Introducing pragmatic program budgeting to address budgeting missteps

Seventy years after it was introduced, program budgeting remains controversial. The concept, also known as Planning Program Budgeting, or PPB, is based on a simple idea: shift the focus of budgetary processes from control of inputs to producing measurable results. Yet aspirations and outcomes have not matched up.  

For the most part, program budgeting has not achieved either more efficiency or more control. In many places it has made budgeting more complex and more difficult to manage. That’s why we are publishing a proposal for a new kind of PPB called pragmatic program budgeting. The new PPB addresses some of the shortcomings of the original system as it has been implemented. It is designed to ensure that the lofty aspirations can be largely met.  This means effectively linking resources with results to hold managers accountable for the delivery of specific targets and how the resources are deployed and used.

PPB implementation has faltered mainly due to the difficulty of combining the objectives of planning, management, and control in one budget system (Schick 1966). This tension remains unsatisfactorily resolved in many countries today. Program budgeting has too often been associated with the undermining of control, while the pursuit of control has been at the expense of the higher-level goals of program budgeting. In some countries, implementation appears to have gone far off-track. Instead of providing more information to government to manage its resources, program budgeting has sometimes resulted in implementation of more, rather than less, controls and a fragmentation of the budget. That is exactly counter to the aspirations of program budgeting.

Our paper does not provide a full account of program budgeting, nor does it provide guidance about whether countries should pursue program budgeting reforms. Rather, for countries already using program budgeting, it identifies specific stumbling blocks that have caused implementation difficulties, especially in budget execution. These difficulties have also stymied some of the expected gains in budget preparation.

We propose some means to address these obstacles. We aim to help resolve the tensions between planning, management, and control in pursuit of higher performance from governments.  In doing so, the focus is not only to observe and support the efficiency and effectiveness goals of program budgeting. It is necessary also to resolve the tensions arising from execution control and designing measures to support analysis and performance. We set out the issues that have beset PPB, and fashion responses. Here are the main problems:

• Rigidities in budget execution
• A proliferation of controls that directly cut across the objectives of programmatic management
• Inadequate recording and reporting
• Undue complexity in the budget system that compromises control and undermines order and confidence
• The creation of a tussle between resourcing at the programmatic level (organizationally blind) and organization level (programmatically blind)

These problems are real. In some countries, there has been a proliferation of controls driven by the number of line ministry activities that can run into the hundreds. The total number of these activities for all ministries could be 10,000 or more. Such large numbers mean that it can take the budget controller several months into the new financial year to complete the process of allocating at this level (sometimes referred to as “loading the budget”).

Our solutions are pragmatic. We accept that what looks wonderful in planning may require adjustment to accommodate capability and resource constraints. The compromises we propose around the design of the PPB system should yield a version that works.

We focus on three main areas:

• Releasing funds to the program and sub-program level, with associated controls at that level.
• Acknowledging that the recording and reporting of transactions and events need to be driven by the chart of accounts and accounting policies and not by releases.
• Harmonizing program and administrative structures.

With these measures, the five issues identified above can be addressed. Complexity is managed, control is maintained while flexibility is increased, and programs and organizations can come together.

Purists – of program budget design and of control regimes – will need to give a little to make this work. In the pursuit of the common interest, especially given the pressures of COVID, we think that the design compromises will be worth it. Rather than being misled by an incomplete theory of program budgeting or getting stuck on some of the tricky trade-offs in implementation, we think this is a case of applying good overall judgement, borne by many years of hard experience.  That is why we are calling it ‘pragmatic’ program budgeting.

We contend it is the living proof of the old maxim: good judgment is usually the result of experience, and experience is frequently the result of less good judgment.