Formula Funding and Performance Budgeting in the Public Sector (Tildelingsmodeller og effektbaserede principper i den offentlige sektor)

Samfundslederskab i Skandinavien (forthcoming)

43 Pages Posted: 17 Jul 2020 Last revised: 31 Aug 2020

See all articles by Per Nikolaj Bukh

Per Nikolaj Bukh

Aalborg University - Department of Business and Management

Karina Skovvang Christensen

Aarhus University - Department of Economics and Business Economics

Date Written: June 25, 2020

Abstract

English abstract: In recent years, focus has increased both on the effect from public sector activities and on the resources spent. It demands changes in management accounting and in the way resource allocation models based on formula funding work. The article focuses on devolved management, which regards what decisions management can make, the consequences management is accountable for, and how the decisions and consequences of them affect budgets. The article argues that the allocation models construct the devolvement of management. Consequently, performance budgeting is a matter of allocation models and devolvement of management. In order to assess how budgets based on formula funding works, we emphasize cost-effectiveness as the central evaluation criterion. The article distinguishes between direct performance budgeting, where the payment criteria are formulated as effects, and indirect performance budgeting, where the allocation criteria are intended to improve incentives to increase cost-effectiveness, but without effect being included as an allocation criterion. We outline the basic principles of performance budgeting based on formula funding, showing first how direct incentives are built into the allocation model, and next discussing the conditions that must be met in order for direct performance budgeting models to be applied.

Danish abstract: I de senere år er fokus øget både på den effekt, der opnås af de offentlige indsatser, og på de ressourcer, der medgår. Det nødvendiggør ændringer i den økonomiske styring, og i den måde ressourcetildelingsmodellerne fungerer på. Artiklen sætter fokus på ledelsesrummet, der drejer sig om, hvilke beslutninger man kan træffe, hvilke konsekvenser af beslutninger man har ansvar for, samt hvordan beslutningerne og konsekvenserne af dem påvirker de økonomiske rammer. Artiklens centrale pointe er, at tildelingsmodellerne konstruerer ledelsesrummet. Effektbaseret økonomistyring er derfor et spørgsmål om tildelingsmodeller (og dermed ledelsesrum), der sikrer helhedsorientering og sammenhængende styring af forløb. For at kunne vurdere tildelingsmodellernes egenskaber ser vi på omkostningseffektivitet som det centrale styringskriterie. I artiklen skelnes mellem direkte effektbaserede tildelingsmodeller, hvor tildelingskriterierne er formuleret som effektmål, og indirekte effektbaserede tildelingsmodeller, hvor tildelingskriterierne skal sikre økonomiske incitamenter til at øge omkostningseffektiviteten, men uden at effekt indgår som et tildelingskriterie. Vi skitserer grundprincipperne i en effektbaseret tildelingsmodel, idet vi dels viser, hvordan der indbygges direkte incitamenter i tildelingsmodellen, og dels diskuterer, hvilke betingelser der skal være opfyldt, for at direkte effektbaserede tildelingsmodeller kan anvendes.

Keywords: Bundled Payment, Devolved Management, Formula Funding, Management Accounting, Performance Budgeting

JEL Classification: M41

Suggested Citation

Bukh, Per Nikolaj and Christensen, Karina Skovvang, Formula Funding and Performance Budgeting in the Public Sector (Tildelingsmodeller og effektbaserede principper i den offentlige sektor) (June 25, 2020). Samfundslederskab i Skandinavien (forthcoming), Available at SSRN: https://ssrn.com/abstract=3635306

Per Nikolaj Bukh (Contact Author)

Aalborg University - Department of Business and Management ( email )

Aalborg, DK-9220
Denmark

Karina Skovvang Christensen

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V, 8210
Denmark

HOME PAGE: http://pure.au.dk/portal/da/kschristensen@econ.au.dk

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