CIRINYA DAN INSTITUSI/SISTEM PENDUKUNGNYA KPJM AUSTRALIA CIRINYA DAN INSTITUSI/SISTEM PENDUKUNGNYA Disajikan oleh Pat McMahon Penasehat Anggaran, Department Keuangan dan Deregulasi Australia 1

Tujuan dari dua sesi berikutnya adalah: Memperoleh pemahaman yang lebih baik mengenai KPJM dan perbedaannya dengan pendekatan tradisional; Memberi gambaran institusi utama dan sistem yang dibutuhkan untuk mendukung KPJM; dan Melihat contoh-contoh praktis mengenai bagaimana KPJM dapat diaplikasikan pada beberapa instansi percontohan (pilot) The aims of the next two sessions are outlined here. This session will concentrate on the first two of these aims. The next session will look at the practicalities in the Indonesian context I now want to focus in the remainder of this session on the features of an MTEF (from the Australian perspective) and then outline the key institutions and systems necessary to support an MTEF. 2

Tiga ciri dari sebuah KPJM Penganggaran untuk lebih dari satu tahun – prakiraan tahun-tahun maju merepresentasikan keberlanjutan kebijakan-kebijakan pemerintah; Penyesuaian yang diperbolehkan hanya untuk i) perubahan harga atau biaya diluar kendali manajer, ii) keputusan pemerintah, and iii) variasi permintaan pada program yang digerakkan oleh permintaan; dan KPJM tidak berarti bahwa appropriasi adalah untuk beberapa tahun. Di Australia, appropriasi hanya untuk satu tahun saja. An MTEF usually involves: Budgeting for more than one year; An end to zero based budgeting. The forward years’ estimates represent a continuation of government policies; Government’s are able to focus on fine turning existing policies and addressing new priorities; and The only adjustments to the forward estimates being for price or cost changes beyond the control of managers and government decisions. This will become clearer if we look at some real examples drawn from the Australian Budget documents. 3

Manfaat dari sebuah KPJM “Sebenarnya” (Penganggaran multi-year) I would not advise the adoption of a Forward Estimates system that is indicative top down forecast and not linked to the Budget There is a high risk of lack of precision in the estimates from such top down approaches (also known as MTFFs/MTBFs etc). Most countries who adopt this form of MTEF don’t find it useful and eventually move to a Forward Estimates system which is a multi-year Budget where the aggregate estimates reflect a bottom up reflection of individual Cabinet decisions on expenditure and revenues.

Ciri 1. Penganggaran untuk lebih dari satu tahun – Anggaran 2008-09 This is the first slide I want to show you. From this slide there are 4 points to note: The simplest definition of an MTEF is that it is a Budget that spans more than one fiscal year. 3 forward years is the normal planning horizon for an Australian government as they are elected for 3 years. In Indonesia five years is the planning horizon as the president is elected for 5 years. It makes sense for an Indonesian MTEF which links planning and budgeting to be over 5 years. MTEF is not just a multi-year expenditure framework – it includes revenue as well. It should be obvious that a multi-year budget cannot be made without both sides of the budget being addressed, i.e. revenue and expenditure Fiscal sustainability is transparent – i.e. the effects of decisions on the planned surplus/deficit (fiscal balance/underlying cash balance) from the Government’s decisions in 2009-10, 2010-11 and 2011-12 are very clear This slide shows that Australia has a healthy surplus and is not heading into trouble with deficits. The value of an MTEF is that it provides governments with information that allows for sustainable fiscal management over time. Budgeting for more than one year means that the first forward year becomes the baseline for the budget in the next year. This is an important point because it highlights that adoption of an MTEF means the end to zero Budgeting. This is much more apparent in the next slide. 5

Ciri 2. Prakiraan Maju dihubungkan dengan Anggaran (tidak ada penganggaran baru /zero-based budgeting setiap tahun) If the first forward estimate becomes the baseline for the Budget in the next year, by definition you must be able to reconcile the difference between Budgets. This reconciliation comes out of the Budget papers for the 2008-09 Budget and shows the changes from the 2007-08 Budget to mid year (MYEFO) and from the Mid Year estimates until last year’s election (PEFO) and then from the election to the most recent 2008-09 Budget. The key point to note is that the variations are broken into only two categories Effects of policy decisions (revenue and expenditure) by the government; and The Effects of parameter and other variations (not under the control of government). It is important that I elaborate on what are “other variations” mean and the next slide uses practical examples reported in the Budget papers.

