Evaluation of the Decision making process of the Mexican federal budget. MSD Model

1. Evaluation of the Decision making process of the Mexican federal budget.MSD Model • AGUSTÍN CASO RAPHAEL DIRECTOR ADJUNTO DE EVALUACIÓN DEL DESEMPEÑO

2. MACROECONOMIC INDICATORS Mexico´s recent public finances reflect an era of fiscal responsibility Over the past fifteen years, Mexico has undergone significant economic and political reforms. This period has witnessed important improvements in the economy and of public finances: Formal employment generation (thousand of employments) Aggregate supply and demand, 2012 (%) Source: INEGI Source: InstitutoMexicano del Seguro Social

3. MACROECONOMIC INDICATORS Main numbers of the Mexican economy at the beginning of fiscal year 2013 Fixed Gross Investment (%) Inflation (%) Source: INEGI Source: INEGI Exchange rate (pesos per dollar) Treasury Bonds (%) Source: Bank of Mexico Source: Bank of Mexico

4. MACROECONOMIC INDICATORS Main numbers of the Mexican economy at the beginning of fiscal year 2013 Public deficit without Pemex investment (% of GDP) Country Risk Source: Ministry of Finance of Mexico Source: JP Morgan

5. MACROECONOMIC INDICATORS Mexico´s recent public finances reflect an era of fiscal responsibility… • Two decades ago, the situation of the Mexican economy was significantly different: • In August 1982, the debt crisis hit Mexico and the bailout came at a very heavy cost. • In 1995, the peso crisis had once again catastrophic consequences. • The government embarked in a comprehensive economic policy to foster economic growth with monetary stability. • The good economic and financial records have been achieved by means of: • Strengthening the monetary system, • Enhancing fiscal sustainability and the efficiency and effectiveness of public spending, • Improving the accountability of public expenditure at the national and sub-national levels; and • Implementing a sound Performance Evaluation System (SED)

6. BUILDING A M&E SYSTEMThree stages of development • Mexico’s path to a Performance Evaluation System (SED) can be divided into three periods: • 1970’s to 1990’s: Limited and isolated efforts of evaluation, concentrated in specific areas of the public administration (e.g. education, agricultural policy). • Late 1990’s: Budget System Reform; New Programmatic Structure (NEP), Integral Process of Planning and Budget (PIPP); Evaluation of Social Policy. • 2006-2007: Institutionalization of M&E across the federal and sub-national governments. Wider use of institutionalized, law binding, whole-of-government single evaluation system. • The landmark 2006 Federal Budget and Fiscal Responsibility Law and the 2007 Integral Fiscal Reform fostered the: • Creation of the Performance Evaluation System (SED) • Legal framework for performance budgeting at the Sub-national and Local levels • Accounting and financial harmonization across all levels of government: Federal, Sub-national and Local

7. BUILDING A M&E SYSTEMGovernment Major Fiscal Reforms It also established: • A balanced-budget rule and modified the congressional budget approval process; • Principles and rules for the evaluation of investment projects; • Required performance indicators to be included in the federal budget; • Called for the establishment of Guidelines for the External Evaluation of Federal Programs; and • Set out strict rules for controlling personnel and current expenditure for a more efficient execution of public expenditure.

8. BUILDING A M&E SYSTEMGovernment Major Fiscal Reforms The 2007 Integral Fiscal Reform (IFR), a wide-reaching reform package: • Induced tax reforms and modified the fiscal framework between the states and the federal government: • Established the framework for performance budgeting at the Sub-national and Local levels. The 2008 Government Accountability Act established accrual accounting and financial harmonization across all levels of government: Federal, Sub-national and Local. • By 2014, we shall have accrual-based accounting registries, account catalogues, and accounting manuals, at both the Federal, Sub-national and Local levels.

