As 2004 started, there was concern that the current efforts might not be able to integrate performance information into the budget process. In particular, the current performance information included in the annual performance plan and report was a collection of performance goals, indicators, and targets. It was not clear how to use this information for budget allocation purposes. Since the PB was run by the central budget office and its role was limited to the budgeting issues, it was crucial to find ways of linking performance information and budget allocation. Although program improvement is one of the important purposes of PB, it could not provide enough rationale for the Ministry of Planning and Budget to implement PB.

In October, an internal meeting chaired by the Planning and Budget minister was convened under the title “Future Directions for the Performance Management of the Budgetary Programs.” The meeting reached a consensus that more comprehensive performance information on each program was needed to integrate PB into the budget process. To assist in guiding this effort the Korea Development Institute, in cooperation with the World Bank, gathered information on the recent trend of PB. The Korea Institute of Public Finance conducted a case study on the PB system in the U.S., with a focus on the Program Assessment Rating Tool. The experience of the U.S. provided a very useful lesson: performance information without prioritization might not be useful for decision making purposes. In the U.S., the Program Assessment Rating Tool produced more comprehensive information on each program and provided a way of explicitly setting priorities for spending. After reviewing the case study, the Ministry of Planning and Budget bought into this recommendation.

To improve the existing PB system, the ministry established the Planning Unit for Performance Management System Improvement in January 2005. As mentioned in the previous section, this task force included officials responsible for PB, officials experienced in budgeting or evaluation, and researchers from the Korea Institute of Public Finance. The team conducted an intensive study for four months to develop a Korean version of the Program Assessment Rating Tool, named the Self-Assessment of Budgetary Programs. Rather than directly copying the U.S. tool, the team customized the criteria and questions to reflect the characteristics of the Korean system. In addition, the team developed a program checklist, which the ministry viewed not only as an evaluation tool for the central budget office but also as a self-examination tool for line ministries.

To introduce the new self-assessment process, the Planning Unit for Performance Management System Improvement solicited feedback from the budget office within the Ministry of Planning and Budget, and also from the line ministries. The line ministries were not entirely approving of the new review process, because they viewed it as an additional and duplicative performance evaluation process. In response to this lukewarm response, the planning unit explained why the process was not redundant, and why performance information would be useful for decision-making purposes. Eventually, line ministries agreed that the self-assessment would be implemented in 2005. In April 2005, at a cabinet meeting chaired by the president, the Ministry of Planning and Budget reported that the SelfAssessment of Budgetary Programs would be introduced that year. One-third of budgetary programs is evaluated every year; in other words, each program should prepare for evaluation every third year.

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