Beberapa contoh dari Variasi “lain” (dari Dokumen Anggaran No “Pengurangan $318 juta pada prakiraan belanja untuk Parenting Payment menunjukkan adanya kenaikan jumlah orang yang tidak lagi berhak untuk pembayaran tersebut berdasarkan penghasilan terlapor yang lebih tinggi” “Pengurangan $178 juta pada prakiraan belanja untuk Farmasi dan Jasa Farmasi didorong oleh kenaikan penggunaan sejumlah obat yang lebih rendah dari yang diekpektasikan dalam Skema Tunjangan Farmasi” “Pengurangan $128 juta pada prakiraan belanja untuk Tunjangan Pajak Keluarga didorong oleh penurunan jumlah penerima berdasarkan penghasilan terlapor yang lebih tinggi” Some 70% of Australia’s Budget expenditures are on demand driven programs where the size of an eligible population will be the key driver of the expenditure. The size of these populations are beyond the control of governments. This slide shows how changes to estimates of the size of these populations can significantly change the estimates of expenditures. In this case the expenditures are reduced. The next slide shows how the expenditures can increase from volume changes.

Feature 3. Penganggaran Tahun Jamak tetapi appropriasi tahunan! This slide shows the funds appropriated to the Australian Customs Service. Note that while the Budget is for the Budget and three forward years the appropriations by the Parliament are only for one year (in this case for the financial year 2008-2009). You may well ask then how does Multi-year budgeting and annual appropriations work. This is shown in the next slide.

Ciri 3. Penganggaran Tahun Jamak dan Appropriasi tahunan dibawah KPJM Arencana Pembangunan Jangka Panjang – yang akan diimplementasikan Ciri 3. Penganggaran Tahun Jamak dan Appropriasi tahunan dibawah KPJM Melanjutkan Kebijakan Proses Kebijakan Baru UTK MENCAPAI ANGGARAN 4 TAHUNAN BARU MTEF KPJM - Saat ini (sudah diimplementasikan – Current (already implemented) 20 yrs Long Term Development Plan Rencana Pembangunan Jangka Menengah – yang akan diimplementasikan - Agenda Pemerintah/ Rencana Strategis 5 yrs 4 thn Medium Term Development Plan/Strategic Plan Kebijakan Baru Pemerintah/Kebijakan Baru Kemernterian There are 5 points I want to emphasise from this slide. The Government has a 4 year plan which matches a 4 year budget. The plan and the budget are one and the same. The Government reviews its plan and budget each year. The review is at the margin, that is, the Government does not zero base everything but instead it takes the forward estimates as its starting point and adds to it with new policy and fine tunes existing policy. The term has been used elsewhere by others to refer to “increments” and “decrements” to the baseline estimates. The increments are the additions and the decrements are the subtractions to the estimates from changing continuing policy. Because there is no zero-basing the “ceiling” within which agencies have to operate relates to new policy submissions (not to their overall funding) By not zero basing its plan each year, the Government can focus its decisions on more strategic objectives and not become bogged down about the detail of funding ongoing policies. Because this is an annual process of review and fine-tuning, a multiyear budget can readily fit within a one year appropriation structure. The linkage between a 4 year budget and an annual appropriation process is shown in this slide by the link between the top and bottom set of boxes Lets now turn to some of the key institutions/systems that underpin the Australian MTEF. These are essentials to be in place if Indonesia is to implement an MTEF. Review of Continuing Policy using PBB Review of Continuing Policy using PBB Activity Kegiatan Program Program Output Keluaran Hasile Outcome Perubahan untuk Kebijakan Berlanjut dari PBK Changes to Continuing Policy from PBB PB MTEF – Revised APPROPRIASI SATU TAHUN New State Budget Plan – 5 Years Melanjutkan Kebijakan Tpada ahun Anggaran Continuing Policy Kebijakan Baru Pada Tahun Anggaran New Policy over 5 Total Appropriasi Total over 5 years over 5 years years

