Chapter 6

Public Sector Performance

Evaluation
 Chapter 6
Contents
• IMF Code of Fiscal Transparency
• Accountability and performance evaluation
• Perform Measurement and benchmarking
• Financial Condition Analysis
• Program Evaluation
• Community Participation in performance
Measurement
 6.Public Sector Performance Evaluation
6.1 IMF Code for Fisc. Transparency
1. Fiscal Reporting: Fiscal reports should provide a
comprehensive, relevant, timely, and reliable
overview of the govt’s financial position and
performance
2. Fiscal forecasting and budgeting: Budgets and
their underlying fiscal forecasts should provide a
clear statement of the govt’s budgetary
objectives and policy intentions
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3.Fiscal Risk Analysis and management: Govts should

disclose, analyze, and manage risks to the public
finances and ensure effective co ordination of fiscal
decision making across the public sector
6.2 Accountability and Performance Measurement
Accountability refers to “the principle that individuals,
organizations and the community are responsible for their
actions and may be required to explain them to others”
6.Public Sector Performance Evaluation

The measurement of performance and the demonstration of

accountability are closely related
Assessing and measuring accountability at any level (local,
state, or national) and holding organizations accountable
requires measuring what is accomplished and assessing the
effectiveness and efficiency.
Performance Measurement is an instrument for assessing
progress against stated program goals and objectives.
 6.Public Sector Performance Evaluation

PM consists:
(1) Documenting the processes and activities used to turn
inputs into output,
(2) Assessing the outcome.
PM covers five dimensions of performance:
1. Efficiency: is the relationship between the goods and
services produced by a program and the resources used
2. Effectiveness: is the extent to which programs achieve their
objectives
 6.Public Sector Performance Evaluation

3. Economy: “is the acquisition of the appropriate

quality and quantity of financial human and physical
resources at the lowest cost and the appropriate
time concerned.”
4. Compliance: whether agencies complied with the
budget and appropriation
5. Service quality: refers to timeliness, reliability, and
continuity of services
 6.Public Sector Performance Evaluation

6.3 PM and Benchmarking

Performance is measured by using indicators and
then compared against benchmarks. Normal
indicators include:
1. Inputs: These indicators concern the use of
personnel, equipment, material etc.
When expressed as a ratio of output,
input indicators are used to measure efficiency and
effectiveness
6.Public Sector Performance Evaluation

2. Outputs: anything a system produces. E.g. No. of children

vaccinated. They assess efficiency of the program
3. Outcomes: measure the desired ends of a policy that are
achieved by producing the outputs.
E.g. Reduction in the number of case of a disease.
They are concerned with effectiveness.

4. Intermediate outcomes: are expected to lead to the desired

ends, but are not ends in themselves.
E.g. In an environmental program, reduction of
hazardous wastes
6.Public Sector Performance Evaluation

5. Process: is the manner in which inputs are

procured, outputs are produced, or outcomes
achieved
6. Quality of Public Service Delivery: concerns about
service delivery through customer satisfaction
indicators.
E.g. No. of complaints received, police
response time, hospital waiting time etc.
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7. Social Indicators: may be used to assess the broad

impact of certain govt policies. They consist of
measures at a highly aggregated level such as infant
mortality rates and adult literacy rates
Qualitative indicators may be used. They have to be
converted into quantitative indicators through
surveys or other techniques. E.g. Quality of
education may be measured by the % of parents
who are “fully satisfied.”
 6. Public Sector Performance Evaluation

Benchmarking
It is a technique used for comparing the performance of
one organization against a standard of comparable
organization.
It can be used to (1) assess performance against the
defined standards,(2)expose areas where improvement
is needed,(3) Identify processes of activities,(4)Test the
effectiveness of steps taken to improve the efficiency
 6.Public Sector Performance Evaluation

Types of benchmarking
Two approaches of Benchmarking: are metrics and
process benchmarking.
Metrics benchmarking focuses on the numerical
performance indicators.
Process benchmarking focuses on the comparison of
the processes and activities
Metrics allows you to identify the problem areas, and
process benchmarking helps you to find ways to
deal with the problem
 6.Public Sector Performance Evaluation

6.4 Financial Condition Analysis

Financial Condition: The ability of an organization to meet its

financial obligations (Or ability to finance services on a
continuing basis).
The organization’s ability to pay its obligations determines a
good/bad FC
The ability to pay is commonly called solvency in finance.
The four levels of solvency are: cash solvency, budgetary
solvency, long term solvency, & service solvency
 6.Public Sector Performance Evaluation

