Results-oriented Budget Practice in oecd countries odi working Papers 209

6.3 Linking financial and performance management 
Performance management is seen by the OECD as a key aspect of new public management and is 
relevant here in that it involves processes to

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Set performance objectives and targets for programmes 
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Give managers the freedom to achieve these objectives and targets 
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Monitor and report performance levels, and
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Provide information for future decision making and audit (OECD, 1995). 
If the goal of improving the quality and effectiveness of programmes is to be achieved, Pollitt 
argues for the integration of financial management and performance management systems, so they 
enjoy a ‘shared mission’ (Pollitt, 2001, p 11). However, he argues that integration has failed to take 
place, for a number of reasons: 
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The failure to link financial and performance management (see for example the Australian 
Department of Finance and Administration’s publication The Performance Improvement Cycle,
the UK Citizen’s Charter Initiative (see Pollitt, 2001) and the UK local government Best Value 
Programme.) 
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Reasons set out above on the failure of PPBS. 
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Moving from results based management to the linking of performance and budgets makes the 
tensions even greater and requires change management (Mayne in Pollitt 2001). 
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There may be a ‘cultural divergence’ between the ‘hard’, economic, control considerations of 
central budget offices and the ‘soft’, social, developmental considerations of performance 
improvement (Pollitt, 2001, p 14). According to a Japanese state official, Japan’s programme of 
Central Government Reform has recognised that historically too much emphasis has been placed 
on planning legislation and increasing budgets, with less significance attached to evaluation of 
the socio-economic effects of policies (Yamanaka, 2002, p 71). Talbot questions why the UK 
government dropped the link between resources and performance for the 2000 Public Service 
Agreements (Treasury Select Committee, 2000, p 1). 
Pollitt (2001) identifies a number of key interfaces for the integration of financial management and 
performance management: 
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