Program budgeting is about making budgets more transparent, ensuring that public money is spent on the right priorities, and linking budgets more closely to the purposes of spending. IBP’s work on program budgets, in partnership with the World Health Organization (WHO), examines global practices related to budget program structure in health to shed light on how governments define program objectives as part of their broader quest to shift budgeting towards results that matter to citizens.
One of the great challenges of public finance is how to ensure that the money governments raise and spend delivers the services the public expects, and that these services ultimately improve welfare. For this to be the case, there must be a connection between resources and results, and it must be possible for managers, oversight actors, and the general public to understand how adding or subtracting resources from particular sectors will result in changes in society.
Anyone who has interacted with a government budget knows that establishing a connection between funding and results is rarely straightforward. Budgets are technically complex and opaque, and large allocations are absorbed by items that have no obvious connection to results: wages and pensions, administrative costs, transfers and so on. While these costs may well have a bearing on government services, this is often not apparent to users who are not public finance experts.
Enter program-based budgeting. The goal of program budgeting is to ameliorate this problem. A program budget organizes the presentation of the budget around the objectives of government activity, such as improved health, and then tries to measure progress toward these objectives using a set of indicators and targets. This turns out to be a lot easier said than done, but it should be clear that this is the conversation almost all of us ultimately want to have about the budget.
While program budgeting holds a lot of promise to increase budget transparency, clarify the link between finances and results, and assist in priority setting, these outcomes are not automatic. To understand more about what makes program budgets effective (or not), IBP recently conducted research as part of a larger collaboration with the World Health Organization that focuses on program budgeting in the health sector. Our research includes case studies on health budget program reforms in four focus countries (Brazil, Indonesia, Mexico, and the Philippines), an assessment of budget documents in 26 additional countries, and a review of the existing literature.
The results of our research are captured in a synthesis paper that elaborates further on these key findings:
- Program budgeting is first and foremost a tool of communication, but more effort needs to go toward ensuring that those who produce and those who use budgets understand the language used to describe programs and results. Our findings indicate that in many countries, ministries of finance and ministries of health do not understand one another. Different understandings of terms as basic as “program,” “outputs” and “outcomes” at the executive level also lead to confusion among legislatures and citizens about what exactly the budget contains.
- Program budgets must have a hierarchy, both in terms of programs and in terms of performance results, that explains how basic government activities will lead to higher level outputs and outcomes. This requires the development of a theoretical chain of results with several steps and a thoughtful narrative. Governments must also consider how to divide up the budget in meaningful ways that clarify the trade-offs actually available at any given time to policymakers. Too often, these are obscured by the organization of the budget, confusing the public and legislators about what is at stake. Many countries have large budget programs whose budgets are actually determined by other legislation, or programs that are not oriented toward performance (e.g., organized around financing streams rather than objectives); these kinds of programs make it hard to understand the choices that are being made in the budget.
- If program budgets are to be used to enhance accountability for outputs and outcomes, then there must be widespread ownership of the outputs and outcomes measured in the budget. When performance measures are devised by government officials without consulting legislators or the public, it can lead to measures that are not seen as useful by oversight actors. While there is some evidence that performance measures are used by auditors, there is much less engagement by legislators or civil society in holding governments to account. More must be done by governments and civil society to organize consultation around the performance measures in the budget, and to create widespread awareness and ownership of these goals.
From a civil society perspective, the question is: how can we engage with governments to make program budgeting more effective? One idea is for civil society to work with governments to better define the kinds of objectives and performance indicators that are used in the budget to ensure they respond to the concerns of the public.
What do you think? Is this feasible? What other ideas do you have? Share them below or email us at [email protected]!
Further Reading
IBP’s work on program budgets, in partnership with the World Health Organization (WHO), examines global practices related to budget program structure in health to shed light on how governments define program objectives as part of their broader quest to shift budgeting toward results that matter to citizens. The following publications were produced as part of this project:
- Program Budget Structure in the Health Sector: A Review of Program-Based Budgeting Practices in Low- and Middle-Income Countries (Synthesis Paper)
- Program-Based Budgeting in Health in Low- and Middle-Income Countries: A New Dataset (Dataset of 30 Countries and Technical Note)
- Defining and Managing Budget Programs in the Health Sector: The Brazilian Experience (Case Study)
- Program Budgeting in the Health Sector in Indonesia (Case Study)
- Program Budgeting for Health Within Mexico’s Results-Based Budgeting Framework (Case Study)
- The Philippines: From Performance to Programs in the Health Budget (Case Study)