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13 The Chilean Experience

Author(s):
Marc Robinson
Published Date:
October 2007
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Author(s)
Marcela Guzmán

In Chile, the Budget Directorate of the Ministry of Finance has over recent years sought systematically to improve the formulation, execution, and transparency of the government budget by increasingly focusing budget management—and public management more generally—on the results delivered by public expenditure. These management and budgeting reforms, referred to collectively as the Management Control System, comprise initiatives in the following areas: performance indicators; program and agency performance evaluations; the introduction of a new standard format for submission of results-oriented funding requests for public programs; agency management improvement programs linked to performance-based pay for staff; and agency performance reports.1

The Chilean system of performance management and budgeting has evolved under a presidential regime that grants the President of the Republic exclusive initiative with respect to bills concerning the financial and budgetary management of the central government. In particular, legislation having a financial impact may only be initiated by the executive branch. In the process of discussing and approving the budget, the National Congress may neither increase nor decrease the revenue estimate, and may only reduce expenditure. Consequently, parliament’s capacity to modify the budget is limited. This makes the executive branch responsible for administration and management of public finances. It has also led to the development of a system in which the budget has become the central instrument not only for funding decisions, but for public management reform.

The executive branch’s budgetary responsibilities are borne primarily by the Ministry of Finance,2 and within the MoF by the Budget Directorate. The Budget Directorate’s main function is to prepare the budget and apply budgetary policy in the framework of national plans and objectives. It manages budgeting formulation and execution. In the budget formulation the Budget Directorate works closely with spending ministries in meetings of technical groups and senior officials.

There are a number of other distinctive aspects of the Chilean experience, particularly:

  • The indirect method of using performance information in budget decisions?3 The link between performance information and decisions on resource allocation is in general neither mechanical (formularized) nor direct. In particular, poor performance does not necessarily lead to funding cuts. Formula funding is, however, used on a selective basis for certain services.4

  • The existence of various performance evaluation and monitoring instruments. The system currently in operation includes various performance management and evaluation instruments, which are being developed and used in a complementary and synergistic manner. The instruments are based on methodologies and formats of varying degrees of complexity and cost, with a view to meeting information needs efficiently and effectively.

  • Gradual development. The various instruments in use were introduced gradually, commencing with the introduction of performance indicators in 1994. They were introduced as part of the budgetary process, without the need for new legislation.

  • Information on both past performance and expected future performance is used—the former in the case of existing programs and activities, and the latter in the case of new investment projects and programs.

  • The identification of the objectives of expenditure. The structure of the budget classification classifies most (although not yet all) expenditure by function and objective.5

  • The degree of flexibility given to spending agencies. The rules governing agency operations, including the financial management regulations, provide a considerable degree of managerial freedom.6

Description of instruments, uses, and results7

Performance indicators

The introduction of performance indicators into the budgetary process in 1994 had the aim of making information on agency performance available in order to enhance the analysis used in budget formulation and in budget debates in the National Congress.

In the Chilean system, performance indicators are categorized according to the various performance dimensions (effectiveness, efficiency, economy, and quality) and also according to the steps in the results chain (processes, outputs, intermediate and high-level outcomes). Selected key performance indicators are submitted to the National Congress as part of the supplementary budget documentation which accompanies the budget bill. The performance targets are defined considering the budget funding provided for each of these key indicators.

The process whereby these key performance indicators and targets are identified, formulated, and monitored is detailed in Box 13.1.

The process of developing good indicators and targets took time. Particular progress was made during the period 2001-06, especially in the selection of better and more exacting targets. There was in this period an increase from 275 indicators covering 72 agencies in the 2001 budget to 1,552 indicators covering 136 agencies in the 2006 draft budget (that is, an average of 11.4 indicators per agency)8 (see Table 13.1). Of the total number of indicators formulated, 19 percent are process-based indicators, 63.1 percent are output-based, and 17.7 percent are outcome-based (either intermediate or high-level outcomes).

