Mr. Guilherme Gomes Dias Executive Secretary of the Ministry of Planning, Budget and Management of Brazil

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1 Mr. Guilherme Gomes Dias Executive Secretary of the Ministry of Planning, Budget and Management of Brazil International Forum on Ensuring Accountability and Transparency in the Public Sector OECD - OAS - MP Brasília, 5-6 December 2001

2 BACKGROUND Macroeconomic stability Recovery of the planning process New fiscal regime accompanied by other structural reforms More transparency and social control over the formulation and execution of public policies, including the intensive use of decentralization practices

3 INNOVATIONS IN THE BUDGET PROCESS AND IN THE MEDIUM-TERM EXPENDITURE FRAMEWORK (PPA) Output-oriented budgeting: focusing on programs instead of accounting classifications Strategic approach and ranking of priorities the logic of national integration and development regions Partnerships with the private sector; Generation of associated investments; Management Information System (SIG) has an interface with the Integrated Government Financial Management System (SIAFI) transparency and on- line information.

4 INNOVATIONS OF THE FISCAL RESPONSIBILITY LAW (FRL) IN THE BUDGET GUIDELINES LAW (LDO) á á Strengthening of the evaluation and monitoring mechanisms of fiscal performance: Fiscal Targets Annex (three-year targets for revenues, expenditures, public debt, primary and nominal balances) Fiscal Risks Annex (contingent liabilities and fiscal risks sensitivity analysis)

5 RESPONSIBLE FISCAL MANAGEMENT Budget Process planning (PPA, LDO, LOA) + FRL rules and ceilings (personnel, debt,...)...) Compensation and deviation-correction mechanisms Transparency and social control + Sanctions: institutional and personal

6 FRL INNOVATIONS: TRANSPARENCY AND SOCIAL CONTROL Principle: transparency during the preparation and broad dissemination of budgetary and accounting documents; Public access electronic means all the information of the three levels of government (PPA, LDO, LOA, rendering of accounts, preliminary audit reports and fiscal management reports); Bi-monthly summary reports on budget execution and four-month fiscal management reports are required.

7 FRL INNOVATIONS: TRANSPARENCY AND SOCIAL CONTROL National Consolidation of Accounts (National Treasury Secretariat); Monthly dissemination by the Ministry of Finance of the listing containing the members of the Federation which exceeded the debt ceilings.

8 SANCTIONS FOR NON-COMPLIANCE WITH TIMELINESS (30 days after the reference period) For the annual dissemination of the Summary Report on Budget Execution and the Fiscal Management Report: Receiving voluntary transfers and engagement in credit operations will bot be allowed, except for refinancing the securities debt.

9 FRL CONTROLS Internal control (Federal Control Secretariat monitoring of programs, inspections, and auditing) + External control: (Audit Courts and Legislative - auditing and inspections) + Attorney General s Office and Judiciary (judgement and application of penalties) + Market control (risk evaluation - compliance with the FRL) + Social Control of the democratic process (polls)

10 ACTIONS TOWARDS THE IMPLEMENTATION OF THE FRL Technical assistance and financial cooperation to the municipalities for the compliance with the FRL (ART.64): National Training Program for municipalities, co- financed by the World Bank; National Plan for Modernizing Subnational Audit Courts co-financed by the International Development Bank;

11 ACTIONS TOWARDS THE IMPLEMENTATION OF THE FRL Credit lines to municipalities: Tax and social sectors management modernization program (PMAT- BNDES); National Program to support managerial and fiscal administration of municipalities (PNAF - IDB/ Ministry of Finance/ Caixa Econômica Federal).

12 ACTIONS TOWARDS THE IMPLEMENTATION OF THE FRL Publications: Books: 19 books, copies of technical material distributed among mayors, governors, congressmen, ministers, members of the state courts, secretaries of finance, financial market... CD ROMs: contain all the publications with the collaboration of BNDES, CD-ROMs were already distributed; Mailing list: periodic information is sent to people and s.

13 ADMINISTRATIVE ACTIONS TOWARDS THE IMPLEMENTATION OF THE FRL Preparation and presentation of the following draft laws: á to the National Congress: the draft law which establishes ceilings for the federal secutiries debt (art. 30, II); á to the Senate: the draft of a resolution with the gobal ceilings for the consolidated debt of the Federal, state and municipal governments (art. 30, I); á to the National Congress the draft law which creates the Fiscal Management Committee (art. 67);

14 THE FRL AND THE MUNICIPALITIES Sample of municipalities (75% of the cities and 86% of the country s population): Rendering of accounts: 85% have sent their balance sheets to the Ministry of Finance and almost all of them have sent them to their Audit Courts; Charge the taxes according to the Constitution: 99% of the municipalities generate their own revenues (R$ 12,5 billion) exceeding the Municpalities Participation Fund (FPM); Personnel expenditures: 94% of the municipalities complain with the law (43% of the current revenue is the average national expenditure);

15 THE FRL AND THE MUNICIPALITIES Low indebtedness: 52% of the current revenue is the average size of the debts; 38% of the cities have no banking loans; two thirds of the total municipal debt belongs to only 9 cities; Save to finance investments (R$8 billions): 30% of the investments stem from credit operations and capital transfers; Commitment to social responsibility: half of the budget is spent with education (27%) and health (22%).

16 RESULTS AND PERSPECTIVES In the last years Brazil has achieved a high degree of fiscal transparency, together with major improvements in the management of its public finances: Broad coverage of fiscal statistics and targets high quality, timeliness and detail; Budget and planning process reforms have significantly increased the realism and transparency of the federal budget; Brazil is at the forefront of countries at comparable level of development in the use of electronic means for the dissemination of statistics and for the delivery of public services (e-government).

17 RESULTS AND PERSPECTIVES Medium-term agenda: Decrease of overlapping functions in various levels of government (transportation, water and sanitation); More detailed sensitivity analyses will be included in the Fiscal Risks Annex of the Budget Guidelines Law; Preparation of a national database with all the financial statistics of subnational governments on line with the audit courts; Implementation of an evaluation and rolling forward cost estimates budget system, including continuing spending programs.