The Performance Budgeting Practice In Germany And Its Inspirations For China

Budgeting is an important tool for the government to regulate the economy and social development. It is an essential element for modern countries to construct the public finance system, and is directly related to the healthy operation of the national economy. For a long time in China, the government has been facing the problem of ever growing scale and continued low efficiency of financial expenditure, which is mainly due to the defect of the budget management system. As a result, the reform of the budget management system is becoming a widely concerned problem.Performance budgeting is a new results-oriented budget management model. As a core component of the New Public Management (NPM), it plays an important role in improving the efficiency of government spending, as well as solving the government’s financial, management and trust crises. Being adopted by many developed countries in the world, performance budgeting has also become the goal and direction of future budget reform in China.In the1990s, Germany, under contexts of the aforesaid government crises, globalization and NPM, began to implement performance budgeting, which produced positive effects on reducing costs and improving efficiency, and provided a strong guarantee for the prosperity of the German economy. This article describes the overview of the performance budgeting practice in Germany, which is conducted in the compiling, approving, implementing and monitoring processes, and has gained satisfactory results. It then concludes the successful experience of such practice, including a well-developed legal system, a sound budget monitoring system, high transparency of society, moderate separation of powers, perfected assessing and evaluating mechanisms, the introduction of the accrual accounting methods and so on.Since the2000s, China has been promoting budget-focused financial reform, through which the goal of "one budget for one department" has been achieved, while the reform has brought no effective controls over allocations even though it has successfully cut the staff expenses and routine costs. Due to lack of evaluating performance, the function of department budget is greatly crippled. There still exist problems including low efficiency of financial expenditure, lack of reasonability in extant budgeting system and imperfect budget monitoring mechanism. Both the central and local governments in China have achieved some goals after introducing tailored performance managements, while they still have a long way to go to actually realize the goal of performance budgeting management. The governments have to solve problems like lack of legal ground, insufficient consciousness toward budgeting performance, high cost and low quality of performance evaluation, the mismatch between cash basis and performance budgeting management, as well as the yet to be strengthened budget monitoring.This article introduces an empirical analysis of the effects of performance budgeting on the efficiency of public finance in China. The data are collected from22provincial districts during2007to2012. Then, it selects expenditures on general public services, education, social security, employment spending and health care as input variables, while taking GDP growth, the amount of primary and middle school students, the number of health technical personnel per million people and the per capita disposable income of urban households as output variables. Using the CCR and BCC models of the DEA method, the article concludes that the effects of performance budgeting is not necessarily related to the timing of the implementation; Jiangsu, Fujian and Henan provinces have reaped satisfactory results from performance budgeting, while the implementation in Beijing, Shanghai, Guangdong and Zhejiang are not effective due to the inappropriate scale, though the performance budgeting structures in these districts are proper. Horizontally, the insufficient improvement of finance efficiency is due to the short period of implementation, during which the complicated conduction, the increasing paperwork, personnel training and the introduction of new software and equipments will lead to growing costs and low efficiency. Besides, the various problems in the reform of performance budgeting also exert negative effects on the implementation.Based on the successful experience of Germany, the article puts forward some proposals for China’s future reform, such as establishing a sound legal system of performance budgeting, strengthening evaluation coordination, constructing an information sharing platform, establishing a motivation and restraint mechanism, introducing the accrual accounting methods, cultivating the idea of performance culture, strengthening personnel training and so on.