Table 13.1.Growth of performance indicators, 2001-05
YearNo. of indicatorsNo. of agenciesAverage per institution
2001275723.8
20025371094.9
20031,0391119.4
20041,68413212.8
20051,58813311.9
20061,55213611.4
Source: Budget Directorate.
Source: Budget Directorate.

Box 13.1.The use of performance indicators in the budget process

The use of performance indicators in the budget process involves three main steps, as follows:

  1. Selection of the key indicators that will be used in the budget process.

    • - The Budget Directorate makes an initial selection of indicators from different available sources of information, including indicators used in the previous year’s budget process and indicators used in program evaluations or in the Comprehensive Management Report (Balance de Gestión Integral—BGI).

    • - These key indicators are sent to the agencies in the forms that are used to prepare the budget bill. The agencies can modify, refine, and/or expand the initial selection and put forward their own proposals, including in respect to targets. The indicators and targets must be submitted together with agency budget proposals to the Budget Directorate during the budget formulation phase.

    • - Once agencies have submitted the proposed indicators and targets to the Budget Directorate, the Directorate carries out a review and, together with the agency, selects the final indicators and targets that will be incorporated in the budget documentation accompanying the budget bill. This stage includes a technical analysis and a check to ensure the relevance and consistency between the established target and the allocated budget.

  2. Submission of performance indicators and targets to the National Congress, as part of the budget bill documentation.

  3. Monitoring. This final stage involves the evaluation of actual performance against the targets specified in the budget documentation. Information about performance against targets is sent, together with supporting information, to the Congress.

Target-setting has focused primarily on the most important outputs (goods and services) produced by agencies. The process of identifying targets aims to takes all available previously existing information into consideration to set exacting targets for the budget allocations established for each budget cycle. It recognizes that, particularly in the case of targets for effectiveness and quality, there is no precise mathematical relationship between expected results and resources. In respect to efficiency targets, the target-setting process makes use of information on past resource use ratios together with best-case scenarios for the future.

Performance against targets has been assessed each year, and the percentage of targets achieved increased in the period 2001-04 from 69 percent to 86 percent (see Table 13.2).9

Table 13.2.Achievement of indicator targets, 2001-04
Achievement ranges2001200220032004
95-10080%69%76%86%
90-946%9%5%3%
80-894%8%7%4%
<8010%15%12%7%
Total no. assessed1633949581,579
Assessed/formulated79%73%92%94%
Source: Budget Directorate.
Source: Budget Directorate.

Information on performance against targets is reported to Congress. It is also used in the budgetary process—specifically, in the assessment of budget execution, which is part of the work schedule of the Budget Directorate, where the information is analyzed together with other available financial and performance information.

The work on the use of performance indicators in the budget has been complemented and reinforced by the increased use of indicators in other aspects of performance management discussed below, including the agency Management Information System (SIG) (which is part of the broader Management Improvement Program), in the development of the logical frameworks used in program evaluations, and in the standard format for program presentation in budget formulation.

Program and agency evaluation

Since 1997 the government has sought by a variety of means to make greater use of evaluation in order to make information available to support management, analysis, and decision-making in the allocation of public resources. This commenced with the introduction of Government Program Evaluation (Evaluación de Programas Gubernamentales—EPG), which was followed by Impact Evaluacion (Evaluatión de Impacto—EI) and, subsequently, by the agency-focused instrument known as Comprehensive Expenditure Evaluatió;n (Evaluatión Comprehensiva del Gasto—ECG). These evaluation instruments were originally outlined in a number of memoranda signed with Congress, the aims of which were to improve the allocation and use of public resources. Since 2003, these memoranda have been supported by regulations.

The EPG approach was based on the logical framework methodology used by multilateral development agencies. That methodology identifies the program objectives and then determines the consistency of their design and results with those objectives. In this manner the main aspects of program performance can be assessed, on the basis of past and current information, at reasonable cost and within an appropriate timeframe.

