Fiscal Transparency and Performance Budgeting: The Case of Brazil

Ministry of Planning, Budget and Management
Fiscal transparency and

performance budgeting :
the case of Brazil
Ana Teresa Holanda de Albuquerque

Director of Fiscal Affairs Dep. to the Federal Budget Secretariat
Ministry of Planning, Budget and Management of Brazil
Feb, 2006
BACKGROUND
• 1995-2000 fiscal reforms: refinance of states debt conditioned to fiscal adjustment

programs; broad privatization program. Along with the consolidation of the Real Plan
and the adoption of inflation targeting approach.
• 1998: First step toward the performance budgeting approach. Reform of budget
management: change of program definition; introduction of program
evaluations; designation of a program manager; creation of a program
evaluation data bank system.
• May 4th, 2000: The President enacts the Fiscal Responsibility Law (FRL): clarity of
roles and responsibilities; very comprehensive fiscal definitions;
• Through the FRL is was possible to advance on the agregates control and on the
disclosure of this information to the public.
• Since 2000, the Multi Year Plan (4 year) and its annual reviews are prepared through
the performance budgeting approach. The process of programs evaluation is still
being absorbed by the public administration.
MAIN GOALS PROVIDED BY THE FISCAL RESPONSABILITY LAW
• Structural change of the fiscal regime:
Ñ Long-term fiscal adjustment.
Ñ Introduction of new concepts, such as responsibility

and transparency.
• Broad and diversified range:
Ñof themes: harmonizes and consolidates different

rules for public finance equilibrium and organization.
Ñof space: the 3 levels of government, as well as the

Executive, Legislative and Judiciary branches.
Ñof time: inter- temporal.

FISCAL MANAGEMENT
Budget
BudgetProcess
Processplanning
planning + FRL
FRLrules
rulesand
andceilings
ceilings
(PPA,
(PPA,LDO,
LDO,LOA)
LOA) (personnel,
(personnel,debt,
debt,...)
...)
Compensation
Compensationand
anddeviation-correction
deviation-correctionmechanisms
mechanisms
Transparency Sanctions:
Transparencyand
andsocial
social +
Sanctions:
control institutional
institutionaland
andpersonal
personal
control
The Budget Process and the FRL
FRL
FRL––Fiscal
FiscalResponsibility
ResponsibilityLaw
Law
Multi-year
Multi-yearinvestment
investmentframework
framework--PPA
PPA
3-year
3-yearmacro
macroframework
framework&&fiscal
fiscaltargets
targets--LDO
LDO
Annual
AnnualBudget
BudgetLaw
Law--LOA
LOA
Expenditure
ExpenditureLimits
Limits&&Programming
ProgrammingDecree
Decree––(art
(art8-9
8-9LDO)
LDO)
FISCAL TRANSPARENCY
1. Recordkeeping and consolidation of accounts
• The public sector, direct and indirect organs, autarchies and

foundations, state-owned enterprises depending on the National
Treasury resources, as well as those of all the members of the
Federation.
• Expenditures must be registered on an accrual basis (settlement);
• The publication of general standards for the consolidation of public

accounts must be the responsibility of the Federal government’s
central accounting organ, until the fiscal management council is
established.
FISCAL TRANSPARENCY
2. Annual publication of accounts
• Municipalities consolidate their accounts and send them to the

States and to the federal government up to April 30th ; States
consolidate their accounts and send them to the federal
government up to May 31st ; the federal government consolidates
its accounts as well as all the others accounts ; publishes them
up to June 30th.
FISCAL TRANSPARENCY
3. Summarized budgetary execution report
• Will be published at the end of each two-month period, and will contain:
Ñ net current revenue
Ñ social security revenues and expenditures
Ñ outstanding commitments
Ñ actuarial projections for the general and public social security
systems
Ñ changes in public assets, showing sale of assets and use of
respective funds
Ñ justifications must be presented for funding commitments
limitations.
FISCAL TRANSPARENCY
4. Fiscal Management Report
• Will be published at the end of each four-month period, will be

signed by the heads of the branches of each level of government
and will contain:
• a comparison between the limits of total personnel expenditures,

consolidated and securities debt, guarantees granted and credit
operations, including those based on revenue anticipation;
• indication of corrective measures taken or to be taken in case any
of the limits is exceeded;
• statements, in the last four-month period of the amount of available
financial resources on December 31 and of the amounts recorded
in outstanding commitments of expenditures;
• Published up to 30 days after the end of the reference period.
FISCAL TRANSPARENCY
5. Sanctions
• The non-compliance with the annual deadlines for the publication

of these reports results in:
Öbeing prohibited from receiving voluntary transfers

Öcontracting credit operations, except those aimed at refinancing
securities debt
FISCAL TRANSPARENCY
6. Social control and market oversight
• Broad access by the public, as well as through the Internet.

