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The Ekurhuleni Story of Financial Competence

The Ekurhuleni Story of Financial Competence. Presented by Khaya Ngema City Manager. Our story goes like this…. “Begin with the end in mind” We started by asking: What results are we seeking? What are we hoping to accomplish? How will we accomplish it?

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The Ekurhuleni Story of Financial Competence

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  1. The Ekurhuleni Story of Financial Competence Presented by Khaya Ngema City Manager

  2. Our story goes like this… “Begin with the end in mind” We started by asking: • What results are we seeking? • What are we hoping to accomplish? • How will we accomplish it? • What are the underling principles that informs our work?

  3. Our starting point…..

  4. GDS IDP/SDBIP Getting feedback from Key Stakeholders Accountability Matrix Using performance information and results Budgeting Reporting on performance information and results Monitoring and Measuring Results Stages for Managing for Results Strategic Leadership and Governance

  5. City Strategy

  6. Grow and Development Strategy Organisational Results Measurement Select Principal Interventions Implementation & process monitoring (inputs, outputs) Develop Business Plans Development of IDP/SDBIP Resource Needs, Funding STRATEGY RESULTS CYCLE Determine the Key Strategic Priorities

  7. The Various Levels of Planning within the City Each level of planning is distinguished by the nature of the process and output but is integrated through a clear system of alignment. Outputs Responsible Process ORGANISATIONAL Alignment of the City’s Annual Plan to Political Priorities and Growth and Development Strategy EMM IDP City Manager Strategic Planning Departmental SDBIP HODs Performance Agreements Service Delivery Budget Improvement Plan Departmental Alignment to Overall IDP (HODs Performance Contract Departments and Entities DEPARTMENTAL Development of Business Plans to deliver against The SDBIP Business Plan (Departments) Business Plans Performance Agreements For Managers Departments

  8. Grow and Development Strategy Determine the Key Strategic Priorities Organisational Results Measurement Implementation & process monitoring (indicators, resource tracking) Develop Business Plans Resource Needs, Funding STRATEGY RESULTS CYCLE GDS PLAN PRIORITIZATION Select Principal Interventions Development of IDP/SDBIP

  9. Grow and Development Strategy Determine the Key Strategic Priorities Select Principal Interventions Develop Business Plans Development of IDP/SDBIP Resource Needs, Funding STRATEGY RESULTS CYCLE IDP/SDBIPBusiness Plan (budgeting, funding) Organisational Results Measurement Implementation & process monitoring (indicators, resource tracking)

  10. Business Planning Business Plan How does this Business Plan relate to the IDP/SDBIP? IDP/SDBIP Where we expect to be at the end of year 1 Year 2 Year 3 Year 4 Year 5 Year 5 Year 1 What will we do this year towards achieving the overall the intermediate and ultimate outcomes of the IDP/SDBIP

  11. How did we link planning to the budgeting process

  12. The link…

  13. Why Results-Based Budgeting? • Why RBB? Results-Based Budgeting (RBB) is a strategic management tool that focuses in improving resource management and public sector accountability. • RBB establishes a budget process that: • increases transparency; • ensures accountability’ • promotes proactive management; and • focuses on performance. • RBB focuses attention to the results achieved at each stage -from input application, activity completion, outputs delivery, and outcome/impact achievements.

  14. Why is this Important? • Bond sales require indicators of financial condition which are well presented by Results data; • Local government revenues are becoming insufficient making effective use of resources imperative; • Promotes the logical tie between planning and budgeting; • Provides a way to quantify to the citizens how well their local government is doing compared to previous years and other similar communities; i.e. “how much bang they’re getting for their buck”; • Both the Accounting Standards Board (GASB) and the Office of the Auditor General are promoting Results measurement indicating it may soon become a requirement.