In view of the fact that, generally speaking, the logical framework methodology used in the EPG approach makes use of program information that becomes available within a relatively short time, it can be difficult to assess high-level outcomes using this methodology. This difficulty led in 2001 to the introduction of the EI approach, which uses more comprehensive instruments and methodologies for data collection and analysis.

ECGs, which were introduced in 2002, are evaluations of agencies as a whole, and as such aim to assess the most important policies, programs, and procedures of each agency which is evaluated. They include the assessment of consistency of the agency’s objectives, its organizational structure and internal allocation of functions, as well as the evaluation of its effectiveness, efficiency, and economy in the use of resources.

The design of each of these three evaluation instruments reflects common principles and requirements—namely independence, reliability, public disclosure, relevance, efficiency, and timeliness.10 The process by which they are implemented is outlined in Box 13.2.

During its nine years of existence, the evaluation program has encompassed a total of 188 evaluations of public programs and 19 evaluations of agencies (see Table 13.3).

Table 13.3.Number of evaluations, 1997-2005
1997-99200020012002200320042005Total
Government Program
Evaluations (EPG)80201814131314172
Impact Evaluations (EI)24442a16
Comprehensive Expenditure
Evaluations (ECG)
- No. of evaluations1221a6
- No. of agencies824519

Evaluations in progress.

Evaluations in progress.

To date, expenditure subject to program evaluation covers 61 percent of the total budget that can feasibly be assessed with the methodologies used, and represents annual expenditure of some $3.75 billion. Agency evaluations based on the ECG methodology have so far (that is, during the period 2002-05) covered agencies with expenditure of $685 million, equivalent to 4 percent of the total budget.

Regarding the quality and pertinence of the evaluations, it should be noted that the items covered by the evaluations and the methodologies used in the various approaches are considered appropriate by the various parties involved (principally agencies and evaluators).11 These aspects have also been assessed by outside experts.12

Box 13.2.Evaluation of programs and agencies

The evaluation process comprises eight stages, as follows:

  1. Selection of programs or agencies. The evaluation process begins with the selection of the programs to be evaluated. The selection is made in consultation with the National Congress, based on a proposal submitted by the Ministry of Finance.a

  2. Selection of consultants. Once the programs and agencies have been selected, consultants are selected via public tender to undertake the evaluation.

  3. Preparation of background information. In tandem with the selection of the evaluators, the agencies concerned are informed that the evaluation process is about to begin, and are asked to prepare the background information required to conduct the evaluation and to identify the key program issues. The same request is made to the person in the Budget Directorate responsible for the specific sector.

  4. Training and preparation of logical frameworks. The basic methodological aspects used in the evaluations are explained to the staff of the agency. In the case of an EPG, prior to the beginning of an evaluation, evaluators and professionals of units responsible for the programs receive training in the methodology of logical frameworks. Initial preparation of these frameworks for each relevant program is undertaken by the program professionals.

  5. Conduction of the evaluation. This involves the preparation of both preliminary and final evaluation reports. Both the agency being evaluated and the Budget Directorate comment on these reports. The final evaluation report must include recommendations to improve the program or agency on the basis of the evaluation findings. The result of each evaluation is revised and analyzed by the Budget Directorate and appropriate decisions are taken.

  6. Submission to Congress. The final evaluation report is submitted to the National Congress, together with an executive summary prepared by the Budget Directorate and comments by the agency concerned.

  7. Formalization of commitments. Based on the recommendations made by the evaluators, specific formal commitments are defined between the agency and the Budget Directorate with the aim of improving the performance of the program or agency.

  8. Monitoring. The follow-up on the commitments made on the basis of the recommendations is carried out by the Budget Directorate on December 31 and June 30 of each year.

