Top elected officials should ensure 'quality expenditure'

BILAL HUSSAIN

The fact that public expenditure —government spending— has tendency to increase overtime making it imperative to have better spending by ensuring quality expenditure. In a state like: Jammu and Kashmir (J&K) where the public expenditure far exceeds the state revenue, to have quality spending is a must.

The availability of better social and physical infrastructure in the state generally reflects the quality of its expenditure. The improvement in the quality of expenditure basically involves three aspects: adequacy of the expenditure (adequate provisions for providing public services), efficiency of expenditure (use), and the effectiveness (assessment of outlay-outcome relationships for select services).

Efficiency

In view of the importance of public expenditure on development heads from the point of view of social and economic development, it is important for the state governments to take appropriate expenditure rationalization measures and lay emphasis on provision of core public and merit goods.

Apart from improving the allocation towards development expenditure, particularly in view of the fiscal space being created on account of decline in debt servicing in recent years, the efficiency of expenditure use is also reflected by the ratio of capital expenditure to total expenditure (and/or Gross State Domestic Product) and proportion of revenue expenditure being spent on operation and maintenance of the existing social and economic services. The higher the ratio of these components to total expenditure (and/or Gross State Domestic Product), the better would be the quality of expenditure.

In J&K the aggregate of development expenditure under both Revenue and Capital heads varied between 63 and 69 per cent. In absolute terms, it increased from Rs 14874 crore in 2009-10 to Rs 16296 crore in 2010-11 registering an increase of Rs 1422 crore (10 per cent).

The Comptroller and Auditor General (CAG) of India in its latest report mentions that “the reasons for huge variations of Development Capital Expenditure (DCE) with budget estimates was not intimated by the state government.”

The ratio of capital expenditure to total expenditure in Social and Economic Service Sectors during 2010-11 showed a decrease over the previous year. In the revenue expenditure the salary and wages formed the major component within the Social and Economic Services. The share of salary and wage in these sectors instead of coming down had increased during 2010-11 as compared to the previous year. However, the share of operation and maintenance expenditure within the sectors had increased over the previous year which was encouraging, the CAG report reveals.

Effectiveness

The outlay-outcome relationship besides stepping up the expenditure on key social and economic services, enhancing human development requires the state to improve the delivery mechanism to obtain the desired outcomes.

The state government is expected to relate expenditure to outcomes in terms of quality, reach and the impact of government expenditure.

Control

To ensure control of and insight into the performance of agencies, controller units need to be established in most departments. Controlling includes activities such as analysing efficiency, assessing quality, internal and external benchmarking, evaluating user satisfaction and implementing management information systems. Consequently, controlling is an important instrument in rectifying information imbalances between various departments and agencies.

Relationship

The focal point in the state government should be results-based management to have better relationship between various departments, the focus on objectives should not be limited to relationships only. The state ministries should draft explicit mission statements that apply to both departments and subordinate agencies. These statements should serve as a point of reference when agency performance contracts are formed and negotiated. The ministerial mission statements would help in ensuring that agency targets are mutually compatible and supportive, and in line with overall government objectives.

While much is done to co-ordinate and consolidate performance targets at the department level, additional improvements are possible. One approach under consideration is setting outcome targets for departments. Such targets should make it easier to convert intended effects on society into performance contracts for subordinate agencies.

Accountability

An important instrument for holding agencies accountable is the use of departmental head contracts that should contain performance targets focused on three dimensions: agency output, innovation and internal management. Setting targets for these areas of focus means that a broad range of managerial tasks and obligations are taken into account when the performance of a heads are evaluated.

The terms and conditions of the contracts should be negotiated between the secretaries in each ministry and the head of a subordinate agency. Among others, a maximum amount of performance pay should be agreed upon before the contract is finalised. It should be the responsibility of the secretary to ensure that there is a reasonable connection between the level of difficulty in fulfilling the performance targets set and the final performance pay.

The performance pay should be computed on the basis of the degree to which targets and objectives are achieved. An amount may be added to this calculated amount at the discretion of the secretary if s/he deems that the results achieved by the heads are extraordinary.

Framework

To improve the dialogue between agencies and users, targets for government-citizen interaction should be incorporated into the majority of performance contracts. This would ensure both political demand and the use of holistic quality frameworks.

Targets for greater citizen involvement often require agencies to conduct user surveys to determine the level of satisfaction with provided services. The information collected is used to decide how operations should be adjusted to better serve the needs of users. In addition, the views of citizens and users are taken into account when services are developed and public organisations restructured.

The ministry of finance should makes an effort to ensure that user surveys meet high methodological standards and are used to achieve organisational learning; one of its initiatives should be publishing guidelines on how to design, implement and use surveys. In addition, the ministry of finance promotes better management, also stressing the need to make systematic use of responses from citizens to promote organisational learning and innovation.