CoP-MfDR-Africa

The ABCs of RBB (Results-Based Budgeting)

Dear Colleagues,

For this online discussion on results-based budgeting, we’ve been lucky to receive support from experts in the field: the UNDP Regional Center in Dakar Senegal. The Center has crafted the framework and content of this ediscussion, and will be intervening on occasion to respond to any burning questions or issues raised. We are really grateful for their experience and advice and look forward to working with this on this discussion.

Overview

As you know, in Africa, citizens and development partners are increasingly demanding greater accountability and transparency from their governments. Dissatisfied with the often lacklustre growth and performance in fighting poverty, development stakeholders are insisting that budgets be more effective and have a clear link between resources and results.

The most direct way to link resources with results is through results-based budgeting. Results-based budgeting systems are gradually being adopted throughout African, with English-speaking countries leading the way. For the past 10 years or so, more and more African countries have begun developing medium-term expenditure frameworks and program budgets. This means that sector ministries and departments are required to propose public expenditure programming for several years (generally three or four), broken down into programs and accompanied by specific goals (as opposed to yearly budgets that don’t focus on results).

A recent results based budgeting milestone has been achieved. A newly harmonized public finance framework was adopted in 2009 by the West African Economic and Monetary Union (WAEMU). This marks the transition from a line item budgeting approach to a results-based logic, characterized by budgets built around public policy objectives and tracking and monitoring systems. These monitoring systems are less focused on the amounts spent and more focused on results achieved. This reform is causing stakeholders to review the structure of responsibilities within departments/ministries and institutions. Program mangers are now becoming key players in the budgeting process. This reform, already under way in the WAEMU, is now being proposed in the countries of the Monetary and Economic Community of Central Africa (CEMAC), and will likely take place in the Economic Community of West African States (ECOWAS).

In short, reform today is no longer limited to proposing programming tools alongside classical budgets. Results based budgeting is a radical change, the focus of which is the ways in which budgets are put together, presented and discussed. Secondly, it addresses how responsibilities are structured and the nature of budget dialogue at the managerial level in each ministry/department and public institution. It also aims to strengthen parliamentary prerogatives for the preliminary evaluation of the government’s major budget directions and the subsequent monitoring of the use of public resources and results achieved.

Discussion Format

By comparing and highlighting individual experiences, the discussion will focus on the array of processes used, take stock of difficulties encountered, and identify best practices. The discussion will also try to dispel myths and clarify technical terms.

The discussion will run for approximately two months, with a set of questions posted weekly. Furthermore, the main findings will be summarized on a regular basis.

The discussion will focus on seven topics:


  1. Lessons learned from line item budgeting and how to transition from line item budgeting to results-based budgeting
  2. Key concepts, areas in need of clarification, objectives to be attained
  3. General results-based budgeting process framework
  4. Technical options for transitioning to results-based budgeting
  5. Results-based budgeting and enhancing social and economic performance
  6. Results-based budgeting and organizational change
  7. Results-based budgeting, strengthening of parliamentary institutions and developing citizen oversight
  8. Summary

To get started, please find a list of helpful resources below!

Please let me know if you have any questions, comments, or thoughts.

I am really looking forward to this discussion.

Recent Resources

  • Allen R. (2009), The Challenge of Reforming Budgetary Institutions in Developing Countries, IMF Working Paper 09/96, Washington.
  • Ljungman G. (2009), Top-Down Budgeting – An Instrument to Strengthen Budget Management, IMF Working Paper 09/247, Washington DC.
  • Schiavo-Campo S. (2009), Potemkin Villages: ‘The’ Medium-Term Expenditure Framework in Developing Countries, Public Budgeting & Finance, Vol. 29, Issue 2, Summer 2009.
  • World Bank (2007), Results-Based National Development Strategies: Assessment and Challenges Ahead, Washington DC.
  • World Bank and GTZ (2007), Minding the Gaps: Integrating Poverty Reduction Strategies and Budgets for Domestic Accountability, Washington DC.

The Pole - Development Strategies and Public Financial Management was established in 2007 within the UNDP Regional Centre in Dakar.