  1. performance background on the programs available in the Budget Directorate of the Ministry of Finance, based on its budgetary and management control functions

  2. whether or not a program has already been assessed in the framework of the evaluation program of the Budget Directorate of the Ministry of Finance, or as part of other evaluation mechanisms, and the year in which that took place

  3. program execution schedule and priority

  4. suggestions from the General Secretariat of the Presidency (Ministerio Secretaría General de la Presidencia—SESPRES) and the Ministry of Planning (Ministerio de Planificación—MIDEPLAN), both of which are members of the program’s Interministerial Committee

  5. suggestions made at meetings of the Special Joint Committee on the Budget and the budget subcommittees during the review of the draft budget law in Congress.

The Budget Directorate of the Ministry of Finance considers these factors and drafts a proposal for programs to be assessed. This proposal is then examined with the members of the Special Joint Committee on the Budget of the National Congress, and a memorandum of understanding (MOU) is drafted. The MOU accompanies the approved draft budget law and contains a final list of programs.

a The selection of programs to be assessed each year is based on the following:

The improvement of the technical quality of evaluations in recent years has resulted in more relevant recommendations, which better reflect the issues identified and the changes required to address those issues. The improved quality of the evaluations has made them more useful in the resource allocation process as well as in the process of agency management improvement. This is illustrated by the fact that from 2000 to 2005, out of a total of 118 programs assessed,13 24 percent were substantially redesigned, 38 percent underwent major changes in the design of internal management components and/or processes, and 24 percent were the subject of minor adjustments to their information systems, monitoring systems, or other administrative processes. In 5 percent of the programs, some reassignment of program responsibilities between agencies was recommended; 9 percent of the programs were terminated because the results and/or objectives no longer fully met the new needs and/or the better solution was that some components or activities of the program were absorbed by other programs (see Table 13.4).

Table 13.4.Actions arising from Government Program Evaluations and Impact Evaluations undertaken in 2000-05
Categories of effectsPercentage

of programs
1. Minor adjustments
Includes programs that primarily require minor adjustments, such as optimization of their information, monitoring, and oversight systems, clarification of some design aspects, and/or adjustments to internal administrative or management processes.24
2. Important changes to the design of internal management components and/or processes
Includes programs that require major changes in the design of some of their components and/or activities or in their internal management procedures. The most important of these are: revision of methodological instruments; design and implementation of information systems to enhance oversight and monitoring of results; changes to internal and/or external agency coordination in program delivery; and improvement of administrative processes relating to transfers of financial resources.38
3. Substantial program redesign
Includes programs that require extensive and in-depth reformulations or restructuring of the program design internal management processes, or organizational structure, or where substantial aspects of the design must be further developed for the program to meet its objectives.24
4. Reassignment of agency responsibility for the program
Includes programs that, based on their objectives, require a change of reporting authority.5
5. Program termination
Includes programs that, based on their results, cannot justify their budget appropriations; or are reaching the end of their commitment period and for which the extension of further funding is not warranted; or that require such substantial changes that it would be tantamount to the wholesale replacement of the program or its absorption into the institutional function.9
Total programs (118)100

In the case of the ECG, from 2002 to 2004, out of a total of 14 agencies, 72 percent made major changes to their design or internal management, while 21 percent underwent minor adjustments, mainly in strategic definitions and information and monitoring systems (see Table 13.5).

Table 13.5.Actions arising from Comprehensive Expenditure Evaluations undertaken in 2002-04
Categories of effectsPercentage

of programs
1. Minor adjustments21
Includes agencies that are identified as requiring minor adjustments, such as the fine-tuning of their strategic definitions, information, monitoring, and oversight systems, or the results measurement systems.
2. Important changes to design or internal management72
Includes agencies that require changes, whether to the design of aspects of their organizational structure, to their strategic goals, and/or to their internal management.
3. Substantial redesign of agency management or design7
Includes agencies that require extensive and in-depth reformulation or restructuring, whether in the design of a large part of their organizational structure, their strategic definitions, or their internal management. Total agencies (14)100

Since 2000, the effects and implications of each program and agency evaluation have been reviewed jointly by the professional staff of the programs concerned and those of the Budget Directorate of the Ministry of Finance. This review process results in the agency commitment to incorporate changes in the program, with specific indications of how the problems or inadequacies identified in the evaluation are to be addressed and in what timeframe.

