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Bullets Ch 2

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  Chapter 2Performance measurement ã requires the planning, execution and monitoring of the government’s service provision to include measurement of specific services, in definitive form free at the point of delivery, to specific individuals or groups of individuals ã  performance measurement of an organization, relating to the arbitrary period of a fiscal year, cannot naturally be separated from  past performance or from the performance of others ã the ideal of performance measurement of an organization, namely to  judge only those matters that are under the control of the organization, cannot be achieved ã the specificity of performance measurement requires the measures to  be partial, which in the absence of a unifying metric such as money, means that taen together they are necessarily incomplete ã there is no complete set of performance measures, no absolute measure of performance of an organization, a programme or a government as a whole! ensible judgments of these measures are allcomparative# they are about marginal changes over time and marginal differences between other organizations ã during the second half of the twentieth century there was a stream of initiatives in government budgeting and accounting, which shared the same fundamental premise# that $ given scarce resources $ explicit measurement of the quantity, and if possible the quality, of services provided, lined to measurement of resources consumed,  produces better services ã in the %&'(s and %&)(s, the initiatives produced the comprehensive  budgeting models nown as performance budgeting, program  budgeting and zero$base budgeting* in the %&+(s and %&(s, the initiatives focused more on auditing* and since then the focus has  been on every aspect of budgeting, accounting and auditing! ã this premise can be said to underpin all for$profit organizations# the resources consumed and the quantity and quality of services  provided are measured using money! ince money is the medium of accounting, accounting has a central role in performance measurement in for$profits ã when services are provided free at the point of delivery, the recipients do not express their preferences by accepting or rejecting a price for these services! -oney does not, therefore, provide an observable measure of the services and products provided! .he other uses of money are common to government# in particular, money   provides an observable measure of what the organization buys in order to provide a service! -oney also has additional uses in measuring the government’s ability to collect taxes, by comparing money collected with what was budgeted to be collected! ã /n definitive governments, in which the services provided free at the  point of delivery are financed by taxation, performance is assessed using financial and non$financial measures, and qualitative  judgments ã in performance measurement, it is useful to thin of the following distinct elements of performance# o inputs, being resources consumed by the government, measured primarily using costs but also non$financial measures, commonly the number of employees* o outputs, being the services provided, measured primarily usingnon$financial measures* o outcomes, also being the services provided, but primarily using unmeasured, qualitative judgments! 0hen the judgmentsof outcomes are systematically gathered from service recipients, typically based on interviews or questionnaires, they can be measured and statistics of satisfaction produced! ã  1on$financial inputs, outputs and outcomes of government services are best thought of as being hierarchical, in which at the low levels of the hierarchy there are easily counted surrogate measures of input,at higher levels easily counted surrogate measures of output, then easily counted output measures, then counted measures of service recipient satisfaction, and at the highest level unmeasurable outcomes ã .he lowest levels in the hierarchy, while they can be reliably measured, are farthest away from what the government services are ultimately trying to achieve* at the highest level they are what the services are ultimately trying to achieve but these cannot be measured ã none of the levels in the hierarchy of outputs and outcomes is the natural responsibility of accounting! /n the provision of government services as in nonprofits3, outputs and outcomes are matters for others# in this case, service professionals and politicians! .his includes the measurement of outputs and outcomes! .he measurement can be easy and related to matters of fact but questions of what to measure, how to measure and what use to mae of the resultant measures are not neutral 4 and accountants are not free to answer them ã nevertheless, accounting is acutely interested in those outputs and outcomes! Performance measurement is meaningless to accounting without consideration of what the services cost  ã  performance is usefully analyzed into inputs, outputs and outcomes  but all of these elements must be judged together# o successful outputs and outcomes at any cost are not useful measures of performance number and classification of examination passes increase, as do approval levels, but  budgets are overspent and borrowing is out of control3 o successful outputs, with unsuccessful outcomes, at high cost are not either number and classification of examination passesincrease but approval levels fall and budgets are overspent and borrowing is out of control3 o in the short$run, accounting might judge successful outputs, with unsuccessful outcomes but at low cost, favourably number and classification of examination passes increase, butapproval levels fall, and budgets are lowest compared with comparable services3 but in the medium$term might worry about the implications for future budgets if the low approval levels lead to radical changes ã .he language of financial and non$financial inputs, non$financial outputs and outcomes is commonly expressed in different ways# for example, distinguishing between economy, efficiency and effectiveness# o economy focuses on financial inputs to judge whether the costs were as low as possible! /t is bolstered by the sense that  public money must be spent on the cheapest o efficiency is a ratio of inputs to outputs, measurable in financial or non$financial terms o effectiveness focuses on whether the outputs and outcomes ultimately achieved what was wanted5 common way to use these terms is to point out that a programme could be very efficient but ineffective# it could do the wrong things very well! /n ordinary usage, we would not say that something was efficient if it was doing the wrong thing but, in this technical sense, we might say so* separating the terms can help to reinforce the point! ã  but they can also be used to emphasize how imperative it is to judge economy, efficiency and effectiveness together# the age$old imperative to spend public money on the cheapest that money can buy never made sense when buying cheaply meant buying unwisely67xhibit 2!%867xhibit 2!28 ã the national government explicitly nows that there are factors relevant to the performance of a school other than the numbers of 5s, 9s and Cs  achieved by its students! .hese factors are relevant to the measures of input local living costs of teachers3 and of output poverty and learning difficulties of students3 and are used in determining funding, but they are not part of the performance measurement! ã the complexity of the funding of secondary schools means that it is not  possible for the national government to lin inputs, outputs and outcomes comprehensively, when the budgets are fixed and therefore when they are executed and monitored! .he increments of the budgets for 2(x2 to 2(x' can be lined to incremental changes in the  performance measures67xhibit 2!:8 ã these measures are used to judge the performance of the national government in meeting these targets! ;owever, they are less satisfactory in judging the performance of each secondary school relative to all other schools! .his is because the test results in one school are liely to be affected by factors that are not under the control of that school! .he education specialists are not always agreed on what these factors are, or their relative importance, but there is some agreement67xhibit 2!<8 ã some of these factors determine the distribution of national government grants relative poverty and special educational needs3  but not others prior academic achievement, ethnicity, gender, age, first language not 7nglish, and the length of time spent enrolled in one school3, and none is overtly used to determine the overall budgetfor secondary schools ã the national government does need to understand the contribution that each school maes to its performance targets, including chool 5’s, in its highly aggregated planning, execution and monitoring of 2,((( schools! =ne part of this is a government inspection service67xhibit 2!'8 ã the inspection reports are qualitative judgments of school outcomes, set in the context of reference to test results! .he judgments emerge from visits to each school, including informal interviews with staff and students, and parents, and are expressed in scores on a scale of < down to %! .he report for each school does not mae reference to  budgets, either financial or of numbers of employees
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