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Budgeting with a Results-based Management Approach

Budgeting with a Results-based Management Approach

If anything is desired about the resource strained budgets in Sri Lanka is prudence and direction. It is said that if you do not know where you are going, any road will take you there. This lack of direction is what Results-Based development Management (RBM)is supposed to avoid. It is about choosing a direction and destination first, deciding on the route and intermediary stops required to get there, checking progress against a map and making course adjustments as required in order to achieve the desired results(i.e. output, outcome, impact).

United Nations programme budget shifted from a system of input accounting to results-based accountability way back in 1997, under the leadership of Kofi Annan.Incontrast to such an approach, as Sri Lanka has started another cycle of budgetary allocation for 2021, nothing much is heard from a result- or outcomes-based perspective. In this context, it is revisiting our budget laws to see how enabling are they to transform the budget into a result-based accountability framework, as decisions are made on how thousands of billions of public money and liabilities are to be spent.  

The Social Contract

The idea of accountability is derived from the hypothetical ‘social contract’ that we presume to exist between rulers(people’s representatives) and the citizens. The notion emphasizes the need to govern the state based on rule of law, on one hand. On the other hand, accountability is presumed to be need to ensure the efficiency and productivity of governance. There is an intrinsic connectivity between accountability and the efficiency of the governance.

In such a context, results-oriented development should be the key indicator to gauge the utilization level of resource allocation of a country. In such a direction, five key principles are adopted to ensure results-based development management. They are: outcome & impact oriented, interdisciplinary approach towards achieving collective results, inclusive and participatory approach,transparency, and adaptive management.

Since Independence,Sri Lanka adopts an annual budgetary allocation process to fulfil the development needs of the country. Sri Lankan budgetary process is governed by national laws, namely the Statutory Budget Law and law related to fiscal responsibility. Nevertheless, Sri Lankan legal framework for budgetary and fiscal responsibility do not create an essential responsibility on the officials to adopt results-based development management or results-based accountability related approach.

The Department of national planning, the department of Project Management &Monitoring and the Finance Commission of Sri Lank are the key state institutions that are responsible for the development of national policies, programmes and projects. They are also tasked with the duty to conduct monitoring and evaluation at the national as well as at the provincial level development. At any of these levels, it is questionable whether results orientation is couched into their institutional missions.

In Sri Lanka, development accountability is often understood as financial accountability. But this approach misses out the results; output,outcome and impact of spending. According to financial regulation 1, the financial year of the government starts on 1 January of each year and ends on 31 December of the same year and requires reporting at least once every year over the expenditure made by the state institution according to the budgetary allocation.

According to financial regulation 124, it is the duty of the minister of finance and planning to account for all receipts and payments to Parliament. The Minister, therefore, assigns the secretary of each ministry as chief accounting officer,to supervise departmental financial transactions and ensure the adequacy of financial administration at the Ministry, including all Departments coming within the purview of that Ministry.

The powers of the Auditor-General under the Constitution limits him to check whether an organization’s systems, procedures, books, records, and other documents have been properly and adequately designed from the point of view of the presentation of information by the chief accounting officer and whether there has been economy and efficiency in the commitment of funds and the use of such funds. This kind of an approach prevents one from knowing the effectiveness of the expenditure.

Narrowness of this approach is obvious and pin pointed when one reads Committee on Public Finance Report on the Budget 2019. For an example, the analysis given by the report on education and health amply vouch on our national weaknesses in planning, budgeting and implementation.

In 2019, Central Government direct allocations to the health sector is Rs. 188 billion and accounts for 5.63% of the budget and 1.21% of nominal GDP. Since 2013, the expenditure has grown at an average rate of almost 11.8% a year. At the same time, estimates have been over-optimistic, and the actual health expenditure has fallen short of allocations by about 13% on average during 2013-2017.

In 2019, Central Government direct allocations to the education sector is almost Rs. 198 billion and accounts for 5.92% of the budget and 1.27% of nominal GDP. During 2013-2017, the expenditure has grown at an average rate of 19%.

While the education sector allocation in 2018 and 2019 range between Rs. 188 -198 billion, considering that actual sector spending in 2017 was less than Rs. 137 billion, the COPF is not able to determine if the budget has been adequately expended in 2018 or if it will be in 2019. This concern is supported by past experiences. Actual education spending of the Central Government has fallen short of allocations by over 21% on average during 2013-2017.

It is quite obvious from the two-case study analysis the problem that we faced with in development. We have lost the direction and destination in development. Another example of this lack of direction is coming from Decentralized Capital Budget Programme (DCB) allocated to the MPs. With the objective of enhancement of socio-economic status of the community, a policy decision has been taken to allocate Rs. 10.00 million annually for a Member of Parliament (MP). Accordingly, in the year 2018, Rs. 2,250 million have been allocated for the DCB programme and 17,514 projects worth of Rs. 2,186.78 million were approved to implement under the supervision of District Secretaries. If we count DCB funds that allocated for last two decades alone the amount comes to trillions of rupees. Nevertheless, if we measure the development outcomes and the impact of those investments, it is clear that we have not been collecting data to measure them. Therefore, we are not in a position to measure the outcomes, which would be very minimal anyway.

Under above circumstances, and at a time when Sri Lanka is pressed for money, it should be a priority to establish a policy regime that links the traditional Monitoring and evaluation based on performance with a new paradigm of result-based development. This new paradigm shall enable a new approach to development decision making.