CLEAR Week: Zhao Min and Ningquin Wu on Experience of Establishing a Performance-based Budgeting System: The Case of Shanghai

We are Zhao Min, Deputy Director of the Asia-Pacific Finance and Development Institute (AFDI) in Shanghai, China, and Ningquin Wu, Coordinator at AFDI. AFDI is a member of the CLEAR Initiative (Centers for Learning on Evaluation and Results) and hosts the East Asia CLEAR Center. CLEAR promotes evaluation capacity building in regional centers across the globe. This week’s blogs are by CLEAR members.

Effective governance and spending is important in a city like Shanghai, with a population of 24 million residents. To that end, in 2011, the Shanghai government established a performance-based budgeting (PBB) system. Performance budgeting aims to improve the effectiveness and efficiency of public expenditure by linking the funding of public sector organizations to the results they deliver. It uses systematic performance information (indicators, evaluations, program costings, etc.) to make this link. The effect of performance budgeting may be felt in improved prioritization of expenditure, and in improved service effectiveness and/or efficiency. Our partners at the Shanghai Municipal Finance Bureau (the Bureau) are working to establish a sound management approach in applying performance-based management concepts to their public budgeting framework. We’ve been researching their PBB efforts. Here are some lessons from their PBB experiences, useful to others who are working on using performance to better manage budgets and spending.

The key ingredients in setting up Shanghai’s PBB system are below, which drew on advanced theory and international practices of PBB management.

  • A strong framework for running the performance-based budgeting system
  • Sound legal systems in place
  • Signing of performance contracts by public managers to improve accountability
  • Public managers having sufficient discretion to achieve results
  • Use of accrual accounting to do comprehensive accounting of government costs
  • Institutional arrangements and manpower

There were many monitoring and evaluation elements that were also part of the PBB arrangements, described below.

  • An ex-ante budget review system was established, with an institutional framework for the evaluation of earmarked fiscal funds.
  • A mid-term monitoring system of fiscal budget funded projects was established.
  • Ex-post evaluations are planned for all public departments.
  • Self-evaluations are being phased in among budget departments
  • The application of evaluation findings to budget management has been enhanced.

Additionally, the Bureau is implementing these processes:

  • Releasing of evaluation findings to all public departments
  • Providing recommendations for improvement on performance related problems
  • Monitoring the implementation of action plans by public departments 

Rad Resources:

Learn more about performance-based budgeting and how to do it with these resources. CLEAR blog 1

The American Evaluation Association is celebrating Centers for Learning on Evaluation and Results (CLEAR) week. The contributions all this week to aea365 come from members of CLEAR. Do you have questions, concerns, kudos, or content to extend this aea365 contribution? Please add them in the comments section for this post on the aea365 webpage so that we may enrich our community of practice. Would you like to submit an aea365 Tip? Please send a note of interest to aea365 is sponsored by the American Evaluation Association and provides a Tip-a-Day by and for evaluators.

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