  • Its mission is to support the West and Central African countries in translating their development vision into medium and long term strategies, planning documents and budgets that are realistic and based on results. The center also promotes initiatives to strengthen the role of national parliaments and civil societies in the analysis and control of strategies as well as budgets. Its action is part of the current reforms of planning public financial management systems, conducted at both national and regional levels.
  • The center now operates in eleven countries in the sub-region: Benin, Burkina Faso, Cape Verde, Cote d'Ivoire, Guinea Bissau, Mali, Mauritania, Central African Republic, Democratic Republic of Congo, Senegal and Togo.
  • Comprised of a team of economists and specialists in public financial management, the center supports initiatives aimed at strengthening links between national development strategies and budgets. It provides advisory, training and support services in favor of knowledge exchanges in the areas of planning, programming, budgeting and monitoring-evaluation of public policies.
  • For more information, please visit the website of the Pole: www.le-pole.org

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Replies to This Discussion

Permalink Reply by Charles Warria on March 8, 2011 at 12:42am

Dear Hannah,

 

This is a very timely discussion! Recently, there has been the buzz around Activity-based budgeting, which is being seen as the effort at aligning budgets directly to implementation. I guess one would argue that implementation does not necessarily equate results, and thus the need for a results-based budgeting framework. My understanding is that this new framework will enable the different actors to align expenditure on delivery of results, and with the tracking of expenditure, critical results shall automatically be accumulated or otherwise lessons captured. It is exciting, i'm looking forward to the discussions!

 

Charles Warria

 

Permalink Reply by S.T.CHANDRASEKHAR BABU on March 8, 2011 at 10:07am

Dear all,

 

  Normally throughout the globe, we follow certain patterns for budgeting and performance reviews or outcomes.To do any budgetary exercise, we have to consider previous performance,environmental changes both internal and external and also various corrective measures we adopted in the past.Basically the budgeting process is different for different organsations and it depends on the nature and purpose of the organisation ,its objectives.

 Statistical tools/techniques such as averages,trend analysis,moving averages,regression analysis,multiple regression analysis ,ARIMA.are mostly adopted tools.

 

I am happy to associate with this programme

 

STCHANDRASEKHAR BABU

Permalink Reply by Sithole Humbe on March 9, 2011 at 4:35am
Thanks for bringing up this e-discussion topics. I hope the mist can be dusted for a while. Results based budgeting is compromised by activity/ line item budgeting in many African Government budgeting system. This is depicted by votes allocated to general ledger items and specific road or hospital in their Appropriations. Im looking to see how the answers will flow from other EXPERTS
Permalink Reply by Hannah J Cooper on March 18, 2011 at 11:35am

Dear Colleagues,

 

Thank you so much for your positive responses and feedback to date!

 

I'd like to start off with this first group of questions on establishing lessons learned. Please share your experiences with line item budgeting and reasons from transitioning to results-based budgeting! In particular, we'd like to know:

  • In your opinion, what are the chief weaknesses of a line item system for managing public finances? What concrete examples can you give of these weaknesses as they pertain to your country?

 

  • Do line item budgets allow for accurate reporting of poverty reduction expenditure?

 

  • Weaknesses aside, can line item budgetary systems still translate into progress, for example in issues of departmental/ministerial autonomy, targeting of budgetary allocations for key services and monitoring of resource usage?

 

  • Some people believe that in countries with limited administrative capacity, it is preferable to maximize management based on “classical budgets” before embarking on more ambitious reforms leading to the introduction of results-based budgets. Are they right?

 

Let us know what you think!

 

Kind regards,

 

Hannah

Permalink Reply by Tenaw Wallelgn Derseh on March 19, 2011 at 2:23am

      Dear colleagues,

First of all I want to say it is very important discussion and it is in appropriate time.

As we know that most of African country's budgeting system is line item including my country now even if it going to programing budget since 2011/12 budgeting year

line item budget is very outdated and it is exposed to corruption

it is not objective mean it is consider only implementation or usage of budgets but not necessary deal in results

It is very difficult for reporting, monitoring and evaluation.

general to eradicate poverty in Africa budgeting system also must be changed from line item to result based budgeting system.

   kindly regards

           Tenaw

Permalink Reply by Arunaselam Rasappan on March 19, 2011 at 7:55am

Dear Hannah,

Thank you for starting off discussion on this important topic. It touches on real world challenges in our countries and especially reflects the realistic challenges we face in our countries when dealing with MfDR.

