the term of a government. The exception within our sample is Austria, also a codified administrative system, which also has the most recently implemented MTEF. There, as part of the political compact required for budget reforms, the timeframe, expenditure ceilings and reporting elements of the MTEF are set out in legislation (Federal Organic Budget Act 2009). Table 3.1 Comparative MTEF Institutional Arrangements: Summary of Responses Australia Austria Canada The Netherlands Legal and/or policy basis? Policy + Principles-based law (Charter of Budget Honesty Act 1998) Legal Federal Organic Budget Act 2009 Policy Policy Coalition Agreement (CA) Integrated with the annual budget process? Yes High integration Yes High integration Yes High Integration Yes High Integration What is the timeframe covered? Four years (Budget + three outyears) Four years (t+1 to t+4) Three years Annual Reference Level Update (ARLU) is Budget + two years Budget papers report new initiatives separately Four years + 1 (Annual budget within 4 year expenditure limits set out in CA + extrapolation year) Are forward years on a change basis? How defined? Yes Forward years exclude new policy, but include forecasts of economic and non-economic parameters, which are the basis for costing existing policies No Forward years expenditure ceilings have two components: 75% fixed nominal and 25% variable Yes ARLU ‘cost of existing programs’ Forward years exclude new policy, but include forecasts of economic and non-economic parameters, which are the basis for costing existing policies Yes Forward years expenditure ceilings are ‘real’ How are forward years reported? Ministerial portfolios and programs Headings (sectors) and chapters (ministries) Departments and programs Chapters (ministries) and articles (programs) Are estimates determined by the Finance Ministry? Yes Finance approval process for ministry updates Yes BMF (Austrian Ministry of Finance) prepares estimates in consultation with ministries Yes TBS (Treasury Board Secretariat) determines ARLU in consultation with departments Yes CA sets budget totals Finance manages a ‘trade-off’ system within the totals How often are forward year projections updated? Three times a year: - Budget - Midyear outlook - ERC consideration Nominal ‘heading’ expenditure ceilings for four years: revised only as necessary and Annual Also, in-year update of Economic and Fiscal Projections (Oct-Nov) Four times a year: Most important are Spring and Budget Day Independent Central
The Australian Department of Finance manages the ‘Commonwealth Program List’ to ensure the accuracy, materiality and consistency of information disclosed in budget programs, including a central approvals process for modifying the program list. Table 4.1 Comparative MTEF Program Costing Practices: Summary of Responses Australia Austria Canada The Netherlands Does the finance ministry issue program guidelines? Are they mandatory? Yes Programs Policy and Approvals Process Mandatory No Yes Policy on Management, Resources and Results Structures (PMRRS) and Program Alignment Architecture (PAA) Not mandatory Not specified Is a program defined? Does the finance ministry issue program specification guidelines? Yes Guidance for the Preparation of Portfolio Budget Statements (annually) No Budget is organised on ‘chapter’ basis, with each chapter specifying up to 5 outcomes Yes PMRSS and PAA Yes Accountable Budgeting Reform: Budget is organised on ‘chapter’ basis, with each chapter comprising ‘policy’ and ‘non policy’ articles What is the purpose of costing information? To assess financial impact of proposed policy - Assess the reasonableness of estimates - Assess consistency of costs with policy objectives - Assess direct impacts to other areas of expenditure To provide ‘implicit’ support for the outcome oriented impact assessment process Determined by ‘purpose’: - cost recovery - make-or-buy decisions - decisions - cost-benefit decisions - costing of a new initiative (incremental funding) Not specified Does the finance ministry issue guidelines on program costing? Are they mandatory? Yes Not mandatory but ‘conventional costing template’ must be used for staffing and ‘on-costs’ (such as pensions and other benefits) No Yes Guide to Costing (2008) Not mandatory TBS Submission Guide mandatory (for submission of new spending initiatives) Not specified What methodologies do costing guidelines cover? Differentiated for: - Departmental Items (conventional costing template [Cost = Quantity x Price] + wage index) - Administered Items Not specified Range of methods - Causal relationships - Cost pools - Standard costs and fixed percentages Not specified
