The adoption of a technique called performance-based budgeting (PBB) could help Dubai’s government boost its efficiency, fulfil a government-wide mandate to leverage information and communications technology, and get the most out of its public spending. This process has the potential to save millions of dirhams, essentially by helping to anticipate costs more accurately and provide incentives to public agencies and workers to achieve better outcomes. At the heart of the PBB process is the concept of results-based spending in the hope of ensuring that monies are allocated to initiatives that can provide the most benefit.
PBB is not a new concept in Dubai, having already been tried at lower levels of government. For example, Dubai Customs completed implementation of the approach in 2010, the culmination of a three-year process. For Dubai Customs in particular, the electronic procurement system was an important outcome. For the wider Dubai government, the effort is being led by the Department of Finance, which will use Oracle’s Hyperion Public Sector Planning and Budgeting applications suite to deploy planning models and budgeting processes to more accurately anticipate costs in a variety of areas, such as employee compensation and benefits. Dubai’s leadership will be able to use a set range of options to forecast its costs instead of spending time and money on a customised alternative. The process also seeks to help governments by evaluating specific bodies and programmes for effectiveness before deciding on budget allocations.
Following Example
In a broad sense, PBB fits with a theme common across the non-profit sector. Development aid agencies, for example, have begun in recent years to focus not on the inputs they introduce into countries or communities, but on the outputs they create. This is called output-based aid, or results-based aid. Additionally, public and non-profit groups alike are increasingly teaming up with commercial enterprises in the belief that economic development for the former and shareholder returns for the latter can be better achieved by working together, thereby allowing organisations of different types to play to their respective strengths.
In the PBB system, before deciding how much money to spend for each budgeting cycle, an evaluation of the previous cycle is conducted, including a comparison of what was spent against the results that money delivered. This is called programme budgeting, and is the simplest form of PBB, according to the IMF. It also includes techniques such as adopting an outcome-based payment system for public bodies, called the purchaser-provider model. In doing so the government views its ministries and agencies as service providers, and pays them according to their outputs.
Making such a system work, however, requires a disciplined public sector environment. Before countries decide to introduce it they need to be sure that other budgeting basics are in place. According to the IMF, there is little point in attempting to introduce performance budgeting in countries where the government and ministry of finance exercises weak control over the level of spending of line ministries.
Getting Smart
In Dubai, the move to PBB comes under an initiative called the Smart Fiscal Planning Programme, under which the Dubai government has pledged that it will bring increased transparency and allow for decentralised decision making and administration across government entities. Transition to the new system will begin with the 2016 budget cycle and be complete by 2020. PBB is set be adopted in Abu Dhabi, which has started the process, according to the IMF’s 2014 annual state-of-the-country report for the UAE. Indeed, the potential advantages of PBB are being noticed at the federal level, with the UAE central government making moves to adopt the system. The implementation of PBB has the potential to unlock a number of advantages, including increased transparency and heightened expectations for public bodies, thereby boosting efficiency and encouraging smarter spending across the emirate and the UAE.
Read More from OBG