These agency commitments have been the subject of a rigorous and regular monitoring process to determine the extent to which the necessary changes are made in the areas assessed. Since 2001, the information from this monitoring progress has been used, in conjunction with other performance information, in the budget process. This monitoring indicates that, in the period up to June 2005, in respect to the commitments made by agencies following 98 program evaluations and 12 agency evaluations, 80 percent had been fully met, and 16 percent partially met during the established timeframe. Only 4 percent of commitments had not been met at all. Monitoring results also indicate that there has, over the years, been an increase in the rate of fulfillment of commitments.

The use of program evaluations has thus resulted in managerial changes incorporated to improve performance. But it has also had a substantial impact on the allocation of resources in recent years, contributing to the goal of efficient resource allocation. The resource allocation effect is shown in Table 13.6, which indicates that programs in which substantial design changes were made as a result of evaluation tended also to experience more substantial budget funding reductions than did those that were the subject of minor adjustments or smaller design changes.

Table 13.6.Budgetary effects of program evaluations, 2002-05 (millions of 2006 pesos)
Categories of effects
1. Minor adjustments, changes to the design of some internal management components and/or processes, and/or institutional relocation2. Substantial program redesign3. Terminationa
Evaluation processBase budgetbRate of change of budgetcBase of budgetRate of change budgetBase budgetRate of change of budget
200292,7702.2%34,731-1.8%4,717-46.5%
200375,026-0.8%15,938-30.4%5,890-65.3%
200449,75116.7%167,79810.1%1,672-19.0%
200593,51415.7%30,190-11.9%1,886-66.3%

Programs in the “termination” category receive funding to cover commitments already made, which explains why the budget is not immediately reduced to zero.

For EPGs, the figure is based on expenditure of the program in the year in which the evaluation was conducted. In the case of Els, it is expenditure in the year immediately preceding the year in which the evaluation results were taken into consideration in the formulation of the budget.

Corresponds to the percentage change in the budgets of the programs assessed in the year (t + 1) (that is, the year in which the evaluation results were taken into consideration in the budget) relative to their budgets in the base year (f).

Programs in the “termination” category receive funding to cover commitments already made, which explains why the budget is not immediately reduced to zero.

For EPGs, the figure is based on expenditure of the program in the year in which the evaluation was conducted. In the case of Els, it is expenditure in the year immediately preceding the year in which the evaluation results were taken into consideration in the formulation of the budget.

Corresponds to the percentage change in the budgets of the programs assessed in the year (t + 1) (that is, the year in which the evaluation results were taken into consideration in the budget) relative to their budgets in the base year (f).

Submission of programs for financing, standard format, and resources for innovation

Beginning with the 2001 budget formulation process, a standard format for submitting new expenditure proposals to the Budget Directorate was introduced,14 with the aim of making higher-quality information available in a format more appropriate for review and analysis during budget formulation. From 2001 to 2003, this format was used as a methodology for prioritizing “discretionary” expenditure, allowing such expenditure to be allocated on the basis of the best new initiatives and extensions of the best existing programs. This was done on the basis of better technical explanations, better identification of anticipated results, and better past performance information in the case of existing programs.

This new format was subsequently extended to serve as the basis for consideration in the budget process of the level of funding which would be allocated to programs that had been evaluated; to grants from one ministry to public agencies for specific purposes; and also programs which serve as the basis of budget appropriations.15 The use of the submission format covers only a portion of the budget, thus allowing for reasonable management of the procedure and use of the information by the Budget Directorate and by the agencies themselves.

