Evaluation of the Decision making process of the Mexican federal budget.

MSD Model

DIRECTOR ADJUNTO DE EVALUACIÓN DEL DESEMPEÑO

AGUSTÍN CASO RAPHAEL

Over the past fifteen years, Mexico has undergone significant economic and political reforms. This period has witnessed important improvements in the economy and of public finances:

MACROECONOMIC INDICATORSMexico´s recent public finances reflect an era of fiscal responsibility

Source: INEGI Source: Instituto Mexicano del Seguro Social

Aggregate supply and demand, 2012 (%)

Formal employment generation (thousand of employments)

MACROECONOMIC INDICATORSMain numbers of the Mexican economy at the beginning of fiscal year 2013

Fixed Gross Investment (%) Inflation (%)

Treasury Bonds (%) Exchange rate (pesos per dollar)

Source: INEGISource: INEGI

Source: Bank of Mexico Source: Bank of Mexico

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Public deficit without Pemex investment (% of GDP)

Source: Ministry of Finance of Mexico

MACROECONOMIC INDICATORSMain numbers of the Mexican economy at the beginning of fiscal year 2013

Source: JP Morgan

Country Risk

MACROECONOMIC INDICATORSMexico´s recent public finances reflect an era of fiscal responsibility…

Two decades ago, the situation of the Mexican economy was significantly different:

In August 1982, the debt crisis hit Mexico and the bailout came at a very heavy cost.

In 1995, the peso crisis had once again catastrophic consequences. The government embarked in a comprehensive economic policy to

foster economic growth with monetary stability.

The good economic and financial records have been achieved by means of: Strengthening the monetary system, Enhancing fiscal sustainability and the efficiency and effectiveness of

public spending, Improving the accountability of public expenditure at the national

and sub-national levels; and Implementing a sound Performance Evaluation System (SED)

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Mexico’s path to a Performance Evaluation System (SED) can be divided into three periods: 1970’s to 1990’s: Limited and isolated efforts of evaluation, concentrated in specific

areas of the public administration (e.g. education, agricultural policy). Late 1990’s: Budget System Reform; New Programmatic Structure (NEP), Integral

Process of Planning and Budget (PIPP); Evaluation of Social Policy. 2006-2007: Institutionalization of M&E across the federal and sub-national

governments. Wider use of institutionalized, law binding, whole-of-government single evaluation system.

The landmark 2006 Federal Budget and Fiscal Responsibility Law and the 2007 Integral Fiscal Reform fostered the: Creation of the Performance Evaluation System (SED) Legal framework for performance budgeting at the Sub-national and Local levels Accounting and financial harmonization across all levels of government: Federal, Sub-

national and Local

BUILDING A M&E SYSTEMThree stages of development

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It also established:

A balanced-budget rule and modified the congressional budget approval process;

Principles and rules for the evaluation of investment projects; Required performance indicators to be included in the federal

budget; Called for the establishment of Guidelines for the External

Evaluation of Federal Programs; and Set out strict rules for controlling personnel and current

expenditure for a more efficient execution of public expenditure.

BUILDING A M&E SYSTEMGovernment Major Fiscal Reforms

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The 2007 Integral Fiscal Reform (IFR), a wide-reaching reform package: Induced tax reforms and modified the fiscal framework between

the states and the federal government: Established the framework for performance budgeting at the Sub-

national and Local levels.

The 2008 Government Accountability Act established accrual accounting and financial harmonization across all levels of government: Federal, Sub-national and Local.

By 2014, we shall have accrual-based accounting registries, account catalogues, and accounting manuals, at both the Federal, Sub-national and Local levels.

BUILDING A M&E SYSTEMGovernment Major Fiscal Reforms

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The SED relies in a comprehensive programming and budgeting architecture: The Budgetary Program (BP) is the main link between programming, budgeting and M&E (programmatic category for organizing, in a representative and homogeneous way, the resource allocations of federal program in charge of spending ministries and agencies in order to achieve its objectives and goals).

The SED has two main components:

1. The evaluation of BPs and public policies by means of: Performance Indicators (strategic indicators) to measure program

outputs and outcomes, Program and policy evaluations, carried out as part of the Annual Evaluation

Program (AEP).2. The evaluation of the management processes and public goods and services

delivery, by means of the Program for a Close, Modern Government

THE SED The government´s effort to improve the efficiency and effectiveness of

Public Programs

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PbR-SED The relationship of the SED to the Budgeting for Results Strategy and the

NDP is represented in the following figure:

National Development PlanNational Development Plan6 years within a 20 to 25 years time frame perspective6 years within a 20 to 25 years time frame perspective

BUDGETING FOR RESULTS (PBR)

• Links budgeting with• the NDP, its

objectives and programs.

