Tracking Public Expenditure: A Guide

Tracking Public Expenditure:A Guide Waly Wane Development Research Group The World Bank Are You Being Served? June 2009

Presentation Overview • Why PETS • PETS Key Features • PETS and Resources Allocation Rules • An Example: Tracking in Chad • Lessons to date • PETS Next Steps…

Why PETS • Weak correlation between public spending and outcomes • Poor information systems and need for accountability mechanism • Need for better understanding of service delivery performance • Improve transparency and budget execution • Improve efficiency and poverty reduction impact of public expenditure

PETS - Key Features • Diagnostic tool for flow of resources through the system • Delays • Leakage • Data collected at all involved administrative levels and at the frontline provider • Quantitative versus perceptions

PETS - Key Features • No “standard” approach • Survey methods are complex and context specific • Design is difficult • Data collection based on records • Poor record keeping practices • Multiple sources of financing • Allocation rules are defining characteristic • Hard vs. soft allocation rules environments

Hard Allocation Rules Donor contributions MoF MoF Budget allocation Capitation grant Sector Ministry Sector Ministry Sub-national Level 1 Sub-national Level 1 Sub-national Level 2 SDU SDU Contracting of staff Procurement of other inputs Procurement of materials

Soft Allocation Rules Donor contributions MoF Budget allocation Sector Ministry Procurement & distribution of materials and other inputs Contracting & allocation of staff Sub-national Level 1 Sub-national Level 2 SDU

Tracking & Hard Allocation Rules • First PETS – Uganda 1996 • Zambia 2002 & Mali 2005 • Hard Allocation Rules make • Tracking easier & more reliable • Results more reliable, though… • Sampling issues still remain • Do Hard Allocation Rules reduce leakage? • Zambia’s leakage of rule-based resources is scant • Capitation grant leakage in Uganda (1996) is 87% • Leakage of books in Mali (2005) is 60% • In Uganda, information helped reduce leakage

Tracking & Soft Allocation Rules • Soft Allocation rules change the game • Leakage is not always defined • No denominator because what provider should receive does not exist • Need to broaden the concept • Serious sampling issues

Broadening the Concept of Leakage • Lack of allocation rules and no allocation on the budget for providers makes leakage in the traditional sense hard to come by • Leakage is here defined as the share of earmarked regional resources that effectively reaches them • Need to account for all public resources that 1) should and 2) do reach the regions

Administrative Data is Crucial • Primary Data collected from • Regional and District Health Administrations • Regional and District Pharmacies • Frontline Provider, Staff & Patients • Is important to address problems at the facility level such as staff morale, stock-outs of drugs, efficient use of resources, etc. • Secondary data is crucial to estimate “leakage” and hence effective public spending

Administrative Data is Crucial • Record keeping practices are often poor even within the administration, data rarely on magnetic support • Collect as much admin. data as possible, carry them, xerox them if necessary • Recall period over one fiscal year are risky • Necessary to triangulate the data • Tracking the “petty” helps build confidence in the data but it also has a cost

An Example: Tracking in Chad • Decentralized administrations, and Providers receive public resources under three channels: • Decentralized credits • Procured goods from the MoH centralized • Ad hoc allocations

“Leakage” Rates in the Health Sector

Figure 1: Official vs. Effective Expenditures by Regional Health Delegations • On average, RHDs received only 26,7% of their official non-wage budgetary expenditures from the MoH

An Example: Trackingin Chad Public Resources Reaching Health Centers • We estimate from reports of heads of facilities that they received about 50 million CFAF of medical materialsaccounting for 17.8% of materials received by all RHDs • Only 4 centers (2%) report receiving financial resources from the health administration in 2003. • Total value of drugs received by HC is estimated at 3% of the MOH official budget for drugs which has been fully executed.

Impacts of Public Resources • Do public expenditures have an impact on output in the health sector? • Public expenditures do have an impact …when leakage is controlled for. • Official vs. effective health expendituresin a regional delegation and utilization of health centers in Chad

Transmission Channels • How does the receipt of public resources improve outcomes? • Only one channel explored here is reduction in drugs costs which increase financial accessibility to health care

Transmission Channels • Drugs costs account for 65% of total costs • Mark-ups decrease with the receipt of public resources • Why would monopolistic providers that receive public resources reduce prices?

Lessons to date • Large discrepancies between budget allocations and actual spending • Uganda: 13 percent of intended funds arrived • Resource flows are endogenous to facility characteristics (rural vs. urban) • Tanzania: rural schools and health centers can expect longer delays and receive smaller proportions of funds • Resource flows are endogenous to resource type • Zambia: rule-based versus discretionary • Salaries less prone to leakage and delays than material

Lessons to date… • Decentralization matters • Senegal: central level responsible for delays • Senegal: leakages happen mostly at the local level • Information matters • Uganda: empowerment of users through newspaper campaign effective in reducing capture • Information System matters

PETS – Next steps… • Expenditure tracking only part of the story • Need to strengthen the facility component - QSDS • Understanding impact on households • Linking facility and household surveys

Tracking Public Expenditure: A Guide