Management Improvement Programs

Management Improvement Programs (Programas de Mejoramiento de Gestión—PMGs) are another important tool in the Chilean system of performance-based budgeting and management. PMGs provide for staff monetary incentives linked to the achievement of management objectives.16

Since 2001, PMGs have been structured around a number of managerial systems of public sector agencies—namely human resources, user services, management planning and control, internal audit, decentralization, accounting/financial management, and gender issues. Under what is known as the Framework Program, a number of stages of development are defined in respect to each of these managerial system. Each stage is defined specifying its content and requirements, so that with completion of the final stage, the system is implemented in accordance with pre-established characteristics and requisites. In 2005, the PMG system was further refined with the development of the so-called Advanced Framework Program, which applies the international quality standard ISO 9001:2000 to the preparation and certification stages for each of the managerial systems of PMGs.

The 2006 budget process represented the sixth consecutive year in which the PMG has been applied. During these six years, the system has evolved to a stage which has made it possible to use it as the basis for monetary incentives to staff.

PMGs cover a total of 179 agencies17 and more than 62,000 staff members. The 2004 evaluation of PMGs showed that 74.9 percent of the agencies achieved between 90 percent and 100 percent of their PMG managerial improvement objectives and that, as a result, more than 56,000 staff members received bonuses equal on average to 5 percent of their pay (see Table 13.7). Of the total agencies, 48 percent fulfilled 100 percent of their commitments.

Table 13.7.Degree of compliance, PMGs, 2001-04
AgenciesAgenciesAgenciesAgencies
Percentage of compliance2001200220032004
No.Participation rateNo.Participation rateNo.Participation rateNo.Participation rate
90-10011666.3%13979.4%13275.0%13474.9%
75-892916.6%2816.0%3620.5%3519.6%
<753017.1%84.6%84.5%105.5%
175100%175100%176100%179100%
Source: Budget Directorate.
Source: Budget Directorate.

PMGs have made the following contributions to performance-based management and budgeting: (1) as of 2002, information on the achievement of management objectives has been used in the budgetary process, alongside other performance information; (2) developments in the financial/accounting system of the Framework Program have improved the quality of financial information, leading to better quality of financial management; (3) developments in the Management Planning and Control System have generated better indicators for presentation with the budget bill, as well as for use in evaluations.

Other important changes intended to link incentives to staff with agency performance have been coordinated with the PMG. This is the case of the performance pay mechanism established by Law 19,882,18 which requires that indicators and targets related to work unit performance must be linked to the mission, strategic objectives, and relevant outputs of their agencies (as specified in the Management Planning and Control component of the PMG). This system will also serve as a basis for performance agreements, which the same law requires, between the ministries and the heads of the agencies as part of the Public Senior Management System. In addition, the PMG results were used as selection criteria for the award of the Annual Prize for Agency Excellence. Lastly, arrangements were introduced in 2004 to accord additional flexibility in budget execution19 to agencies that have complied with a set of conditions relating to the development of their PMG and financial discipline. Fifteen agencies benefited from such additional budget flexibility in 2005.

Comprehensive Management Report

Since the end of the 1990s, the Budget Law has required that central government agencies provide information concerning their objectives, management targets, and results. To give effect to this requirement, Decree-Law 47 (1999) of the Ministry of Finance imposed upon agencies the obligation to produce a Comprehensive Management Report (Balance de Gestión Integral—BGI), which would be provided to the National Congress as a public report.

BGIs have been prepared since 1998. In 2000, significant improvements were made to their required content and format, based on the experience of the first few years. In 2006, a total of 113 agencies submitted BGIs. As well as being provided to Congress and the public, the information they contain is also used in the budget process20 and in the program and agency evaluations (where they serve as baseline information).

Factors explaining the development of the Chilean experience

A series of factors has fostered the development of performance-based management and budgeting in Chile, namely:

  1. a politically stable framework since 1990, when the country resumed its path towards democracy

  2. the development of each of the instruments as part of a broader process of financial modernization and government reform21 underpinned, particularly in recent years, by strong political support

  3. strong financial management, in terms of aggregate fiscal discipline, transparency, and productive efficiency,22 that has facilitated the development of performance-based management instruments and budgeting, and created conditions for the use of performance information in budgeting and management

