Practice Advice on Public Financial Management
Central Input Controls (OECD)
Summary Advice: The OECD advises that, except in situations where there is a danger of increasing the probability of corruption, governments should endeavour to relax central input controls because heads of individual agencies are in the best position to choose the most efficient mix of inputs to carry out the agency’s activities.
Main Points: Three promising areas for relaxing central input controls are:
The consolidation of various budget lines into a single appropriation for all operating costs (salaries, travel, supplies, etc.).
The decentralisation of the personnel management function.
The decentralisation of other common service provisions, notably accommodations (buildings).
A single appropriation for operating expenditures is useful but not enough to generate required managerial flexibility as various central management rules inhibit this flexibility. It is in the area of human resource management where most central management rules tend to exist. The cost of staff is generally the largest component of operating expenditures, and it makes little difference to consolidate budget lines if central rules in this area prevent any flexibility.
Sweden has gone the furthest in this area by decentralizing personnel management except for collective bargaining arrangements. Now there are essentially no differences between the labour legislation governing the public sector and the private sector in Sweden.
Collective bargaining is totally devolved to the agencies and is the responsibility of the director-general of each agency, not Parliament or the Ministry of Finance. The agreements are negotiated entirely by the agencies. The experience with this new framework is predominantly positive. The agencies have welcomed their increased responsibility for wage formation, and employer policies in general. The pay agreements that have been reached have been within the cash limits of agency appropriations. This is attributed primarily to the “immense” peer pressure that directors-general exert on each other for responsible settlements. There are, however, significant variations between agencies and it is estimated that over 90% of government employees in Sweden now receive individualised salaries, i.e. based on their personal performance. Public sector unions have been constructive partners in this area.
New Zealand is an example in creating common service provisions concerning buildings by allowing agencies the freedom to choose their accommodation. However, the freedom to choose accommodations cannot be enjoyed equally by all agencies. Some agencies occupy very special accommodations, prisons and museums being outstanding examples. This can also create a conflict of interest between the agencies viewed in isolation (as they move to private sector accommodations) and the government as a whole (which may be left with surplus accommodations). These problems would be corrected in the long run.
Source: OECD (2003). Budget Reform in OECD Member Countries: Common Trends at http://www.oecd-ilibrary.org/governance/budget-reform-in-oecd-member-countries-common-trends_budget-v2-art20-en (accessed 21 October 2012).
Page Created By: Matthew Seddon on 1 November, 2012. Updated by Ian Clark on 4 January 2013. The content presented on this page is drawn directly from the source(s) cited above, and consists of direct quotations or close paraphrases. This material does not necessarily reflect the official view of the publishing organization.