June 2006

Document of the World Bank

Report No. 34323-AR

ArgentinaInstitutional and Governance Review

Poverty Reduction and Economic Management UnitLatin America and the Caribbean

This document has a restricted distribution and may be used by recipientsonly in the performance of their offi cial duties. Its contents may not otherwisebe disclosed without World Bank authorization.

Report N

o. 34323-AR

A

rgentina Institutional and Governance R

eview

FOR OFFICIAL USE ONLY

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IGR IMF PAP

IT Jefe de Gabinete LAF LCC7C

LCSPS Legajo r jn ico Legitimos Abonos Ley de Administracibn Financiera y de 10s Sistemas de Control del Sector P6blico Ley de Convenciones Colectivas de Trabajo para el Sector Pdblico Ley de Convertibilidad Ley de Etica Pdblica Ley Marco Ley Marco de Regulac ih del Empleo Piiblico Ley de Solvencia Fiscal NCO NGOs PFOs

Plan Rector de Modernizacibn Precios testigos RCgimen Federal de Responsabilidad Fiscal Secretaria General de l a Gobernacih Servicio Exterior de la Naci6n SIAF/IFMS

S I D I F SIGEN

SINAPA

Sindicatura General de la Provincia

SIPRO Sistema de Compras y Contrataciones Subsecretaria de Plani f icacih y Control de Gesti6n Tribunal de Cuentas UAIs/IAUs WB WBI

Provincial

Institutional and Governance Review International Monetary Fund Instituto Provincial de Administracih Pdblica (Provincial Public Administration Institute) Information Technology Chief o f the Ministers’ Cabinet Ley de Administracih Financiera (Financial Administration Law) Argentina, Chile, Paraguay and Uruguay Country Management Unit, World Bank Public Sector, Latin America and Caribbean Region, World Bank Single file Exceptional regimes Financial Administration and Public Sector Control Systems Law

L a w o f Collective Labor Conventions for the Public Sector

Convertibility Law Public Ethics L a w Framework Law Framework L a w Regulating Public Employment

Fiscal Solvency Law Nacional Contracting Office (Oficina Nacional de Contrataciones) Nongovernmental Organizations Programas de Financiamiento Ordenado (Programs for Orderly Financing) Framework Modernization Plan Standard prices Federal Regime o f Fiscal Responsibility Government Secretariat Foreign Service Sistema Integrado de Administracibn Financiera (Integrated Financial Management System) Sistema Integrado de Administracih Financiera Sindicatura General de l a Naci6n (Executive Audit Agency)

Sistema Nacional de la P ro fes ih Administrativa (National System for Administrative Professionals) Executive control agency

Suppliers’ Registry Procurement and Contracting System Sub secretary o f Planning and Control

Tribunal o f Accounts Unidades de Auditoria Interna (Internal Auditing Units) World Bank World Bank Institute

V i c e President: Pamela C o x Country Director: A x e l van Trotsenburg Sector Director: Ernest0 M a y Sector Leader: James Parks Sector Manager: Ronald M y e r s Task Manager: Linn Hammergren

ACKNOWLEDGMENTS

This report, and the research on which i t was based, was only made possible through the contributions and collaboration o f a series o f individuals in Argentina and Washington. The core team (Linn Hammergren, Task Manager; Marcel0 Barg, Consultant, and Gerardo Ufia, Consultant), and the various contracted experts (listed in Annex 3) would first l ike to thank Axel van Trotsenburg, Director, LCC7C; James Parks, Lead Economist, LCC7C; Felipe Saez, Country Manager, LCC7C; Milena Sanchez de Boado, Extended Term Consultant, LCSPS; Karla Lopez, Program Assistant, LCSPS; and Ronald E. Myers, Sector Manager LCSPS for providing support, and funding for i t s realization. We are also grateful to our official peer reviewers, Yasuhiko Matsuda, Senior Public Sector Management Specialist, LCSPS; Ed Campos, Lead Public Sector Management Specialist, PREM; Roby Senderowitsch, Senior Social Scientist, LCSPS; and Carlos Santiso, DFID, for their very useful comments. Appreciation i s also extended to various other World Bank staff who attended the several concept and decision review meetings and provided written or oral comments.

In Argentina, aside from those who worked directly on the research, there i s a long list o f individuals who collaborated in the preparation o f the concept note, in the validation o f the analytic matrix, and in the meetings to review the initial results. Among them our special thanks go to: Gerardo Hita (Director Nacional de la Direccidn Nacional de Proyectos con Organismos Internacionales de Crbdito), Juan Manuel Abal Medina (Subsecretario de la Gestidn Ptiblica), Raid Rig0 (Subsecretario de Presupuesto de la Nacidn); Marcela Losardo (Secretaria de Justicia de la Nacidn), Oscar Tangelson (Secretario de Politica Econdmica), Fernando Martin Jaime (Subsecretaria de la Gestidn Pziblica),Oscar Luna (ex Director de la OJicina Nacional de Contrataciones), Eduardo Salas (Director Nacional de la OJicina de Empleo Ptiblico), Norbert0 Ivancich (ex -Subsecretario de la Gestidn Ptiblica), Adrian Dominguez (ex Coordinador del Consejo Federal de la Funcidn Pziblica), Jorge Roe1 (Director Nacional de Programas y Proyectos con Financiamiento Externo, JGM), Susana Vega (ex Directora Nacional de la OJicina Nacional de Presupuesto), Carmen Odasso (Directora Nacional de Evaluacidn Presupuestaria, JGM) Oscar Lambert0 (Diputado de la Nacidn), NicolSs Raigorodsky (OJicina Anticorrupcidn), Julio Saguier (Secretario de Planeamiento Estratbgico - Prov. de Tucumcin), Carlos Ponce (Universidad Congreso - Prov. de Mendoza) and to a l l the members o f the provincial governments who kindly provided the information required by the teams o f university researchers.

PREFACE

The fol lowing study i s based on fieldwork done in Argentina in late 2003 and early 2004. I t thus should be read as a product o f that historical context. Since the cut-off date, some elements o f the situations i t describes have changed, and the institutions surveyed have in several cases independently adopted measures similar to those recommended in the report. These changes do not alter the significance o f the init ial findings or the conclusions deriving f rom them. However, as the study is being released over two years after the fieldwork ended, i t should be stressed that i ts contents do not represent the latest developments in Argentina.

I t also warrants mention that the aim o f the study i s not to evaluate Argentina’s state modernization program or the progress it has made in implementing it, but rather to use the experience o f the period covered (1990 through 2003) to add to our understanding o f the institutional constraints o n public sector reforms. These constraints are not unique to Argentina, and it i s thus hoped that the findings will be useful to others embarking on similar projects and to a broader community o f practitioners interested in improving the quality o f governance. The study explores an approach to institutional reform incorporating certain explicit and implici t assumptions as to how change occurs. I t is the validity o f the approach and o f i t s underlying assumption that constitutes the focus o f the research. During the period covered, the approach was used to advance a series o f specific changes in administrative operations in Argentina’s national and provincial governments, but the model or approach can be separated from i t s contents and thus applied to other ends. In effect, more recent developments in Argentina not covered in the report, suggest that this may be happening as the government modifies i t s vision o f what is both feasible and desirable. Nonetheless, even with a different set o f objectives, the lessons derived from the earlier period should st i l l be useful. I t is in this spirit that the now historical study i s offered, as a contribution to a dialogue on policies aimed at strengthening the institutional capacities o f the Argentine state.

TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................................................................ 3 Background and Explanation o f Research. ............................................................................... 3 Results at the Federal Level ...................................................................................................... 4 Provincial Reforms ................................................................................................................... 7 Conclusions., ........................................................................................................................... 10 Options .................................................................................................................................... 11

CHAPTER I: BACKGROUND, OBJECTIVES AND METHODOLOGY ................................ 15 Introduction ............................................................................................................................. 15

Analytical Focus and Working Hypotheses ............................................................................ 18

CHAPTER 11: ANALYSIS OF THE FEDERAL LEVEL ........................................................... 22 Introduction ............................................................................................................................. 22

The Political Economy and Institutional Aspects o f Administrative Reform in Argentina ... 34

Background and Overview ofthe Research ............................................................................ 16

Research Methodology ........................................................................................................... 20

Principal Findings on the Five Administrative Systems Analyzed ........................................ 22

Remaining Challenges and Next Steps ................................................................................... 41 CHAPTER 111: COMPARATIVE ANALYSIS OF THE PROVINCIAL LEVEL ..................... 48

Introduction ............................................................................................................................. 48 Description o f the Second-Stage Research at the Provincial Level ........................................ 52 Comparative Analysis o f the Provincial Reform .................................................................... 53 Control .................................................................................................................................... 58 Procurement and Contracting ................................................................................................. 61 Human Resources ................................................................................................................... 65 Transparency ........................................................................................................................... 67 Complementarity and Progress o f Reforms in the Provinces ................................................. 69 Summary findings ................................................................................................................... 74

CHAPTER IV: CONCLUSIONS ................................................................................................ 79 Introduction ............................................................................................................................. 79 Some Theoretical Considerations as They Affect the Design and Use o f the Reform Model 80 The Dangers o f Excessive Formalism, the Inversion o f Means and Ends, the Many Routes to Rome, and Other Problems in the Model’s Application ......................................................... 85 Rescuing the Model and Rescuing Second Generation Reforms ........................................... 88

ANNEX 1 : RESEARCH METHODOLOGY ............................................................................. 95

ANNEX 2: THE GUIDE TO D A T A COLLECTION ............................................................... 103

ANNEX 3: LIST OF PARTICIPANTS IN FIELD RESEARCH ............................................. 109

REFERENCES ........................................................................................................................... 111

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TABLES

Table 1 . Schematic Representation of the Four Reform Outcomes.,, .......................................... 8 Table 2 . Options for Further Reforms in Five Administrative Areas, at the Federal and

Provincial Levels ......................................................................................................... 12 Table 3 . Additional Observations on Provincial Reforms ........................................................ -13 Table 4 . Some General Observations o n Governance Reform Programs .................................. 14 Table 2.1, Amount o f Budgeted Resources and Expenditures (1 993- 2004) ............ 25 Table 2.2. Status o f AGN Reports on Government Financial Accounts ...................................... 27 Table 2.3 Number o f Employees in the National Executive by Similar Groups o f Collective

Contracts and Short Term Contractors (2002) ............................................................. 32 Table 3.1. Reform Progress in the 24 Provinces .......................................................................... 49 Table 3.2 Level o f Adoption o f Reforms in the 24 Provinces (Percentage Refer to Proportion

o f Provinces in Each Category) ................................................................................... 51 Table 3.3. Schematic Representation o f the Four Reform Outcomes ........................................... 52 Table 3.4. Financial Administration ............................................................................................ -55 Table 3.5. Control ......................................................................................................................... 59 Table 3.6. Procurement ................................................................................................................. 62 Table 3.7. Human Resources ........................................................................................................ 65 Table 3.8. Transparency ................................................................................................................. 68

96 Table A.1, Analytic Matr ix ....................................................................

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EXECUTIVE SUMMARY

Background and Explanation of Research

1. This study began with the question o f why, after over a decade o f legal and structural reforms to public sector organizations, the citizens o f Argentina do not have a more positive evaluation o f government outputs.’ A s this i s a very broad topic, i t was decided to narrow the focus to the package o f financial and administrative measures adopted at the federal and provincial levels between 1990 and 2003 and their record, during the same period, in effecting promised improvements in five executive branch functions* -- financial management, control, procurement, human resources, and transparency. Within these limits, the study does not pretend to capture the whole o f Argentina’s political economy even as regards i t s more narrowly defined target. I t instead i s an investigation into the challenges o f institutional reform, which it i s hoped can contribute to an on-going pol icy dialogue within and with Argentina o n the challenges o f improving the institutional capacities o f the Argentine state.

2. The study i s the sixth3 in a series o f Institutional and Governance Reviews (IGRs) the Wor ld Bank has done in Lat in America. I t s emphasis is on seeking explanations for performance problems in the underlying institutional and political environment, and on involving government and other stakeholders at every stage o f its development. It introduces a novel methodology based on the design o f an analytic framework or matrix summarizing the reforms’ explicit and implici t goals and using it to track their trajectory across the five administrative systems at the national level and in 24 local jurisdictions (the 23 provinces and the Ci ty o f Buenos A i re~) .~ Results o f the three stages o f the reforms (adoption o f measures, realization o f internal changes, and achievement o f predicted results) were evaluated on the basis o f f ield research and the application o f a 360-question data collection guide - the latter introduced to ensure greater consistency among the several teams doing the init ial analysis.’ The working hypothesis was that the reform logic itself, as depicted in the matrix, oversimplified the institutional change process in the fol lowing three regards:

I t assumed that the init ial legal and structural changes would be sufficient to push the reforms ahead.

I t also assumed that progress in the next two levels o f change (modifications in internal procedures and in outputs or outcomes) would be automatic.

One might also ask why citizens’ assessments precipitously declined in the period from 2001 to 2003 and are only

Field work was completed in M a y 2004 and thus did not capture any changes after that date. Although IGRs are also used in other regions, L A C holds the quantitative record, wi th five additional studies done,

in Bolivia, Peru, the Dominican Republic, the Eastern Caribbean States, and Paraguay. See: World Bank (2001d, 2003 a and b, 2005).

The matrix i s included in Annex 1. I t i s a stylized representation o f the series o f reforms actually attempted. This series i s also called here the reform model because o f the substantial consistency in i t s elements at both levels o f government.

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slowly rebounding, but the answers there are different, and are closely tied to the economic and political crises.

Examples o f the items included in the guide are provided in Annex 2.

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0 I t failed to consider the force o f informal institutions and political interests in impeding these changes, by preventing enactment o f the init ial measures, manipulating their contents, or circumventing their requirements after the fact.

3. Whether these strategic oversights can be considered design or implementation failures i s a matter o f interpretation. In any event, the answer does not affect the larger argument as to their impacts on the extent o f real change. As regards the identification o f the critical institutional and political constraints, the study emphasizes proximate causes, those directly affecting the programs under consideration. This was not an effort to explain reform shortfalls as a consequence o f some unique characteristics o f Argentine politics, but rather to explore how factors common to many other settings undermined that country’s ambitious program o f governance reform. The research does take note o f context-specific details (e.g. two economic and political crises, certain legal rigidities, the logic o f political alliances) but it nevertheless treated the Argentine case as an example o f a more general phenomenon just as i t s objectives were to draw lessons o f wider applicability.

4. As discussed in greater detail in the text, the research design was highly participatory, using local experts to do the data collection and init ial analysis and incorporating a final series o f workshops with members o f government, other academics, and c iv i l society organizations. Although the init ial plan did not provide for a written report, the workshop participants strongly recommended that one be produced. The findings summarized below are organized by level o f government (federal or provincial) and by administrative system, with the section o n the provinces focusing o n a more detailed analysis o f six representative cases.

Results at the Federal Level

5 . Financial Administration: This was the administrative area in which most progress was made, beginning in the early 1990s and continuing to this day. Among the major legal and structural changes are the following:

Passage o f a Financial Administration Law (Ley de Administracidn Financiera - No. 24.156 o f 1992) establishing the role and competencies o f both the Executive and the National Congress in the budgetary process and the integration o f the subsystems for Budget, Treasury, Accounting, and Public Credit.

Creation o f an automated information system, SIDIF (Sistema Integrado de Informacidn Financiera) and o f a single treasury account to facilitate the provision o f integrated, reliable and timely financial information and greater control over expenditures.

Introduction o f program, multi-year and results-based budgets, and o f standardized reports to be sent to the Congress and disseminated to the public.

Passage o f a Fiscal Solvency L a w (Ley de Solvencia Fiscal) in 1999.6

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A second l a w o f “Fiscal Responsibility” was enacted in 2004, outside the l i m i t s o f this study. I t aimed at correcting some imperfections in the 1999 version and also extended i ts impact t o the provinces. Because i t was passed after the research’s cut-off date and wou ld require st i l l more t ime for implementation, it is no t evaluated here.