My apologies for the long silence from this forum. Some of my colleagues from the CoP have been asking what happened to me. Actually, I've been terribly busy with implementing the Results Based Budgeting (RBB) under the IRBM system here in Malaysia as well as the Integrated Development Planning and M&E system under the IRBM in Vietnam, which has also accepted the IRBM system with close support from the Asian Development Bank.

 

In Malaysia, though it has implemented the RBB since 1990, we found there were still some weaknesses which were posing problems with our development results.The review shows that our success rate with our development plan was only around 60-70 percent which we all agreed was not good enough for us as we are now moving towards a high income economy.

I've been pushing for reform of the RBB system here to plug the various system weaknesses for several years.  We got the breakthrough in 2009 when the government decided to take serious action to improve our development results and decided to apply the IRBM system and to make the current planning, budgeting, M&E systems fully IRBM compliant. I was completely engaged here with guiding the government in revising and restructuring the national development plan to be IRBM compliant.  After that exercise, I have been working closely with the Ministry of Finance to review and revamp the existing RBB to make that too fully IRBM compliant to support the integrated development planning system under the IRBM.  The RBB system revision includes moving to an outcome based program approach as well as upgrading the M&E system to ensure that the current five year national development plan is not only fully IRBM compliant but also to ensure optimal development results.

By end of this year, we would have completed this exercise and I would like to then share the upgraded Malaysian system through our resource center here at CeDRE as well as through the AfCoP and AsCoP.

I hope to be a bit more active with the AfCoP discussion forum after this and to share more details of the IRBM initiative here and more importantly the improved development results.  In the meantime, let me share two things with the AfCoP members:  (i) a special paper I had written for the World Bank in 2002 which discusses the RBB and budgeting for developing countries.  If there is interest in the new generation RBB system here, I would be happy to share this with the AfCoP members.

(ii) Budgeting and budget systems should be looked at from a number of perspectives. These are from the angle of principle, structure, and focus.  Otherwise we tend to talk about budgeting and budgeting systems in one breath without differentiating between them.  Some budget systems are focusing on the structure (Line Item Budgeting (LIB), OEB, Program Budgeting etc) while others are focusing on the resourcing principles (ZBB, Incremental Budgeting) while others are looking at the result of the budgeting system (MBO, RBB, PBS, OBB etc).  Yet others are a hybrid of the above (PPBS).  Often times, when we talk about Traditional Budgeting we are typically referring to the LIB & OEB budgeting systems.

So, when discussing the LIB in this forum, it might be helpful to examine and discuss the LIB in the correct context and then making comparisons between the various types and forms of budgeting systems across the world.

Best regards
Aru Rasappan

Attachments:
Permalink Reply by Hannah J Cooper on March 29, 2011 at 11:48am

Hi Aru,

 

Thank you so much for your feedback and update on your work! Much appreciated.

 

I'd love to hear from other members on their thoughts on your suggestions - in particular on the idea that we should discuss Line Item Budgeting in the correct context and make comparisons between various types and forms of budgeting. This is why we've asked the first group of questions.

 

Members - please share your thoughts!

 

Kind regards,

 

Hannah

Permalink Reply by Tenaw Wallelgn Derseh on April 2, 2011 at 3:09am

Now I am very delighted, why because I am the beginner of this discussion and I want to say thank you a one who rise this issue for discussion. I expect that we will have get so many information which help as for the future decision .

I want to share our experience not only as an organization but as a country level why because I am working Ministry of Finance and Economic Development that is budget administrator organization in the country.

Line budget item system is a very traditional, fruitless not accountable, not target full and it is exhausted for corruption and it has its own problem in our country contexts.

Generally one organization budget increased if the organization used its last year budget fully, but not concerned the budgets outcome/result. on the other hand if the organization has return budget its budget may be declined in the next. Due to this reason some organization may use there budget in different ways other than productively which leads to corruption. But now this budgeting system not in use further more in our country.

