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 spending2. 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 Health4. 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 targetingPoor official audits Important network of CSO (Mothers’s Committees)

Programa de Vaso de Leche

D ire c to r V L A d m in is tra tive C o m m ittee

H H B e ne fic ia ries

M o th ers ' C om m itte e a t lo ca l le ve l

M o th ers ' C om m itte e a t d is trict le ve l

M a jo rA lca lde

Vaso de Leche:Leakages

Municipality

Municipality-VdL team

Committee VdL

Household

Central Government

Proceso deCompra

Leak 1

Leak 2

Leak 3

Leak 4

Beneficiaries

Leak 5

Conclusions

100.00% 99.98% 99.92% 97.33%

71.34%

29.25%

0%

20%

40%

60%

80%

100%

Initial Amount CG to Mun. Within Mun. Mun to VdLC VdLC to HH Within HH

Conclusions • Significant leakages• Heterogeneous product delivered• Lack of clear rules: no registry, no

information about its execution, no operational manuals, no supervision

• Little training to mothers (preparation and distribution)

• Corruption is not the main issue (but exists!)

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