OECD - OECD Good Practices for Performance Budgeting

Performance budgeting is defined by the OECD as the systematic use of performance information to inform budget decisions, either as a direct input to budget allocation decisions or as contextual information to inform budget planning, and to instil greater transparency and accountability throughout the budget process, by providing information to legislators and the public on the purposes of spending and the results achieved.

Performance budgeting has been around since the 1960s, but was adopted more widely by OECD countries from the 1990s. Over the past decade there has been a rapid increase in the adoption of performance budgeting by OECD countries so that all but 4 countries reported having some form of performance budgeting in 2018.

Performance budgeting takes a wide variety of forms. The OECD classifies these forms as presentational, performance informed, managerial and direct. In this order, each form represents a progressively stronger link between performance measurement and budgetary decision making. The 2018 survey results showed that countries were more or less equally divided between the first three approaches. None reported using direct performance budgeting, which directly links budget allocations to performance measures. This highlights the inherent limitations of such a technocratic approach, given the political nature of the budget, as well as the many conceptual and practical problems in relating resource allocations and outcomes in the public sector.

Performance budgeting reforms have often proved disappointing compared to initial expectations. Despite this nearly all countries that initially adopted performance budgeting have persisted in their efforts, progressively modifying their approaches based on experience. The purpose of this paper is to distil the lessons learned, identify good practice principles and provide specific examples of good practices from OECD countries. This is based mainly on the work of the OECD Senior Budget Officials Network on Performance and Results, which has been researching and sharing experience on performance budgeting since 2004.