Lima “Unsur” institusional terkait KPJM Australian Proses kabinet yang mencatat keputusan berbasis tahun jamak; Parameter – Penyesuaian ekonomi (cth. harga) dan spesifik (terkait) program untuk faktor-faktor diluar kendali pemerintah; Menetapkan kerangka program dan biaya operasional (“running costs” vs “non running costs”) (berhubungan erat dengan manfaat PBK dan menselaraskan KPJM dan PBK; Sistem biaya yang membutuhkan persetujuan Departemen Keuangan; dan Sistem Informasi Manajemen Keuangan yang Handal This slide is to emphasise 5 “Building blocks” that make the Australian MTEF work. They are: Cabinet decisions that are recorded as multi year funding decisions; A parameter adjustment system to allow for price and volume changes beyond government control; Mapping expenditures to new programs that will apply under the PBB and making a distinction between expenditures that are running costs and those that are not. (I will explain these terms later as this goes to the heart of what performance should be expected in a PBB); A costing system that is independent and not influenced by political considerations – the decisions may be influenced by the political realities but the costs should not be; An authoritative FMIS controlled by the Dept of Finance Lets look at some examples of these 5 building blocks to illustrate this further.

Unsur A. Contoh Keputusan Anggaran oleh Pemerintah This slide is an example of one policy decision of many made by the Australian Government in the 2008-09 Budget. If you wish to see all of the decisions go to Budget Paper No.2. It shows the multiyear budget dimension (revenue and expenditure) of the government’s decision to provide 500 additional places in the Humanitarian migration program. This slide is also useful in demonstrating that an MTEF must also have a system that allows for the influence of parameters that are beyond the Government’s control. This is evident in the slide when you look at how the funding numbers change. The government’s policy is stated in terms of 500 additional places - it is very important that adjustments to the estimates occur in the Forward Estimates for price or cost changes beyond the control of managers, otherwise the funding provided will not be sufficient to allow the delivery of 500 places as intended by the Government. Note that this is why the numbers tend to increase over time allowing for inflation.

Unsur B. Parameter untuk variabel ekonomi dan spesifik (terkait) program Parameter adalah variabel ekonomi atau spesifik (terkait) program dimana manajer & pemerintah tidak memiliki kendali untuk mempengaruhi harga atau biaya dari keluaran. Kesepakatan dibutuhkan untuk menghasilkan dan mengaplikasikan perkiraan parameter untuk prakiraan maju Adalah sangat penting bahwa penyesuaian tersebut terjadi pada Prakiraan Maju, jika tidak pendanaan yang disediakan tidak akan mencukupi untuk melaksanakan program sesuai dengan yang direncanakan oleh pemerintah It is clear from the previous slide that funding can vary across the forward years even though the Government’s policy does not change. Parameters are used to adjust that funding in order to maintain the governments requirements in terms of output volume and quality. Institutional arrangements must be in place to generate economic parameter forecasts. Separate special arrangements are required to generate forecasts for program specific variables.

