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Bridging Policy and Finance: Integrating Financial Consideration into the Policy Life-Cycle


Bridging Policy and Finance: Integrating Financial Consideration into the Policy Life-Cycle Murray Lindo: Director, Financial Management & Control Policy – PowerPoint PPT presentation

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Title: Bridging Policy and Finance: Integrating Financial Consideration into the Policy Life-Cycle

Bridging Policy and FinanceIntegrating
Financial Consideration into the Policy Life-Cycle
  • Murray Lindo
  • Director, Financial Management Control Policy
  • Office of the Provincial Controller
  • Ministry of Finance

1. Purpose
  • To understanding the key strategic challenges,
    facing the government is pivotal to designing
    policy and achieving program value-for-money.
  • Describe five key financial lenses that can
    enable you to identify, assess and mitigate the
    financial risks and establish risk-based
    financial measures.
  • Provide a framework to better integrate financial
    considerations and measures, across the policy
    life-cycle from design, implementation,
    maintenance and evaluation.

2. Policy and Financial Management Definitions
  • What is Policy?
  • Policy is the translation of governments
    political priorities and principles into
    programmes and courses of action to deliver
    desired outcomes.
  • What is Financial Management?
  • Financial management is the process by which
    financial aspects of public sector organizations
    are directed and controlled in order to achieve
    the organization's goals.

3. Strategic Financial/Policy Challenges
  • Economic managing program expenditure and
    evaluating performance/alternatives during a
    global economic recession that has constrained
  • Stewardship of the Long-term balancing immediate
    program funding over infrastructure investments,
    while understanding the long-term financial
    legacy of current policy/program decisions.
  • Public Expectations access to information and
    heighten public expectations will drive greater
    transparency and the need to demonstrate
    effectiveness, efficiency and value-for-money.
  • Core Programs demographics changes will impact
    the sustainability of large, open programs in
    the health, social services and education
  • Broader Public Sector (BPS) changing
    governments role as a social-investor
    overseeing BPS management and leveraging
    performance through agreements that codify
  • Capital and Investments Increasing complexity of
    integrating financing, capital investment and
    operations planning to ensure efficient and
    effective delivery of services.
  • Public Reporting Strengthen public accounting
    and financial disclosure standards will
    necessitate more rigorous financial analysis and
    data supported by attestations of its integrity.

4. 2009-10 Budget Expense
Program expense equals total expense minus
interest on debt.
5. Key Messages
  • Only by integrating financial analysis into
    policy and programs proposals can ministries
    design high-quality, sustainable and cost
    effective policies.
  • In an constrained economic environment, the
    strengthen of your policy proposal (and its
    success) will depend on the ability to
    demonstrate savings, value-for-money and positive
    cost/benefit analysis.
  • Evaluating your existing portfolio of policies
    and programs, using objectives financial
    analysis, to find efficiencies and effectiveness
    improvements is going to be essential to maintain
    services with less resources.

6. Financial and Policy Decision Process
Voted Appropriations
Proposals with Financial Implications
Treasury Board/ Management Board of Cabinet
Eight (Policy) Subcommittee (e.g. Legislation and
Regulations Committees)
  • Treasury Board authorizes annual and in-year
    spending plans and ensure compliance.
  • Reviews policies with financial implications.
  • It approves the government's overall human
    resource, information technology plans and also
    makes decisions about government land and
  • Ministry of Environment
  • focused on policy development
  • program delivery and managing service partners
  • managing within the fiscal envelope
  • establishing performance expectations and
    evaluating program outcomes
  • financial management and results reporting
  • Policy committees review and make recommendations
    to Cabinet on the policies and programs
    government delivers.

  • Ministry of Finance
  • (Treasury Board Office)
  • supporting Treasury Board in its fiduciary
  • financial long-term stewardship
  • responsible for the development of the fiscal
    plan (budget), Fall Economic Statement and
    publishing the Public Accounts.
  • managing the Results-based Planning process.
  • developing financial policies
  • Cabinet Office
  • supports Cabinet and sub-committees
  • manages how the government makes decisions
  • works with ministries to coordinate policy,
    communications and intergovernmental strategy
  • monitors government strategies and supports
    implementation and delivery of results

7. Five Financial Lenses for Developing
  • Efficiency
  • Inputs over outputs
  • Effectiveness
  • Outputs over outcomes
  • Economy
  • Cost/benefits against alternatives
  • Economic/ Fiscal Impact
  • What are the economic and fiscal implications and
  • How can these risks be mitigated through policy
    and program design?
  • What are the financial and fiscal trade-offs
    in supporting the decisions?
  • Financial Transparency Risks
  • Disclosure of financial information consistent
    with public accounting and financial reporting
  • Financial information is completes, reliable,
    timely, comparable, relevant, clear and
  • Impairing Future Decisions
  • Impacts on (future) revenues/ assets/
    liabilities (e.g. auto sector pensions)
  • Impacts on budgets, the multi-year
    fiscal/capital plans, transfers/ cash flows and
  • Public Reporting (consolidation)
  • Ensuring appropriate financial accountability
    and transparency provisions are incorporated into
    program delivery and design.

