The most important sequencing of reform actions needed to introduce results-based budget management (RBBM) across government organizations is

RBBM should not be confused with the so-called New Public Management (NPM), which focuses on the New Zealand form of RBBM.⁴ The NPM incorporates aspects of public financial management (PFM) not necessary for all forms of RBBM.

For example, formal contracts or agreements, such as the Purchase Agreement Contract in New Zealand between a minister and the chief executive officer of their agency, is not a necessary part of any RBBM system. Likewise, accrual accounting is not an essential part of an RBBM system.⁵ Further, the extent of devolution of authority, and deregulation of rules and procedures, is a matter of preference in each jurisdiction (and also capacity of both information technology systems and personnel).

Hence, some critics of the NPM overstate their case against the New Zealand model because they focus on only one aspect of a particular approach in claiming that the whole approach is flawed.⁶ Furthermore, many critical analyses of the NPM fail to differentiate between failure of the model itself and poor implementation of the business model. This report’s author contends that failure of RBBM to realize its full potential resulted from poor implementation of the model, and perhaps a lack of capacity within civil service bureaucracies to adapt to the business model, rather than failure of the model itself. One of the major problems with the introduction of RBBM in both developed and developing countries is the conflation of organizational corporate planning concepts with national RBBM. This resulted in unstable outcome and output definitions.

There are many misconceptions about what RBBM and performance-based budgeting (PBB) are capable of delivering, or what they should achieve and how they should be used. In general, RBBM is a statistics-based, logical specification of output deliverables supporting the achievement of outcome indicator targets, which should be developed and defined in a manner that facilitates medium- to long-term correlation analysis to support policy development and resource allocation decisions.

Many authors have extended PBB and RBBM to encompass performance-based remuneration. While data related to output delivery to end-customers is fundamental to payment of performance-based remuneration to organizations, achievement of output delivery service standards does not translate directly into performance-based remuneration for individual staff members.

Performance-based remuneration of staff should be treated quite distinctly, as a separate topic, which would require developing and implementing a logical interface between remuneration of an organization based on output delivery, and the allocation of performance-based remuneration to individual staff members based on responsibilities for performing specific tasks (which might be identified in corporate or business planning documentation and individual duty statements).

Important budget reform is often driven by the vision and personalities of a small number of key people within the bureaucracies of central agencies, and some champions scattered among line agencies, with crucial support from a few key political actors. The particular form that RBBM takes in any jurisdiction will depend on the choices made by the reform managers in each jurisdiction.

An unpublished survey of 13 countries undertaken by the author between November 2014 and February 2015, which aimed to investigate the extent to which PBB was introduced in each country, showed that within each responding country there were widely disparate views of the way their national budgeting systems operated in practice. Of even more concern was that this disparate understanding was not only between organizations but also within them, including the central budgeting and planning agencies of each jurisdiction.⁹ This survey indicated that even if the business model on which the budgeting system is based is well understood and broadly disseminated, many important stakeholders may not fully understand or be aware of how it operates in practice.

The following sections identify some of the significant PFM budget reforms introduced in the last 50−60 years, and suggest some appropriate characteristics of program budgeting and RBBM.

The first goal has two aims—combating corruption, and improving public understanding (and perceptions) and, thereby, widespread acceptance of the purpose of government interventions.

The data descriptions should be presented in relation to each agency of government in annual budget documentation and in annual reports.

The second goal, increased efficiency in the use of public resources, achieves socioeconomic objectives, or targeted outcomes, as efficiently as possible by

Increased transparency in the use of public resources is critical to combatting corruption and ensuring the most efficient and effective application of government resources to achieve government goals.

Historically, government budgeting had been cash-based and relied on incremental “line-item” budgeting, constructed under organizational units. Budgets were identified according to organizational units that had mandates to provide particular services, and the specification of the organizations’ outputs was taken to be inherent in the mandate. Because organizational units were aligned with distinct functions, and therefore outputs, budgets were defined for each organization only by input components (such as “salaries and remuneration,” “transport and communication,” “consultants,” “conference and membership fees,” “periodicals and newspapers,” and “vehicles and equipment”). Budgets were usually increased or decreased for each line item at the margin, according to the inflation rate, an assumed natural growth rate, or particular policy decisions that impacted on the organization’s role and responsibilities.

During the mid-20th century, the use of program budgeting by governments became more widespread, particularly in the United States (US), mainly in response to a need for increased transparency about the purposes for which funds were provided as part of the US war effort (World War II) so that resource allocation decisions could be made with an increased level of information related to the physical resources required to produce particular outputs.¹⁰ The functional classification system was also developing as a useful tool during this period and, consequently, program budgeting structures in many cases developed along the lines of a functional purpose approach.¹¹ Program budgeting was critical within the US Department of Defense during World War II, and was gradually adopted during the next 40 years by an increasing number of agencies and governments in the US and internationally.¹²

Program budgeting requires that an organization identify each distinct “purpose” or function for which it receives a budget and to then construct a list of all the discrete activities and projects that it undertakes to achieve, or realize, the stated purpose(s). The budget is effectively constructed for all the objects of expenditure (line items) under each of the activities and projects and then aggregated as the budget for the purpose, or program. In effect, each purpose identified results in the creation of a “program” budget. (A “purpose budget” does not sound nearly as businesslike as a “program budget,” and so, presumably, the term “program budgeting” has stuck.)

Over the years that followed, program budgeting in the US was supplemented by different concepts, including the planning–programming–budgeting system, which focused on short- and long-range planning and the cost-effectiveness of different alternatives. That system was followed by a “management by objectives” approach, which tracked the achievement of objectives (common with outcome budgeting), but focused on productivity rather than results.¹³ Zero-based budgeting was introduced in a number of jurisdictions in the 1970s as an annual budgeting exercise, focused on management and efficiency. Zero-based budgeting was gradually abandoned, primarily due to the perception that...