9. THE SED The government´s effort to improve the efficiency and effectiveness of Public Programs The SED relies in a comprehensive programming and budgeting architecture: The Budgetary Program (BP) is the main link between programming, budgeting and M&E (programmatic category for organizing, in a representative and homogeneous way, the resource allocations of federal program in charge of spending ministries and agencies in order to achieve its objectives and goals). The SED has two main components: • The evaluation of BPs and public policies by means of: • Performance Indicators (strategic indicators) to measure program outputs and outcomes, • Program and policy evaluations, carried out as part of the Annual Evaluation Program (AEP). • The evaluation of the management processes and public goods and services delivery, by means of the Program for a Close, Modern Government

10. PbR-SED The relationship of the SED to the Budgeting for Results Strategy and the NDP is represented in the following figure: National Development Plan National Development Plan 6 years within a 20 to 25 years time frame perspective 6 years within a 20 to 25 years time frame perspective • Links budgeting with • the NDP, its objectives and programs. • Strategic objectives. • Logic Framework Methodology. • Objectives, goals and indicators. • New budgeting process and organization. • Resource allocations based on results. BUDGETING FOR RESULTS (PBR) Broad alignment: NDP " • Performance Evaluation System • (SED) Sector Programs " Budgetary programs Evaluation of social Development programs Evaluation of Budgetary Programs and Policies Budget Indicators Program for a Close & Modern Government ANNUAL EVALUATION PROGRAMME IMPROVEMENT COMMITTMENS

11. PbR-SED Stakeholders

12. PbR-SEDBudgeting for Results is tied to the National Development Plan… The objectives that all the programs must achieve are identified by the National Development Plan (NPD). NATIONAL DEVELOPMENT PLAN NATIONAL TARGETS / TRANSVERSAL STRATEGIES PROGRAMS DERIVED FROM NDP OBJETIVES INDICATORS STRATEGIES TARGETS ACTION LINES BUDGETARY PROGRAMS

13. THE BUDGETING FOR RESULTS ANNUAL CYCLE • Link of sector program to the National Development Plan • Ministries and agencies strategic objectives (SO) setting PLANNING • Program structure authorization • Budgetary programs definition • MIR/LFM • Strategic and management indicators PROGRAMMING RESULTS BUDGETING • Results based Budgetary appropriations • PIPP link • Administrative performance and public expenditure improvements SPENDING AND CONTROL • Monitoring reports. • Following up indicators. FOLLOWING UP • Specific outcome commitments and improvement of administrative performance EVALUATING (SED) • Public accounts with results. • Reports to Congress. REPORTING ACCOUNTABILITY

14. THREE STAGES OF SED The SED has followed a three-stage process: a) SED Implementation Actions taken during 2007 and 2008 to establish and implement the principles, concepts, methodologies, guidelines, procedures and systems that support SED operation. The SED implementation phase was audited by the Federation Superior Audit Office, audit branch of the Federal Congress, in 2010.

15. THREE STAGES OF SED b) SED Consolidation From 2009 onwards, the main goal has been to expand and improve the quality of the SED, using performance information for planning, programming, budgeting and resource allocation and for streamlining budgetary programs. The SED consolidation phase was audited by the Federation Superior Audit Office, audit branch of the Federal Congress, in 2011.

16. THREE STAGES OF SED c) Support to Sub-national governments The Federal Government established a program, with the support of the World Bank (WB) and the Inter-American Development Bank (IADB) to implement PBR-SED in Sub-national governments. PbR-SED diagnoses for the implementation of the SED in 31 states as well as in the Federal District were performed in 2010 and 2012.

