Public Sector Governance and Accountability Series: Budgeting and ...

124 Alta Fölscher
budgeting are located on a spectrum between incrementalism and pure
comprehensive rationality. These approaches involve attention to the
following key issues:
Developing budgeting institutions that respond to incentives so that
more of the traditional review, assessment, and allocation work of central
budget offices is done at the spending ministry level, where there is
better information, because it is in the spending ministry’s own interest
to have it done well
Improving but demarcating and sequencing the information that is
brought to bear on budgeting decisions
Making budget decision-making processes more transparent, including
the ex ante setting of rational allocation criteria
Introducing a focus on outputs and ultimately on results as the driver of
discussions in the budget process.
To a large degree, modern budgeting techniques do not operate on their
own. Where they are successful, they are linked to an overall approach to
managing the public sector, with the budget and its associated methods as a
central process to make the approach operational.
Modern budgeting practices now include New Public Management
(NPM) approaches. NPM approaches involve the targeting of organizational
incentives to leverage changes in how individual agencies budget and
spend. Most notably, they involve the decentralization of responsibilities to
lower organizational levels, including the discretion to decide how funds
will be spent and to account for what was achieved with funds received. By
bringing the responsibility to budget closer to better information about
spending efficiency and effectiveness and by holding managers accountable
for results, NPM approaches try to use the alignment of incentives to
improve the quality of spending decisions. An NPM approach to budgeting,
therefore, works only if it also includes reorganizing the budget into an
output- or product-based format or narrowly linking a traditional inputbased
format to measurable targets.
Larbi (1999) identifies circumstances in both developing and industrial
countries that lead to the proliferation of NPM-type reforms in budgeting
practices (table 4.1).
NPM is a set of broadly similar structural, organizational, and managerial
changes in public sectors. It shifts the emphasis from traditional public
administration to public management. Table 4.2 sets out typical characteristics
of an NPM approach and notes how the principles have been applied
in the budgeting environment.