaders, media blame public sector backwardness In January contacts between government and opposition to respond with public sector reform. What reform? Political agreement around performance-based management, budgeting, promotion and pay, based on cumulative experience, thinking on results-oriented management over previous years

9. Managing for Development Results MARRAKECH 2004 9 The value added by performance management Performance management provided “meat” to Public Sector Reform Agreement In some cases, voluntary, administrative developments made statutory In others, performance orientation and mechanisms incorporated into new systems (HRM) Accountability to Congress strengthened Reforms enacted in matter of weeks Trust in Chilean public sector restored, transparency assessments suffer little damage, country risk drops...and value gained: consolidation of reforms

10. Managing for Development Results MARRAKECH 2004 10 Summing up In the end, there was some sort of crisis But it was sorted out better because of previous progress in performance-based management Crisis provided an opportunity to consolidate reform and gain bipartisan political support Lessons for discussion of influence of Global Context on country approaches to managing for results: –External pressure is unavoidable, even necessary for reform –But readiness of government institutions to respond with effective solutions is key to success

11. Managing for Development Results MARRAKECH 2004 11 See system in practice: www.dipres.cl