 

         Kindly regards

    Tenaw Wallelgn

Permalink Reply by Arunaselam Rasappan on April 3, 2011 at 11:45am

Dear Tenaw,

 

The LIB and incremental budget system approach is a dangerous combination.  When you apply it for a developing country, its counter-productive as this is not what that country needs to move ahead.  Developing countries have limited resources and actually they need to utilize a budgeting system that will help them optimize the limited resources they have. But the LIB and IB does just the opposite with net result of government agencies never dying once created but demanding (and getting) more budget each year to the point that no one actually even questions (after years even) why the agency even exists - and by that time, the agency in question is already consuming large amounts of limited resources that could otherwise gone to more crucial programs.  Now, multiply that agency by say 100 times for about 99 more agencies and what do we get? Am sure we can all do the mathematics on this?

 

But there are good things about LIB as well (though not the IB approach).  For financial accountability reasons, it is often good to have a LIB system in place as it provides line item control or Objects of Expenditure (OoE) control to ensure sound financial planning and expenditure management.  BUT this must be in combination with a results-based system and not by itself as the main budget driver.

 

More on this later, depending on what others say but just to be clear, the LIB system is not all that bad but must be applied prudently to be useful.

 

Regards

 

Aru Rasappan

Permalink Reply by Hannah J Cooper on April 6, 2011 at 3:28pm

Dear Aru,

 

Thank you so much for providing us with your insights on line item budgeting and some of the potential benefits. 

 

I'd like to move our ediscussion into the next set of questions, focusing on key concepts. Members I'd really like your feedback and thoughts on the following questions:

  • The general meaning of the transition from an input-centred logic to an output- and results-based logic is readily understandable. But what exactly does results-based budgeting mean?
  • Of the tools, which ones actually apply to this approach, and which ones are neutral?
  • Can there be agreement on a single definition of medium-term expenditure frameworks (MTEFs) and program budgets? Where reform is concerned, should sector MTEFs be favoured over departmental/ministerial MTEFs?
  • What objectives are we trying to achieve in transitioning to results-based budgeting? How does adopting a results-based budgeting system further the traditional objectives of budgetary policy (macrobudgeting, optimum resource allocation, operational efficiency, etc.)?

I think that in discussing these questions, we can really start to get at the core of some of the issues surrounding RBB.

 

I am really looking forward to your feedback!

 

Kind regards,

 

Hannah 

Permalink Reply by Willem H.M. van Immerzeel on April 9, 2011 at 11:49am

Result based budget-allocation

In our approach, proposed for Malawi, but also for Rwanda by IFAD, families and their villages are encouraged to implement innovations, which they learn from successful farmers, through peer learning. Project funds are allocated through contests. These contests are held between families, and between communities and they last about 6 months, so there are two contests per year and people have time to implement innovations. Participants are requested to implement a range of innovations, and are judged on how well they have done so. Those with the best results receive attractive prizes. This means that people are highly motivated. It also means that an important percentage of the budget goes to those who implemented the innovations the project wants to spread among the population.

If managed properly, this strategy results in people investing in their own future, while the project invests according to results which are already obtained. Typically, the mobilization of people's energy and creativity means that the total investment by the farmers is over five times the total project cost.

 

Permalink Reply by Hannah J Cooper on April 15, 2011 at 1:23pm

Dear Willem,

 

Thank you so much for sharing this example. It sounds very interesting. What kind of prizes are you offereing? This sounds a bit like some of the ideas behind conditional cash transfers - is that correct?

 

It'd like to ask members to elaborate on the general frameworks of their results-based budgeting processes:

  • How did your government or organization engage the transition from means-based budgeting to results-based budgeting? Was this process engaged within the framework of a pre-determined action plan? In this area, did the government take a gradual approach, or was it determined rather to engage a process to make the tools of reform quickly and widely available?
  • Was the methodological framework defined by national groups, or was it introduced by outside experts? Were sufficient safeguards put in place to ensure strong national ownership of the process and tools from the outset?
  • Which institution took the lead in the reform?
  • What role was given to sector departments/ministries in shaping and implementing the reform?
  • What steps were/are being taken to strengthen institutional capabilities? Is there a specific program for this? Is funding being provided by the government, outside partners, or both? Did the government create its own dedicated structure to provide technical assistance to the departments/ministries for developing their program budgets?

Am looking forward to your thoughts!

 

Kind regards,

 

Hannah

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