NSW Treasury begins outcome budgeting


This year, curious residents of New South Wales can not only see how much their government plans to spend in particular areas of the budget, they can see the outcomes its agencies are working towards.

Going to the outcome budgeting website, one can choose education, health or any other area to see this represented in graphical form.

Inside this year’s budget papers you find outcome indicators, like one related to the skills of teachers. Each has a 2018-19 baseline figure and a forecast for 2019-20. A count of 174 accredited Highly Accomplished and Lead Teachers is expected to grow to 234 over the coming year in this case.

A NSW Treasury spokesperson was keen to point out it’s only the first year of outcome budgeting and the department is taking a slow and steady approach to leading the change across Australia’s largest public service.

“Last year we said we wanted to start this journey of moving away from just looking at our agencies and service lines,” the spokesperson told The Mandarin.

The plan, according to a statement included in the 2017-18 budget, is to develop “the ability to measure and monitor the outcomes achieved” against the spending.

“This journey begins with the delivery of a new whole-of-government financial management system, Prime, and will be followed by new legislation to replace and modernise a thirty-year-old legislative framework,” the statement explained, promising these two elements would underpin the new approach that was unveiled this week.

Outcomes over outputs

It’s a common observation that public sector organisations often focus on outputs, rather than the outcomes that really matter. Using Treasury’s examples, paying for more buses and trains isn’t good value unless it provides shorter trips for commuters; more doctors and nurses should lead to outcomes like shorter waiting times at the emergency room.

Part of setting the stage last year was a shift from “service groups” focused more on outputs to “program groups” based around shared outcomes, a process explained in last year’s budget paper three. Over the following 12 months, each of these groups worked to define what it does for the public and how to express that in simple terms that can be tracked over time.

Public servants were asked to begin work towards embedding those outcomes into agency business planning and strategic thinking, and how they might measure success. Treasury asked agencies to work together, with staff presenting their ideas to each other. The goal was expressing this information in a way that “someone on the street” could understand.

This produced 46 official “state outcomes” that can be seen in this week’s new budget papers and the interactive online visualisation. This is a good way to show the majority of people, who won’t delve into the budget papers, but most of the real change is happening below the surface, within the bureaucracy

“It’s really the beginning of a much longer journey of cultural change in the sector,” said the Treasury spokesperson. “We’re still really used to thinking about outputs and inputs, because they’re easier.

“Outcomes can be difficult to grasp.”

Motivation to improve measurement methods

Often, outcomes involve factors beyond government control, and in many cases they are quite hard to define, let along measure.

This year was the first time agencies included the outcomes in their budget submissions. The plan is now to embed the outcome-budgeting approach across the government over the next few years and work on monitoring performance.

This year, NSW residents can see the budget linked to simple aims that will have “longevity” over time, encouraging public servants to find better ways of measuring and improving impact for citizens.

In many examples of the NSW government’s first foray into outcome budgeting, there is little or no change from the baseline figure to the forecast. In many cases this indicates areas wherethe government’s aim is to maintain relatively good outcomes, rather than improve disappointing ones.

The proportion of children enrolled in an early childhood education program in the year before school is expected to stay level at 95% over the financial year, for example. Of that enrolled group, 94.1% were enrolled for 600 hours, and this is only forecast to rise slightly by 0.9% over the year.

In areas like health and education it is relatively easy to make sense of this idea, and plenty of performance measurement and reporting has gone on for years. In others, like Premier and Cabinet for example, outcomes such as “accountable and responsible” government aren’t always easy to quantify.

As mentioned, the transition to outcome budgeting leads to a different way of grouping entities together in a more joined-up approach. That doesn’t always line up with performance reporting at the end of financial year, but agencies don’t have to radically change their annual reports.

References to the outcome budgeting system will still have to make sense in individual annual reports, however there is a way to go before agencies will be reporting together as outcome-focused clusters.

“We want to get beyond it being about particular departments and agencies and get them to work together on delivering the outcome,” explained the Treasury spokesperson.

What comes next?

“A lot of internal pieces — like improving our performance monitoring, the way we’ll be regularly getting information back against this, talking to agencies about it throughout the year and the way we use this information in budget decision making,” according to Treasury.

Right now it’s mainly something new reported in the budget but the idea is that over time, it can become part of the DNA of how a treasury department thinks about resource allocations, and the way it interacts with other agencies.

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