1. A Framework For Assessing Subnational Government Performance Baoyun Qiao China Academy of Public Finance and Policy Central University of Finance and Economics

2. Outline Principles of promising practices –Being Responsive: Doing the right things or knowing what to do? –Being Responsible: Doing things right –Being Accountable World Bank Approach Other Approaches Design Criteria for China

3. Principles of promising practices Being Responsive –Local services match responsibilities –Budget priorities consistent with residents preferences –Specifying mandatory standards and access of local services –Improving the quality of life

4. Principles of promising practices Being Responsible –Following due process: Adherence to The principle of ultra vires The procedure bye-law Local master plans and budgets Zoning bye-laws and regulations Funded mandate

5. Principles of promising practices Being Responsible –Being fiscally prudent Operating budget in balance –Exploitation of own tax bases –Expenditures in line with revenue means Observing golden rule for borrowing New capital projects specify upkeep costs and how debt is to be repaid Conservative fiscal rules to have sustainable debt levels All major capital projects subjected to referenda Striving to improve credit worthiness Maintaining positive net worth Commercially audited financial statements maintained

6. Principles of promising practices Being Responsible –Earning trust Professionalism and Integrity of staff Safeguards against malfeasance Streamlined processes and e-governance Complaints and feedback acted upon Honest and fair tax administration Strict compliance with service standards Rewards for exceeding standards and penalties for lack of compliance Citizen friendly output budgets and service delivery performance documents Participatory budgeting and planning

7. Principles of promising practices Being Responsible –Working better and costing less All tasks subjected to alternative service delivery test -competitive provision across governments and public and private divides Financing creates incentives for competition and innovation -Comparative evaluation of service providers Benchmarking with the best Flexible administration accountable for results : Government by contract, absolutely minimum set of rules No lifelong and rotating employments Task specialization General administration costs subjected to public scrutiny Boundaries balance benefits and costs of, scale and scope economies, externalities and decision making Boundaries consistent with fiscal sustainability

8. Principles of promising practices Being Accountable –Letting the sunshine in Local government bye-law on the citizen ’ s right to know New budgetary proposals and annual performance report posted at all libraries All decisions including the costs of concessions posted at the internet Value for money performance audits by independent think tanks Open information and public assessment

9. Principles of promising practices Being accountable –Working to strengthen citizen voice and exit New budgetary proposals, major contracts and annual performance report presented at a weekend town hall meeting open to all All documents subjected to “ citizen friendly ” requirements. Open processes for contract bids Mandatory referenda on large projects Taking steps to ensure that at least 50% of eligible voters vote Citizen boards to provide scorecard and feedback on service delivery performance Provisions for popular initiatives Bye-law on taxpayer rights

10. World Bank Approach Assess performance of national government 2007 Criteria 1.Macroeconomic Management 2.Fiscal Policy 3.Debt Policy 4.Trade 5.Financial Sector 6.Business Regulatory Environment 7.Gender Equality 8.Equity of Public Resource Use 9.Building Human Resources 10.Social Protection and Labor 11.Policies and Institutions for Environmental Sustainability 12.Property Rights and Rule-based Governance 13.Quality of Budgetary and Financial Management 14.Efficiency of Revenue Mobilization 15.Quality of Public Administration 16.Transparency, Accountability, and Corruption in the Public Sector

11. World Bank Approach The ratings process involves two key phases. In the benchmarking phase a small, representative sample of countries drawn from all Regions is rated; In the second phase, staff rate the remaining countries using benchmark countries’ scores as guideposts.

12. World Bank Approach Example: Quality of Budgetary and Financial Management –Comprehensive and credible budget linked to policy priorities Multi-year expenditure projections integrated into budget formulation process Spending ministries and the legislature consulted in budget formulation, adhering to fixed budget calendar Budget classification system comprehensive and consistent with international standards Minimal and transparent off-budget items –Financial management Budget implemented as planned Budget monitoring based on management information systems Negligible payment arrears –Fiscal reporting Reconciliation of banking and fiscal records Regular in-year fiscal reporting Timely preparation of public accounts Timely auditing of accounts and appropriate action taken on budget reports and audit findings

13. World Bank Approach Example: Grade 1 a. If there is a budget, it is not a meaningful instrument, nor an indicator of policies or tool for allocation of public resources. There is no forward look in the budget, nor any meaningful consultation with spending ministries. No consistent budget classification system is used. More than 50 percent of public resources from all sources do not flow through the budget. b. Expenditures across broad budget categories have little or no relationship to the amounts budgeted. There is practically no monitoring and reporting of public expenditures. Payment arrears exceed 10% of total expenditures, or cannot be determined. c. There is no reconciliation of cash accounts with fiscal records. No regular, in-year fiscal reports are produced. Public accounts are seldom prepared, or are more than five years out of date. The use of public resources is not on the public agenda.

14. World Bank Approach Example: Grade 5 a. Policies and priorities are linked to the budget. Multi-year expenditure projections are integrated into the budget formulation process, and reflect explicit costing of the implications of new policy initiatives. The budget is formulated through systematic consultations with spending ministries and the legislature, adhering to a fixed budget calendar. The budget classification system is comprehensive and consistent with international standards Off-budget expenditures are minimal, and transparent. b. The budget is implemented as planned, and actual expenditures deviate only slightly from planned levels 38 (by less than 10 percent on most broad categories). Budget monitoring occurs throughout the year based on well functioning management information systems. Payment arrears are negligible or non-existent. c. Reconciliation of banking and fiscal records is practiced comprehensively, properly, and in a timely way (daily or weekly). In-year fiscal reports are prepared at least quarterly, issued within 4 weeks of end of period, and provide accurate data on all budget items, with coverage of expenditures at both the commitment and payment stages. The public accounts are prepared within 6 months of the end of the fiscal year, and include full information on revenue, expenditure, and financial assets and liabilities. Accounts are audited in a timely, professional and comprehensive manner, and appropriate action is taken on budget reports and audit findings.

15. Other Approaches A comprehensive evaluation of states in US –Criteria Information Infrastructure Money People –Sources: surveys, written documents interviews –Methodology Defining the criteria Grading against criteria

16. Other Approaches Example: Money Criteria –The state uses a long-term perspective to make budget decisions. –The state’s budget process is transparent, easy to follow and inclusive. –The state’s financial management activities support structural balance between ongoing revenues and expenditures. –The state’s procurement activities are conducted efficiently and supported with effective internal controls. –The state systematically assesses the effectiveness of its financial operations and management.

17. Other Approaches Approaches focus on prospective outcomes –Oregon Benchmarks: 158 measures of social well-being in 1991 to 20 in 1999 –Florida Critical Benchmarks: 268 indicators dealing with progress in : families and communities, safety, learning, health, economy, environment and government. –Alberta “ Measuring Up ” : 27 indicators –USA GPRA (1993): fiscal performance, initiatives and commitments –Canada: Agreement on Canada indicators not yet in sight.

18. Design Criteria for China Define the responsibilities of sub-national government –Public Services –Sustainable Development –Growth Capacity Building

19. Design Criteria for China Defining criteria –Basic Public Services Delivery –Growth Capacity Building –Sustainable Development –Fiscal Health –Accountability –Public management

20. Design Criteria for China Representative provinces/cities –Benchmark

21. Thanks