• Strategic objectives.

• Logic Framework Methodology.

• Objectives, goals and indicators.

• New budgeting process and organization.

• Resource allocations based on results.

Performance Evaluation

System(SED)

Broad alignment: NDP "Sector Programs "

Budgetary programs

ANNUAL EVALUATION PROGRAMME

IMPROVEMENT COMMITTMENS

Evaluation of

social Development

programsProgram for a Close & Modern

Government

Evaluation of Budgetary

Programs and Policies

Budget Indicators

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PbR-SED Stakeholders

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PbR-SED Budgeting for Results is tied to the National Development Plan…

PROGRAMS DERIVED FROM NDP

STRATEGIES

ACTION LINES

INDICATORS

TARGETS

NATIONAL DEVELOPMENT PLAN

NATIONAL TARGETS / TRANSVERSAL STRATEGIES

BUDGETARY PROGRAMS

The objectives that all the programs must achieve are identified by the National Development Plan (NPD).

OBJETIVES

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THE BUDGETING FOR RESULTS ANNUAL CYCLE

PLANNING

• Monitoring reports.• Following up indicators.

• Public accounts with results.

• Reports to Congress.

• Administrative performance and public expenditure improvements

• Program structure authorization• Budgetary programs definition• MIR/LFM• Strategic and management indicators

• Results based Budgetary appropriations • PIPP link

• Specific outcome commitments and improvement of administrative performance

• Link of sector program to the National Development Plan• Ministries and agencies strategic objectives (SO) setting

PROGRAMMING

BUDGETING

SPENDING AND CONTROL

REPORTINGACCOUNTABILITY

RESULTS

FOLLOWING UP

EVALUATING(SED)

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The SED has followed a three-stage process:

a) SED Implementation

Actions taken during 2007 and 2008 to establish and implement the principles, concepts, methodologies, guidelines, procedures and systems that support SED operation.

The SED implementation phase was audited by the Federation Superior Audit Office, audit branch of the Federal Congress, in 2010.

THREE STAGES OF SED

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b) SED Consolidation

From 2009 onwards, the main goal has been to expand and improve the quality of the SED, using performance information for planning, programming, budgeting and resource allocation and for streamlining budgetary programs.

The SED consolidation phase was audited by the Federation Superior Audit Office, audit branch of the Federal Congress, in 2011.

THREE STAGES OF SED

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c) Support to Sub-national governments

The Federal Government established a program, with the support of the World Bank (WB) and the Inter-American Development Bank (IADB) to implement PBR-SED in Sub-national governments.

PbR-SED diagnoses for the implementation of the SED in 31 states as well as in the Federal District were performed in 2010 and 2012.

THREE STAGES OF SED

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GROAGSOAX

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BCS

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2010 Octubre (2012)

SUB-NATIONAL GOVERNMENTS: RELATIVE ADVANCE IN SED IMPLEMENTATION (2010-2012)

Convenios con Entidades Federativas

PBR SED IN SUB-NATIONAL GOVERNMENTS

Budgeting for Results

Performance Evaluation System

Transparency

Legal FrameworkPlanningProgrammingBudgetingExercise and ControlTraining

EvaluationPerformance

IndicatorsUse of Information

for decision making

Transparency in general

Citizen LanguageBudget

Transparency

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PHASES OF THE SED – PERFORMANCE EVALUATION UNIT (UED) SETTING

Definition of public expenditure policy.

Performance Evaluation System (SED) coordination.

Rules and methodologies for underwriting performance improvement tools at the institutional level.

National Development Plan (PND) sector, special and regional program dictamination.

Performance evaluation and planning for results-oriented budget planning.

Federalized resources (transferred to Sub-national and local governments) M&E.

Performance information for budgetary decision-making mechanism (PIPP).

Synthetic Model of Performance Information (MSD) improvement.

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PHASES OF THE SED – PERFORMANCE EVALUATION UNIT (UED) SETTING

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Website creation with useful information on public spending.

PHASES OF THE SED – STRENGTHENING TRANSPARENCY IN BUDGET INFORMATION

Elements:

• Budget Integration information in one system.• User´s easy access. • Data Warehouse for budget information. • Ministry of Finance portal linking all institutional systems.

www.transparenciapresupuestaria.gob.mx

MONITORING AND EVALUATION

Monitoring

• Continuous improvement of MIR.

