Performance based budgeting a model for the Indonesian DoD

Abstract

A dramatic increase in the past three years in the Indonesian defense budget, from approximately US $800 million (FY2002$) in 2002 to approximately US $2.4 billion (FY2005$) in 2005, has created the need for the Indonesian Department of Defense (DOD) and National Armed Forces (TNI) to enhance performance and accountability for effective and efficient use of state funding. It is imperative that DOD and TNI move to better inform the public and high level government officials by increasing transparency on how the defense budget is allocated and spent. Current DOD and TNI performance evaluation tools and financial management measurement and reporting methodologies are ineffective, particularly because they do not link performance assessment to the budget and the budget process. Reform is needed to implement Performance Based Budgeting (PBB) to create direct linkages between allocation of resources in the budget, performance measurement, and strategic planning relative to defense policy objectives so as to bolster public accountability for the DOD and TNI. This thesis analyzes implementation of the Government Performance Results and Act of 1993 in the US Federal Government and specifically in the US Department of Defense, to develop a PBB model for the Indonesian DOD/TNI. The thesis addresses critical factors and the steps and processes necessary to create a performance-based budget including strategic planning, performance measurement, and methods to link performance to budgets.