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

Soft Allocation Rules Donor contributions MoF Sub-national Level 1 Sub-national Level 2 SDU Sector Ministry 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 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: 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 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? Mkup Comp Rec. Pub. Res -27.9**-23.3**-15.9**-19.0* Private 30.9**20.6*14.7* * Competition 9.7***13.4**-16.1 Other Controls NO YES R-squared

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