departments are expected to generate efficiency gains to offset any unexpected cost increases). Projections in the internal ARLU update are presented over a five year period, whilst the fiscal projections presented in the budget are identified over a rolling two year planning horizon. The ARLU process is a technical exercise that updates the reference levels – it is not intended to consider past performance and the results of programs – and nor is it a mechanism for departments to request new funding. Systematic review of the effectiveness of ongoing programs has only been implemented in the last decade or so. Table 5.1 MTEF Budget and Forward Year Cost Estimate Practices: Summary of Responses Australia Austria Canada The Netherlands Is the MTEF ‘rolling’? Yes t + 1 becomes starting point for budget, new t + 3 added Yes 4 year budget ceiling New MTEF has t + 4 added, with t + 3 as starting point Yes t + 1 becomes starting point for budget, new t + 2 added Yes 4 year budget ceiling New MTEF has t + 4 added, with t + 3 as starting point Are there central guidelines for program costings for budget proposals? What is the basis for proposals, i.e. program, sectoral etc. Yes Standardized Costing Model for New Policy Proposals Program and/or ‘measure’ (initiative related to a program) No RIA (Regulatory Impact Assessment) new proposals but not cost specific Proposals are not ‘program’ based but law or project based Yes Costing Guide and Guide to Preparing Treasury Board Submissions ‘New Initiative’ No data Is there a distinction between recurrent and capital? Do the latter estimate recurrent costs of capital expenditure? Yes Separate appropriations NPPs identify recurrent and capital separately Capital proposals estimate costs No distinction between capital and recurrent Yes No data No data Do guidelines treat entitlement programs differently? No Entitlement programs specified by separate legislation – ‘special appropriations’ Yes MTEF distinguishes ‘nominal’ fixed ceiling (75%) and ‘variable’ ceiling (25%) for entitlement activities No ‘Statutory’ programs No data Are there separate guidelines estimating program costs over the budget and forward No Standardised costing methods that apply to budget and forward years No RIA is required for all new laws and projects; however, ‘not directly linked to MTEF or the annual budget’ No Standardised costing methods that apply to budget and forward years No data
Case 2. Austria The Austrian federal government is a relatively late mover in implementing a MTEF, and its current reforms are still in progress. Until the mid-1990s budgeting was ‘very traditional, cash-based, highly legalistic and input-oriented’ and initial forays into strategic budget reform, which included top-down budgeting and the piloting of new forms of budget flexibility, were quite tentative (Steger 2010, 2). It was only in 2004 that the Austrian Federal Ministry of Finance (BMF) commenced the development and negotiation of fundamental reform of budget systems. A comprehensive package, comprising a medium term expenditure framework, global budgets, performance budgeting, accrual reporting, and financial management incentive mechanisms, is currently being implemented in two stages (BMF 2010; BMF 2011a; Steger 2010). Stage 1 of budget reform Stage 1 of budget reform commenced in 2009 and is based on amendments to the constitution. BMF’s strategy was to shepherd reform implementation by entrenching new budget principles and a timetable for their completion (by 2012) in the constitution (Steger 2010, 6-8). Following a protracted multi-party policy development process, in 2007 Parliament unanimously passed two reform bills – one to amend the constitution and a second detailed reform bill. Amendments to the constitution (Article 51 of the Constitution) focused on ‘budgeting principles’, replacing traditional budget principles of economy and regularity with four ‘outcomes-oriented’ principles – outcomes, efficiency, transparency and ‘true and fair view’ – to commence in 2013. The detailed reform bill (the Federal Organic Budget Law 2009) introduced both a MTEF and budget flexibility for spending ministries. The MTEF contains legally binding expenditure ceilings for headings four years in advance on a rolling basis (i.e. t+4 is added annually). The MTEF budget structure comprises ‘headings’ (which are equivalent to policy sectors) and ‘chapters’ (which are equivalent to ministries or smaller units), although budget chapters are used to structure the annual budget law. Budget chapters are binding for the budget year. There are currently five headings, each of which is a group of chapters; and each chapter is assigned to a specific ministry. For example, the ‘law and security’ heading groups six chapters that align with the ministries of justice, interior, defence, foreign affairs, finance and chancellery.