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6. After a strong init ial push at the beginning o f the 1990s and some dramatic immediate improvements, hrther macro and micro objectives - fiscal stability and solvency on the one hand and the improved quality o f public goods and services on the other - were not definitively achieved or experienced only minimal advances. Moreover, the Executive and Legislature’s checks and balances role in the budgetary process has not been realized, and in recent years there has been an increasing tendency to exempt agencies and fiduciary funds from coverage by the integrated system and single account. Within the financial management area, the approved measures have been circumvented and that seems the key factor in explaining the limited results. Initiated as a response to the economic crisis o f the late 1980s and promoted by a core group o f technical specialists within the Ministry o f Economy with strong support from political leadership, this area saw the most progress in the adoption o f the recommended measures. For the most part th is was done without significant alterations to their content and with sustained efforts to secure some o f the predicted internal changes. Further changes to internal behaviors and external impacts were undermined by the more narrow focus o f the reforms’ technical supporters, and the conflicting agendas on the part o f the politicians in charge. Support for reform dissipated once the crisis had passed. The reformers, whose broader interests were never that clear, were forced back into a minimal position and even into relinquishing some ground already gained in the reform efforts.

7. Control: The reforms here paralleled those o f financial administration and were also supported by L a w No. 24.156. The law created a new control system designed o n the basis o f internal controls integrated with management, primari ly v ia the automated financial information system and under the responsibility o f agency heads, and concomitant or ex-post audits, carried out by Internal Auditing Units (Unidades de Auditoria Interna, I A Us), the Executive Audit Agency (Sindicatura General de la Nacidn, SIGEN) and the External Audit Agency (Auditoria General de la Nacidn, AGN). In addition:

a

a

a

e

e

8.

All forms o f ex-ante control by units or bodies other than the heads o f offices and ministries were eliminated.

The control system was universally applied throughout the public sector (no entities are exempted from the audit function) and it has even been extended to the new fiduciary fbnds.

The number o f professionals in government auditing positions was increased.

SIGEN established an exhaustive set o f rules for internal auditing and control.

From the 1990s onwards, the dissemination o f the auditing reports or internal control evaluations was begun by SIGEN and AGN.

The results were impeded from the start by: a failure to implement internal control systems; the absence o f incentives for agency heads-to track noncompliance; a series o f design flaws in the internal auditing units (IAUs) and AGN, reducing their political independence and limiting the AGN’s ability to enforce i t s findings; and the incomplete development o f results- based budgeting which thus prevented i t s use as the basis for audits. Still, the creation o f the new structure holds the promise for future improvements, and there have been some signs that both SIGEN and the AGN might take the reforms forward.

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9. Procurement: The reforms to this system are relatively recent, and consequently, present a lesser level o f development. They include the enactment o f a new procurement law in 2001, the creation o f the National Contracting Office (NCO) seven years earlier, and the adoption o f policies to publicize procurements o n the internet. I t bears noting that the 2001 law was enacted by the Executive v ia Delegated Decree No 1023/01, in use o f the functions delegated to i t by the National Congress. The new law does not cover public works. I ts implementation i s regulated by Decree No 436/00, which was drafted for the prior procurement law. Neither the N C O nor the sector contracting units have been sufficiently upgraded.

10. As opposed to financial administration, the reform process in procurement was more pro forma from the start, owing largely to the absence o f any strong internal constituency to push for real, or even formal, changes. The economic crisis o f the early 2000s created further setbacks and a reemergence o f noncompetitive practices.’ Possibly, more concerted attention and greater follow-up from i t s external supporters (within and outside o f the government) might have made a difference, but even they seemed unwilling to go beyond the adoption o f legal and structural changes.

1 1. Human Resources: Human resource management reforms also got o f f to an early start in adopting a lengthy set o f recommended measures. These include the passage o f framework laws regulating public employment and collective contracts; the creation o f a merit-based career system, National System o f Administrative Professionals (Sistema Nacional de la Profesidn Administrativa, SINAPA); standardizing procedures for selection, training, performance evaluation, and promotions; and the st i l l earlier development o f specialized career systems (i.e. foreign service, the corps o f government administrators).

12. Despite the early advances, the vision on which the human resource reforms were f i rst based (the creation o f a single, unified c iv i l service with standardized merit appointments and career development) appears to have reached its l imits in the face o f Argentine reality. External events as much as active opposition simply prevented the full implementation o f the measures adopted, and also reduced the chances for the rapid implementation o f some o f the new legally mandated practices. The central office charged with overseeing the system i s weak, but it i s advancing a process to create a full registry o f al l employees and standardize the maintenance o f personnel files. Fol lowing init ial drastic cuts in the early and mid-l990s, employment in the national executive has not risen, but the composition o f the workforce and the rules under which i t operates remain disparate, with an increasing reliance on the use o f contracted staff, Despite efforts to regulate the contracting process, i t remains highly decentralized and does not respond to a larger vision o f how and where individual contracts wil l be used. SINAPA’s expansion stopped at coverage o f only 30 percent o f c iv i l employees, with the rest st i l l governed by as many as 48 different regimes. Improvement o f the situation may indeed require the adoption o f a modified basic model and an attempt to reach the ultimate objectives (greater professionalization, higher productivity, more motivated employees) through a different set o f measures.

’ These are further documented in the text, and in the commissioned background papers. I t should be noted that some o f the trend can be blamed on the economic crisis, and the difficulties it created for “normal” procurement. Faced with unpredictable and occasionally arbitrary cuts in programmed disbursements, agencies simply took shortcuts to ensure contracts could be effected once they had the money in hand.

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13. Transparency: Transparency is less a system than a series o f principles adopted as a fifth area o f reform. The adoption came late in the 1990s - and thus the advances here have been few. Among the most important are: the enactment o f a Public Ethics Law (Ley de Etica Ptiblica); the creation o f an Anti-Corruption Office (OJicina Anticorrupcidn); the establishment o f a computerized system o f sworn assets declarations which are used to track conflicts o f interest and signs o f i l l ic i t enrichment and which are also available to the public; the increasing use o f agency websites, the internet publication o f information o n procurements, citizen charters, and public hearings. However, most o f these changes affect only executive agencies. Some key legislation, including laws o n freedom to information, conflicts o f interest, and whistle-blower protection, has yet to be enacted. In addition, most o f the other measures providing information to citizens or enabling their participation in decision-making remain optional and unregulated.

14. The impetus for increasing transparency came largely f rom the highest level o f the executive branch (in the Menem, de la R ~ a , and Kirchner administrations') as a response to citizen demands and possibly some external donor support. Executive impetus continues to be the driving force under the current administration, although the results hardly constitute a well- institutionalized set o f practices and organizations. They instead continued through the period covered (to the mid 2004) as a series o f fairly disconnected initiatives, with greater or lesser impact on resolving citizen complaints. Conceivably this ad hoc approach, backed by continuing citizen pressure, may be sufficient to expand their collective impact, For this to happen, the reforms wil l also have to overcome the resistance o f c iv i l servants, who tend to regard the transparency polices as a kind o f punitive control rather than a legitimization o f their actions before society. Since procurement i s a primary concern for citizens, closer coordination with, and further advances in, reforms in that area wil l also be needed.

Provincial Reforms

15. The provincial reforms began relatively recently, in some cases at the end o f the 1990s and, for the majority, at the beginning o f the present decade. Their late development followed certain national level changes effected in the mid 1990s in which many public services, public employees, and a higher proportion o f public revenues were transferred to the provinces. As the national economic situation worsened and the level o f provincial debt increased, the performance o f the provinces became more critical. Provincial reforms were also supported by the international financial institutions (IFIs). As regards the full analysis (24 jurisdictions) and the more detailed focus o n six provinces (Buenos Aires, Cdrdoba, L a Pampa, Salta, Santa Fe, and Tucumin), the fol lowing generalizations hold:

Since the provincial reforms began later than those at the federal level, progress even in adopting the recommended legal and structural changes has been far from complete.

As with the federal level, reforms tend to begin with the financial administrative system, with those in the other areas lagging far behind, and in some cases not even beginning.

0

0

Although the public pressure was most important in creating the impetus, i t was the three administrations that gave 8

form to the responses.

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No province has advanced as far as the federal executive in al l areas, or even in any individual one. Those provinces that had adopted more o f the recommended measures were most l ikely to have produced some o f the predicted internal changes and outcomes.

Nonetheless, some provinces appear to have achieved the outcomes by alternative means. In short, they were positive deviations from the model. In contrast, there were also negative deviations, i.e. provinces which adopted measures without visible results.

Among the constraints to the model’s application, especially but not exclusively in the area o f control, was the constitutional protection o f various organizations and procedures.

Yes

NO

Recommended measures and Implementation of Expected Changes in Internal Processes

16. The provincial analysis can be summarized in a four-quadrant table comparing the level o f adoption o f recommended changes and the results achieved. Whi le most provinces appeared to l ie in quadrants 1 and 4, several can be located in the other quadrants, and many provinces demonstrated less than a one-to-one correspondence between measures adopted and results achieved.

Expected Results Yes NO

Group (1) o f Provinces

Group (3) o f Provinces

Group (2) o f Provinces

Group (4) o f Provinces

Table 1. Schematic Representation of the Four Reform Outcomes

Source: World Bank staff.

17. While placing provinces within the matrix illustrates some o f the limitations o f the reform model, the exercise does not fully capture the different trajectories followed with respect to areas o f achievement or gaps between adoption and results in each area. The following short summary elaborates on these comments for the six provinces studied in more detail. Supporting documentation is provided in the main report and background papers. I t should again be emphasized that the evaluation does not refer to the overall quality o f any provincial administration, but only i ts success in implanting the reform model.

18. Salta i s the province with the highest levels o f recommended measures adopted and results produced. I t s performance in obtaining results i s most marked in financial administration and procurement, where i t i s the only province to have produced visible improvements on the output indicators. Its performance in transparency is only partial, and despite i t s early enactment o f legal changes to its control system, the results here are minimal (largely due to the partial implementation o f an integrated financial management system, IFMS). Lack o f progress in introducing human resource reforms coincides with the absence o f recordable results in that domain.

19. Santa Fe’s performance i s based on different areas o f achievement. I t adopted a majority o f the recommended measures in the areas o f financial administration, control and transparency while effecting some important changes to internal procedures. Consequently i t has made

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improvements in al l three areas, and especially in transparency, where i t i s the province that has achieved the greatest advances in actually making information available to the public. Nonetheless, Santa Fe’s advances are also based o n certain deviations from the model. For example i t has implemented an IFMS despite not having enacted a FAL (Financial Administration Law), and i t has used an emergency law and an Expenditure Monitoring Committee to enforce fiscal solvency despite a failure to adopt the required law. Meanwhile i t s adoption o f recommended measures in procurement and human resources has not produced the expected results.

20. For i t s part, Cdrdoba experienced higher (but s t i l l partial) level o f measures adopted than o f results obtained. Even though its reform process i s recent, it appears that the emphasis to date has been on the formal side o f the equation, and thatefforts to promote changes in internal procedures have lagged behind. This is the simplest explanation for the lack o f impact o n outcomes, although the reasons merit further exploration.

21. The province of Buenos Aires i s an example o f few measures adopted and l imited progress made in achieving improvements in output. Two partial exceptions, with regard to the adoption o f measures but not results, are the areas o f procurement (where new regulations were enacted) and transparency (with the creation o f websites and a system o f asset declarations). The only changes in internal procedures relate to improvements in budgetary practices.

22. Tucumhn occupies an intermediate position, based on i t s partial adoption o f the recommended measures and the achievement o f some early results. I t has partially adopted reforms in financial administration and control and some equally partial improvements in these areas and in human resources. In procurement and transparency, i t neither attempted reforms nor recorded any improvements in outcome indicators.

23. The experience o f L a Pampa could be considered a paradox, indicating a failure to adopt the recommended measures while achieving a reasonable level o f performance o n the outcome indicators. L a Pampa has pursued i t s own means for achieving the desired ends, ignoring or rejecting most o f the specific measures included in the model. This i s especially evident in the areas o f financial management and control where provincial authorities have modified traditional practices to produce better results. Similar resistance to change had less positive results in the area o f human resources; the traditional system has not produced greater professionalization o f staff or permitted the introduction o f methods to encourage higher productivity. Even given this negative detail, L a Pampa does demonstrate a fairly successful deviation f rom the reform model, in which a combination o f traditional practices, an emphasis on i t s own formal rules, and the interests o f key political actors have allowed i t to achieve relatively satisfactory levels o f performance.

24. Finally, although the crisis o f the late 1980s helped push national-level reforms ahead, that o f the early 2000s tended to impede the progress o f the provinces. I t diverted attention to other issues (especially in Buenos Aires and T u c u m h with their large populations o f the structural or newly poor) and it decreased the availability o f resources required for the reforms. The economic crisis did allow the provinces (with the exception o f Buenos Aires which, nevertheless, achieved major fiscal adjustment) to eliminate their deficits, but i t remains

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uncertain whether further developments will encourage or discourage a return to the reforms only recently begun. This is an important question because the role o f the provinces i s critical as regards overall expenditures, fiscal solvency, and the quality o f services provided to citizens.

Conclusions

25. The research did not invalidate the reforms undertaken, and in fact i t revealed important areas o f progress. I t does indicate an overemphasis o n formal change at the design stage and an inadequate follow-up during the implementation process, especially as regards ensuring that formal measures affected real behaviors. I t revealed only a few instances o f “insincere reforms,” but many more cases where passive or active resistance obstructed what may have been inadequate attention (or dedication) to real implementation. As outlined in the analytic matrix (see Annex 3), the three steps or levels o f reform - recommended legal and structural change, modification o f internal practices, and improved outcomes - describe the process adequately, but may place too much emphasis on the first steps, give the impression that the rest i s automatic, and also discount the potential for alternative routes, different sequencing, or pauses along the way.

26. To the extent these tendencies undermine the progress o f second generation, institutional reforms, this may be partly due to an extrapolation o f the lessons and successes o f the first generation, macro-structural reforms that preceded them. First generation reforms relied on the use o f a few macro triggers to produce predictable, first order results irrespective o f the context in which they are applied. Because they can be accomplished quickly, they are often aided by crises. Second generation reforms do not have triggers in this same sense. The recommended measures in the model are only f i rst steps, and their utility in producing the desired end results i s more context-dependent. I t also hinges on a series o f more complex actions to overcome the many types o f resistance to change. W h i l e second generation reforms can get an initial push from a crisis, the longer time frame needed for their implementation requires additional sources o f impetus. The problem o f maintaining continuity across different administrations (inter- temporal pacts) i s not even envisioned for first generation change.

27. Among the many suggested reform measures, three components stand out as key: the introduction o f new principles to guide operations, the creation o f better systems for collecting information and their use to monitor performance, and the establishment o f a body responsible for overseeing the reform trajectory and impact within each administrative system. These may be achieved outside the standard formula, and their achievement is not concluded with the enactment o f a law. Here, those interested in promoting the reforms need a technical plan (the matrix or some equivalent), a long range vision which gives priori ty to the ends pursued, and a strategy to manage change and the political context. The political strategy could be informed by a thorough understanding o f the obstacles arising in vested interests, bureaucratic inertia, or lack o f skills and resources, and may include tactics for overcoming each. Part o f the technical plan and political strategy would also need to take into account issues o f interaction and sequencing.

28. The nearly universal tendency to start with the financial administration system follows a clear technical and political logic. Technically, an integrated financial management system (IFMS) provides a core around which to structure advances in the other areas. Politically, this i s

10

the reform with the strongest promoters behind it. While politically far more difficult, reforms to the control and procurement systems would benefit f rom following soon if the financial reforms are to complete their trajectory and fully realize their aims. Transparency may best be advanced as an integral part o f the whole reform process, thereby enhancing the impact o f i t s usually weak central body. At some point however, and especially with the passage o f freedom to information laws, oversight o f their implementation needs to be coordinated, something not yet contemplated even at the federal level. Although failures to advance in the management o f human resources have negatively impacted al l the other systems, the political obstacles appear to be greatest here. In poorer provinces, the state’s traditional role as the employer o f last resort poses an additional challenge.