• Social participation in the budgetary process.
• Every four months, the Executive branch evaluates the compliance with
the fiscal targets in a public hearing.
• The Ministry of Finance will disseminate, every month, on the Internet, the
members of the Federation which have exceeded their limits on debt.
• Social control on the democratic process + internal control and audit

courts, the Legislative/Judiciary/Office of the Public Prosecutor +
market oversight (honors the good fiscal managers with more access
to credit facilities)
PERSONAL SANCTIONS (ORDINARY LAW)
• Every citizen is a legitimate part for denunciation, where the unfounded

denunciation is considered to be a crime.
• Applied to the the Heads of the three branches.
• Punishments: loss of mandate, of position, barring from public office and

imprisonment.
• In several cases, the governors are punished by omission

THE PERFORMANCE BUDGETING APPROACH
2000 : introduction of the concept of performance budgeting in the budget

management.
The 2000-2003 Reform

Change of program definition; Plan and Budget with same
classification
Introduction of program evaluations and designation of a program
manager
Transparency: Annual Programs Evaluation Report
2004-2007 Plan
1. Proposals to broaden access by the public
2. The 2007 budget Proposal must be compatible with the 2005 Program
Evaluation Report
Multi Year Plan: management process
Evaluation
Programs
review
Information
Monitoring
Programs Impact on
execution society
Problem or
Planning public demand
through
Programs
Multi Year Plan: management process
Strategic guidelines
Strategies
Guidelines (3)
Challenges (30)
Goverment actions Programs (345)

What is a program?
9The PROGRAM is created to respond to a demand of society. The PROGRAM
specifies TARGET INDICATORS related to its OBJECTIVES
9Each PROGRAM identifies required ACTIONS to accomplish its OBJECTIVES.
The ACTIONS can be defined as PROJECTS, ACTIVITIES and SPECIAL
OPERATIONS. The ACTIONS specify its VALUES and QUANTITY PRODUCTS.
Program
Actions
Project Activity Special operations

Product
Value (R$)
Evaluation Steps Ministry of

Planning
Sectorial
Ministries Plan Evaluation
Sectorial
Manager Evaluation Avaliação do
• macroeconomic
Programa
Program enviroment
Evaluation •Results
• Results •Conception as a
•Plan management
• Conception whole
• Implementation •management
ANNUAL PROGRAM EVALUATION REPORT

Evaluation Report features:
• Self-evaluation (by the manager of the program)
• Three levels of evaluation: manager, sectorial ministry and

Ministry of Planning
• Integrated to the Multi Year Plan and the Annual Budget
• Sent to the Congress on Sept, 15 th.
• Released to the public through the internet

http://www.planejamento.gov.br/planejamento_investimento/conteudo/relatorio_ppa/relatorio_avaliacao_ppaEX2005.htm
Evaluation Report: Strong points
¾ Introduction of the performance budgeting approach
¾ Exposure of the constraints to the implementation of

the programs
¾ Permits access by the public (transparency)

Evaluation Report: Weak points
z The evaluations are not extensive enough
z The annual budget does not use the evaluations

feedback (2007 change)
z Poor quality of information and weak indicators
z Insufficient timely information and evaluation

Programs, actions and indicators
2000 2001 2002 2003 2004

Programas 389 392 380 392 394
Ações 4.461 3.729 3.708 3.980 4.125
Indicadores 598 662 663 663 674
Fonte: Sigplan
Programs with displayable indicators and
indicators timely collected by the managers
Indicadores 2000 2001 2002 2003 2004

Com apuração 34,00% 41,00% 36,00% 39,00% 39,00%
Programas com indicadores

35,00% 45,00% 41,00% 41,00% 24,00%
apurados
Fonte: Sigplan
Quantity targets compliance
Cumprimento de Metas Físicas
58%
53% 54%
47%
33% 31% 34%
23% 20% 26%

18% 18%
17%
14% 11% 16%
12%
9%
5% 4%
2000 2001 2002 2003 2004
Acima do previsto Dentro do previsto

Abaixo do previsto Muito abaixo do previsto
Flow of fundings
Fluxo de Recursos
48%
42% 44% 43%
38%
34% 32%
30% 32% 30%31%
21% 20% 24%
17%
3% 4% 3% 3% 1%
2000 2001 2002 2003 2004
Fluxo compatível com a programação

Descontinuidade sem prejuízo à execução orçamentária
Descontinuidade com prejuízo à execução orçamentária
O programa não demanda recursos de origem orçamentária
Means of public access
Existência de Canais de Participação

Social
76%
68%
62%
2002 2003 2004

Proposals to extend public access for 2004-2007
1. Selection of a set of programs to public scrutiny;

