Tracking Public Expenditure:A Guide

Waly WaneDevelopment Research Group

The World Bank

Are You Being Served?

June 2009

Presentation Overview

Why PETS PETS Key Features PETS and Resources Allocation RulesAn Example: Tracking in ChadLessons to datePETS 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 executionImprove 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” approachSurvey 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

MoF

Sub-nationalLevel 1

SDU

SectorMinistry

Capitation grant

MoF

Sub-nationalLevel 1

Sub-nationalLevel 2

SDU

SectorMinistry

Budget allocation

Contracting of staff

Procurement of materials

Procurement of other inputs

Donor contributions

Soft Allocation Rules Donor

contributionsMoF

Sub-nationalLevel 1

Sub-nationalLevel 2

SDU

SectorMinistry

Budget allocation

Procurement & distribution of materials

and other inputs

Contracting & allocation of

staff

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 conceptSerious 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 riskyNecessary to triangulate the dataTracking 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

Health Sector Ressources Distribution

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100

Non-Wage Recurrent Total Recurrent

% B

ud

get

MoPH

Initial DRH Allocation

Effective DRHS Alloc.

Provider Ressources

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

0

100

200

300

400

500

600

700

800

900

1000

Mil

lio

ns o

f C

FA

Fra

ncs

0

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10

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Perc

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tag

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eceiv

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Initial Allocation

Resources Received

Percentage

Average

An Example: Tracking in Chad

Public Resources Reaching Health Centers

We estimate from reports of heads of facilities that they received about 50 million CFAF of medical materials accounting 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

expenditures in 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?

01,

000

2,00

03,

000

4,00

05,

000

Public

Privat

e fo

r pro

fit

Not-fo

r-pro

fit

NGO

Visit Tests

Drugs

020

4060

8010

0pe

rcen

t

Public

Privat

e fo

r pro

fit

Not-fo

r-pro

fit

NGO

Visit Tests

Drugs

Patients' Payments at the FacilityMkup Mkup Mkup Mkup Comp

Rec. Pub. Res -27.9** -23.3** -15.9** -19.0*

Private 30.9** 20.6* 14.7* 25.6 0.3*

Competition 9.7*** 13.4** -16.1

Other Controls NO NO YES YES YES

R-squared 0.03 0.04 0.06 0.16 0.5

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

levelInformation 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