17. SUB-NATIONAL GOVERNMENTS: RELATIVE ADVANCE IN SED IMPLEMENTATION (2010-2012)

18. Convenios con EntidadesFederativas PBR SED IN SUB-NATIONAL GOVERNMENTS • Budgeting for Results Performance Evaluation System • Legal Framework • Planning • Programming • Budgeting • Exercise and Control • Training • Transparency • Evaluation • Performance Indicators • Use of Information for decision making • Transparency in general • Citizen Language • Budget Transparency 18

19. PHASES OF THE SED –PERFORMANCE EVALUATION UNIT (UED) SETTING • Definition of public expenditure policy. • Performance Evaluation System (SED) coordination. • Rules and methodologies for underwriting performance improvement tools at the institutional level. • National Development Plan (PND) sector, special and regional program dictamination. • Performance evaluation and planning for results-oriented budget planning. • Federalized resources (transferred to Sub-national and local governments) M&E.

20. PHASES OF THE SED –PERFORMANCE EVALUATION UNIT (UED) SETTING • Performance information for budgetary decision-making mechanism (PIPP). • Synthetic Model of Performance Information (MSD) improvement.

21. PHASES OF THE SED – STRENGTHENING TRANSPARENCY IN BUDGET INFORMATION • Website creation with useful information on public spending. Elements: • Budget Integration information in one system. • User´s easy access. • Data Warehouse forbudget information. • Ministry of Finance portal linking all institutional systems. • www.transparenciapresupuestaria.gob.mx

22. MONITORING AND EVALUATION Monitoring Evaluation • Continuous improvement of MIR. • MIR budgetary programs coverage expanded. • 75.7% of programmable spending with performance information. • Annual Evaluation Program (PAE). • External and independent evaluations. • 883 external evaluations since 2007.

23. PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD) • The Performance Information Synthetic Model (MSD) is a tool for assessing the performance of budgetary programs. • Budget decision-making based on Budgetary programs. • Information to improve objectives, indicators and targets. • Possible synergies or overlaps identification. Purposes

24. PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD) • What is the Performance Information Synthetic Model-MSD? • The MSD is an instrument for budgetary evaluation which gathers the main performance information of budgetary programs, in order to know their trend. • What is the purpose of the MSD ? • That the agencies of the federal public administration: • Have elements for budget allocation decision making based on program results. Justify any proposed increases or decreases in budget allocations • Use the information to improve the goals, indicators, targets and issues arising from external evaluations • Identify positive externalities and potential duplications in order to strengthen budgetary programs • Present information in a clear and simple language that allows citizens to know and understand programs performance • What is the overall assessment? • To obtain the overall performance rating of each budget program a value range from 1 to 5 is established, with 5 representing the highest performance

25. PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD) • What elements of evaluation does the MSD consider? • Budgetary efficiency (2008-2011) • The efficiency in budget spending for each budget program for the past 4 years • The difference between the authorized and spent budget in order to determine the degree of under-spending or over-spending • Government priorities • Takes into account government priorities according to what is established by law • Results from the analysis of the Indicators for Results Matrix (MIR) 2009-2011, taking into account three criteria: • Quality of the MIR according to an external evaluation • Ratio between the achievement of goals and the budget increase • Achievement of determined goals • External Evaluations • It includes the assessment of external evaluators, taking also into consideration the lack of evaluations as an incentive for contracting evaluations • Recommendations of external evaluations (ASM) • The degree of progress in implementing the recommendations of external evaluations is taken into account.

26. PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD) • How is the overall assessment done? • For each budget program a score is recorded for each one of the items considered and a final performance rating is obtained. • Outcomes: • The Ministry of Finance convenes meetings with program managers in order to analyze performance results. Information is analyzed by both parties in order to improve the budgetary cycle and agreements are reached. From these meeting the next results have been achieved: • Improvement of the MIR • Proposals for new external evaluation • Elimination of duplicated programs • Improvement of budgetary structure • Compaction of programs • Improvement of programmed goals • Improvement of performance information • Review of on going external evaluation recommendations • Compliance with budgetary allocations • Resource re-allocation • Increased performance transparency

27. BUDGETING PROGRAMME PERFORMANCE COMPARISSON 2011 - 2012 Comparative Performance High Medium Medium High Low Medium-Low Performance

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