Contoh dari beberapa parameter ekonomi dari Dokumen Anggaran 2008-09 In Australia we use approximately 20 different economic parameters. This slide shows just five economic parameters. Some others that are used, but are not shown here, include the foreign exchange rate and the price of crude oil. There are a number of features I want to highlight from this particular slide. Note that: The projections can be different to the forecasts for the Budget year. (each parameter set is different) The projections in the forward years can also be different. In our 20 or so parameters the forward years are often the same but not always. 13

Contoh yang menyoroti beberapa parameter spesifik program (dari Dokumen Anggaran 2008-09) “Kenaikan $207 juta pada perkiraan belanja untuk Jasa Perawatan Medis/Medicare menunjukkan kenaikan pada permintaan pada sejumlah jasa medis termasuk jasa yang disediakan oleh praktisi umum, jasa patologi dan jasa diagnosa gambar (diagnostic imaging services)” “ Kenaikan $240 juta pada perkiraan belanja untuk subsidi tingkat bunga dibawah bantuan Kondisi Pengecualian (Exceptional Circumstances), utamanya dikarenakan lebih banyak petani yang berhak dibandingkan dengan perkiraan” Besides the economic parameters, there are also “non-economic” program specific parameters that are used. These examples taken from the Budget papers show that estimates of populations in demand driven programs can vary the size of forward estimates for some programs quite considerably. The examples here are typical demand driven programs where appropriations are not capped in dollar amounts, but expenditures are determined by the numbers eligible for assistance who claim that assistance. The eligibility and entitlements are almost always determined by laws defining eligibility and entitlements.

Menyusun perkiraan parameter ekonomi & variabel spesifik (terkait) program Parameter ekonomi berdasarkan dari perkiraan Kelompok Peramalan Ekonomi Bersama (Joint Economic Forecasting Group). Parameter ekonomi diperbaharui setiap interval waktu yang teratur, biasanya tiga atau empat kali setahun. Parameter spesifik program Model yang disetujui oleh Departemen Keuangan dan Kementerian/Lembaga biasanya digunakan untuk menyusun prakiraaan maju program yang kompleks dan besar. Economic parameters Economic parameters are based on the forecasts of the Joint Economic Forecasting Group (a group comprised of officials from the Department of the Treasury, Department of Prime Minister and Cabinet, Department of Finance and Deregulation, Reserve Bank of Australia and the Australian Bureau of Statistics). The economic parameters are updated at regular intervals, usually three or four times a year, usually after the release of the quarterly National Accounts by the Australian Bureau of Statistics. The forward estimates are also updated at least three times a year. This timing usually fits with the government’s requirements for an update of the forward estimates during various stages of the budget formulation. Program specific parameters Models agreed between the Department of Finance and the line ministries are usually used to generate the forward estimates of complex and large programs

Unsur C. Menyelaraskan KPJM & PBK dan menetapkan sebuah kerangka untuk “fleksibilitas biaya operasional” FUEL SUBSIDY Inputs Processes / activities Outputs programs Outcomes Departmental (running) costs Salaries Program Management Subsidy Payment to oil refiners. Affordable Fuel for Indonesia n citizens Good s and Services You might recall that in the previous session I said that Australia implemented MTEF and PBB at the same time. Aligning MTEF and PBB also required defining expenditures into two types of expenditures – “running costs” and “non-running costs” . To illustrate why this was important I want to use an Indonesian example rather than an Australian example, and I have chosen the fuel subsidy. Performance is measured in terms of both efficiency and effectiveness. Efficiency can be measured in terms of whether the costs of processes/activities are reducing over time. Efficiencies arise from better management of the inputs available where managers have been given the flexibility to control their costs by varying their inputs. The distinction between “running costs” and “non running costs” is simply about who controls the costs and expecting efficiency from managers. Running costs are those costs that could be under the control of managers to allow flexibility in the use of inputs in order to get more efficient program delivery (e.g. personnel and materials expenditures); and Non running costs are those expenditures that are wholly under the control of the Government or specified in laws (e.g. transfers to the regions, interest payments and subsidies or other forms of welfare assistance to the poor). In the example above it is clear which input costs are under the control of managers, or could be, and which are not: Only the Government has control over the size of the subsidy paid under the fuel subsidy – this would be deemed to be a non-running cost expenditure. All other expenditures would be deemed to be running costs as they are managed, or could be managed, by program managers who if given operating cost flexibility would be expected to either reduce costs over time or increase the quantity and/or the quality of their outputs. I want to emphasise that this distinction is about who is responsible for performance, managers or government? For this reason YOU SHOULD NOT REGARD “RUNNING COSTS’ as a re-badging of the previous concepts of “routine’’ or ‘‘non discretionary” or ‘recurrent”. YOU SHOULD also NOT REGARD “NON-RUNNING COSTS” as a rebadging of the previous concepts “development” or ‘‘discretionary”. More on this later today when we discuss Performance Based Budgeting. Property Expenses Program Management Office Expenditure Program Management Administered costs (non running - costs ) Subsidy Payment set by Subsidy Payment to oil Affordable Fuel for Subsidy Government refiners Indonesian citizens