  15. Results-based Budgeting (RBB) “RBB is budgeting for results - with an eye on the price tag” • RBB emphasizes program effectiveness and bases decision making (whether for continuation or enhancement of a program) on outcomes. • However, the costs of achieving those outcomes must be scrutinized to ensure efficient service delivery and maximize allocation of scarce resources.

  16. Results-based Budgeting (RBB) Results-based budgets focus on “return on investment”—that is, what do we get for our investment of resources? • Basic service level (or continuation of basic services)? • Increased services (more services to same recipients or expansion of same services to more recipients)? • Better (higher quality) services? • More efficient services (cost savings in service delivery)? • Mitigation or resolution of a problem?

  17. How do we see RBB assisting EMM • Results-based budgeting aims to improve the efficiency and effectiveness of EMM expenditure by linking the funding of EMM to the results we deliver, making systematic use of Results information. • Based on the assumption that presenting Results information alongside budget amounts will improve budget decision-making by focusing funding choices on program results. • Managing the efficiency and effectiveness of departments and/or the internal control and accountability within individual departments. • Improving decision making in the budget process, and/or in the allocation • of resources and accountability of departments. • Improving external transparency and accountability to the Legislature and Council and the public and clarifying the roles and responsibilities of politicians and EMM officials. • Achieving savings.

  18. Results-based Budgeting • Results-based budgeting cannot begin until we developed a system of Results measurement. • A functional Results-based budgeting system cannot be expected to produce the long-term desired results in the first year of its inception. • Must build a Results-based Management System.

  19. So this is how it happens ...

  20. Results-based Budgeting (RBB) Program Structure • Strategic plans, operational plans, and Results based budgets are geared to program structures. • Funds are appropriated to departments/programs • A program is a grouping of activities directed toward the accomplishment of a clearly defined objective or set of objectives. • Program structure is an orderly, logical array of programs and activities that indicates the relationship between each.

  21. Integrating Results into Budget Decision Making: • Establish the link between resources and results early and maintain that link through budget development, appropriation, and budget control processes. Set Results standards linked to appropriation levels: • Results standards are the expected levels of Results associated with a Results indicator for a particular period and funding level. They link randsand results. • Results standards are one way to demonstrate RETURN ON INVESTMENT--what we can expect to receive for our money (easier to explain to stakeholders).

  22. Integrating Results into budget decision-making Establish the link between resources and results early and maintain that link through budget development, appropriation, and budget control processes. • During budget development, Results indicator values associated with the funding level recommended in budget discussions are proposed Results standards. • During the budget process, Results indicator values become Results standards linked to the funding amounts actually appropriated in the budget. • Results standards may be modified only through approved processes. • Results standards are monitored and tracked.

  23. Where are we in RBB • We are at a rudimentary stage of RBB - i.e. we will be at this stage until a formal system can be produced; • This could include the following in each department’s budget request: • An explanation of the department’s Ultimate Outcome. • An explanation of what the department has accomplished in the past year. • An explanation of what the department intends to accomplish in the coming year. • An explanation as to what is different from last year in the proposed budget and why. • A NT compliant budget showing past year budget expenditures .

  24. Measuring Organisational Results STRATEGY RESULTS CYCLE Grow and Development Strategy Determine the Key Strategic Priorities Organisational Results Measurement Select Principal Interventions Implementation & process monitoring (inputs, outputs) Develop Business Plans Development of IDP/SDBIP Resource Needs, Funding 24

  25. Organisational Performance Monitoring It is also necessary to establish processes to ensure all major organisational components of the city are integrated into an overall organisational monitoring and reporting framework. Report against SDBIP Quarterly Departments Consolidated Report that Measures Organisational Performance against IDP /SDBIP Targets Report Against HOD Performance Agreement Report against Departmental SDBIP Report against Business Plan Report against Business Plan Monthly Departments Report Against Managers Performance Agreements

  26. ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY Hierarchy for Monitoring Strategic GDS Mayoral Priorities Political Monitoring - Indices IDP/SDBIP Organisational Monitoring to targets Bus Plans Bus Plans Departments Direct Outcome Direct Outcome Direct Outcome Direct Outcome Direct Outcome Direct Outcome Operational Monitoring ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY ACTIVITY

  27. “All performance measures that have ever existed for any program in the history of the universe involve answering two sets of interlocking questions.”