• MIR budgetary programs coverage expanded.

• 75.7% of programmable spending with performance information.

Evaluation

• Annual Evaluation Program (PAE).

• External and independent evaluations.

• 883 external evaluations since 2007.

PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD)

Purposes

Budget decision-making based on Budgetary programs.

Information to improve objectives, indicators and targets.

Possible synergies or overlaps identification.

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The Performance Information Synthetic Model (MSD) is a tool for assessing the performance of budgetary programs.

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Evaluation

Range in%

Overall Performance

5 95-100 High performance

4 80-94 Medium High Performance

3 55-79 Medium performance

2 30-54 Medium Low Performance

1 0-29 Under- performance

What is the purpose of the MSD ?

That the agencies of the federal public administration: Have elements for budget allocation decision making based on program results. Justify any proposed increases

or decreases in budget allocations Use the information to improve the goals, indicators, targets and issues arising from external evaluations Identify positive externalities and potential duplications in order to strengthen budgetary programs Present information in a clear and simple language that allows citizens to know and understand programs

performance

What is the overall assessment?

To obtain the overall performance rating of each budget program a value range from 1 to 5 is established, with 5 representing the highest performance

What is the Performance Information Synthetic Model-MSD?

The MSD is an instrument for budgetary evaluation which gathers the main performance information of budgetary programs, in order to know their trend.

PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD)

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What elements of evaluation does the MSD consider?

1. Budgetary efficiency (2008-2011) The efficiency in budget spending for each budget program for the past 4 years The difference between the authorized and spent budget in order to determine the degree of under-spending

or over-spending

2. Government priorities Takes into account government priorities according to what is established by law

3. Results from the analysis of the Indicators for Results Matrix (MIR) 2009-2011, taking into account three criteria:

Quality of the MIR according to an external evaluation Ratio between the achievement of goals and the budget increase Achievement of determined goals

4. External Evaluations It includes the assessment of external evaluators, taking also into consideration the lack of evaluations as an

incentive for contracting evaluations

5. Recommendations of external evaluations (ASM) The degree of progress in implementing the recommendations of external evaluations is taken into account.

PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD)

Budget (over/under spending)

Government Priorities

MIR External Evaluations

Recommendations of external evaluations

10% 15% 25% 25% 25%

Improvement of performance information Review of on going external evaluation

recommendations Compliance with budgetary allocations Resource re-allocation Increased performance transparency

How is the overall assessment done?

For each budget program a score is recorded for each one of the items considered and a final performance rating is obtained.

Outcomes:

The Ministry of Finance convenes meetings with program managers in order to analyze performance results. Information is analyzed by both parties in order to improve the budgetary cycle and agreements are reached. From these meeting the next results have been achieved:

Improvement of the MIR

Proposals for new external evaluation

Elimination of duplicated programs

Improvement of budgetary structure

Compaction of programs

Improvement of programmed goals

PERFORMANCE INFORMATION SYNTHETIC MODEL (MSD)

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BUDGETING PROGRAMME PERFORMANCE COMPARISSON 2011 - 2012

2011 2012Performance 586 643High 0.0% 3.6%Medium High 9.0% 26.1%Medium 31.1% 57.2%Medium Low 49.5% 15.2%Low 10.4% 7.7%

Comparative Performance

Low Medium-Low Medium Medium High High

Performance

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Ranking

Branch Budgetary ProgramBranch General

20 Desarrollo SocialSubsidios: Sectores Social y Privado o Entidades Federativas y Municipios

Sujetos a Reglas de OperaciónS048 Programa Habitat Sí MIR 45.1 MEDIUM HIGH MEDIUM HIGH MEDIUM HIGH MEDIUM HIGH 1 79 S052 Programa de Abasto Social de Leche a cargo de Liconsa,

S.A. de C.V.Sí MIR 1,086.8 HIGH MEDIUM LOW MEDIUM HIGH MEDIUM MEDIUM 5 177

S053 Programa de Abasto Rural a cargo de Diconsa, S.A. de C.V. (DICONSA)

Sí MIR 1,858.9 MEDIUM HIGH MEDIUM LOW MEDIUM HIGH MEDIUM HIGH MEDIUM 3 157

S054 Programa de Opciones Productivas Sí MIR 414.1 MEDIUM HIGH LOW MEDIUM MEDIUM MEDIUM LOW 18 506 S057 Programas del Fondo Nacional de Fomento a las

