SPENDING REVIEW
challenging way for achieving value for
money
Outline
•
Technical concepts of Spending Review
•
Best Practices
•
Key elements of a successful review
•
Indonesian Context
Outline
•
Technical concepts of Spending Review
•
Best Practices
•
Key elements of a successful review
•
Indonesian Context
The Nature of Spending Reviews
§ Spending Reviews are centrally driven exercises focusing on ways to improve the efficiency of spending across government (i.e. between sectors/programs) and in consideration of differing funding levels.
§ Spending reviews also serve to help identify and prioritize high priority programs and thus go beyond the typical program
evaluation.
§ A spending review analysis covers the evaluation of programs, policy, and organization from a functional or strategic perspective.
Spending Reviews –
Some Key Questions
What are we doing? What are the collective
needs and expectations?
Who should act?
Which transformation scenario should be
adopted? Who should pay?
Types of Spending Review
SPENDING REVIEW
Government instrument to evaluate the government financial performance. The report will be used in planning and budget policy increase value value for money.
PROGRAMS
ORGANIZATION FORM POLICY
FUNCTIONAL REVIEW
STRATEGIC REVIEW
Functional Review : focus on efficiency in implementing program
Strategic Review : focus on scaling priority program
Outline
•
Technical concepts of Spending Review
•
Best Practices
•
Key elements of a successful review
•
Indonesian Context
Selected EU reviews
Selected EU reviews
Outline
•
Technical concepts of Spending Review
•
Best Practices
•
Key elements of a successful review
•
Indonesian Context
Spending Review Key Success Factors
There is no one-size-fits-all methodology for spending
reviews. However, key success factors can be identified. They
include:
•
political commitment
•
ownership by the administration
•
clear objectives and governance
•
integration in the budgetary process
•
anticipation of implementation
•
building of transformation capability and
The Institutional Framework and Process
• It is important to set up an institutional process whereby the
Spending Review recommendations are integrated into the budget process by linking the evaluation of past performance with future spending plans.
• The process of a Spending Review requires setting out the
responsibilities for its various stages (OECD 2011):
• Methodology and steering guidance
• Selection of scope of review
• Preparation of the reports and proposals • Supervision and review of the reports
• Final decision-making (including integration of recommendations into the Budget cycle)
Outline
•
Technical concepts of Spending Review
•
Best Practices
•
Key elements of a successful review
•
Indonesian Context
Indonesian Spending Review - Context
The increasing trend of deficit and bigger gap between revenue and spending requires government to be more concern about efficiency
Deficit actuals and potential trend
% to GDP
Revenue and Spending % to GDP
Revenue Spending
0,68
1,08
1,78
2,22
Indonesian Spending Review - Concept
•
A way to improve expenditure performance by seeking a 'smarter'
expenditure allocation across national policy priorities through
in-depth and coordinated examination of baseline expenditure in
light of the policy outcomes pursued.
•
Spending review can have two dimensions
:• Firstly, a strategic dimension questioning the relevance of public funding for a specific policy objective, the depth of the involvement of public authorities and consequently the relevant public level/ body in charge.
• Secondly, a tactical dimension aiming at increasing - for policies passing the strategic test - the efficiency of each public Rupiah spent by optimizing the relationship between expenditure level and impact, for example in terms of quality of service.
•
Once the results materialize into specific, implemented reforms
ideally reflected in the budgetary process, spending reviews can
contribute tangibly to the achievement of fiscal consolidation
targets and may even free up fiscal space for new policy priorities
•
Spending review helps realign actual spending with policy priorities
Indonesian Spending Review - Methods
•
The regular Spending Review which is done annually, is a
systematic scrutiny of baseline expenditures with the
objective to detect efficiency savings and opportunities for
cutting low-priority or ineffective expenditures in a
coordinated effort
•
The non regular Spending Review which can be conducted in
§ Substantive baseline review in MTEF context
§ Check and balance process of budget allocation
§ To identify fiscal space for next year budget
§ To identify saving options
§ To determine expenditure priority in the case of budget cut
§ To measure government expenditure performance in economic perspective, i.e. efficiency, effectiveness and value for money of government expenditure
§ To policy making in public financial management, e.g. expenditure prioritization, budget reallocation, development planning and public sector reform
Outline
•
Technical concepts of Spending Review
•
Best Practices
•
Key elements of a successful review
•
Indonesian Context
Preparation Execution Confirmation Revision Report Utilization
Indonesian Spending Review - Process
• Preparation: setting goal, focus, criteria/norms and methods.
• Execution: conduct of review, compilation of results, analyze findings
• Confirmation: discuss initial findings with stakeholders, in the case of annual spending review with spending units or representative of line ministries
• Revision: revise the findings as per result of confirmation
• Report: wrap up findings and report to Minister of Finance and/or Cabinet Meeting
• Utilization: as per Minister’s direction, follow up the findings and/or suggest recommendation to external stakeholders for baseline cut, revise current budget, next year allocation etc.
(trillion rupiah)
Indonesian Spending Review – Results of
Annual Spending Review (2013-2015)
Year Allocation Inefficient expenditure Non recurrent expenditure Potential Fiscal Space*
2013 594.6 50.6 18.6 69.2
2014
638.0 18.7 8.3 27.0
2015
647.3 8.9 4.7 13.6
* Suggestion for baseline cut/reallocation
The decreasing findings, especially in terms of inefficient expenditure, is likely due to:
1. The use of previous spending review in budgeting process 2. Increasing quality of budget document/allocation