information is necessary for the budget proposal ‘as the budget is based on internal BMF calculations and/or proposals coming from the line ministries, which are validated by the BMF’. All new projects are subject to the ‘outcome oriented impact assessment’ process (BMF 2012) ‘which includes information about medium- and long-term costs’. According to the BMF, ‘[t]hey are anyhow not directly linked to the MTEF or the annual budget as line ministries have the full responsibility for their individual budgets’. The ‘outcome oriented impact assessment’ process uses standardized economic parameters as the basis for MTEF and budget forecasts – these are sourced from an independent body, the Austrian Institute for Economic Research (WIFO). However, the impact assessment process applies only to new spending proposed in the budget. The BMF advised that forecasting methodologies do not differentiate between policy changes and parameter changes except to note that (a) annual budget process considers new spending only and (b) variable ceiling component of the MTEF does acknowledge changes linked to pre-defined program parameters. The BMF advised that whilst there are no explicit allowances for cost contingencies, MTEF ceilings are in part ‘variable’ (i.e. the component relating to entitlement program funding).
References and resources General – Medium term expenditure frameworks and other Allen, R. and Tommasi, D. Eds. 2001. Managing Public Expenditures: A Reference Book for Transition Countries. Paris, OECD. Dorotinsky, B. 2006. Medium Term Expenditure Frameworks: Concepts and Lessons. World Bank Presentation, 2 May 2006. Harris, J., R. Hughes, G. Ljungman and C. Sateriale. 2013. Medium-term budget frameworks in advanced economies: Objectives, design and performance. In M. Cangiano, T. Curristine and M. Lazare, Eds, Public Financial Management and Its Emerging Architecture. Washington DC, International Monetary Fund, 137-173. Lundback, E. J. 2008. Medium-Term Budgetary Frameworks: Lessons for Austria from International Experience. IMF Working Paper 08/163, International Monetary Fund, Washington, DC. OECD. 2012. OECD International Database of Budget Practices and Procedures. Overseas Development Institute. 2003. Implementing a Medium-Term Perspective to Budgeting in the Context of National Poverty Reduction Strategies. Good Practice Guidance Note, November. Oxford Policy Management. 2009. A Suggestion for Making MTBF Reforms Simpler and More Achievable. OPM Briefing Notes 2009-2. Oxford, Oxford Policy Management. Painter, M. and Peters, B. Guy. Eds. 2010. Tradition and Public Administration. New York, Palgrave Macmillan. Robinson, M. 2013a. Aggregate expenditure ceilings and allocative flexibility. OECD Journal on Budgeting, 12 (3), 1-19. Robinson, M. 2013b. Program Classification for Performance-Based Budgeting: How to Structure Budgets to Enable the Use of Evidence. The World Bank Independent Evaluation Group Blue Booklet. Washington DC, The World Bank. Schick, A. 2009. Budgeting for fiscal space. OECD Journal on Budgeting, 9 (2), 1-18.
order to obtain the cost figure for more aggregate cost objects or higher organizational levels. The intermediate organizational levels (Levels 2 and 3) represent clusters of similar units, which also serve as comparators in benchmark exercises. Figure 2 and 3 show the services matrices constructed for SAP/SP and SES/SP. Figure 1 – Conceptual Framework of the SCSP/SP Source: SEFAZ/SP Figure 2: IDENTIFICATION AND ACCUMULATION MODEL - SERVICE MATRIX FROM SAP/SP Service Matrix - State Penitentiary Administration Secretariat Cost Objects Level 0 Level 1 Level 2 Level 3 Level 4 Services State Penitentiary Administration Secretariat Prison Units Provisional Detention Centers Basic Needs Detailing: services, programs, projects, covenants, functions Health Care Education Human and Safe Management Legal Assistance Psychosocial Assistance Penitentiaries Male Penitentiary Basic Needs Health Care Education Human and Safe Management Legal Assistance Psychosocial Assistance Female Penitentiary Basic Needs Health Care Education Human and Safe Management Legal Assistance Psychosocial Assistance Maximum Security Penitentiary Basic Needs Health Care Education Human and Safe Management Legal Assistance Psychosocial Assistance Source: SEFAZ/SP