29. The bottom line i s that beyond developing a technically sound sequence for introducing change, successful reformers also operate politically. They cannot assume that the logic and inherent desirability o f their aims wil l be sufficient to push their programs ahead. The reform model, treated as a tool and not a recipe, with an appropriate prioritization o f i t s ends over i t s means, and without any assumptions about automatic causal links, is a good place to start, but its successful application requires equal attention to the political context and how to promote change despite the many opposing forces. I t i s also worth noting that the failures o f the last decade may be unfairly overstated. Important progress has been made both in its own right and as a base for future advances. Those organizing the current reforms could benefit from recognizing this fact and use the lessons derived from the past efforts to improve their work.

Options

30. Generally speaking, IGRs are not expected to generate guidance for future actions, especially if their focus i s macro-level or high-level politics. Studies tracking the impact o f party discipline or clientelism o n an entire political process can offer l i t t le in the way o f remedies, except to halt the practice. However, as the current IGR took a more micro-focus, examining the trajectories o f a set o f reform programs, and the institutional and political explanations for their emergence, i t can offer some suggestions, especially as regards options for improvement and, if to a lesser extent, potential means to overcome the obstacles detected. In effect, there are too many pol icy alternatives put forward in the report to summarize here. To facilitate the process, this section divides the ftture options into three parts: a general set applicable for reforms in the individual systems at both the provincial and federal level; a second set, reviewing some province-specific conclusions; and a final set, highlighting some general lessons about undertaking this type o f reform and the utility o f the change management approach underlying the Argentine program.

11

Table 2, Area General

Financial Administratio]

Control

Procurement

Human Resources

tions for Further Reforms in Five Administrative Areas, at the Federal and Provincial Levels Option For each o f the administrative areas, three actions might be considered: 0 Introduction o f general principles to guide performance 0 Creation or strengthening o f a central office to oversee implementation and staffmghpgrading o f

decentralized offices to execute programs 0 Development o f information systems to register activities and track results

The logical starting place for al l reforms i s the creation o f an integrated system and an IFMS 0 Once fiscal control has advanced, the emphasis might shift to the quality (efficiency and efficacy) o f

expenditures Strengthening o f sector offices to facilitate t h i s shift

0 At federal level, clearer division o f functions between the Ministry o f Economy and Jefatura with the former managing macro-economic policy and the latter setting substantive priorities. A comparable definition o f functions for provinces

0 Simplification and rationalization o f budget formulatiodexecution rules to facilitate compliance Reductiodelimination o f exemptions from inclusion in integrated system and single treasury account

0 Strengthening the legislature's capabilities in budget approval and control o f execution 0 Integration o f internal controls into the management function via technological and legal change (to

make agency heads responsible for slippage) 0 Better integration o f agency heads into the budgetary process with an emphasis on resource

allocation based on planning, prioritized objectives, and measurable results 0 Supreme audit institutions (external and internal) to monitor the adequacy o f IAUs, not duplicating

their work 0 At federal level, eliminate flaws in design o f IAUs, SIGEN, and AGN to make them more

independent and to enforce their findings. Comparable efforts in desigdredesign o f provincial counterparts, wi th or without retention o f Tribunal o f Accounts model

0 A t federal level, and where necessary, at provincial, make external agency more independent o f congressional oversight Createhtrengthen central oversight office and build capabilities o f decentralized contracting units Introduce/enforce requirements for development, use, and publication o f annual procurement plans

0 Incorporate procurement unit in SIDIF or i t s provincial equivalent 0 Simplify procurement procedures to encourage compliance 0 Ensure central office has the resources/ability to track rule compliance and to detect systematic

deviations Where they do not exist (including federal level) create single data bases and standardized personnel f i les for a l l public employees. Consider publishing l i s t s Enacb'enforce general principals to guide hiring, evaluation, promotion o f employees, stressing merit base for al l actions Take steps to consolidate multiple regimes or at least ensure al l operate by similar principles Apply same merit standards to use o f contracted employees and develop general guidelines as regards when and where individual contracts w i l l be utilized Prioritize professionalization o f staff in human resources and other central administrative offices

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Transparency

31. in the case o f the provinces a few additional suggestions can be made.

The above principles and options are applicable to both levels o f government. However

Table 3. Additional Observations on Provincial Reforms

Createhtrengthen office for developing standards for th is area and overseeing their implementation Ensure greater independence for office and for others (e.g.fiscalias de investigacidn administrativas) doing similar work; encourage coordination o f their programs

0 Adopt and publish assets declarations for key employees in al l branches and levels o f government Enact freedom o f information laws and create an office to set standards for/ oversee imdementation

Areas Financial Management

Control

Procurement

Human Resources

32. Aside from the system-specific guidance, the report also offers some conclusions on the overall reform process. Directed both at reformers and their external allies, these are summarized as follows:

Options 0 Encourage the adoption o f the three key principles (norms, installed centralized and

decentralized capacity, and information) without mandating a given order or form 0 Find ways to extend the crisis-facilitated deficit control beyond the crisis period 0 Given the difficulties in eliminating constitutionally protected Tribunals o f

Accounts, explore the potential (and positive experience) in reorienting them to modern auditing practices

0 More guidance probably required as to the content o f an improved law Use o f positive examples, like that o f Salta which has measurably reduced prices paid

0 Given the frequently high incidence o f corruption in t h i s area, a closer linkage with the transparency “system” and the activationhvolvement o f c iv i l society and business associations may encourage progress While always a difficult area, the specific obstacles and negative impacts vary from province to province and may require (although we lack positive examples) different remedies

0 In provinces where government i s the primary employer, there may be no short-run solution except to improve the capacity o f the existing work force Where patronage inevitably leads to corruption, a more frontal attack may be required, but i t s feasibility needs to be ascertained Build civ i l society support for transparency Investigate potential for involving business and other local associations in reform planning

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Table 4. Some General Observations on Governance Reform Programs

Theme Use o f a standardized matrix or model

Sequencing and interaction o f reforms

Some possible modifications to the existing model

Change strategy

Overcoming active resistance

Overcoming passive resistance

Observations 0 These are useful in laying out and tracking a plan, but should never be

regarded as immutable or one-size-fits-all 0 Reverse the priorities - outcomes first, internal changes second, and

initial measures only as a possible f i r s t step 0 Recognize that the linkages among the three stages are not automatic and

that the initial legal and structural measures do not necessarily trigger follow-up action

0 Leave room for successful deviations from the norm Financial management i s a logical start, but it w i l l short circuit without attention to other areas, especially control and procurement

0 Transparency i s not a system in itself, but a principle to be adopted in the other four areas

0 The management o f human resources i s the politically most difficult, but until i t s problems are resolved, i t will hold up progress in the other areas Human resources - consider alternatives to a full fledged, across the board career system, and at the very least, regularize contract employment to make merit appointment the ru le

0 Control - consider a transition strategy rather than an abrupt change from ex-ante external control to integrated management control

0 Have one and recognize that it requires substantive and political content; reforms are rarely adopted on the basis o f their inherent goodness

0 If possible, work across administrative systems, using the stronger ones to leverage change in the weakest For external actors promoting reforms, recognize that success i s not measured by the number o f laws enacted and new organizations created

0 Recognize that interest-based opposition w i l l not easily shift to support and thus that other tactics may be needed to deal wi th i t

0 Consider divide-and-conquer tactics or postponing conflicts until later in the game Use visible quick victories to leverage more difficult change

0 Do not confuse t h i s with active resistance; it has other origins and merits a different treatment

0 Identify obstacles to compliance (lack o f resources, knowledge, or understanding) and deal wi th them appropriately

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CHAPTER I: BACKGROUND, OBJECTIVES AND METHODOLOGY

Introduction

1.1 Over the better part o f the last century, Argentina’s governance institutions experienced a series o f substantial transformations as the country sought to balance the disparate demands and expectations o f its inhabitants in the face o f changing circumstances. With the nation’s return to democracy in 1983, and the resolution o f the economic crisis at the end o f that decade, external and internal observers seemed willing to believe that the system, whatever its flaws, was finally working. I t took another economic crisis twelve years later, and an accompanying period o f political chaos to suggest that the most recent transformations had not been whol ly successful and that many o f the weaknesses identified over the prior decades had either not been resolved or had been replaced by new ones.

1.2 Although most attention and blame have focused on corruption, i t is worth noting that this has never been the only concern. Argentina’s scores o n several o f the Wor ld Bank Institute’s (WBI ’s) six dimensions o f governance’ had placed the country below the average for i t s level o f development even prior to the most recent crises. I t s precipitous post-2001 fal l on this and other international rating systems was thus not the f i rst indication o f the seriousness o f the problems. . Even after an apparent return to normalcy, the country is st i l l paying a price in such basic areas as citizen confidence in institutional quality and the rule o f law.

1.3 The Kirchner administration has made improving the quality o f governance one o f the pillars o f i t s political program. This follows a decade in which political leaders undertook a series of programs, collectively termed “modernization o f the state,” aimed at upgrading public sector processes and outputs. Possibly a higher level o f citizen expectations, a new definition o f priorities, and a different approach to the challenges may create greater chances o f success. Nonetheless, to avoid the risks o f repeating history because o f a failure to understand it, the present study has reviewed some o f the earlier efforts, seeking to explain why they did not attain their objectives, and thus attempting to draw lessons to help Argentina and i t s external partners better respond to the current challenges.

1.4 Although sponsored by the Wor ld Bank, this study, as explained in greater detail below, relied heavily on the participation and contributions o f the Argentine government, academic institutions, and private experts and, thus, was conceived and conducted in the spirit o f close collaboration as a project important to al l the parties. I ts findings are intended as an input to programs designed by the government and supported by the Wor ld Bank, but also are meant to foster a wider dialogue o n the problems they address. Because the issues are not unique to Argentina, i t i s hoped that the methodology, findings, and broader lessons wil l be o f interest and use to others pursuing governance reforms within and outside the Lat in American region.

Aside from conuption, these include political stability and violence, voice and accountability, ru le o f law, 9

efficiency and efficacy, and the quality o f regulation. See Kaufman et a1 (2005).

15

Background and Overview of the Research

1.5 The present study is one o f a series o f Institutional and Governance Reviews (IGRs) that the World Bank and its Public Sector Group have conducted in the Lat in American and Caribbean region.” The Bank introduced the IGRs in 1999 as a tool for better understanding i t s client countries’ problems with governance performance and the obstacles to effecting improvements. The IGR seeks to explain, not just identify, practices and behavioral patterns which have tended to produce less than optimal results. To this end, the IGR uses an analytic framework focusing on the role o f “institutions” (formal and informal rules, mental models, and incentive systems’ ’) in structuring the actions o f individuals and groups within the public sphere, combining this with an identification o f the interests and objectives they pursue, as defined by the broader political economic setting. The IGR’s approach may be applied to a variety o f problems and settings, ranging from broad issues o f “high politics” to very targeted questions relating to specific programs and policies. The current study falls into the latter category; it does not attempt to explain Argentine politics writ large, but rather explores the micro-level institutional and political constraints affecting the outcomes o f a specific range o f governance reforms. The macro and micro-levels o f course interact, but that interaction is not the primary focus o f the research.

1.6 Each IGR i s intended to help the Bank better organize its programs and facilitate i t s dialogue with national counterparts, including c iv i l servants, representatives o f the legislative branch, NGOs, academics and others who are involved in the definition and implementation o f public policy. Although specific methodologies vary, they commonly include interviews, surveys and other more direct contributions from these same groups concerning their own actions, perspectives on problems and their causes, and how processes occur in fact as opposed to theory as embodied in legislation. W h i l e the government’s point o f v iew and that o f national stakeholders are always reflected in the final product, the goal o f the IGR is to reach an objective and, to the extent possible, innovative analysis -- innovative either in the details included or in the interpretation o f known events. Additional analytic tools, sources o f information, and the more specific focus o f each study differ according to the country situation, governments’ interests and the Bank’s program. In some cases, a government has specifically requested a study, but whether or not this happens, i t s agreement with the undertaking is always a prerequisite and, it, along with other stakeholders, i s usually invited to participate at various stages in the exercise. ’’ 1.7 In the wake o f Argentina’s political and economic crisis o f the early 2000s, the World Bank decided to undertake an IGR as a means o f better informing its operations and improving i t s pol icy dialogue in that country. Because the quality o f governance institutions was frequently blamed for contributing to the crisis and complicating i t s resolution, a better understanding o f the

lo Although IGRs are also used in other regions, L A C holds the quantitative record, wi th five additional studies done, in Bolivia, Peru, the Dominican Republic (where the IGR was combined with a PER -Public Expenditure Review), the Eastern Caribbean States, and Paraguay. See World Bank (2001d and e, 2003 a and b, 2005). ‘I North (1990). ’* The Argentina IGR was very closely coordinated, in i ts design, execution, and final review, wi th the Office o f the Chief o f Cabinet (and especially the Sub Secretariat o f the Public Function) and with the Ministry o f Economy and Production, via i t s National Direction o f Projects Financed by International Organizations.

16

problems was seen as critical. In this case, the Bank's preference was for a highly participatory process in which a final series o f meetings with al l stakeholders would substitute for the usual written report. However, the interest generated in those meetings and the numerous requests for further details led to a decision to draft the present summary o f major findings for more formal and wider dissemination.

1.8 The IGR team had to keep in mind one extremely important fact: Argentina and its governance system are well-studied, including by the Bank itself. The Bank had already conducted a series o f related diagnostics and research: the Country Financial Accountability Assessment (CFAA), Country Procurement Assessment Report (CPAR), pol icy notes, Economic and Sector Work (ESW) on corruption, and several other targeted studies.13 Collectively, they revealed some o f the governance problems addressed by this IGR which are critical to Argentina's development and the implementation o f its o w n public policies. In addition, over the last decade, the Argentine g~vernment , '~ public and private universities, research institute^,'^ and individual researchers16 have generated a body o f increasingly detailed studies o f specific aspects o f governance practices, ranging from across-the-board problems to those o f individual agencies. Argentina also has a long tradition o f academic, journalistic, and more personal efforts to describe i t s political system and i t s impact o n national deve10pment.l~ Taken collectively, these and other works represent a r ich source o f facts, observations, and recommendations useful to anyone concerned with understanding how Argentina's governance institutions operate and why their perfomance i s so often considered inadequate. They illustrate the dimensions and forms taken by many common problems and suggest some o f the factors accounting for their existence and persistence. They also provide insights into the advances and shortcomings o f past reform efforts, especially, but not exclusively those taken at the federal level over the past decade.

1.9 The IGR team's dilemma was thus how to provide a study that added value to this already impressive l is t . Part o f the answer was contextual. In the contemporary, post-crisis environment, where hr ther institutional change has been prioritized by the administration and by citizens, there was both an opportunity and a very strong reason for revisiting these topics in a more concentrated fashion. I t i s essential for the Bank and for the Argentines, as an input to their own debates o n what to change and how to accomplish it. These considerations motivated the

l3 These include: World Bank (200a, b, and c; 2002 a, b, c and d); Dorotinsky (1998), Maldonado (2002), and Rinne

l4 See Argentina, Jefatura de Gabinete de Ministros, Secretaria de Coordinacidn, Proyecto de Modernizacidn de la Gestidn Ptiblica (2001a and b); Argentina, INSSJF' (2001); Argentina, Ministerio de Justicia y Derechos Humanos, Oficina Anticorrupcidn, Direccidn de Planijicacidn de Politicas de Transparencia (2000). The W B finded Modernization of the State Loan has produced many studies, some done by leading Argentine academics, on aspects o f public administration failings.

