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Session 5: Aligning accounting systems and performance information

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Session 5: Aligning accounting systems and performance information 28.10.2008 Juha Majanen, Ministry of Finance, Finland Matti V is nen, Ministry of Education, Finland – PowerPoint PPT presentation

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Title: Session 5: Aligning accounting systems and performance information


1
Session 5 Aligning accounting systems and
performance information
  • 28.10.2008
  • Juha Majanen, Ministry of Finance, Finland
  • Matti Väisänen, Ministry of Education, Finland

2
Aligning accounting systems and performance
information
  • Key elements
  • Accountability
  • Agency --gt Ministry/Government --gt Parliament
  • Performace targets
  • True and fair information
  • Performance management
  • Agency lt--gt Ministry
  • Agreement on resources and performance targets
  • Information for managerial purposes

3
What is performance management ?
  • Performance management is an agreement-based
    interactive control model.
  • Its operational core is in the ability of the
    agreement parties (ministry and agency) to find
    the appropriate balance between the available
    resources and the results to be attained with
    them.
  • The basic idea of performance management is to
    balance resources and targets on the one hand and
    efficiency and quality on the other as well as
    possible and to ensure that the desired effects
    are cost-efficiently achieved.

4
Performance management development
  • Performance management problems and development
    needs have mainly been identified, and they have
    been taken into consideration in the performance
    management and accountability reform and in
    changes to the budget legislation in 2004.
  • The main aim has been to enhance performance
    management by emphasising the contolling task and
    accountability of ministries.
  • The content of control has been diversified, and
    a clear distinction has been made between
    strategic outcome targets and operational
    performance targets.

5
Use of performance information in budgeting
  • Different level of targets are set and reported
  • social policy targets changes in the state of
    society and the conditions of its members and the
    extent to which the set targets have been
    achieved (social effectiveness)
  • costs of achieving the social policy targets
    (cost effectiveness)
  • operating performance
  • outputs, service capacity and the quality
    of outputs and processes (outputs and quality
    management)
  • economy, productivity and the cost effectiveness
    and profitability of charged and jointly financed
    operations (operational efficiency)
  • personnel and job satisfaction, and information,
    expertise and renewal.

Mainly at the level of Government and ministries
Mainly at the level of agencies
6
Outcome targets and social impact targets at the
level of ministries
  • The ministries are responsible for the
    functionality of performance management and for
    control development within their respective
    operational branches.
  • The basic tasks of ministries are emphasized
    preparation for political decision-making,
    strategic control of their operational branches
    and international influence.
  • Proper performance management includes the
    ministries ensuring that proper performance
    targets are set (also regarding their own
    operations) and the agencies presenting true and
    fair information on their operations in their
    annual accounts.
  • Social impacts and outcome targets are amphasized
    in the performanace targets of ministries (policy
    effectiveness).

7
Operational performace targets at level of
Agencies and Institutions
  • Operational performance targets are emphasized in
    the perfromance targets of agencies and
    institutions.
  • The targets should be connected with operations
    and resources as closely as possible, whereby
    their attainment depends direcly on what the
    agency does and how it is managed.
  • Alongside positive performance targets and
    outcome targets, targets conserning unintended
    effects or side effects should also be set.
  • Performance targets are set primarily as
    indicators and only secondarily as verbal targets.

8
Good performance targets
  • Targets are
  • connected with and derived from the basic tasks
    of a government agency
  • strategic, essential from the point of view of
    operations
  • clear, understandable to everybody
  • concrete and operational
  • evaluable, measurable and tíme-dependent
  • preferably comparable
  • such that the government agency itself can
    influence them
  • ambitious and challenging, but attainable and
    realistic
  • acceptable, jointly outlined and agreed
  • such that they cover as large a part of the
    operations as possible while on the other hand
    determining priorities

9
Basic performance criteria (true and
fair information)
Outcome targets
Policy effectiveness outcomes
Policy effectiveness
How operations and finances have affected policy
effectiveness
ACCOUNTABILITY
PERFORMANCE MANAGEMENT
Operational performance targets

Operational results outputs (which can be
influenced through management)
  • Operational efficiency
  • economy
  • productivity
  • profitability
  • cost-equivalence
  • Outputs and quality management
  • -goods and services
  • service capacity and quality

Human resource management
10
Performance information in budgeting
  • Preliminary performance targets are agreed
    (between Agencies and corresponding ministries)
    and set during the preparation of spending limits
    (medium term fiscal framework)
  • Preliminary performance targets (operational
    targets and outcome targets) are represented to
    the Parliament in the budget proposal together
    with the appropriations.
  • At the same time the Financial Statements and the
    achievement (or non-achievement) of the
    Performance targets of previuos year is reported
    to the Parliament
  • An important budget development point is the
    presentation of outcome targets in the
    justifications for classes within the main title
    for each ministry --gt reflects the accountability
    of ministry concerned.
  • Budget classes need to be collated into larger
    entities constituting an administrative sector or
    policy sector for which an outcome target can be
    set.

11
Public statement of the ministry (Central
Government Budget Decree section 66i)
  • 1) an estimate of performance and the trend
    therein and of the outturn of the performance
    targets set
  • 2) a statement as to whether the grounds for
    reporting performance are appropriate with
    respect to steering and accountability and the
    ministrys position on development needs
  • 3) the measures that should be taken by the
    agency due to the final accounts and to improve
    performance
  • 4) the measures to be taken by the ministry
    because of the final accounts and to improve
    performance.
  • The Ministry has to formulate an opinion on
    performance, (achievements and non-achievements)
    and take its position
  • Opinion is published

12
Accounting and Performance information I
  • Netra Reporting System
  • Operational since 2004
  • Internet-based tool which includes
  • Accounting data
  • Performance data
  • Tool for performance management --gt providing
    information for decision making and reporting in
    all levels
  • Ready-defined reports and user-defined reports
  • Public --gt enhances transparency
  • Available at www.netra.fi

13
Accounting and Performance information II
  • On-going reform of budget preparation system and
    some other systems
  • Started 2007, operational at 2010
  • Common tool for preparation process of Budget
    proposals, Spending Limits (medium term fiscal
    framework) and Financial Statemens
  • Will be in use in Agencies, line Ministries and
    MoF
  • Enables more coherent approach
  • Reduces manual work
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