3 1 MARWANTO Ministry of Finance

SPENDING REVIEW
challenging way for achieving value for
money
Hotel Grand Hya-, Nusa Dua - Bali
10-11 December 2015

Presented by:

Marwanto Harjowiryono
Director General of Treasury, Ministry of Finance
Republic of Indonesia

Outline
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Technical concepts of Spending Review
Best Practices

Key elements of a successful review
Indonesian Context
Getting practical

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Outline
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Technical concepts of Spending Review
Best Practices
Key elements of a successful review
Indonesian Context
Getting practical

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The Nature of Spending Reviews
§  Spending Reviews are centrally driven exercises focusing on ways to
improve the efficiency of spending across government (i.e. between
sectors/programs) and in consideration of differing funding levels.
§  Spending reviews also serve to help identify and prioritize high
priority programs and thus go beyond the typical program
evaluation.
§  A spending review analysis covers the evaluation of programs,
policy, and organization from a functional or strategic perspective.
§  Spending reviews can be used as a tool to improve the efficiency,
effectiveness and value for money of government spending

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Spending Reviews –
Some Key Questions
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What are we doing?

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Should we continue
in the same way?

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Who should act?

What are the collective
needs and expectations?

Who should pay?


How can we
do better at a lower
cost?

Which transformation
scenario should be
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adopted?

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Types of Spending Review
Government instrument to evaluate the government financial performance. The
report will be used in planning and budget policy increase value value for money.

PROGRAMS
SPENDING
REVIEW


FUNCTIONAL REVIEW

POLICY

STRATEGIC REVIEW
ORGANIZATION FORM

Functional Review : focus on efficiency in implementing program

Strategic Review

: focus on scaling priority program
give recommendation to government in term of what to do or/
and not to do
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Implementation stages and types of
evaluation

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Outline
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Technical concepts of Spending Review
Best Practices
Key elements of a successful review
Indonesian Context
Getting practical

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Selected EU reviews

■  kk


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Selected EU reviews

■  kk

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Outline
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Technical concepts of Spending Review
Best Practices
Key elements of a successful review
Indonesian Context
Getting practical


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Spending Review Key Success Factors
There is no one-size-fits-all methodology for spending
reviews. However, key success factors can be identified. They
include:
•  political commitment
•  ownership by the administration
•  clear objectives and governance
•  integration in the budgetary process
•  anticipation of implementation
•  building of transformation capability and
•  performance culture at all levels of public service.

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The Institutional Framework and Process
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It is important to set up an institutional process whereby the
Spending Review recommendations are integrated into the budget
process by linking the evaluation of past performance with future
spending plans.

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The process of a Spending Review requires setting out the
responsibilities for its various stages (OECD 2011):
•  Methodology and steering guidance
•  Selection of scope of review
•  Preparation of the reports and proposals
•  Supervision and review of the reports
•  Final decision-making (including integration of
recommendations into the Budget cycle)
•  Monitoring and follow-up

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Outline

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Technical concepts of Spending Review
Best Practices
Key elements of a successful review
Indonesian Context
Getting practical

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Indonesian Spending Review - Context
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1,08


Revenue and Spending
% to GDP

2,22
2,32

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0,68

1,78

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2010

2011

2012

2013

Revenue

3.5

2014

The increasing trend of
deficit and bigger gap
between revenue and
spending requires
government to be
more concern about
efficiency

Spending

Deficit actuals and potential trend
% to GDP

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2.5
2
1.5
1
0.5
0
2010

2011

2012

Defict

2013

2014

Legal deficit limit

2015
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Indonesian Spending Review - Concept
•  A way to improve expenditure performance by seeking a 'smarter'
expenditure allocation across national policy priorities through indepth and coordinated examination of baseline expenditure in
light of the policy outcomes pursued.
•  Spending review can have two dimensions:
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Firstly, a strategic dimension questioning the relevance of public
funding for a specific policy objective, the depth of the involvement
of public authorities and consequently the relevant public level/
body in charge.
Secondly, a tactical dimension aiming at increasing - for policies
passing the strategic test - the efficiency of each public Rupiah
spent by optimizing the relationship between expenditure level and
impact, for example in terms of quality of service.

•  Once the results materialize into specific, implemented reforms
ideally reflected in the budgetary process, spending reviews can
contribute tangibly to the achievement of fiscal consolidation
targets and may even free up fiscal space for new policy priorities
•  Spending review helps realign actual spending with policy priorities
and may even detect alternative ways of reaching policy objectives.
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Indonesian Spending Review - Methods
•  The regular Spending Review which is done annually, is a
systematic scrutiny of baseline expenditures with the
objective to detect efficiency savings and opportunities for
cutting low-priority or ineffective expenditures in a
coordinated effort
•  The non regular Spending Review which can be conducted in
response to specific needs or by mandate, is an in-depth
examination of specific public expenditure or area of public
management to support evidence-based policy making with
different acceptable research methods

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Indonesian Spending Review - Purposes
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Substantive baseline review in MTEF context
Check and balance process of budget allocation
To identify fiscal space for next year budget
To identify saving options
To determine expenditure priority in the case of budget cut

§  To measure government expenditure performance in economic
perspective, i.e. efficiency, effectiveness and value for money of
government expenditure
§  To policy making in public financial management, e.g. expenditure
prioritization, budget reallocation, development planning and public
sector reform

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Outline
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• 
• 

Technical concepts of Spending Review
Best Practices
Key elements of a successful review
Indonesian Context
Getting practical

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Indonesian Spending Review - Process

Preparation

Execution

Confirmation

Revision

Report

Utilization

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Preparation: setting goal, focus, criteria/norms and methods.
Execution: conduct of review, compilation of results, analyze findings

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Confirmation: discuss initial findings with stakeholders, in the case of annual
spending review with spending units or representative of line ministries

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Revision: revise the findings as per result of confirmation

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Report: wrap up findings and report to Minister of Finance and/or Cabinet
Meeting

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Utilization: as per Minister’s direction, follow up the findings and/or suggest
recommendation to external stakeholders for baseline cut, revise current
budget, next year allocation etc.

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Indonesian Spending Review – Results of
Annual Spending Review (2013-2015)
(trillion rupiah)
Year

2013
2014
2015

Allocation

Inefficient expenditure

Non recurrent expenditure

594.6

50.6

18.6

638.0

18.7

8.3

647.3

8.9

4.7

Potential Fiscal Space*
69.2
27.0
13.6

* Suggestion for baseline cut/reallocation

The decreasing findings, especially in terms of inefficient expenditure, is likely due
to:
1.  The use of previous spending review in budgeting process
2.  Increasing quality of budget document/allocation
3.  More effective confirmation process

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Indonesian Spending Review – Way Forward
•  Strengthen mandate from top level officials
•  Institutionalize the process by integrating the spending
review into the budget cycle
•  Shift focus from budget document-based review to
performance review
•  Explore thematic (expenditure-specific types of) review
•  Move to strategic dimension/conduct strategic review
•  Leverage know-how and learning curve by establishing
career path for reviewer

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