See for example Bonvecchi et a1 (1998); Bozzo et a1 (2000); FIEL (1996 and 2002); Garavano (2000); Grupo Unidos del Sud (2002 a-e); Iaryczower et a1 (2002); and Tommasi et a1 (2002). l6 See for example: Alvarez and Highton (2000); Aspiazu (2002); Bielsa and Graiia (1996); Carri6 (1996); De Michele and Manzetti (ad), De Perez Cortts (2002); Essayag (2001); Estenot and Cao (2001); Gervasoni (2001); Gil Dominguez (2002); Gonzitlez (2001); Highton et a1 (2002); Lardone (2004); Ozlak (2000); Pellet Lastra (2001); Piaggi de Vanossi (2001); and Rodriguez (2001).

See for example Acuiia (2001); Alvarez (2002); Arriazu (2004); Bergoglio (2000);.and Spiller and Tommasi (1999 and 2003).

(2001).

15

17

17

Bank and the government’s support for the present study. Although realized within a fairly short period (four months,) the study generated hundreds o f pages o f documentation, the main findings o f which are summarized in the present report.

Analytical Focus and Working Hypotheses

1-10 Governance i s a very broad topic, and despite an emerging consensus o n its importance, there i s s t i l l considerable debate as to its precise meaning. Given the absence o f a universally accepted definition, the present study adopts one commonly used in the Wor ld Bank, but also similar to usages o f other authors: the “manner in which the State acquires and exercises authority to provide and manage public goods and services,”18 including the respect and authority accorded i t s actions by al l public and private actors.” Financial and time constraints dictated greater selectively o f emphasis. I t was thus decided to focus the Argentina IGR on one part o f the larger governance field -- the performance o f executive agencies at the federal and provincial levels in managing public resources, implementing public policy, and providing services to the citizenry. The choice was partly based on the Bank’s own comparative expertise and its past work in Argentina. Additionally, poor service provision and attendant problems o f corruption, inefficiency, and unresponsiveness to users are frequent complaints o f the Argentine public while the criteria for evaluating process and outcomes are less controversial in this area than in others (for example, the electoral and party systems, the division o f functions and interactions among branches and levels o f government, or the interface between civil, economic, and political societies).20 The same arguments might have supported an investigation o f the impact o f judicial reforms, o f the delegation o f service provision to provincial governments, or o f infrastructure investments. These are equally important topics, but it was simply impossible to cover them all.

1.11 Even after this ini t ial decision, the scope o f the study had to be further restricted. It was thus agreed to focus the investigation on the results o f efforts to improve public sector resource management undertaken in Argentina between 1990 and 2003. As has occurred in other countries o f the region, Argentina had adopted a series o f measures intended to promote greater efficiency and effectiveness within i t s public sector institutions, particularly focusing on the areas o f financial administration, control, procurement, human resources, and transparency. These programs, often referred to as second generation reforms, have been supported by the Bank and other multilateral institutions in the belief that improving public sector performance was essential to advancing other growth and development goak2’

1.12 Argentina’s programs were adopted in the context o f the current universal consensus that improving the quantity and quality o f public sector outputs requires a process o f institutional change. Simply put, this means altering the way organizations carry out their functions through a mix o f change strategies aimed at defining new rules and structures as wel l as modifying the

~

Campos and Ryterman (2003), p. 5.

The other area where the Bank has significant experience i s judicial reform. This was discarded as a topic because

18

l9 This last part i s crit ical to the WBI def i t ion of governance. (See Kaufmn et a1 2005).

the complexity of the issues could not be properly addressed within this IGR. 21 See for example Burki and Perry (1998), Easterly and Levine (2002), World Bank (2002e).

18

incentive systems and objectives o f the actors working within or using them.22 In line with the arguments o f neo-institutional economics, this implies attention to both formal and informal rules, incentives, and practices. Even so, in the Argentine case, the reform model has focused on the formal side o f the equation. It begins with a number o f legislative and organizational measures on the assumption that once adopted, they would produce a series o f visible, predictable changes -- first, in internal operations o f public agencies and, subsequently, in outcomes. I t was thought and, to a large degree i t st i l l is, that these structural and legal changes would be sufficient to overcome counterproductive behaviors and, consequently, would achieve results in terms o f greater efficiency, effectiveness, transparency, citizen participation and social equity. 23

1.13 Drawing o n the results o f the many prior studies cited above, the present research began with the question o f why, despite the apparent agreement on what needed to be done, and the visible adoption o f much o f the reform package, the results have been so meager and the complaints about governance quality, if anything, have been growing. The working hypothesis adopted draws o n the findings o f the same earlier studies. I t argues that the emphasis on formal legal and organizational changes has been insufficient to override the informal practices and behaviors o f politicians, public sector employees, key groups o f private actors, and other citizens. These groups with unreformed agendas have been able to veto programs o f changes through one o f the fol lowing tactics:

0

0

Preventing the adoption o f new procedures.

Introducing modifications to reduce their impact.

Finding ways to work around them when adopted.

1.14 While al l three tactics can be observed, i t appears that straightforward obstruction o f any and al l formal change has been less frequent. During the period covered (1990 to mid-2004), the organizational structure, laws, and official operating ru les shaping Argentina’s public bureaucracies underwent considerable transformation. Within this same timeframe, the impact on performance was less dramatic. This was the central problem to be explored and explained in the IGR.

1.15 This argument suggests the limits to improving governance performance by simply changing the normative framework, including altering organizational composition and responsibilities. I t implies far greater attention to the identity and incentives o f the affected stakeholders and to how the new arrangements evolve over time, especially as regards the objectives they are expected to hrther. Whi le true to a greater or lesser extent in al l countries (it was a Paraguayan who said that in h i s country, conflicts do not end, but only begin with the

22 This formulation i s explicit in the work o f Douglass North (1990). However, the neo-institutionalists tend to l imi t their discussions o f incentives to those arising within organizations, overlooking the influence o f external political actors, except as a residual variable, accounting for institutional change. 23 As critics note (see Santiso, 2001, for a review o f the literature), these guiding assumptions appear to have derived from the methodology used for the f i rst generation structural reforms, which indeed did rely on one-off or stroke-of- the-pen changes to force the desired new behaviors. Although some o f the unanticipated consequences o f the first generation measures have also been criticized for changing behaviors insufficiently or in perverse directions, the notion that incentive structures can be changed through such simple triggers appears alive and well.

19

enactment o f a new law), Argentines’ level o f sophistication in maneuvering within the legal and organizational framework merits special attention to ensure that future efforts have a better chance o f producing important, positive results.

Research Methodology

1.16 IGR involved the following steps:

In l ine with these introductory arguments and the working hypotheses, conducting the

1. A “reform model” was identified and defined as a sequenced package o f recommended organizational and legal changes in each o f five targeted administrative systems (financial management, control, procurement, human resources, and transparency), along with their anticipated effects on within-organization behavior (here called internal results) and o n overall performance (external outcomes). It should be noted that because the reforms were conceived as a package for each administrative system, there is a certain amount o f overlap as regards the anticipated effects o f individual measures on internal behaviors and especially on outcomes.

2. Reviewing the application and effects o f the model at the national level and in each o f the provinces as defined by gaps at each stage o f the process: anticipated and actual level o f adoption o f the recommended measures; anticipated and real level o f changes in internal behavior; and predicted and actual level o f changes in the quality o f outcomes.

3. Characterizing the interrelationship o f the three stages o f the process for each system, noting where the anticipated causal sequences held and where they did not.

4. Determining the extent to which the model “worked” and where it did not, providing explanations for the deviations from the anticipated course o f events.

1.17 A more detailed description o f the methodology and an abbreviated version o f the analytic matrix are included in Annex 1. It bears noting that the process was highly participatory, beginning with extensive consultations with representative public and private sector stakeholders, leading academics, and members o f NGOs; using Argentine experts to do the f ield work and to review the init ial reports; and concluding with a series o f meetings, to which the same stakeholder groups were invited, to discuss and validate the results. To ensure greater consistency in the data collection by the individual experts and research teams, the matrix was supplemented by a 360-question research guide with detailed criteria to be used in making the assessments. Annex 2 provides examples o f the guide’s contents. A s regards the provincial focus, a first stage o f data gathering included al l 23 provinces and the City o f Buenos Aires. A more detailed second-stage inquiry concentrated in greater depth o n six provinces only.

1.18 I t again bears emphasizing that the focus is l imited to reforms attempted and the results produced during the period o f 1990 to mid-2004. There have been a number o f critical changes since then that might alter some o f the assessments o f the earlier outcomes. These subsequent events are not covered or evaluated as they were not captured in the init ial f ield work and analysis and thus could not receive sufficiently systematic treatment. Except for the possibility that more time might have improved the impact o f the init ial measures, this exclusion i s entirely

20

consistent with the purposes o f the study, which were not to “grade” Argentina, but rather to explore problems related to implementing a particular set o f reform measures.

1.19 In the fol lowing two chapters, the findings f rom the national-level studies, and those conducted in six o f the provinces are summarized, along with some suggestions or guidelines for further change. A final chapter looks beyond the individual conclusions and future options to offer an overall assessment o f the reform model as a guide to improving governance performance.

21

CHAPTER 11: ANALYSIS OF THE FEDERAL LEVEL

Introduction

2.1 This chapter summarizes the findings o f the research done at the federal level. As explained above, the IGR team used a matrix outlining the “reform model” or package o f recommended reform measures adopted in Argentina and their anticipated consequences, to guide i t s data collection and analysis. As at the provincial level, the purpose was to document the application o f the reform model and its impact on public sector performance. I t also sought to identify where events deviated from the model’s prescriptions and predictions, and to provide explanations for those deviations as well as suggestions for future actions.

2.2 On the assumption that much o f the material covered had already been studied by Bank, Argentine and other experts, the IGR’s major contribution at the federal level was envisioned as a consolidation o f existing analyses and interpretations, rather than a radically new set o f findings. Nonetheless, when organized in this systematic fashion, the research revealed several gaps in the prior work (especially as regards systems that had been less studied or whose study had been l imited by a narrower focus). I t also revealed some emerging tendencies commonly given less attention, and ways in which the timing and sequencing o f changes in each o f the five administrative systems not only affected results there but also impacted o n progress in the other four areas.

2.3 N o t unexpectedly, the research revealed gaps within each system as regards the extent o f adoption o f the reforms. I t also produced new insights as to a subsequent selectivity regarding the internal changes and external impacts most actively pursued. The latter, what might be called the reformers’ revealed priorities, or alternatively, their realistic assessment o f what they could accomplish in the face o f opposition and other constraints, provides another type o f explanation for where the model went o f f course. The overall conclusions, as detailed hrther below, are not that the model is wrong, but only incomplete. Even at the federal level, where it was developed and first applied, improving the quality o f governance can start with, but requires far more than, simple legal and structural change.

Principal Findings on the Five Administrative Systems Analyzed

2.4 The fol lowing section i s organized system by system, fol lowing the matrix’s categories o f recommended legal and structural changes, anticipated alterations in internal procedures and presumed improvements in external outcomes. To the extent i t provides explanations for deviations from the expected course o f events, this section focuses largely o n the incomplete or imperfect implementation o f recommended reform measures. Later sections review the explanations for these shortcomings, the interactions o f changes in the five areas, and provide some suggested options as to future actions.

2.5 Financial Administration: This is where the reform program really began, and thus, not surprisingly, i s the one in which the greatest progress was made. However, timing is not the only explanation. Other early starters, namely control and human resources (which in some sense had i t s origins even before the period covered), have not progressed so well. One critical factor is

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simply the greater quantity o f reform measures adopted here. This was not, as demonstrated by the fol lowing list, a one-time effort but, rather, a continuing work in progress.

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The adoption in 1992 o f Law No. 24.156 and o f i t s subsequent regulations created a normative framework which clearly established the role and competencies o f both the Executive and the National Congress in the area o f financial management.

A new financial management structure was implemented integrating the subsystems o f Budgeting, Treasuring, Accounting, and Public Credit.

A highly innovative automated information system, known as SIDIF (Sistema Integrado de Informacidn Financiera), was developed, consisting o f a central module, administered by the Secretariat o f Finance and decentralized modules, located in the other ministries and agencies.

N e w budgeting rules and the implementation o f the Single Treasury Account (Cuenta Unica del Tesoro) guaranteed a high level o f institutional coverage by the system.

Collectively, these changes ensured the availability o f financial information in an integrated, reliable and timely fashion, characteristics which were especially important in controlling public expenditures during the crisis o f 2001 -2002.

N e w principles were institutionalized for the accounting o f accrued transactions.

Significant achievements were made in improving the technique o f program budgeting, instruments for the elaboration o f preliminary budgets were designed, and important steps were taken toward the introduction o f multiyear budgets.

N e w instruments were created to allow budgetary evaluation based on the preparation o f quantifiable goals and monitoring indicators for programs within the National Budget.

Financial programming mechanisms were established through the budgetary quota system, administered by the Secretariat o f Finance.

Routines were institutionalized for the periodic reporting o f budget execution to members of parliament to facilitate their oversight role and for public dissemination.

The passage, in 1999, o f a Fiscal Solvency L a w (Ley de Solvencia Fiscal), was a hr ther curb o n deficit spending. A second law, the Federal Regime o f Fiscal Responsibility, (Rkgimen Federal de Responsabilidad Fiscal), was enacted in 2004 in an effort to correct some o f the failings o f the earlier legislation and extend coverage to the provinces. Fieldwork ended too early to assess i t s impact, in the context o f this study.

These achievements were accompanied by significant problems, as regards their impact on internal processes and their anticipated improvement o f output indicators as o f the study's cut-off date.

The new financial administration system had limited effects on overall fiscal discipline, the sustainability o f public spending in the long term, and i t s vulnerability in the short term.

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Attempts to provide a remedy with the 1999 Fiscal Solvency Law, which also contemplated measures aimed at improving expenditure quality (via the adoption o f management by results) and increasing transparency, had little effect, in part because o f the l o w level o f compliance with, and implementation of, these aspects o f the law.24 Facing issues o f fiscal insolvency, the financial administration system did not succeed in resolving the problems o f contingent liabilities. The Chief o f (the Ministerial) Cabinet (Jefe de Gabinete) did not successfully institutionalize processes to coordinate annual budgeting with the broader functions o f strategic planning and setting cross-sector p r i o r i t i e ~ . ~ ~ Advances in strengthening the responsibilities o f institutional decision-makers in the formulation and management o f the budget, as wel l as the development o f less rigid central control in the budgetary and treasury subsystems, were almost non-existent. Along the same lines, both the preliminary budget and the multiyear budget had a l o w level o f actual implementation and use. (See Table 2.1 below) This situation was exacerbated by inaccurate estimates o f such basic macro-economic parameters as the GDP growth rate or anticipated tax revenues.26 There were also limited advances in updating the procurement and contracting system and the system for the management o f public properties or for their inclusion in the Integrated Financial Management System. The Secretary o f Finance and the Chief o f Cabinet were unable to reach agreement on mechanisms for evaluating the efficiency and efficacy o f resource use. Consequently improvements in the quality, costs and productivity o f public expenditures were not registered and probably did not occur. In the last five years, the increasing tendency to create fiduciary funds or grant certain organizations permission to operate outside o f the financial administrative system overseen by the Secretary o f Finance (situations arising from different causes) has meant a progressive departure from across-the-board application o f the principles o f integrated budgetary management and a single treasury account.27 The growing concentration o f budgetary powers in the Executive combined with the use o f emergency decrees wrested importance from the Budget L a w approved by the Congress. For its part, the National Congress did not improve i t s capacit to participate in the process o f budgetary formulation, approval, evaluation and control. 2 z

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24 For an analysis o f the problems in the design and implementation o f the 1999 law, see Braun y Tommasi (2002). 25 Martirene (2004). 26 Stein et a1 (1999), Abuelafia et a1 (2005). 27 Figures for 2004 (Ufia, 2005) suggest 16 percent o f national-level expenditures are now outside the reaches o f SIDIF and the Single Treasury Account (Cuentu Unica del Tesoro). 28 See Mak6n (1999) and Rodriguez y Bonvecchi (2004).