The ability to generate sufficient cash to pay for

current liabilities (Cash Solvency)
The ability to collect sufficient revenues to pay for
expenditures/expense (budgetary solvency)
The ability to pay off long term liabilities (long term
solvency)
The ability to financially support a desired level of
services ( service solvency)
 6. Public Sector Performance Evaluation

• Cash flow problems: generally due to one or more

of these conditions
- Billings are not frequent enough or occur at the
wrong time of the year in relation to expenditure
demands.
- Cash collections are not occurring fast enough
- Unpaid (receivable) amounts are increasing
 6. Public Sector Performance Evaluation

• Causes of budgetary problems:

- problems with budget estimates
-Change in conditions affecting actual revenue or
expenditure levels.
- weak control over revenue, expenditure, or information
system
- increase in expenditure at a faster rate than revenue
-use of non recurring exp for that of recurring nature
- decisions taken with lack of cost effectiveness
- external factors (state or federal mandates, natural
calamities, reduction in population/industry, weak
economy…)
 6. Public Sector Performance Evaluation

• Causes of long term solvency problems

the same causes of budgetary problems, Plus,
- deteriorating infrastructure and fixed assets
-inadequate funding provisions for LTL
-failure to properly account for LTL
- lack of proper planning/budgeting for multiyear
obligations
 6. Public Sector Performance Evaluation

• Causes of service level solvency problems:

chronic budgetary problems result in cuts to
essential services. In addition,
- stagnant or shrinking tax base
- lack of revenue growth
- deteriorating infrastructure
-budget inflexibility
- inadequate cost accounting system
 6.Public Sector Performance Evaluation

Improving financial condition:

- the less advanced the fiscal stress, the easier the fix .
Early detection & correction are important.
Periodic financial condition analysis can be an effective tool
for early detection of negative fiscal trends
Traditional fin. statements are insufficient as a basis for
evaluating the fiscal health of communities.
Information relating to data such as reliance on outside
revenue sources, uncontrollable revenues, per capita income
trend etc are not found in financial statements.
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Measuring financial Condition

• A good financial condition measure should satisfy at least
three criteria
- A measure must assess a specified element of financial
condition ( measurement validity)
- the elements used should be consistent & objective(
measurement reliability)
- the measure and supporting data should be affordable to
obtain ( measurement affordability)
Ratios or indicators are used to measure financial condition of
a government unit. Examples of such ratios include:
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• I. Revenue and expenditure per capita

1. Gross Revenues
Population
2. Gross Expenditure
Population
3. Recurring Revenues (Gross Rev.- Onetime rev)
Population

Less revenue per capita coupled with more expenditure per capita
shows the inability of govt to maintain service. A decrease in ratio
(3) shows dependent on irregular revenues
 6.Public Sector Performance Evaluation

2) Fixed Costs : Personal Services and Debt Service ratios

1. Salaries and Fringe Benefits
Gross Expenditures
The higher the ratio, the less flexible the officials are to
respond to economic changes
3. Long-Term Debt
Long Term Debt
Population
Increased levels of debt can mean that the govt officials have
a decreasing level of flexibility in how they allocate resources
6.Public Sector Performance Evaluation

Public Safety Cost

4. Public Safety=
Gross Expenditures
(often one of the most costly service areas in a
country).
4. Liquidity Ratios
a) Current Asset/Current Liabilities
b) Cash& investment / Current Liabilities
c) Current liabilities/ Gross Revenue
Public Sector Performance Evaluation

6.6 Community participation in performance

measurement
Citizens groups and communities to assess the
performance of service providers
Such groups seek to engage members of the public in
providing feedback and actively participating in the
planning and implementation of the assessment.
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Objectives of community participation

1. Make the communities aware of their
entitlements
2. Strengthen the relationship between
governments and citizens
3. Ensure governments are working towards fulfilling
their promises
4. Ensure that the actions of the governments are
making a real difference to the lives of poor
communities.
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• Citizens play a role in setting agendas, developing

budgets, implementing programs, or evaluating
outcomes.

Good public participation practices can help

governments be more accountable and responsive,
and can also improve the publics perception of
governmental performance and the value the public
receives from the government.
Public Sector Performance Evaluation

• Leaders must find ways to engage all citizens by developing

better and more frequent use of tools such as surveys,
advisory committees, performance review committees, and
community forums to make participation more meaningful.
( web sites, chat rooms, electronic bulletin boards,
electronic town halls, email and a myriad of other tools to
communicate with them)
• The development of electronic communication and instant
messaging hold great promise for the future if developed
properly.
End of Chapter 6