Unsur D. Pembiayaan (Costing) yang Akurat & Independen Pemerintah mensyaratkan bahwa setiap instansi harus membuat persetujuan atas pembiayaan (costings) mereka dengan Departemen Keuangan. Catatan: Departemen Keuangan menyetujui biayanya bukan berarti mendukung nilai-nilai kebijakan dari proposal kebijakan baru. Melalui analisa biaya secara menyeluruh, Departemen Keuangan sering memperoleh pemahaman yang lebih baik mengenai kebijakan tersebut dan nilai-nilainya. Remember that the forward estimates are firm and are guarantees of funding for agencies. A key control therefore is that they must be accurate. A costing system that is independent and cannot be influenced by political considerations is critical if accuracy is to be maintained – the decisions on spending will always be influenced by the political realities but the costings of those spending programs should not be influenced by political considerations. This is why the government requires that before any decision on any policy the costs must be agreed with the Department of Finance. Where there is no agreement it is unusual for the submission to go forward to Cabinet. While the costings may be in some detail, none of this detailed information is considered by Cabinet 17

Unsur E. Sitem penganggaran terpusat untuk mengendalikan variasi atas prakiraan maju Catatan perkiraan yang terotorisasi adalah sistem penganggaran terpusat yang dikelola oleh Departemen Keuangan. Perubahan tidak bisa dibuat tanpa kewenangan cth. Keputusan pemerintah; Parameter ekonomi; Parameter spesifik (terkait) program; dan Lainnya (jarang digunakan, tapi dapat termasuk perubahan terkait standar akuntansi, dll) An authoritative Financial Management Information System controlled by the Department of Finance and Deregulation (i.e. an integrated system for Budgeting, Cash Management and Financial Reporting) is an important underpinning institutional building block for the Australian MTEF system. All the examples from the budget shown in this presentation are from Budget Papers generated using the Financial Management Information System controlled by the Dept of Finance. A key feature of the system is that it will not accept any variations unless they fit in one of the four categories Government decisions Economic parameters program specific parameters Other (generally rarely used, but could include changes due to accounting standards) It will not accept any variation for government decisions unless it has a unique Cabinet Decision number. All entries into the budget and forward estimates are carefully checked against the details recorded in the Cabinet decisions. 18

Rangkuman mengenai apa itu KPJM dan perbedaannya dibandingkan dengan model tradisional Perkiraan pendapatan dan belanja dari kebijakan yang disetujui Pemerintah untuk tahun-tahun ke depan Dihubungkan dengan Anggaran (yaitu. tidak ada lagi zero based budgeting). Variasi dapat terjadi hanya untuk sejumlah kecil alasan, umumnya: Keputusan pemerintah Penyesuaian parameter KPJM dapat secara langsung dihubungkan ke rencana nasional tahun jamak The Forward Estimates are sometimes called agreed estimates. They record the level of revenues and expenses that have been agreed by the Government for future years (based on relevant economic, demographic and other forecasting assumptions). Because the Forward Estimates are Government policy they linked to the Budget. After the Budget is passed by the Parliament the first year of the Forward Estimates becomes the base for the next year’s Budget, and another forward year is added to the forward estimates. Forward Estimates do not include: provision for new programs or expansion of existing programs that the government has not agreed to; or provision for lapsing programs that are not expected to continue. Lastly, an MTEF is a multi-year budget that can be linked to a multiyear plan. To finalise this session I now want to turn to how all this would look in the Indonesian context. 19