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Revenues Expenditures

Source: World Bank staff estimates based on information from the Investment Account, AGN, and ONP.

Fiscal Balance

2.7 As an overall conclusion on financial management generally, and the budgetary process more specifically, after a strong init ial push at the beginning o f the 1990s and some immediate dramatic improvements, the further macro and micro objectives pursued -- stability and fiscal solvency on the one hand and improved quality o f public goods and services, on the other - were not definitively achieved in the f i rst case and experienced only minimal advances in the second. Moreover, the Executive and Legislature’s checks and balances role in the budgetary process (set out in the 1992 law) has not been realized. Reasons for these occurrences are covered in later sections.

2.8 Control: The reform o f the control system was done in parallel with that o f financial administration. Both began with changes introduced through L a w No. 24.156 on Financial Administration and Public Sector Control Systems (Ley de Administracidn Financiera y de 10s Sistemas de Control del Sector Pziblico). The init ial measures adopted also produced some dramatic structural changes as evidenced by the following:

A new control system was put in place, designed on the basis o f internal controls integrated with management, primarily via the automated financial information system, and under the responsibility of agency heads, and concomitant or ex-post audits, carried out by Internal Auditing Units, (MUS) the Executive Audit Agency (SIGEN) and the External Audit Agency (Auditoria General de la Nacidn -AGN), the latter a dependency o f the National Congress.

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All forms o f ex-ante control by units or bodies other than the heads o f offices and ministries were eliminated.

The control system was applied universally (no entities are exempted from the audit function) and i t has even been extended to the new fiduciary funds.

The number o f professionals in government auditing positions was increased.

SIGEN established an exhaustive set o f rules for internal auditing and control.

From the 1990s onwards, the dissemination o f auditing reports or internal control evaluations was begun by SIGEN and AGN.

However, the impact o f the changes was diminished by early modifications to the design o f the new system and by i t s incomplete implementation. shortcomings are the following:

Among the most important

The new internal control systems, which were to be merged into the management function, were not fully implemented. Formal ex-ante control disappeared but was not replaced by integrated controls.

Measures were not introduced to ensure that the responsible agency heads developed internal control systems and otherwise complied with the new legal ru les and principles.

The institutional design o f the IAUs, which made them dependent on the head o f the agency in which each operated, was not conducive to an efficient development o f the internal control function. Appointments o f internal auditors and continuation in their jobs depended o n the good wil l o f the agency head.

Rules regarding the administrative responsibility, discipline and conflicts o f interest o f public employees were not updated to adapt them to the new control system.

Development o f management and results audits has lagged, meaning that most audits continue to focus on legal and accounting rules.

SIGEN and AGN lack the legal ability to compel correction o f failings in management processes encountered through their investigations, or to initiate criminal complaints with the judiciary. This means that repeated findings o f normative breaches, especially those related to the procurement and contracting system, do not necessarily result in change in agency practices.

The internal units, SIGEN, and AGN all face challenges in hiring staff with requisite experience in financial management and control, adequate political independence and without any conflicts o f interest.

Criteria used for appointing AGN’s directory body (Colegio de Auditores) and i t s president prevent domination by the majority party, but st i l l give the organization a partisan nature. Further progress i s needed in ensuring that AGN staff i s selected on the basis o f merit criteria and protected from dismissal when governments (or the directorate) change.

The Congress’s Joint Commission for the Review o f Accounts (Cornisibn Mixta Revisora de Cuentas del Congreso de la Nacidn) has not developed its oversight role vis-&vis,

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AGN nor regularly acted on AGN’s audit reports. Congress has not discharged i t s role o f approving the General Government Accounts (Table 2.2).

While in the init ial stages o f the reform process there was a l o w level o f dissemination o f SIGEN’s and AGN’s audit reports, in recent years the agencies have made a significant effort to ensure adequate dissemination o f their reports and recommendations, particularly through their official websites.

Since 2000, and at least until 2003, there has been a tendency toward the “judicialization” o f the control processes, especially those related to procurement and contracting. This is seen in SIGEN undertaking, either o n i t s own initiative or in response to requests from the Anti-Corruption Office (OJicina Anticorrupcidn, ACO) o f special “fraud audits” (auditorias defraude) directed at specific procurement actions.29

Action and Entity Taking I t Fiscal Year Covered 2002 200 1 1996 1993

Last Report done by the AGN Last Report approved by the AGN Directorate Last Report approved by the CPMRCA* Last report approved by Congress

Table 2.2. Status o f AGN Reports on Government Financial Accounts

Fiscal Year Completed 2004 2003 2003 1998

2.10 This review o f the control system’s development makes i t clear that i t was strongly influenced by the financial administration reforms. Law No. 24.156 established the b c t i o n a l framework for both administrative systems, but was based o n a series o f assumptions, particularly related to internal control, that were never operationalized. These included the proposed integration o f internal control into the regular management function and the accompanying redefinition o f managers’ responsibilities. These failures put more responsibility on the extra-ministerial controls and their concomitant and ex-post audits, but their structural and operational weaknesses, in conjunction with the vague assignment o f accountability, lessened the enforcement capabilities o f the external audit bodies. The lack o f standing o f SIGEN and AGN as criminal complainants also barred the possibility o f judicial recourse. In short, deviations f rom the model occurred in the design stage - reforms were enacted, but with oversights or modifications that lessened their impact. However, the creation o f the new entities may present possibilities for future improvements; what the reform’s sponsors (in the Ministry o f Economy) did not complete, their successors (in the control agencies) can perhaps carry forward. SIGEN and AGN’s recent improvements in disseminating their reports and seeking closer contacts with c iv i l society constitute promising steps in the right direction.

2.1 1 Procurement and Contracting: The analysis o f the procurement and contracting system focused on reforms relating to the procurement o f goods and services, not on the legal framework and procedures governing public works. The reforms introduced to this system are

29 For more detail see Schweinheim et a1 (2004).

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relatively recent as compared to the two already discussed, and consequently, present a lesser level o f development. Among the advances achieved, the fol lowing merit mention:

In 2001 a new procurement and contracting law was enacted to replace the laws in force since the 1970s. The new law incorporates higher standards o f transparency and an emphasis on competitive procedures.

The National Contracting Office (OJicina Nacional de Contrataciones), which had been created even earlier, in 1994, as the system’s governing body, was relocated from Ministry o f Economy to the Chief o f Cabinet’s Office and efforts were made, with external assistance, to reinforce i t s operational capacity.

Advances were made in publicizing procurement processes v ia the internet, especially the announcement o f proposed procurements, the release o f bidding documents, and notification o f the final awards.

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2.12 Considering the recent introduction o f these changes (a full decade after the approval o f the Financial Administration Law), the remaining challenges and problems are, not surprisingly, substantial. Here we have a case o f relatively successful bureaucratic and political resistance to the reform measures themselves, f i rst seen in their delayed approval and then in their incomplete implementation:

0 The new law was approved via the delegation o f powers f rom the Congress to the Exe~u t i ve .~ ’ For details o f i t s implementation, the regulatory decree from the prior regime has been used.31 The new law only covers the federal executive and not the other branches and levels o f government. A delegated decree, even with the force o f law, could not violate the separation o f powers and the federal organization o f the state as established in the Constitution.

0 The procurement units within individual ministries and agencies have not been sufficiently strengthened. Many o f them rely on a significant number o f contract staff, as does the National Contracting Office (NCO).

Even within the new regime, the procedures for competitive procurements are very complex, lack agility, and often result in very lengthy bidding processes. This problem largely originates from the participation o f various internal actors, each with veto power, and the consequently reduced role o f the ministries’ procurement offices’ (Departamento de Compras y Contrataciones) to just one more actor in the process. An important portion (close to 44 percent in 2003) o f total procurement amounts are made through processes considered as exceptional under the new regime. Less than 11 percent (o f the init ial 100 percent) are awarded through full and open public competition.

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30 Decreto Delegado 102312001. This decree was enacted using powers delegated to the Executive by the Congress via Law No 25.414. 3 1 Decreto 43612000 “Reglamento para la Adquisicidn, Enajenacidn y Contratacidn de Bienes y Sewicios del Estado Nacional.” For more details on the legal framework, see Rejman Farah (2004 a), report commissioned for the Argentina IGR.

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0 As o f mid-2004, the majority o f procurements continued to be done through sole sourcing, rotating funds, or shopping. There was also an increasing use o f extensions o f existing purchase orders, at up to 20 percent o f the init ial value, and a mechanism called “legitimos abonos ” involving payment for services or goods provided without a contract (or after a contract had lapsed). Some o f this was a direct result o f the economic crisis o f 2001 , and the situation can be expected to improve.

The requirement to produce and work o n the basis o f annual procurement plans is seldom met, thus undermining the budgetary programming process (through the lack o f articulation with SIDIF) and the predictability o f the procurement system as a whole. These factors negatively impact on the number o f suppliers and the procurement prices.

The new suppliers registry (SIPRO) is not yet fully l inked with the financial management system and i t seems to include a large number o f intermediaries (distributors) specializing in selling to the state. Although part o f the documentation required o f vendors is held by other agencies (as for example, data kept by the Administracidn Federal de Ingresos Publicos; AFIP), i t must nonetheless be supplied anew with every procurement process.

The obligatory use o f lists o f standard prices (precios testigos) determined by SIGEN has not been respected, and questions exist as to the reliability o f the system. The reference prices established by the National Contracting Office only have informational value, and are not l inked to control criteria.

The formal compliance controls used by the Internal Auditing Units, SIGEN and AGN have systematically revealed deviations from the established procurement rules, but have had l i t t le effect on improving processes.

In certain situations, agencies have resorted to outsourcing their procurement procedures, especially when using funds from international organizations.

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Chart 2.1 Contracts by Type of Procedure (2001-2003)

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Source: Rejman Farah (2004).

2.13 As a consequence o f recent reforms, the procurement and contracting system has improved. However, the l o w level o f institutionalization and the successive changes in the legal framework militate against increasing competition and lowering prices by attracting more

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vendors. These and other problems (e.g. the rigidity o f the rules and the uncertainties caused by the economic crisis) led agencies to continue relying on the traditional alternatives such as sole sourcing and revolving funds which the new regime was supposed to relegate to exceptional status. Alternatively, agencies use the more innovative, but no more desirable approach o f outsourcing their entire procurement processes.32 Thus the s t i l l incomplete and imperfect implementation o f reforms, if in part due to exceptional circumstances, had yet to produce the predicted changes in internal behavior or external outcomes. With more time, some o f these downstream changes may occur, but that will be more l ikely if steps are taken to correct some o f the implementation shortcomings - for example further simplification o f the rules, more adequate staffing o f the central and agency procurement offices, and tighter real linkages to the budgetary and control systems. These in turn will require the creation o f a strong constituency to ensure legally enacted change becomes operational fact.

2.14 Human Resources: As with financial management and control, reforms for human resource management got o f f to an early start in implementing a lengthy set o f recommended measures. In fact some o f them were adopted even prior to 1990.

The passage and entry into effect o f the Framework Law Regulating Public Employment (Ley Marc0 de Regulacidn del Empleo Publico, No. 25164 of October, 1999) and the L a w o f Collective Labor Conventions for the Public Sector (Ley de Convenciones Colectivas de Trabajo para el Sector Pziblico, No. 24185 of December, 1992) as wel l as subsequent legislation further regulating their a p p l i ~ a t i o n . ~ ~

The creation, in the 199Os, o f the National System for Administrative Professionals (Sistema Nacional de la Profesidn Administrativa, SINAPA), which currently includes approximately 30 percent o f c iv i l servants in the national executive branch.

0 The implementation within SINAPA o f mechanisms for the selection, training, performance evaluation, and career development o f its members.

The prior development o f specialized career and human resource management systems, for example the Foreign Service (Sewicio Exterior de la Nacidn) and the Corps o f Government Administrators (Cuerpo de Administradores Gubernamentales).

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2.15 disturbingly, seemed to have reached a stage o f paralysis toward the middle o f the last decade.

Advances in the human resources system have faced problems and setbacks and, more

The growth o f SINAPA peaked in the mid 1990s and the proportion o f the national public employees i t covers has since fallen from its high point o f 30 percent. Additional, later obstacles include budget cuts, a hiring freeze, and salary reductions, which not only reduced the incentives to j o i n the system, but effectively stopped further recruitment.

32 Whatever the benefits o f outsourcing, it here represents a clear intent to circumvent the rules and the benefits they were intended to produce, especially as regards fostering more competitive procurement. 33 To avoid a catalogue o f laws, these are not listed in the text. Among those meriting mention are Decree 66/99 (Convenio Colectivo General), Decree 1184/01 (promoting greater flexibility in career paths), and Decree 1421102 (further regulating the Framework Law), As o f the cut-off date for th is report, these and other modifications had had few effects. In the ensuing two and a hal f years, there has been some progress, especially as regards efforts to renegotiate collective contracts to consolidate different regimes and introduce the general principles o f merit appointments and promotions into their contents.

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A wide range o f legal regimes (nearly 48) continues to exist for c iv i l servants in addition to SINAPA. These regimes al l use different criteria for selection, career development, training, and performance evaluation. Collectively they cover 70 percent o f the c iv i l servants in the national executive, and in most cases, their members express strong opposition to any change in the system. Over the short run any efforts to unify their internal rules wil l have to respect the differences that affiliates wish to retain.

Since the mid-1990s there has been a systematic increase in the use o f contracted personnel to do the work normally assigned to permanent c i v i l servants. This has occurred with few standards and criteria to govern selection, remuneration, training, and performance evaluations and incomplete enforcement o f the standards that do exist. Consultants hired in project executing units for international agencies are also affected.

A significant portion o f staff in regulatory agencies, including those supervising the privatized public utilities, lacks employment stability and i s employed under the law regulating private sector labor contracts. This has negative consequences for professionalism, the independence o f their work and their agencies.

Many key administrative units (including financial management, procurement and personnel) and even the central bodies overseeing these functions rely o n a majority o f contracted staff.34

Despite the existence o f nearly 15,000 contracted staff and their increasingly important role in carrying out basic functions, contracting staff was considered as exceptional and, thus, did not receive the concerted attention o f the human resource system.35

Neither a single information base for al l public sector employees, nor a unified system o f personnel files has been created.

Despite the early advances, there i s st i l l an absence o f strategic direction, a high degree o f politicization, and an entrenched formalistic and bureaucratic cu1tu1-e.~~ The init ial vision on which the human resource reforms operated (the creation o f a single, unif ied c iv i l service with standardized merit appointments and career development) appears to have reached i t s limits in the face o f Argentine reality - the legal, cultural, economic, and political environment to which i t is applied. External events, as much as active opposition, simply prevented the expansion o f the measures adopted, and also eroded the logic o f trying to introduce some o f the new legally required practices. Fol lowing init ial drastic cuts in the last decade, employment levels in the national executive have not increased, but the composition o f the workforce and the rules under

34 Abuelafia et a1 (2005) note that the continuing turnover o f political authorities and o f those they hire as contractors has affected budgetary execution, as they are always on the steep side o f the learning curve. 35 In early 2005, via Decree 707/2005, the Executive moved al l contractors wi th monthly salaries under 1,512 pesos into the transitory category, as a fns t step toward normalizing the situation. Subsequent changes include ONEP’s review o f all contracts with salaries o f over 2,000 pesos a month to ensure the candidate i s qualified for the job, and the passage o f roughly 80 percent o f contracted employees to a status (under law 1421) which imposes salary ceilings, but also gives them certain additional benefits. The remaining 20 percent (under law 1184) generally hold shorter t e n q but better paying appointments for highly technical work. The system o f “transitory” status i s gradually being abolished. These changes are important but s t i l l far short o f a strategic approach to the incorporation o f individual contracts within a mixed employment model.