Artesanías (FONART)No MIR 150.8 HIGH MEDIUM LOW MEDIUM HIGH MEDIUM LOW MEDIUM 11 298

S061 Programa 3 x 1 para Migrantes Sí MIR 525.6 MEDIUM HIGH MEDIUM LOW MEDIUM MEDIUM MEDIUM 17 465 S065 Programa de Atención a Jornaleros Agrícolas Sí MIR 300.9 MEDIUM MEDIUM LOW MEDIUM HIGH MEDIUM LOW MEDIUM 13 353 S070 Programa de Coinversión Social Sí MIR 310.6 MEDIUM MEDIUM MEDIUM HIGH MEDIUM MEDIUM 10 284 S071 Programa de Empleo Temporal (PET) Sí MIR 1,291.8 MEDIUM LOW MEDIUM MEDIUM HIGH MEDIUM 15 455 S072 Programa de Desarrollo Humano Oportunidades Sí MIR 36,177.7 MEDIUM HIGH MEDIUM LOW MEDIUM HIGH MEDIUM HIGH MEDIUM 4 161 S118 Programa de Apoyo Alimentario Sí MIR 4,224.9 MEDIUM HIGH MEDIUM LOW MEDIUM HIGH MEDIUM MEDIUM 7 238 S155 Programa de Apoyo a las Instancias de Mujeres en las

Entidades Federativas, Para Implementar y Ejecutar Programas de Prevención de la Violencia Contra las Mujeres

Sí MIR 258.4 MEDIUM HIGH MEDIUM LOW MEDIUM HIGH MEDIUM MEDIUM 8 253

S174 Programa de estancias infantiles para apoyar a madres trabajadoras

Sí MIR 3,547.6 MEDIUM HIGH MEDIUM LOW MEDIUM HIGH MEDIUM MEDIUM 6 231

S176 Pensión para Adultos Mayores Sí MIR 26,000.9 MEDIUM LOW MEDIUM HIGH MEDIUM MEDIUM 12 326 S216 Programa para el Desarrollo de Zonas Prioritarias Sí MIR 6,631.4 MEDIUM HIGH LOW MEDIUM MEDIUM LOW MEDIUM LOW 20 605 S241 Seguro de vida para jefas de familia No MIR 400.0 LOW LOW S / N S / N LOW 31 930

Otros SubsidiosU008 Subsidios a programas para jóvenes No MIR 65.5 MEDIUM LOW LOW MEDIUM LOW S / N LOW 23 793 U009 Comedores Comunitarios Sí No - LOW LOW S / N S / N LOW 29 899

Desempeño de las FuncionesPrestación de Servicios Públicos

E003 Servicios a grupos con necesidades especiales Sí MIR 273.0 MEDIUM MEDIUM LOW S / N S / N MEDIUM 16 457 E016 Generación y articulación de políticas públicas

integrales de juventudNo MIR 247.8 MEDIUM LOW MEDIUM LOW S / N S / N MEDIUM LOW 22 734

Provisión de Bienes PúblicosB004 Programa de adquisición de leche nacional a cargo de

LICONSA, S. A. de C. V.Sí MIR 1,477.1 MEDIUM MEDIUM MEDIUM S / N MEDIUM 9 279

Planeación, seguimiento y evaluación de políticas públicasP001 Definición y conducción de la política de desarrollo

urbano y ordenación del territorioNo No 18.7 MEDIUM LOW LOW S / N S / N LOW 27 874

P002 Definición y conducción de la política del desarrollo social y comunitario, así como la participación social

No MIR 1,042.5 MEDIUM MEDIUM LOW S / N S / N MEDIUM LOW 19 512

P003 Actividades orientadas a la evaluacion y al monitoreo de los programas sociales

No MIR 240.0 MEDIUM HIGH MEDIUM LOW S / N S / N MEDIUM 14 362

P004 Desarrollo integral de las personas con discapacidad No No 21.6 MEDIUM LOW S / N S / N LOW 25 816 Promoción y fomento

F001 Fomento del desarrollo de las organizaciones de la sociedad civil

No MIR 49.6 MEDIUM HIGH LOW S / N S / N MEDIUM LOW 21 650

Proyectos de InversiónK025 Proyectos de inmuebles (oficinas administrativas) No No 8.4 MEDIUM LOW LOW S / N S / N LOW 26 849

Administrativos y de ApoyoApoyo al proceso presupuestario y para mejorar la eficiencia institucional

M001

Aspects Susceptible of Improvement

Budgetary Program

Performance

Priority (Art. 42 LFPRH)

Indicator 2013 Budget2008-2013 Budgetary

Performance

Performance Indicator Matrix

Annual Evaluation

Program

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