Performance-Oriented Budget Reform

To improve financial resource allocation and improve governance capacity, there is starting a new round of tax reform in China, the local budget reform is one of the places especially important part of a major theme of this reform is to improve and strengthen the performance-oriented budget. In this context, how performance information into all stages of the budget process- covering budgeting, review, implementation and evaluation, in order to achieve the full integration of the government budget and performance management, making it the most important, the most effective tools to solve long-standing budget management and performance management(including performance evaluation) out of line problems, has become a theoretical study and practice of urgent reform to study and solve major issue. In this paper, based on case studies of Inner Mongolia aims to establish performance-oriented budget reform " integration " of the topic, assess status and progress of reform, to identify the key issues and challenges exist, make appropriate proposals for reform on this basis.With the development of globalization in 1970 s, the international competition becomes intensified much more and developed countries in Western carried out new public management movement respectively. One of the core content of it is to strengthen the budget control under the guidance of performance. That is to stress the guidance of overall goals of government functions and strengthen the control and management through the performance evaluation to improve the ability of government public management and public service. With the perfection of public finance system in China, the focus of budget management works has been shifting from ‘allocation’ to ‘management’ and putting more emphases on efficient use of public resources. Since the put forwards of ‘to establish the budget performance-evaluation system’ in the third plenary of sixteenth national central committee, there has been a active probe into the budget performance evaluation management. During the third plenary of eighteenth national central committee, the government put forwards the idea of establishing the modern fiscal system and to set it as the ‘the foundation and backbone of the national governance’ and the ‘institutional guarantee for the realization of the lasting peace and order of nation’. Budget managementis the core of the fiscal management. The reform of the budget management system should be put in the first, in order to set up the modern fiscal system. If only should the performance relate information integrated into the process of budget management, could the budget management be efficient. In fact, performance-evaluation carried out across the country in all forms, however, in strengthening of the connection of performance-evaluation, it doesn’t go far enough. The two should be integrated to improve the efficient of performance-evaluation. In theory, there is a comprehensive theory about performance management and budget management. However, there is a lack well connection between theory and practice. Therefore, in this paper, the author mainly explores the ways how to relate the performance information with the process of budget.In China, researchers have been probed into the budget performance theory and its implementation since the 1990 s. In 2003, the finance department takes the lead in piloting in performance-evaluation on projects of the central educational department.In this paper, the author mainly combines the theory with practice to start from the theory of budget reform theory and review the success and failure of budget reform in home and foreign countries. It also analyzed the merits and flows of the budget management under the guidance of performance-evaluation and its application conditions.Then, the author put forwards the budget performance reform modes which suits for Inner Mongolia Autonomous region.The paper consists of two parts; that is the one is related with theory and the other is the practical application.In the first part, the author mainly analyze the budget reform in home and foreign countries and, then, to theoretically discuss the need for budget reform under the guidance of performance-evaluation. It also defines the concept of performance based evaluation.The author beliefs that the performance based budget reform stress the importance of the responsibilities and efficiencies and also the products and results. It is the practical application of the many modern scientific theories in public fiscal management. They are the entrust-agency theory、tragedy of the commons、x-low efficiency theory all stress the expending responsibilities and its efficiencies. It also demands the government to provide more public products and services. It is the theoretical basis of the performance based budget management. The entrust-agency theory states explicitly the double principle-agentrelationship between the public, governments and public fund use units. This relationship determines that it is a must to establish the incentive compatibility and restrains mechanism to strengthen the fiduciary’s public fiduciary duty. It is necessary to take practical efficient measures to improve the capital use efficiency and to accept the entrustee’s supervision and assessment. Fiscal budget has the attribution of the public economic resources. It is easily resulted in the tragedy of common in the process of budgeting and, it is the root of the low efficiency of the budget use. In order to enhance the efficiency to promote the sustainable development of the fiscal fund, it should adopt the result-oriented evaluation mechanism to assess the efficiency of the budget use in all departments; and, it also necessary to set up the rational accountability mechanism to let the department to assume some of the ‘cost’ and to promote the rational allocation of the budget capital through the incentives mechanism. X-low efficiency theory is means that the goals of the administrative department become complex. It would result in the public to comprehend those administrative departments’ responsibilities and real intentions. It would also result in the administrator’s arbitrariness in the process of the policy making and implementation.In the part two, on the basis of the theoretical analysis, the author states the challenges which faced in the process of integrating the budgeting and performance evaluation and counter-measures. At present, the performance-based budget evaluation theory and its implementation comparatively legging behind. For instances, the deficiency in notion of performance-based evaluation; lack in consideration of performance information in budgeting process; the non-objectivity of the performance-evaluation criteria; insufficient of the incentive mechanism.Practical part is based on the theoretical analysis, combined with Inner case presented major challenges in the integration of performance information in the budget process facing, and the approximate methods to deal with these challenges. At present, the theory and practice of performance-oriented budget Inner Mongolia are relatively backward, such as there is lack of performance concepts, the budgeting process excludes the consideration of many factors of performance information, the lack of objective criteria for performance evaluation, lack of incentives and other issues, And although performance budget after a decade of practice in China, across all forms of budget reforms carried out to explore, butin the process have ignored the important role of performance information, if you can not get effective performance information, and its integration into the budget process, it would not be called a performance-oriented budget in the true sense. This paper summarizes the progress of China and the issue of performance-oriented budget, based on the exploration of Inner Mongolia performance-oriented budget reform path, proposed performance information into the various stages of the budget process for the main thrust of the methods and countermeasures.