With concern over sovereign debt growing across the world, the management of public finances has never been so significant an issue. Public sectors face a number of challenges in developing and implementing sound fiscal policy, such as lack of a predominant profit motive – a key driver for organisations in the private sector. Multiple stakeholders and complex delivery chains can reduce the ‘line of sight’ – the cost of different strategies, and this can make it more difficult to gauge effectiveness. In addition, unclear cause and effect relationships and delayed impacts and attitudes towards accountability and transparency can also hinder sound performance management in the public sector.
Greece provides an example of public sector financial failings that triggered an economic crisis. The public sector is a significant element of the Greek economy, accounting for about 40% of GDP, the global average being about 33%. In 2009 credit agencies downgraded Greece following a fall in tax revenues, increases in public expenditure and a lack of trust in official deficit and debt figures published by the Greek government.
On the flipside there are a number of interesting examples of efficient public services and initiatives that have been introduced to increase transparency in government expenditure.
Singapore spends about 19% of its GDP on public services, far below the world average (it does benefit from its small population and compact territory). But despite this level of expenditure, Singapore performs extremely well on many measures which indicate the quality of its public services. There is a high life expectancy of 81 years and GDP per capita is more than $43,000. Singapore is an attractive investment destination, with excellent infrastructure, a well-educated workforce and the world’s second most open economy according to the Heritage Foundation’s Index of Economic Freedom.
In the US, the federal government has introduced online dashboards, demonstrating the use of a proven private sector management tool. The dashboards are hosted on the web, allowing users to review the expenditure and activities of various federal agencies.
Current dashboards include:
- CMS Early Warning System: tracks the effectiveness of Medicare fraud prevention efforts.
- USAspending.gov – how the government spends tax dollars.
- RegInfo.gov – tracks proposed agency rules through the rulemaking process.
- IT Dashboard – monitors IT investments across the federal government.
- Recovery.gov – tracks the spending of money allocated in the Reinvestment Act of 2009.
- Foreign Assistance –examines US Government foreign assistance spending.
The current global economic climate means that many public bodies must meet increased demand with fewer resources. More than ever, there is a need for good performance management and cost control. Performance management can be more difficult in the public sector but effective performance management can achieve sustainable and stable public finances and to gain public confidence that tax revenues are being used effectively.
The CGMA report, Strategic Performance Management in the Public Sector , examines the benefits of performance management practices in the public sector, analyses examples from around the world and provides a specific example of an organisation measuring and reporting how it is meeting its strategies so that it can make effective decisions and take appropriate action to achieve better outcomes.