  4. the credibility and prestige of the Budget Directorate of the Ministry of Finance, which, combined with the strong role that the Directorate plays in programmatic and financial decision-making, has facilitated the changes in practices that the new performance-oriented management and budgeting techniques have required

  5. a basic consensus among the political players, as reflected in memoranda of understanding with Congress on transparency and efficiency in the management of public resources, as well as in new financial management guidelines.23 Particularly since 2003, these have been an important part of the regular work of the Congressional Budget Committee

  6. gradualism in the development and introduction of new management and budgeting techniques, and complementarity between them. This has allowed the agencies to gradually move up the learning curve in respect to both the technical and operational aspects and the use of the information in decision-making processes

  7. a strong institutional framework to support the introduction of these reforms, including interministerial committees, a unit overseeing the system in the Budget Directorate, and formal work networks in the agencies

  8. the existence of the necessary levels of professional capacity within both government agencies and private consultancies in respect to public management reform and evaluation—capacity that has been progressively strengthened as consequence of the experience gathered during the reform process.

Conclusions and future challenges

Progress in the development and consolidation of each of the performance management and budgeting instruments described above has resulted in the increased use of performance information by the Ministry of Finance and other central government agencies.24 This has fostered and promoted management improvements in public programs and agencies, as demonstrated, for example, by the formulation of agency performance-improvement commitments and their fulfillment, the sustained increase in the number and quality of performance indicators, the achievement of performance targets, and progress in the development of management systems through the PMG. Increasingly, this has meant that more and better information is available during the budget cycle, which is then used in analytical and decision-making processes in respect to both current and capital expenditure, thus also contributing to transparency in budget management. In summary, there has been considerable progress in the establishment of a viable performance-based budget model, the objectives and components of which are increasingly widely understood and supported by the various agents upon whom it depends and to whom it is linked.

Notwithstanding what has been achieved to date, there is a need to continue to improve the availability of performance information in the spending agencies and to further develop procedures and practices relating to the use of that information in agency decision-making processes. This would not only help to improve agency management, but would also permit further increases in budgetary flexibility.

Notes

In addition to these instruments, there is the ex-ante evaluation system for public investment under the aegis of the Ministry of Planning.

In Chile, unlike many other countries, the Ministry of Planning has no responsibility in fiscal administration.

For the classification of direct and indirect links, see OECD (2003).

Some examples are: the school subsidy system, per-beneficiary funding of primary care, flexible adult care programs, public defender services in criminal cases, and support for forestry development.

In particular, the expenditure for each public investment project is fully identified in budget appropriations. Furthermore, a large number of public programs are organized financially under budget programs that include their total expenditure.

Public services have authority in a number of areas, the most important being the hiring of personnel, purchases and acquisitions, cash management, prioritization of recommended technical investment projects, and reallocations under the budget subheading “Goods, Services, and Personnel.”

For more information, see Budget Directorate (2005).

Over the past three years, the number of indicators per agencies has been in the range identified for the medium term, so that users can have access to a manageable set of relevant indicators.

Achievement is defined as a performance in the range of 95-100 percent of the target level.

To meet the independence criterion, it was decided that the evaluation would be conducted by entities outside the public sector, through panels of experts, universities, or consulting firms, selected on a competitive basis. The public nature of the information is established through the formal transmittal of the final reports on each evaluation to the National Congress and to the public agencies responsible for making decisions affecting the respective program, such reports being available to anyone who requests them. In addition, summary reports on the evaluations are included in the information attached to the draft budget bill. The relevance of the evaluations is addressed in the definition of the scope of the evaluation included in the methodological design, and in the requirement for recommendations to improve performance on the basis of such evaluations. The efficiency criterion is related to the need for evaluations to be made at a manageable cost; along with the preceding criteria, it aims to ensure that evaluation opinions that meet the principal needs for performance information on programs and agencies are obtained within reasonable timeframes and at reasonable cost. Lastly, the timeliness criterion is related to the need for the evaluation results to be available for the budget preparation process.