8. An Integrated Financial-Policy Model
Policy Analysis
Risk-based reviews
Policy Decision
Financial non-financial risks/options
Program Implementation
Program Evaluation
Financial Analysis
Asset Management
Asset Implications
Financial Performance and Public reporting
Consolidated Public Reporting
Forecasts/ fiscal impacts
Integrity of financial data and reporting
Sustainability and Value-for-Money
Assurance of controls
9. Integrating Financial Considerations into
  • Integrated Policy should be
  • Positive benefits complete and objective
    cost/benefit analysis that includes immediate and
    on-going capital, operational and administrative
  • Forward looking consider the complete and
    long-term fiscal and financial impacts over the
    policys lifetime
  • Outward looking understand the financial
    trade-offs of the recommendation
  • Innovative and creative embed the identification
    and management of financial risks in the policy
    design and implementation
  • Evidence based costing, budgeting and estimates
    must be build on complete information, solid
    assumptions and objective analysis
  • Joined up horizontal connect with other policy
    areas and ministries. Provide opportunity to
    realize efficiencies or economies of scale
  • Evaluated financial and non-financial
    performance must be measured against objective
    and weighted leading and lagging indicators and
  • Demonstrate Value-for-money the initiative must
    be able to efficiency (outputs/inputs),
    effectiveness (outputs/outcomes) and economy
    (cost effective comparisons).

10. Policy and Program Design Financial
  • Cost-benefit analysis all options should be
    valued against full net benefits and costs
    calculations. Costs should be expressed in terms
    of relevant opportunity costs. Categorising costs
    (fixed, variable and semi-variable) will
    strengthen sensitivity analysis, including
    market interest and demographic fluctuations.
  • Cost-effectiveness analysis assess the
    comparative costs and merits of different
    delivery mechanisms. This should be balanced
    against an assessment of the relative financial
  • Delivery Options transfer payments and agency
    methods of service delivery place increasing
    (financial) oversight, evaluation and
    accountability requirements on the ministry.
  • Short and Long-term Financial and Fiscal Impact
    understand integrated program, operating and
    capital costs. Amortized capital costs and sunk
    program commitments will constrain downstream
    ministry fiscal envelopes.
  • Full cost of service delivery All costs
    associated with the program should be factored
    into its cost/benefits analysis. Direct and
    indirect costs borne by another ministry or
    central agency (e.g. OSS) come from the same
    Central Revenue Fund Peter/Paul scenario.
  • Investment Proposals Capital projects (for
    example buildings, ITT and fleet vehicles)
    require a complete asset life-cycle analysis from
    the initial investment, post-build and periodic
    cost/asset evaluations, maintenance, replacement
    and disposal.
  • Cost utility analysis accurate forecasting and
    modeling. Fees and revenues program need to be
    substantiated by robust sensitivity analysis
    using different scenarios.

11. Policy Implementation, Maintenance and
  • Sustainability using robust forecasting and
    modeling to assess the fiscal and financial
    sustainability and opportunity cost of the
    program. Should alternatives delivery mechanisms
    or changes in service offerings be considered?
  • Transfer Payment/ Agency Oversight review of the
    recipients or service delivery organizations
    service and financial results. Assurance of
    effective controls, accurate financial reporting
    and analysis of the organization's financial
  • Non Tax Revenue legal constraints on fees (Eurig
    decisions), the need to demonstrate transparent
    costing and pricing, and associated accounting
    structures for Special Purpose Accounts. Are the
    revenues directly adversely and
    disproportionately effecting another government
    revenue stream?
  • Cost Recoveries what are the full and associated
    costs of collecting fees, fines and defaults
    (particularly during an economic recession)?
  • Influence and Control the concept of
    arms-length is governed by an understanding of
    the degree of influence and control over a given
    organization. Provincial control defines
    whether an entity is consolidated into the Public
    Accounts and is subject to Ministerial
  • Oversight, Program and Technology Enhancements
    sustainability of a program with a substantial
    infrastructure footprint requires an evaluation
    of the key enhancement milestones and their
    associated costs.
  • Assessment of Outcomes performance measures
    should be able to indicate whether the intended
    client are benefiting (and to what extend) from
    the program/policy and demonstrate its
    cost-effectiveness as a service delivery method.

12. Policy Design Questions
  • What are the key financial risks faced by your
    programs and core policies? How do you mitigated
    these financial risks?
  • What financial analysis gaps do you typically
    find when developing a policy proposal?
  • What are the key financial drivers impacting the
    sustainability of your policies and programs?
  • What tools and approaches are you using to
    evaluate policies and programs efficiency,
    effectiveness and value-for-money?

13. Looking Forward
  • Integrating financial risks, analysis and
    measures are critical to evaluating policy,
    programs and ensuring sector sustainability.
  • Only by balancing and weighting efficiency,
    effectiveness and value-for-money measures can a
    full picture of a policy/programs performance be
  • Increasing financial reporting requirements and
    the complex relationships between capital,
    financing and operational require an integration
    of these considerations into policy decisions.
  • Forward looking policy that seeks horizontal
    sectoral solutions cannot be divorced from robust
    financial, cost/benefit, business and capital
    investment decisions.
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