Iacoviello et a1 (2002). 36

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which it operates remain diverse, with an increasing reliance on the largely unregulated use o f contracted staff. An improvement o f the situation may indeed require a modification to the content o f the earlier model and an attempt to reach the ultimate objectives (greater professionalization, higher productivity, more motivated employees) through a different set o f measures. Reasons for this argument and for the perfonnance o f reforms are further addressed in fol lowing sections.

Table 2.3 Number of Employees in the National Executive by Similar Groups of Collective and Short Term Contracts (2002)

Source: Iacovello, Zuvanic and Tommasi (2004).

2.17 Transparency: I t may be less accurate to speak o f a transparency system than o f a series o f principles o n transparency that has been adopted as a fifth area o f reform. The adoption,

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37 Includes employees hired under collective contracts in the National Social Security Administration (Administracidn Nacional de la Seguridad Social) National Roads Bureau (Direccidn Nacional de Vialidad), Official Broadcasting Service (Sewicio Oficial de Radiodifusidn), among others. I t also includes employees o f the National Institute o f Retired Persons and Pensioners (Instituto Nacional de Jubilados y Pensionados, PAMI)) that are included in the National Budget. 38 Includes groups o f employees in technical and scientific entities such as: the National Commission o f Atomic Energy (Comisidn Nacional de Energia Atdmica), the National Scientific and Technical Council (Consejo Nacional de Ciencia y Tecnologia), the National Institute o f Farming Technology (Instituto Nacional de Tecnologia Agropecuaria), and the National Technical Industrial Council (Instituto Nacional de Tecnologia Industrial). 39 Includes employees from the: National Electricity Regulating Body (Ente Nacional Regulador de la Electricidad), National Gas Regulating Body (Ente Nacional Regulador del Gas), Nuclear Regulatory Authority (Autoridad Regulatoria Nuclear), Commission of Transport Regulation (Comisidn de Regulacidn del Transporte), National Communications Commission (Comisidn Nacional de Comunicaciones), Board of Insurers for Workers Liability (Superintendencia de Aseguradoras de Riesgo del Trabajo), Stock Exchange (Comisidn Nacional de Valores) and Regulatory Body o f the National Airports System (Organism0 Regulador del Sistema Nacional de Aeropuertos), among others. 40 Includes the special category o f Government Administrators (Administradores Gubernamentales) and the Foreign Service (Sewicio Exterior). 41 Includes higher level executive appointees (Autoridades Superiores del Poder Ejecutivo) and those in unclassified and management positions (Funcionarios Fuera de Nivel, Personal Superior y Gerencial). 42 Includes contracts under Decree 1184/01 (15,309 positions) plus the contracts through international organizations (1,200) according to estimates from the National Direction o f Occupations and Salaries (Direccidn Nacional de Ocupacidn y Salarios).

44 Excludes 152,876 positions corresponding to military, security, education and health personnel. Does not include civ i l servants taking leave without pay. 43

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indeed the recognition o f these principles, came relatively late - at most in the very late 1990s - and thus advances have been slight. Nonetheless, in some areas the country has made up for lost time, and the fol lowing achievements merit mention:

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The Public Ethics Law (Ley de Etica PGbZica) and decrees regulating i t s application were enacted.

An Anti-Corruption Office (OJicina Anticorrupcidn) was created.

A computerized system o f sworn assets declarations for c i v i l servants has been implemented. The level o f compliance i s high (99 percent) and the public has access to the records.

Using the assets declarations and other data bases, a system has been developed to identify conflicts o f interests or situations o f i l l ic i t enrichment.

The majority o f public sector bodies have created official websites for the dissemination o f information on their operations to the public.

In 2003 provision was made for optional public hearings prior to decisions on government actions, along with another optional tool, the use o f public participation in rule making.

The Anti-Corruption Office has used both mechanisms to propose legislation o n access to information and regulation o f lobbies.

There have been a few significant experiments with the participatory development o f bidding documents.

There are s t i l l significant gaps in the adoption o f the recommended measures and their full implementation.

Other branches o f the federal government (judiciary, legislature and some decentralized bodies) have not fully adopted their own system o f assets declarations or procedures to make the contents public, despite the executive’s offer to give them i t s own software. There are difficulties in detecting conflicts o f interest among those participating in the committees evaluating and awarding public contracts. There are no prohibitions on activities undertaken after leaving public office, including as supplier to the state. Although the information available to citizens o n official websites has increased, most o f the content i s o f l imited use, constituting little more than basic explanations o f institutional functions. Off icial websites are not used to disseminate procurement plans or explain bidding documents and the modifications introduced to them. They usually do not contain statistical information o n procurements or other basic activities. Information on procurement procedures or the results (amounts o f contracts, who received them) i s s t i l l scarce.

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The system o f public hearings remains optional and without any further guidance as to when it should be used. I t was only introduced for a few regulatory agencies (Ente Nacional Regulador del Gas; ENERGAS, and Ente Nacional Regulador de la Electricidad, ENRE), whose framework laws directed them to hold public hearings before taking certain decisions, especially those affecting tariffs. Public hearings have not been very effective and there i s little public participation. There has been no effort to link this practice to the procurement process. A s regards public participation in the elaboration o f laws and regulations, there has been no effort to make i t more effective.

In summary the most important advances in these areas have been the creation o f the Anti-corruption Office and the activities in which it has participated. The office’s efforts to expand i t s actions and influence throughout the public sector have been less successful, and the adoption o f the new principles by other agencies has often been only cosmetic. The improvements to date, if limited, have been important. The real question is whether further progress will run into insurmountable obstacles, as it did with human resources, or whether there exist a way and, more importantly, a will to move the reforms ahead. Given the A C Office’s l imited resources and powers, a potential solution would be to coordinate its efforts with reforms to the other administrative systems. That issue i s addressed below.

The Political Economy and Institutional Aspects of Administrative Reform in Argentina4’

2.20 The preceding analysis o f the recent history o f the reforms attempted in the five administrative systems showed that actual events diverge from the trajectories expected in the reform model. The discussion has already identified where, in each o f the five areas, deviations f rom the model occurred, whether in the incomplete or otherwise flawed implementation o f the recommended legal and structural changes, the failure to alter internal behaviors, or the absence o f the anticipated impacts. Init ial findings confirm that a fundamental problem was an excessive reliance on formal legal and structural changes to alter more basic behaviors. There is also a need to understand, as a prelude to changing them, the reasons behind the behaviors targeted for change. Describing the achievements as institutional change implies an incomplete understanding o f institutions - as the formal rules o f the game and the formal shape o f organizations - that does not conform with the usage promoted by the major theorists o f neo- institutional economics.

2.21 An emphasis on formal structures overlooks the broader political economic context in which institutions are embedded, which in effect constitutes the source o f many o f the interests organizational actors pursue - for example, the role that political allegiance or patron-client networks may play in recruiting employees or certain understandings as to how l o w salaries or l imited potential for advancement might be compensated by informal agreements about outside work., Altering incentives for within-organizational behavior also requires considering extra- organizational goals and activities. Otherwise, the weight o f the latter may wel l counteract whatever changes one makes to the former. Thus, a politician appointed to head an agency, who depends on being able to award jobs to followers, is hardly going to forego that opportunity for

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This section draws on Schweinheim et a1 (2004). 45

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the satisfaction o f having a wel l qualified staff. The existence o f these exogenous goals is not unique to Argentina, and overcoming them is a challenge for al l governance systems. Because many external motives are linked to the glue that holds a political system together, reformers are fighting an uphill battle not only against inertia and the resistance o f the immediate targets o f their actions (Le. individual c iv i l servants), but also against a broader political and institutional context. This does not foreclose the possibility for change. I t does mean recognizing that noble intentions and appeals to the public good are hardly sufficient to overcome the many sources o f opposition, and thus that new rules and structures are only a f i rs t step.

2.22 Despite these constraints, some reforms advanced further than others, and while some seem to have reached paralysis, others are st i l l moving ahead. In the present section, the analysis shifts to the broader institutional and political economic context within which political leaders and public employees operate. I t attempts to explain the differences in outcomes, and even in implementation o f preliminary legal and structural change, in terms o f the interests represented, their linkages to and their perceptions o f the reforms, and the tactics and strategies they adopt. One particular focus is on the kind o f oppositional tactics described in chapter one (preventing any change, manipulating i t s contents, or finding ways to work around it once i t occurred). A second focus is the almost universal failure to fol low through on the legal and structural measures. To fol low through would require attention to their impacts on real behaviors, on adding resources, ensuring new incentives worked, and otherwise upping the chances that the predicted operational changes actually occurred. While some oversights may be blamed on the model (and i t s emphasis on formal change), others arise in reformers’ inability or unwillingness to take the next steps - more plainly put, their lack o f power or their insincerity o f purpose. Finally, although flaws in the f i rst two stages are probably sufficient to explain a failure to achieve results, there are also indications that a consensus on the desirability o f change was lacking in some cases or that, for one reason or another, i t disappeared because o f external events.

2.23 Starting with the financial administrative system, the 1992 reform had its origins in the 1989-90 hyperinflation crisis. This event generated a consensus o n the need to improve the management o f public sector resources via the capture o f better information on revenues and expenditures and its use to maintain fiscal equilibrium. Working within th is context, the ad hoc core group o f technical professionals convened within the Ministry o f Economy, and especially i t s Secretariat o f Finance, succeeded in pushing the adoption o f the financial administration law, with strong support from the political authorities. They also improved the internal processes o f the budgeting, treasury, accounting and public credit subsystems, ini t ial ly producing some o f the internal and external changes predicted in the model. In short, the economic emergency empowered the ministry’s technocrats and facilitated the adoption and implementation o f changes designed to provide them with timely and reliable information on governmental financial management. O f course support provided by political leaders, equally focused on combating the crisis, was also critical in advancing the adoption o f the technical measures.

2.24 However, as the result o f a strong delegation o f powers to the executive, and the creation o f a highly hierarchical budgetary process,46 the objectives o f improving the quality o f expenditures (effectiveness and efficiency) were never accorded equal weight, and even the

46 Alesina and Perotti (1996).

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emphasis o n maintaining fiscal solvency was forgotten once the immediate crisis was resolved. The lack o f incentives for the heads o f other ministries and agencies to do things any differently, the absence o f a system o f rewards and punishments related to efficient programming, and the need to produce short-term results from sector policies led to a systematic increase in public budgets and l imited advances in improving the quality o f expenditure^.^' The first development was inconsistent with the macroeconomic parameters o f the Convertibility Law (Ley de Convertibilidad); the second represented the l imits o f the existing consensus on necessary reforms.

2.25 In an effort to counterbalance these trends, the Secretariat o f Finance’s technical team adopted several strategies. First, i t lobbied the executive for ad hoc budget cuts in an attempt to diminish the growing fiscal disequilibria. Second, i t attempted to centralize decisions regarding the prioritization o f resource allocations by introducing budgetary ceilings different from those approved by the National Congress. Finally, i t withdrew any support for giving increased decision-making powers to sector financial administration offices. These strategies conspired again the real institutionalization o f centralized rule-making and decentralized execution. They also reinforced the resistance o f sector administrators to fbrther change, as well as a tendency toward arbitrary decision-making and a lack o f concern for the quality o f expenditures on the part o f the political factions controlling individual ministries and agencies.48

2.26 The concentration o f decision-making power led to a process o f permanent negotiation over budgetary formulation. Here decisions were ultimately made in a transactional negotiation between the Ministry o f Economy’s technocratic core, the other executive ministries and agencies, and later, the Chief o f Cabinet, with some participation by influential legislators, particularly those from the Budgeting and Finance Commission o f each house o f C~ngress.~ ’ Finance’s assumption was the “greater efficiency” o f i t s position as opposed to the “greater inefficiency” o f the rest o f the actors. Nevertheless, this structure o f transactions, characterized by the centralization o f macro-financial administrative management capabilities in Finance, the absence o f incentives for sector financial managers, and the short term interests o f the executive and the rest o f the cabinet, none o f whom had any concern for the continuity o f reform and its results in the medium and long term, had negative effects. The link was broken between financial administration and the quality o f expenditure. The concentration o f decisions on resource allocations within Finance reinforced the sectors’ tendency toward arbitrary pol icy making and their efforts to obtain supplementary budget credits and other alternative sources (e.g. external credits) o f funding, even at the cost o f quality and fiscal solvency.50 At the highest level, the executive resisted introducing awards and punishments for the sector heads, and supported budgetary adjustments and centralized expenditure management by Finance via the system o f short-term and purely tactical transactions.

47 According to Santiso (2005), these characteristics are associated with very hierarchical budgetary processes. 48 While the study did not explore this in any detail, it i s wel l recognized that in Argentina as elsewhere, intra- and inter-party governing coalitions are often held together by distributing political appointments among the different factions. The practice only makes it more difficult for ministers and agencies heads to feel responsible for the output o f the organizations under their direction. 49 The provincial governors were an especially important lobby during the elaboration o f the budget, working both wi th the Congress and through the min is t r ies (Jones, 2001).

Baldrich (2003) shows evidence for t h i s in the period 1994-2002.

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2.27 The system’s growing precariousness, the incentives derived from a highly-volatile pol i t ical situation after the second ha l f o f the decade, and the rigid rules imposed by the technocratic core explain the limited advances in completing the reform measures and, thus, the failure to achieve the predicted changes in internal processes and external results - budgetary equilibrium, fiscal solvency, a transfer o f greater responsibility to the sector financial managers, and improvements in the quality o f expenditures. Even more, the financing crisis and the rigidity o f the rules for financial administration probably contributed to the failure o f the 1999 Fiscal Solvency Law. They also led to the proliferation o f fiduciary h d s within the public sector, but outside the financial information system (budgeting, accounting, and treasury) as well as the “exit” from this system o f various agencies (e.g. AFIP, the federal tax agency). In this way another o f the principles behind the attempted reforms, the integrated management o f a l l public resources, was increasingly undermined.

2.28 This pattern o f great advances in the first ha l f o f the last decade and l imited advances and even backsliding after the second hal f summarizes the financial administration reform until the 2001 fiscal and economic crisis. Unfortunately, certain o f the less positive trends were reinforced by the crisis itself. These trends include the continuing centralization o f financial management within Ministry o f Economy, the consequently diminished role and incentives for better budgeting within the sectors, and the delegation o f certain o f the Legislature’s powers to the Executive, and especially to the Chief o f Cabinet -- for example, the ability to modify the allocation o f funds (according to agency or between recurrent and capital expenditures) or to increase the budget ceiling, two functions expressly reserved for the Congress by the Financial Administration Law (Ley de Administracidn Financiera). Global budgetary ceilings were also raised with the use o f emergency decree^.^' Meanwhile, the breathing space provided by the devaluation, the exit from convertibility, and the increase in tax revenues effectively reduced the pressure to push the reforms ahead. Thus, although the financial administration reforms enjoyed the longest-lasting and most complete implementation among the five areas covered, they appear to have reached a temporary paralysis. They got as far as they did because o f the strength and common vision o f the technical groups promoting them, and because the context in which they emerged guaranteed the support o f political leaders. However, these same groups, either by preference or f rom a realistic assessment o f what was possible, ended up opting for narrower goals and even then had to fight, not always successfully, to defend them. They did succeed in forcing the adoption o f a s t i l l wider variety o f legal and structural changes, but were unable or unwilling to implement them throughout the public sector. Toward the end o f the period (early 2004), they faced a certain amount o f backsliding as regards their central objective, the macro integration o f the system.

2.29 In terms o f the init ial hypotheses as to how reforms are undermined, within the financial management area, the circumvention o f the measures after approval seems the key factor. Financial management saw the most complete passage o f the model’s recommended measures, for the most part without significant alterations to their contents, as wel l as sustained efforts to ensure some o f the predicted changes in within-organizational behavior. The adoption o f further internal changes and the consequent realization o f external impacts were undermined, o n the one hand, by the narrower interests o f powerful supporters, and on the other, by the conflicting

5 1 Uiia, Bertello and Cogliandro (2005).

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agendas o f the politicians in charge. Support for changes dissipated once the crisis had passed, and thus the reformers were forced back into a minimal position and even into relinquishing some ground.

