Peru Public Expenditure Tracking Survey José R. López-Cálix, LCSPE Highlights from PER Task Managers PEAM Core Course January 14, 2004

PERU PETS First in LAC Covered 2 sectors: Municipal Spending and Education (in reality 2 PETS) Municipal PETS covered 2 aspects: overall transfers (3 types) and the “Glass Of Milk” program Education was a mix of a QSDS and a PETS on payroll and G&S budget

Literature: Previous PETS Results 1.Leakages are bigger in non-recurrent spending 2.Leakages depend on the institutional structure (location of executing units, spending capacity and organization is critical) e.g. Uganda (local government), Ghana (transfer between CG and local) 3.Leakages are bigger in Education than in Health 4.Factors like children’s absenteism and ghost teachers have significant fiscal costs (Peru: US$100 million a year=annual investment level)

Motivation of the Study Social spending increased from 3.9 in 1993 to 6.9 % of GDP in 2002 Protected pro-poor spending was about 2 percent of GDP Big Questions: Where is the money? And why do we not see major progress in social outcomes? Hypothesis: Poor targeting and leakages are the answer. How to prove it? PETS

Issues on Spending Effectiveness Gov spends on wrong goods and on a non-poor population Gov spends on right goods and on poor population Gov spends on right goods and on poor population, but these are not delivered Gov spends on right goods and on poor population but these are “misused” by beneficiaries

The Glass of Milk Program Created by President Garcia (1984) under a populist platform—US$100 million a year (3.5% of total social spending, 20 % of extreme poverty) Direct target: children 0-6 years and pregnant mothers and in post maternity. Previous findings: No nutrition impact Some progressive targeting Poor official audits Important network of CSO (Mothers’s Committees)

Vaso de Leche: Leakages Municipality Municipality-VdL team Committee VdL Household Central Government Proceso de Compra Leak 1 Leak 2 Leak 3 Leak 4 Beneficiaries Leak 5

Conclusions

Policy Recommendations Redefine rules: start by the basics: a good registry (Mothers’ Ctes and beneficiaries) Good case for “conditioned transfers” Cash transfer program could be an alternative (deviation vs leakage is an issue) Mis-targeting needs different tests Proper auditing procedures are the solution to the lack of controls