Budget Directorate, Surveys of Evaluation Procedures: EPG, EI, and ECG, 2000-05.

The number of programs assessed does not correspond to the number of evaluations shown in Table 13.3, as an evaluation may include more than one program.

The key aspects of the format are: (1) strategic objectives and outputs of the agency to which the initiative or program is linked; (2) justification; (3) targeting and beneficiary population; (4) background information on budget, expenditure, and budget proposals; (5) goal and purpose of the initiative or program; (6) description of components; and (7) indicators and means of verification.

Budgetary classification that incorporate different appropriations covering the total cost of the program.

Law 19,553 of February 1998 and Decree-Law 475 of May 1998, amended by Laws 19,618 and 19,882. The monetary incentive provides that achievement of the management objectives established in an annual PMG shall entitle the staff of the respective agency to a 5 percent pay increase during the following year, provided that the agency has recorded an achievement rate for the annual objectives it has pledged to meet that is equal to or greater than 90 percent. The staff shall be entitled to a 2.5 percent increase if the achievement rate is equal to or greater than 75 percent and less than 90 percent.

Since 2001, agencies governed by different pre-existing laws regarding the establishment of management objectives linked to staff incentives have voluntarily adhered to this system. The 2006 formulation includes eight agencies in that category.

The law was published in June 2003.

This refers to the following procedures: (a) carryover: inclusion of an opening cash balance that exceeds the approved budget estimate as a result of higher revenue or permanent savings; (b) reallocating resources between investment projects: flexibility in reallocating resources under items 61-74 of subheading 31 (Real Investment) up to the amount authorized in the Budget Law, so long as the favorable economic and technical recommendation (RS) of the Ministry of Planning and Cooperation (MIDEPLAN) is maintained.

Specifically, in the Internal Evaluation of Budget Execution (Evaluación Interna de la Ejecución Presupuestaria), which is conducted in the Budget Directorate as one of the stages in the budget cycle.

The most important reforms include: definition and observance of a fiscal policy rule; growing dissemination of information and adaptation of fiscal statistics to international standards; improvements in the budget management legal framework; development of a financial management and information system; reforms in human resource management-establishment of a Public Senior Management system; and growing emergence of e-government. See Informes de Finanzas Públicas (Public Finance Report) 2000-05; Evaluatión de la Gestión Financiera (Financial Management Evaluation) 2003-05; Estudios de Finanzas Públicas: Balance Estructural del Gobierno Central (Public Finance Studies: Structural Balance of the Central Government) 2001; and Sostenibilidad y Regla Fiscal (Sustainability and Fiscal Rules) 2003, at <www.dipres.cl>.

Regulation of the reserved spending lines (gastos reservados); disclosure of the budgetary data of the national defense agencies; inclusion of annual budgetary norms in permanent legislation (for example, the obligation for the Ministry of Finance to conduct public program evaluations); and strengthening of the powers of the Congress, among other legal matters.

Surveys sent to institutional agents in 2004, particularly to those in charge of assessed programs and to the directors of the financial departments of public agencies, show that over 50 percent of them report making use of the information in the analyses of institutional resource allocation (“Efectos y Usos de las Evaluaciones de Programas en los Servicios Públicos” (Effects and Uses of Program Evaluations in Public Institutions), Budget Directorate, July 2004). The assessment conducted by the World Bank in 2004 shows similar experiences.

References

    Budget Directorate2005Sistema de Control de Gestión y Presupuestos por Resultados. La Experienca Chilena (Management and Control System and Performance-based Budgeting. The Chilean Experience) (Chile: Budget Directorate, Ministry of Finance).

    OECD2003Public Sector Modernization: Governing for Performance (Paris: OECD) November.

    OECD2004Budgeting in Chile (Paris: OECD).

    World Bank2005Chile—Evaluation of the Program Evaluation System (Washington: World Bank) April.

    World Bank and Inter-American Development Bank2004Chile—Country Financial Accountability Assessment (Washington: World Bank).

    Other Resources Citing This Publication