Bagan yang Menggambarkan Proses Penganggaran dibawah KPJM di Indonesia Melanjutkan Kebijakan Proses Kebijakan Baru UTK MENCAPAI VISI NASIONAL Rencana Pembangunan Jangka Panjang - yang akan diimplementasikan KPJM - Saat ini (sudah diimplementasikan) 20 Tahun Rencana Pembangunan Jangka Panjang Rencana Pembangunan Jangka Menengah- yang akan diimplementasikan VISI PRESIDEN 5 Tahun Rencana Pembangunan Jangka Menengah / Rencana Strategis /Rencana Strategis Kebijakan Baru Pemerintah/Kebijakan Baru Kemernterian There are two main points I want to emphasise here: An MTEF and the Medium Term Development Plan can be linked to develop a five year budget, which is reviewed annually. The five year budget will mean an end to zero budgeting, and will enable the Government to focus on how best to fine tune its plan each year, taking into account changing economic circumstances. The second point is to emphasise that a five year plan and budget does not interfere with the Parliament’s right to issue appropriations annually. We have already seen in the Australian example that multi-year budgeting is compatible with annual appropriations by the Parliament. In your folder I have included a paper that elaborates a little more on some of this presentation here and also provides arguments on the benefits of adopting an MTEF. I deliberately skipped over talking about the benefits of why you would adopt an MTEF, as I was informed that most people are aware of the benefits of an MTEF. For those who are not familiar with those benefits please take the time to read the paper provided. Review of Continuing Policy using PBB Kegiatan Program Keluaran Hasile Perubahan untuk Kebijakan Berlanjut dari PBK KPJM - Disesuaikan RENCANA ANGGARAN PEMERINTAH YANG BARU – 5 TAHUN Melanjutkan Kebijakan selama 5 tahun Kebijakan Baru selama 5 tahun Total selama 5 Tahun

Contoh Hipotesis dari “melanjutkan” dan “kebijakan baru” – Keluarga Berencana Rencana Nasional Lima Tahunan Rencana Nasiona menyatakan target aspirasional untuk Jasa Keluarga Berancana /BKKBN (Family Planning Services) untuk melayani 25 juta keluarga. Rencana Anggaran 4 tahun yang Ada Dana yang dialokasikan pada keputusan sebelumnya hanya untuk melayani 10 juta keluarga. Celah fiskal (fiscal space) memperbolehkan pengeluaran baru pada prioritas yang belum diimplementasikan Pemerintah meminta rencana kebijakan baru sepanjang batas yang tersedia. Kebijakan Baru di Anggaran Pemerintah mengalokasikan anggaran untuk tambahan 5 juta keluarga. Prakiraan maju yang baru menyediakan pendanaan untuk 15 juta keluarga. Appropriasi untuk bantuan Keluarga Berencana menjadi 15 juta keluarga. In this slide I want to emphasise how the plan, the MTEF, Fiscal space and new policy fit together using an example of Family Planning. Note that the new policy is always an addition to or a subtraction from existing policy – in this case, funds for an additional 5 million families covered by the Family Planning program is to bring the new level of total funding to cover 15 million families. The Budget will provide for funding to assist 15 million families not only in the Budget year but in subsequent years until such time as the Government either adds to this amount or subtracts from this amount. The annual appropriation by the Parliament will be for funding to assist 15 million families.

  NUMBER OF FAMILIES 2009 2010 2011 2012 2013 Planning Target 25,000,000 MTEF - Existing Policy 10,000,000 New Policy (Addition) 5,000,000 This is another way of looking at the interaction between the plan and the budget and what the MTEF would look like. New policy represents a change to continuing existing policy. The forward estimates represent the future year impact of policy decisions.

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