2.30 With regard to the control system, the model established by the Financial Administration L a w seems to have incorporated at least one inval id assumption, or perhaps simply a failure to think through the logical steps in the processes recommended. The f law lies in the notion that a system of ex-ante controls could be easily replaced by internal controls integrated into the management function itself. While this i s possible, there were a few missing details. The design o f the internal control systems and the failure to introduce legal changes to make agency heads responsible for actions taken within their organizations worked against their compliance with procedural rules and development o f results-oriented behavior. The rest o f the model may have been valid, but i t s implementation was undermined from start to finish. The dependence o f the I A U s on the agency head, combined with the latter’s lack o f clear responsibility for compliance and results within his organization, eliminated any incentives for the internal auditors to find problems. Moreover, design oversights imposed significant l imits o n their ability to enforce compliance with their findings. For example, there were no sanctions for missing a deadline. There were no requirements for the agency head to either f ix the problem or explain why it did not exist. There was no provision for AGN’s or SIGEN’s ability to act as plaintiffs in criminal cases.

2.3 1 Although the basic model formed part o f the Financial Administration Law, promoted by Ministry o f Economy’s technical reformers, this group seemed to lose interest in the control system once the law was passed. Their sponsorship accounts for the basic organizational changes made, but did not ensure that details o f the law’s contents or those o f subsequent legislation were in line with the init ial vision. The control reforms present a clear example o f manipulated design. Those opposing the changes did not seek to prevent the law’s passage but they ensured that the final version incorporated their own interests and they softened i t s impact by modifications o f detail. The end result both neglected the further requirements for effective internal control and the basic, internationally recognized principles o f the political neutrality and professional composition o f Supreme Audit Agencies.

2.32 That said the prospects for continuing the reforms are brighter than those for the remaining three areas. The creation o f SIGEN and AGN established agencies with sufficient power to move the new agendas ahead. SIGEN has advanced in establishing rules and principles for the internal audit function and conducted some important investigations. An executive branch audit agency will o f course be controlled by the executive, but can play an important role in ensuring accountability within the executive branch The precondition for its success i s an executive interested in detecting malfeasance for which it has the ultimate responsibility. The President o f the country did not need a law to clarify where the blame would l i e should that malfeasance be detected through other means. There are also indications that AGN i s doing better, relying on the society wide demand for greater accountability and increased professionalism in the discharge o f i t s audit functions.

2.33 As a consequence o f the limitations within the financial administration and control systems, the far later and lesser achievements in the procurement and contracting system are not

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surprising. The key political and technical actors in the Secretary o f Finance did not have strong motives to advance reforms in this area. For the politicians, procurement reform was perceived as a limitation o n their own powers. For the technicians, i t simply was too far removed from their primary goal o f attaining fiscal equilibrium via better information on resource flows and the ability to control expenditure levels. Congress lacked reason to demand that the Executive send the draft law within the stipulated time frame. Those already working in procurement had l i t t le motive to change the existing system nor, for the most part, did sector heads, who benefited from the opportunities i t already provided them and who, absent an effective control system, had no incentive to forego them.

2.34 Consequently, legal enactment o f the new procurement and contracting regime was delayed until 2001 and had to be effected through a presidential decree based o n delegated legislative powers. The 2001 crises lessened the incentives to adopt the necessary regulating law. Instead, that corresponding to the prior legislation was ~ u b s t i t u t e d . ~ ~ The crisis also diverted attention from and probably reduced the ability and desire to take the necessary steps to adapt organizations and organizational practices to the new formal rules. This impaired the institutionalization o f the system. Although its governing body was created, i t remained understaffed and with very l imited abilities to monitor or enforce compliance with the rules i t oversees. I t s subsequent transfer from Ministry o f Economy to the Office o f the Chief o f Cabinet might eventually give i t more political presence, but only if two conditions are met: that the Chief o f Cabinet decides i t i s a priority and that he has the political resources to make i t Meanwhile efforts to strengthen contracting units within the sectors have proceeded even more slowly, encumbered by the hiring freeze and the need to rely on contracted staff. Finally, the economic crisis discouraged voluntary compliance with the new rules and probably aggravated the recourse to irregular procurement modalities. Hence procurement reform was, from the start, weak owing largely to the absence o f an internal constituency to push for the real or even formal changes. Possibly more concerted attention and greater follow-up from the external supporters might have made a difference, but even they seemed willing to stop with the adoption o f the legal and structural changes which, in themselves, were clearly only a first step.

2.35 The reforms related to the human resources management system lacked the powerful contextual incentives that pushed the financial management reforms ahead. They did not benefit from inclusion in the framework law, and at the same time faced constraints arising from the high political and human costs linked to changes in personnel policies and practices. Two exceptions were the massive cutback in federal employees as a result o f the structural reforms fol lowing the 1989 economic crisis and the hiring freezes imposed from the mid 1990s on. However, neither o f these measures figured as part o f the overall reform model, which instead incorporated the second generation changes presumed to be at best facilitated by this type o f action. These changes, l ike those in procurement, lack a strong internal constituency, and their chances o f developing one ended when SINAPA stopped expanding. Even at the best o f times, the legal adoption o f recommended reforms and o f additional measures needed to ensure their

52 This remained the situation until mid 2005, when t h i s final report was drafted. 53 As the intellectual author o f t h i s arrangement (Makdn, 2004, p. 3) notes, “the current placement o f the central office had as i ts purpose giving the human resource and procurement reforms to the entity responsible for the ‘reform o f the state’ . . ..and leaving the Ministry o f Economy the responsibility for the ‘hard core’ o f the fmancial administration reforms.”

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real implementation and impact o n internal operations posed enormous political costs for those in charge. Human resources at least had an organizational location, but it lacked much real power, or contrary to the situation in procurement, external support. To the extent external actors had pushed for change, these pressures largely disappeared after the staff reductions o f the early 1990s. After 1995, financial difficulties, and the potential for increasing the numbers o f contracted personnel reduced the resistance o f political authorities to a freeze o n wages and hiring o f permanent staff. However these same measures strengthened the opposition o f permanent employees to any further reforms (fearing the loss o f remaining entitlements and benefits) or to the effective implementation o f measures already legally in place (because o f the implied threat to j ob security). They also narrowed the reformers’ space for moving ahead in either sense.

2.36 In the face o f these changing circumstances, and heightened resistance to their proposals, those backing the reform (essentially the personnel unit attached to the Chief o f Cabinet’s Office) might have revised their tactics or even their strategic model. Instead until wel l into the present decade, they continued along the same lines, sponsoring studies, attempting, so far unsuccessfully, to get sufficient cooperation from the sectors to create their own personnel registry and, at one point, even attempting to revive the pre-SINAPA experiment with creating a corps o f senior administrators. As with the National Contracting Office, placing human resource management within the Chief o f Cabinet’s Office could be advantageous, but only if the Chief decides to push the program and can spare the political capital to do so. As o f early 2004, the chances seemed slight.54 Unl ike procurement, human resource reforms had lost credibility with another source o f support, the external donor community. The donors are themselves in search o f a better model and currently are more inclined to support targeted improvements in the areas and institutions o f most interest to them, or a shift to results based management, possibly with the elimination o f secure tenure.

2.37 Lastly, with respect to transparency, the reforms are recent but have achieved some advances - for example, the creation o f an Anti-Corruption Office, the implementation o f a computerized system o f asset declarations, and the enactment o f an ethics law. All three measures were initiated in the final days o f the Menem administration. They were motivated by growing citizen criticisms o f corruption and demands for greater transparency o f government actions. As noted al l were born with limitations, by intent or because halfway measures were easier to enact over internal resistance. First located in the Office o f the Presidency (as the National Office for Public Ethics) the Anti-Corruption Office was later transferred to the Ministry of’Justice, and thus s t i l l relies o n an executive agency to provide its budget and appoint its directors. The code o f ethics was established by decree and thus affected only the executive branch. Although the present law has national effects, compliance with its contents by other branches o f government, as with the assets declaration system, remains effectively voluntary. A

Following the completion o f the fieldwork for this study, there were some signs o f a renewed interest and the adoption o f different tactics, focusing on renegotiating the collective contracts to incorporate the elements o f the Framework Law. Even here it i s too early to assess the chances o f success, and in any case the new “approach” i s less a different strategy than an effort to: 1) improve the information managed by the central office (ONEP) and 2) impose greater homogeneity on a de facto mixed employment model. A truly new strategic model would have to take two subsequent steps: 1) that o f defining how the different employment modalities fit into a unified vision o f overall present and future needs and the means for satisfying them and 2) o f finding means for turning that vision into fact.

54

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few other critical pieces o f legislation, including a freedom o f information act and a law on conflicts o f interest, were st i l l awaiting approval as o f mid-2005, and once they are enacted wil l require mechanisms to ensure their enforcement. Adoption o f other recommended transparency measures remained voluntary and thus extremely limited.

2.38 The impetus for increasing transparency, thus, came largely f rom the highest level o f the executive branch as a response to citizen demands and possibly some external donor prompting. Executive impetus continues to be the driving force under the current administration. The results do not constitute a well-institutionalized set o f practices and organizations. They instead continue as a series o f fair ly disconnected initiatives, with greater or lesser impact on resolving citizen complaints. To the extent transparency refers to anti-corruption mechanisms, the revival o f the Fiscalia Nucional de Investigaciones Administrativas (National Prosecutor for Administrative Investigations; FNIA) can be taken as another example. However, FNIA i s also small and lacks the personnel and other resources to tackle i t s substantial mandate. Conceivably this rather ad hoc set o f measures, backed by continuing citizen pressure, may be sufficient to expand their collective impact. To do so, those supporting them will also have to overcome the resistance o f c iv i l servants, who tend to regard the transparency polices as a kind o f punitive control rather than a legitimization o f their actions before society. As one o f citizen’s primary areas o f concern i s procurement, closer coordination with and further advances in reforms in that area wil l also be needed.

2.39 In summary, as the political history o f the five reform components suggest, this i s a highly political process. Actions are most l ikely to prosper when precipitated by a visible crisis and when those supporting them have real power and a clear vision o f what they can achieve over the short run. However, more fundamental change takes time, and this poses a conundrum even for the most successful reforms. Once they help resolve the immediate crisis they inevitably lose force. Except for the human resource component, where the aims may simply be out o f date, the model’s goals are st i l l reasonable. Nonetheless, the expectation that a few targeted changes would produce the full set o f downstream results i s simply unrealistic. The sources o f resistance and the strength o f short-term interests are too strong. Thus, the question i s how and whether more complete reform can be achieved, a topic addressed below and in the final chapter.

Remaining Challenges and Next Steps

2.40 The present section focuses on what remains to be done in pursuing the basic objectives o f the reforms which continue to be an important part o f the emerging public sector reform agenda. I t offers far less as regards how to accomplish it, that i s how to overcome the same kinds o f resistance and adverse circumstances that obstructed the earlier efforts. I t does provide some indications o n the overall direction in which the reform process could be oriented to overcome the shortcomings faced during the first change attempt. In the meantime, the identification o f substantive corrections and remaining gaps provides a concrete agenda for the short to medium term future.

2.41 Financial Administration: In this area, the future agenda has two principal focuses: (i) to prevent backsliding even from the init ial advances; and (ii) the full and effective implementation o f measures aimed at improving the quality o f expenditures and linking them to

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system-wide, prioritized, multi-year objectives. Neither wil l be easy. As explained, the early advances were strongly conditioned by the crisis, and once the latter had disappeared, political support for the Ministry o f Economy’s agenda began to dissipate. As regards the additional agenda, support for i t s objectives had never been strong, disappeared during the second crisis, and to some extent is undermined by the inherent tension between the three levels (fiscal solvency, efficacy, and efficiency) o f budgetary management and the Ministry o f Economy’s clear emphasis on the first level. The real challenge here i s how the Ministry o f Economy’s core team can promote changes over the medium or, even short run, that will reduce the ministry’s power vis-A-vis other actors (Le. sectors and Congress) and may be perceived as endangering its primary goals.

Although many o f the formal changes introduced appeared to be directed at improving the efficiency, cost-effectiveness, and results-orientation o f government outputs, they were largely ignored for the reasons discussed above. Hence, despite the l o w priori ty given them by the Ministry o f Economy’s team, a framework already exists for pushing them ahead. For this to happen, some o f the tightly centralized, but in the end counterproductive control, exercised by the Ministry o f Economy will have to be reversed. Sector institutions would need to be given more freedom over their own programming, specification o f results, and allocation o f resources, always within the financial parameters and ceilings set by the Ministry o f Economy and the priorities established by the Chief o f Cabinet. In short, this implies a return to the init ial principle o f centralized pol icy and rule-making and decentralized execution.

In conjunction with this move, and to avoid greater disorder, the Ministry o f Economy and the sectors wil l have to work out procedures for the formulation, reporting, and evaluation o f results indicators at the program level, for assessing the efficiency o f expenditures, and for linking them to budget formulation and multi-year programming. These indicators and measures wil l also have to be incorporated in al l dimensions o f the control system and made available so that the public may evaluate the quality o f resource use.

There i s an apparent need for better specification and operationalization o f the roles o f the Ministry o f Economy and the Chief o f Cabinet’s Office in the setting and enforcement o f macro-economic pol icy and o f substantive priorities as both relate to the budget process. The current framework seems to give the Ministry o f Economy responsibility for the former and the Chief o f Cabinet that for the latter, but in point o f fact, there i s st i l l slippage and competition between the two.

There i s also room for a further simplification and rationalization o f the processes o f budget formulation and execution, and o f the system for establishing budget quotas. A s currently structured, they are both excessively rigid and overly complex, and thus encourage negative responses, ranging from efforts to circumvent the system, to arbitrary decisions within the sector as to where resources actually are used. They also feed the tendency to treat the preliminary budget as a mere ticket punching operation, with no effect o n real expenditures or priorities. Here again designing and effecting changes would benefit from a more cooperative relationship between the Ministry o f Economy and the sectors to avoid reinforcing the current system o f token compliance by the sectors with rules set by the Ministry o f Economy.

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While the above changes may help curb the growth o f the off-budget finance (fiduciary h d s and other entities that have escaped the integrated system), until that happens there i s a need to revise and improve the rules for their constitution, management, internal control, evaluation, and auditing. One step in this direction is the 2004 Fiscal Solvency L a w which stipulated that, beginning in 2007, the national public budget wil l authorize al l public resources and expenditures including those o f the decentralized agencies and fiduciary funds and wil l also contain information on the expenditures and resources o f autarkic entities, institutes, and non-financial state enterprises and companies.

The Budgeting and Finance Commissions o f both congressional chambers and the Joint Commission for the Review o f Accounts could be strengthened so that they can participate more effectively in budget approval and the control o f budget execution.

2.42 Control: The legal and structural changes created a reasonable framework, but i t s actual performance was constrained by defects in the formal rules and incomplete implementation. Corrections o f the legal flaws may be needed sooner or later, but their impact wil l also be limited unless implementation is improved.

First, the integration o f internal controls into the management function has to be effected. One o f the most important steps here involves legal changes, with effective sanctions and monitoring, to place responsibility for failures with the authority in charge o f each office and organization. That responsibility wil l also strengthen the efficacy o f external controls as would clear deadlines for responding to reports and sanctions for noncompliance.

The control system in al l its aspects needs better integration with a budgetary process that allocates resources based on planning, prioritized objectives, and measurable results. Over the medium term, external audits could focus increasingly on these aspects, leaving routine compliance with legal and accounting rules to the integrated internal system. Concomitant audits would be undertaken as a means o f responding to suspected major malfeasance.

To the extent external agencies focus on internal, integrated controls, they might evaluate the adequacy o f the systems installed within each agency, not attempt to duplicate their functions.

