1. 1 Country Systems Chilean Experience 1300 New York Avenue, Washington, DC 20577 Phone (202) 623-2874 Fax (202) 623-157901 Inter- American Development Bank VPC/VPC Fiduciary Forum April 29 –May 3, 2008

2. 2 Chile has an advanced national System that support management, transparency and accountability in the public sector. In 2003, Administrative Contracts and Supply of Services Law (Law N° 19.886) Transparency; Efficiency; Fair competition; and, Due Process. In 2001 – Public Financial Management Information System (SIGFE), Working in 160 (out of 190 entities). Summary of the Chilean Case

3. 3 General Controller (CGR): Autonomous entity; Independent; Not subject to Supervision by Executive Power or Congress; Conflicts due to Bank’s Procurement policies and the project management system: The Executing Agencies can use Country Systems; Duplication by General Controller (CGR); and Complaints related to delayed, lack of flexibility and transparency. Summary of the Chilean (Cont.)

4. 4 Change project management and supervision approach: Country Fiduciary System; Project Management by Results: In order to: Establish compatibility between Chile-Compra and Bank’s Procurement Policies; Enhance SIGFE functionalities for Bank’s project management; Pilot Project with CGR; Pilot Project to increase flexibility and simplification. Objective

5. 5 CGR Pilot on Simplification Project Management SIGFEChilecompra Country Systems to support IDB Project Management

6. 6 ChileCompra: Public Procurement of Goods and Services; Managed by Public Procurement Office. Public Financial Management System (SIGFE): Unique, integrated and standardized information system; Integration of accounting, budget and treasury processes; Registry of commitments. CGR: Public General Controller Entity; Independence from executive branch and other public entities; Oversees judicial system. Country Systems

7. 7 Pilot program (2006): Adjust the Bank’s supeorvision model to Chile’s fiduciary capacity; Rely on the work performed by the CGR; Assist project risk; Create project management tools; Modify the contracts of the four pilot projects (2006). Pilot Program to Simplify the Supervision Procedures Chile’s Operations

8. 8 ChileCompra (partial used accepted): Works, Goods and General Services: Publication up to NCB thresholds. Consultant Services: NCB Thresholds at US$ 500,000. Publication of expression of interest through ChileCompra (above US$ 200,000 UNDB and Bank’s Website). CPAR in process. Achievements

9. 9 Creation of Transaction Centers; Pilot programs with centralized execution; Policy changed to harmonized with World Bank; Harmonized model reports for SIGFE; State-wide implementation; Funcionality - Asistente Bancario-. Achievements -SIGFE

10. 10 Pilot Framework; Include procurement processes; Interim project reports audited by CRG; Support internal control strengthening; Carry out adequate controls. Achievements -CRG

11. 11 Pilot Program (Pending Evaluation): Pilot program agreed; Risk analysis applied; Loan Contracts modified; PEP implemented through Microsoft Project; Faster Procurement reviews; Established project monitoring; Supervision model modified. Achievements

12. 12 CHILECOMPRA: Not ready to accept: Insert a module for IDB; Allow paper Bids (electronic only); Apply expression of interest (without short list). Does not include works as part of public procurement (until 2010). Procured US $4.5 billion in 2007 (IDB only US $32 million, i.e.: 0.7% of the total procured); For 2008, transaction of US$6.5 billion expected. Challenges

13. 13 SIGFE: Resistance to change; Administrative control through non-line units; Delay in implementation of exchange rate; Delay in implementation of reports; Reconciliations not done by SIGFE; MDBs participation is too low to justify system changes. Challenges

14. 14 CRG: Portfolio increase – CGR work load increase; CGR has to audit Bank’s projects (even though they would not need to be audited under CRG risk matrix; Authority and auditors changes in 2007; Demand by society, focus on these new requirement. Pilot Program: Entering into effect delayed; Resistance to moving to Ex post; Implementation of PEP affected by the instrument; Not recognizing use of national legislation is in contradiction to the implementation of pilot. Challenges

15. 15 Formalize commitments; Ensure results in the short-term; Be flexible with respect to a project management instruments; Support country systems with TCs and Loans; Be prepared to take certain risks (controlled); Change in the supervision approach and added value are more than just savings; The importance of the subject and incentives have to be coherent and consistent; Work as a team, be persistent and patient. Lessons Learned

16. 16 Accept ChileCompra as a whole; Ensure financial report on the projects during 2009; Have all projects in SIGFE (currently not harmonized by mid 2010); Implement reconciliation functionality in SIGFE by 2010; Agreed among borrower, CRG and IDB on an audit system based on the risk matrix by the CRG; Assess pilot program and introduce corresponding adjustments; Pay attention to the Government’s Internal Audit Counsel as it becomes an other National System. Challenges going forward