2. Release questions related to programs framework and
management;
3. Discussion about the scrutiny results with the sectorial
ministries;
4. Set up public hearings;
5. Embrace the final conclusions in the Evaluation Reports, in the
Plan reviews and in the Budget Proposals.
Program: Prevention of AIDS and other STD
Indicators reference data collected target compliance
date indicator 2004 2007 probability

rate mortality AIDS* 12/31/98 6,70 6,40 5,09 medium
rate incidence AIDS* 12/31/00 14,20 19,50 10,30 medium
rate detection congenital syphilis (%)** 12/31/03 25,00 50,00 70,00 high
* (1/100.000 persons)
** notification over estimate
Selected actions: quantity analysis 2004

Description product predicted ocurred
AIDS medical service n. persons 200.000 283.700
AIDS drugs provided n. patients 161.000 154.000
AIDS prevention n. condoms 400.000 187.000
Manager Evaluation
1. RESULTS
. AIDS: rate of incidence: the enlargement of the research coverage
biases the rate of incidence in 2004. Still high level;stable among
men, but increasing among women; the AIDS incidence is 2,37
greater among those who adopt irregular use of condom; rate of
mortality: stable; increasing among women in the South, North and
Northeast regions.
. Syphilis: improvement on congenital syphilis notification;
however, only 18% of the universe of pregnant women with
syphilis have had their partner treated.
2. CONCEPTION
. The actions were not sufficient to accomplish the program
objectives
. AIDS prevention comprehends several other procedures.
Manager Evaluation
3. IMPLEMENTATION
. The actions were compromised by transfer delays from the

Treasury;
. The drugs provision reaches 100% of the patients demand. The
lower number of ocurrencies might be related to AIDS incidence
reduction;
. The lower number of condoms released was due to bureaucracy;
. Most of the human resources are international organizations
employees which compromises the actions continuity.
Manager Evaluation
1. PUBLIC ACCESS
. Creation of a Forum ONG/AIDS; Call Health; good access in

www.aids.gov.br; AIDS Annual Commission:4 annual meetings.
2. RECOMENDATIONS
. To reorganize the bureaucracy on aquisition of inputs;

. To adequate budget cycle with the demands;
. To increase medical care of pregnant women partners;
. To ensure qualified and stable human resources.

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Ministry of Planning, Budget and Management

Fiscal transparency and

Ana Teresa Holanda de Albuquerque

• 1995-2000 fiscal reforms: refinance of states debt conditioned to fiscal adjustment

• Structural change of the fiscal regime:

Ñ Long-term fiscal adjustment.

Ñ Introduction of new concepts, such as responsibility

• Broad and diversified range:

Ñof themes: harmonizes and consolidates different

Ñof space: the 3 levels of government, as well as the

Ñof time: inter- temporal.

The Budget Process and the FRL

1. Recordkeeping and consolidation of accounts

• The public sector, direct and indirect organs, autarchies and

• Expenditures must be registered on an accrual basis (settlement);

• The publication of general standards for the consolidation of public

2. Annual publication of accounts

• Municipalities consolidate their accounts and send them to the

3. Summarized budgetary execution report

• Will be published at the end of each four-month period, will be

• a comparison between the limits of total personnel expenditures,

• The non-compliance with the annual deadlines for the publication

Öbeing prohibited from receiving voluntary transfers

6. Social control and market oversight

• Broad access by the public, as well as through the Internet.

• Social control on the democratic process + internal control and audit

PERSONAL SANCTIONS (ORDINARY LAW)

• Every citizen is a legitimate part for denunciation, where the unfounded

• Applied to the the Heads of the three branches.

• Punishments: loss of mandate, of position, barring from public office and

• In several cases, the governors are punished by omission

 2000 : introduction of the concept of performance budgeting in the budget

 The 2000-2003 Reform

 Transparency: Annual Programs Evaluation Report

Multi Year Plan: management process

Goverment actions Programs (345)

Project Activity Special operations

Evaluation Steps Ministry of

ANNUAL PROGRAM EVALUATION REPORT

Evaluation Report features:

• Self-evaluation (by the manager of the program)

• Three levels of evaluation: manager, sectorial ministry and

• Integrated to the Multi Year Plan and the Annual Budget

• Sent to the Congress on Sept, 15 th.

• Released to the public through the internet

Evaluation Report: Strong points

¾ Introduction of the performance budgeting approach

¾ Exposure of the constraints to the implementation of

¾ Permits access by the public (transparency)

Evaluation Report: Weak points

z The evaluations are not extensive enough

z The annual budget does not use the evaluations

z Poor quality of information and weak indicators

z Insufficient timely information and evaluation

Programs, actions and indicators

2000 2001 2002 2003 2004

Indicadores 2000 2001 2002 2003 2004

Programas com indicadores

33% 31% 34%

23% 20% 26%

2000 2001 2002 2003 2004

Acima do previsto Dentro do previsto

2000 : introduction of the concept of performance budgeting in the budget

The 2000-2003 Reform

Transparency: Annual Programs Evaluation Report