  28. Performance Measures Quality Quantity HowWell did we do it? ( % ) HowMuch did we do? ( # )

  29. Performance Measures Effort How hard did we try? Effect Is anyone better off?

  30. Performance Measures Quality Quantity How welldid we deliver it? How much service did we deliver? Effect Effort Output Input How much change / effect did we produce? What quality of change / effect did we produce?

  31. So how does it look…. TQM Efficiency, Admin overhead, Unit costStaffing ratios, Staff turnoverStaff morale, Access, Waiting time, Waiting lists, Worker safety. Efficiency Cost Quantity Quality Process Input Effort Customer Satisfaction(quality service delivery& customer benefit). Effect Product Output Impact Cost / Benefit ratioReturn on investment. Client results or client outcomes. Benefit value EffectivenessValue addedProductivity Effectiveness

  32. Using a BaselineCHART ON THE WALL Comparing Performance 1. To Ourselves FirstCan we do better than our own history? 2. To OthersWhen it is a fair apples/apples comparison. 3. To StandardsWhen we know what good performance is.

  33. Reward? Punish? Comparing Performance 1. To Ourselves FirstCan we do better than our own history? 2. To OthersWhen it is a fair apples/apples comparison. 3. To StandardsWhen we know what good performance is.

  34. Comparing Performance 1. To Ourselves FirstCan we do better than our own history? 2. To OthersWhen it is a fair apples/apples comparison. 3. To StandardsWhen we know what good performance is.

  35. We established standards 1. Quality of Effort Standards aresometimes WELL ESTABLISHED. Quantity Effort BUT Effect 2. Quality of Effect Standards arealmost always EXPERIMENTAL. AND 3. Both require aLEVEL PLAYING FIELD and an ESTABLISHED RECORDof what good performance is.

  36. Organisational Performance Monitoring The volume of performance information that must be managed can be staggering. Watch out for the “shotgun” or “kitchen sink” approach--reporting just about every type of measurement or statistic that is already gathered or can be counted easily. This leads to a heavy emphasis on transactional data--inputs and outputs--rather than results.

  37. Beware of: High balls and low balls (unrealistically high or low Results targets). Instant replays (reporting the same Results level over and over, regardless of circumstances). Greased pigs (indicators for which name, definition, or method of calculation change so often that you can’t get a handle on them). Managing Accuracy

  38. Beware of: (cont.) Orphans(indicators for which no one claims responsibility) Statistical illiteracy (calculations that don‘t add up) Limp excuses (meaningless explanations of Results variances)

  39. Managing Accuracy • Get the right start by developing meaningful, valid, accurate, and reliable Results indicators • Provide documentation for each Results indicator identified in the strategic plan. • Strategic planning guidelines include Results indicators

  40. “If you do what you always did,you will get what you always got.” Kenneth W. JenkinsPresident, Yonkers NY NAACP HENCE WE ARE CHANGING AND IF WE DON’T WANT TO

  41. OR ELSE

  42. References • “Results Based Budgeting – Putting The Pieces Together,” Carolyn S. Lane, Deputy Director, Office of Planning and Budget, Division of Administration, State of Louisiana, September 2006. • “Results Management: Using Results Measurement for Decision Making” Recommended Practice (2002 & 2007) Government Finance Officers Association (GFOA). • “Fairfax County’s Results Measurement System” Results Measurement Team, Dept. of Management & Budget, Fairfax County, Virginia, June 2006. • “Results Management Handbook” Eau Claire County, WI, January 2007. • “Moving From Line Item to Results Based Budgeting: Craig Maher, UW Oshkosh.

  43. THANK YOU

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