The efficacy o f the various audit agencies (IAUs, SIGEN, and AGN) i s constrained by a flawed design that could be improved. As regards the IAUs, their present dependence o n sector heads might either be reduced, or the sector heads’ responsibility for problems detected by the AGN or SIGEN radically i n ~ r e a s e d . ~ ~ The AGN faces the challenge o f increasing i t s autonomy from the political process. There are signs that an increasingly professionalized internal culture may help in this regard. Thought might also be given to further depoliticizing the appointment o f the SIGEN director, although that may be less critical. For al l three types o f control agencies, there i s a decided need for greater compliance with the formal rules concerning qualifications and experience for directors and staff. Whatever the political input to their appointments, they could at the very least

55 There i s a continuing debate among the experts as to which choice i s more effective. This study can only note the conditions apparently required for either option to work.

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be qualified to hold their jobs. The AGN’s current publication pol icy v i s -h i s i t s audit reports does not adhere to the specifications o f the Financial Administration Law. The latter requires prior approval by the Joint Commission, but as this approval has been rarely forthcoming, the current AGN leadership has not waited for i t before releasing the reports. An intermediate solution might be to modify the law to eliminate the pre- approval or to indicate that if the Commission does not ru le within a reasonable time, the AGN may go ahead with the publication.

2.43 Procurement and Contracting: The steps required here are substantial and conceivably will only be taken with considerable involvement o f business groups (who believe current practices prejudice their chances o f obtaining government contracts), and c iv i l society.

The National Contracting Office (NCO) and the decentralized procurement units would benefit from institutional strengthening with the addition o f personnel, training, and resources. Donors can help through the use o f loans and technical assistance.

The rules on the preparation and publication o f annual procurement plans could be enforced, and the impediments to using them as a guide for actual procurements could be identified and eliminated.

The link between the contracting system and S I D I F might be strengthened via the incorporation o f annual procurement plans and information on their implementation.

Procurement procedures need further simplification (i.e. the removal o f unnecessary steps and clearances) to facilitate compliance. Mechanisms like the l i s t o f standard prices (precios testigos) and suppliers’ registry need to be checked for accuracy, utility, and real impact.

The N C O could be provided with the resources and skills to evaluate the efficacy o f the new system, for example by tracking the number and value o f competitive procedures as opposed to the “exceptional regimes,” or the number o f vendors participating in procurement.

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2.44 Human Resources Management: As noted, one principal problem here i s the failure to modify the init ial model - a single system built on life-long public sector employment and predictable career development - when current trends, in Argentina and elsewhere, are quite different. Possibly, the model may st i l l work although i t i s hard to locate a constituency for any part o f i t except secure tenure. In effect, Argentina now has a de facto mixed system o f public employment, but lacks an explicit strategy to shape i t s further development. Over the short term, the following steps, many o f which began implementation after the report’s cut-off date, would help in the development o f this strategy.

The creation o f a single data base and standardized personnel files for al l public employees would benefit from being given the highest priority. In conjunction with the transparency system, thought could be given to publicizing the list.

The principles and processes set out in the Framework L a w (Ley Marco) on public employment and the L a w o f Collective Labor Conventions for the Public Sector could be more actively incorporated into actual practice.

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Efforts could be stepped up to consolidate some o f the various labor regimes currently in force in the public sector, or to ensure greater consistency (among them and with the two basic laws above) in their treatment o f the basic functions o f recruitment, selection, career development, remuneration, training and performance evaluation.

Similar principles might be adopted and enforced for al l individually contracted employees. In addition, any overall strategy might focus on a better definition o f how individual contracts fit into the whole o f human resource planning. Ensuring that the contracting system i s not abused is important, but an effective mixed model also requires a more strategic definition o f where the various modalities wil l be applied.

Special attention could be assigned to the professionalization o f staff in offices overseeing cross-cutting administrative systems, in the decentralized units handling these functions at the ministry level and below, and in the regulatory agencies.

2.45 Transparency: Citizen demands for more information as well as the present administration’s prioritization o f this area as one o f the pillars o f its governance reforms could provide considerably greater impetus for further advances. The key challenges are to shif l from the current ad hoc approach to a better developed strategy and set o f priorities, and to strengthen the operational and enforcement capacity o f those offices carrying out relevant activities. There could be a process for monitoring and evaluating the efficacy o f mechanisms adopted, as regards not only their impact on making government operations more transparent, but also on the related objectives o f encouraging broader participation in policy making and monitoring and controlling corruption and other abusive practices.

There is a need for further strengthening o f the Anti-Corruption Office in such key functions as: its diagnostic work on vulnerable practices; the convening o f c iv i l society and other associations to discuss and campaign for needed changes; the response to questions from citizens and c iv i l servants regarding the laws on ethics and corrupt acts; the creation o f ethics units within the executive and other branches o f federal and provincial governments; i t s use o f the assets declarations to prevent and detect conflicts o f interest and “incompatible” positions; and i t s monitoring o f rules, once they are enacted, o n post-government employment. Aside from more resources and staff, the A C Office’s efficacy wil l depend on access to other government data bases. I t is also suggested that measures be introduced to increase the office’s independence, including more autonomy within the executive. The director may be given longer tenure and the rules for hisiher appointment could be changed.

As regards both transparency and anti-conuption activities, similar measures might be taken with other entities working in those areas, and greater coordination o f their efforts encouraged.

Advances are needed in the use and publication o f assets declarations within al l branches o f government and, if possible, they could be encouraged to adopt the automated system developed by the executive.

In anticipation o f the passage o f a Freedom o f Information Law, an office or offices could be designated or created to guide its implementation. It needs to be determined how information wil l be released, in what form, within what timeframe, and with what

45

restrictions, if any, as to access. A mechanism may be designed (Mexico’s Instituto Federal de la Informacidn Publica; IF IA) is an interesting example) for resolving conflicts when agencies refuse to comply. There could also be rules and sanctions for noncompliance with other provisions. Although an individual has been designated within the Chief o f Cabinet’s Office, to oversee information policies the efforts o f one person will not be sufficient.

Means could be found to encourage the better development and broader adoption o f the mechanisms to inform citizens o n (i) budget execution; (ii) the results o f government actions; (iii) announced, on-going, and completed procurements; and (iv) increased participation in such activities as the development o f bidding documents, proposed laws, and major public works. An obvious obstacle here i s the lack o f any office to oversee these developments. The information office, suggested above, may be a logical candidate, but only if its capacity is further enhanced.

0

2.46 One principal lesson o f the earlier second generation reforms - the insufficiency o f relying o n the impacts o f new laws and structures - must be kept in mind. Other lessons also need to be taken into account, including the many ways implementation can be undermined, and the need to cultivate early and growing support for and understanding o f the ultimate aims (so that no one thinks these are achieved simply with a law’s passage). Moreover, introducing change only when crises demand it can be self-defeating, as i t can produce undesirable short-cuts and furthermore loses impetus once the crisis seems resolved. In addition to these lessons, the findings also suggest a series o f new tactics and strategies that might be introduced to enhance the chances o f faster and more satisfactory progress in attacking the remaining challenges. Whi le short o f a solution to the conundrums posed above, they do indicate some ways o f circumventing the usual sources o f resistance and getting beyond a model that assumes an automatic course o f events that is illusory.

The adoption o f new formal measures and regulations could be based on a more in-depth consideration o f the behavioral incentives o f different actors involved in the change process: politicians inside and outside government, public functionaries, public sector workers’ unions, contracted employees or those aspiring to those contracts, and c iv i l society organizations. An incremental but continuing process aimed at improving government performance necessarily affects the institutional framework within which these actors pursue their formal and informal agendas. Therefore, their incentives for accepting the init ial measures and adopting the consequent changes would benefit from being adequately taken into account as a f i rst step toward encouraging a higher level o f cooperation with the reform’s purpose. Reforms always involve winners and losers, but in identifying who i s who, there may be ways o f decreasing or neutralizing resistance by better explanations, the elimination o f some less necessary but more inherently threatening elements or the addition o f compensatory rewards. This occurred unintentionally when politicians’ opposition to wage and hiring freezes was reduced with the increased opportunity for using contracts - a remedy that if introduced intentionally might also have been designed to avoid abuses. These recommendations are particularly important for the treatment o f pending matters in al l five systems.

Additionally, a more integrated approach to the reforms o f the separate administrative systems based on a better understanding o f their mutual relationships i s desirable. There

0

0

46

are many instances where efforts to push fbrther reforms in any given administrative system will not get far absent some necessary changes in one or more o f the others. Problems in human resource management, for example, afflict al l the systems in that they impede (even in human resources itself) the strengthening o f the core and sector offices. The pending changes in financial management wil l have limited impact without improvements in the control and procurement systems. One additional advantage o f working within an integrated framework i s i t s potential for addressing some o f the incentive problems. Results budgeting or the use o f procurement plans may be taken more seriously if control agencies adapt their audits to include them. More care with hiring might also be encouraged by these developments. As those in charge o f each system come to understand the interconnections, they can also provide support for reforms in other areas.

Fol lowing from the two comments above, it may be possible to introduce a focus that integrates informal patterns of, and incentives for, behavior into the detailed design o f the new measures or the programs to encourage their subsequent impact o n actual operations. This tactic could work o n two levels: one aimed at overcoming the least desirable actions by removing some o f the incentives for their practice, and the second finding ways to use existing incentive structures to encourage the adoption o f different behaviors. Without this understanding o f how and why actors behave prior to the introduction o f the reforms, the potential for changing that behavior is uncertain.

Finally, regardless o f how closely i t corresponded to actual developments a tool like the matrix used for this analysis could also be applied to the monitoring and evaluation o f reform outcomes. Elaborated as a first stage o f the reform, i t would force managers to specify the sequence o f anticipated changes, and thus remind them o f the need to go beyond the formal adoption o f laws. I t would also help them identify where, even after efforts at pushing implementation, predicted changes are not occurring, and thy warn them as to where more attention or a shift in tactics may be required. Finally, i t could also help build greater interest in the reforms and support for their fill implementation. When insiders and outsiders understand the reasons for change and the ways it connects to objectives that are intrinsically more interesting to them than a new set o f rules, they may begin to accord i t more importance and possibly to believe that the attainment o f the ultimate goal o f improving performance i s actually possible.

0

47

CHAPTER 111: COMPARATIVE ANALYSIS OF THE PROVINCIAL LEVEL

General Analysis of the 24 Jurisdictions and Case Studies of the Provinces of Buenos Aires, Cbrdoba, L a Pampa, Salta, Santa F e and Tucumhn

Introduction

3.1 This chapter summarizes the findings o f the research done on Argentina’s twenty-three provinces and the Ci ty o f Buenos Aires. I t again covers the period 1990-2003, although in tracking results, changes occurring by May, 2004 are also considered. The fieldwork was divided into two parts. In i t s ini t ial stage, the research teams collected data from al l twenty-four jurisdictions to assess progress with recommended reform measures and with anticipated changes in internal processes and external outcomes. In the second stage, the teams limited their work to six provinces. This allowed a more intensive focus on five administrative systems, as we l l as the explanations for differences in the reform model’s application and results. Most o f the fol lowing discussion draws on the second stage findings. The results o f the first, global overview, which was by necessity done very quickly and contains many gaps, are summarized in Table 3.1. This table i s based on reports prepared by the research teams and the checklist elaborated for interpreting results. In cases where there was insufficient information to allow a definitive scoring, “NA” (i.e. N o t Available) is used. For a h l l e r explanation o f the three levels o f reform progress tracked (adoption o f recommended measures, changes to internal processes, and improved outcomes), see the matrix in Annex 1.

48

1 z

z

z z z z -

z

z

z

-

- sauopg

ezopuap z z z -

z

z

z

z

3.2 The individual rankings are consolidated in Table 3.2 below. As both tables demonstrate, the provinces made most progress in reforms to their financial administration systems, where 54 percent had adopted some o f the recommended measures. The most important o f these were the enactment o f a Financial Administration Law and the creation o f an IFMS (adopted by 66 percent). Changes to internal processes are only beginning, with the most noteworthy affecting the process o f budget formulation and the better integration o f financial subsystems. On the basis o f these changes, 50 percent o f the provinces recorded partial improvements in outcomes -- for example, closing the gap between allocations in the official budget and in real expenditures, or reductions in the floating debt.

3.3 In control, the provinces showed far fewer advances. Only 25 percent adopted al l o f the recommended measures, 54 percent showed no changes to internal procedures, and 42 percent demonstrated no improvements in outcomes. The 46 percent o f provinces that adopted the relevant legal and structural changes wholly or partially showed some progress as regards the implementation o f concomitant internal controls, their integration into the management function and the accompanying elimination o f ex-ante external controls, and the initiation o f a process o f linking the control system to that o f financial administration.

3.4 The area o f procurement shows a similarly slow advancement. Only 13 percent o f the provinces had adopted a l l o f the recommended measures, and fully 83 percent had not altered internal operations, for example by decreasing the percentage o f purchases made under exceptional regimes. N o t surprisingly, there were few improvements in outcomes. Among the recommended measures most commonly adopted in part were the introduction o f databases on suppliers and standard prices (precios testigos). Eighteen provinces adopted these measures and 12 incorporated ICT, principally internet, in their procurement processes. I t warrants mention that the management o f information was so poor that in 63 percent o f the provinces i t was impossible to determine whether there had been any improvements in outputs and especially in such areas as the number o f legal appeals or lower prices paid for standard goods and services.

3.5 As regards human resources, the majority o f the provinces (71 percent) completely or partially adopted the recommended measures, but did not advance much with the subsequent steps. The measures most widely adopted were a framework law on public employment and the granting o f tenure to regular employees. In addition, over ha l f o f the provinces adopted a standard system o f personnel files (Zegajo tinico) and single data base for al l public workers, as wel l as presenting a consolidated wage bill in the public budget covering al l forms o f employment. However, only 8 percent o f the provinces showed signs o f advances in other procedural changes. The percentage o f those showing improved outputs (e.g. higher professional quality o f public employees, less turnover with changes o f administration, improved public image) is the same.

3.6 The majority o f provinces, close to 75 percent, whol ly or partially adopted the recommended measures in the area o f transparency but did not make significant changes to internal processes or outcomes. The most frequently adopted measures were the creation o f websites to disseminate information on each ministry and the use o f assets declaration^.^^ To a

56 In many cases, the assets declarations were not new, but rather, as occurred at the federal level pr ior to the reforms, were collected but le f t unexamined (except under jud ic ia l orders), and were no t available to the public.

50

lesser extent, measures (e.g. internet publication) were adopted to increase the transparency of procurements. However, the level o f real change to internal operations was much lower, with 83 percent o f the provinces showing no progress. The lack o f available information made i t impossible to rank 70 percent o f the provinces as regards improvements to outcomes. In those cases where information was available, i t revealed that 25 percent o f the provinces had made no changes.

Table 3.2 Adoption of Reforms in the 24 Provinces, 1990 to early 2004 (Percentage Refer to Proportion of Provinces in Each Category)

Financial Administration

rocuremen

Source: World Bank staff.

3.7 Time and other constraints prevented h r the r analysis for a l l twenty four jurisdictions - especially as regards the identification o f endogenous (internal to the model) and exogenous factors accounting for breakdowns in the model’s predicted trajectory. Nonetheless, a few general comments can be made:

Provincial reforms usually began much later than those at the federal level, and thus, progress even in adopting the recommended legal and structural changes has been far from complete.

As at the federal level, reforms to the financial administrative system tended to be introduced first, with those in the other areas lagging far behind, and in some cases not even beginning.

There were no provinces that had advanced as far as the federal, executive in al l of the areas, or even in any individual one. Those that had advanced most had a greater likelihood o f having produced some o f the predicted internal changes and outcomes.

Nonetheless, there were some provinces that appeared to have achieved the desired outcomes by alternative means. In short, they represented positive deviations from the model.

0

0

51

0 Among the constraints to the model’s application, especially but not exclusively in the area o f control, were the constitutional protection o f various organizations and procedures.

I

3.8 Although the research teams prepared extensive reports on the f i rst stage o f the exercise, they will not be discussed further here. I t i s worth noting that the first-stage findings both motivated the second stage analysis and helped identify the areas and provinces on which i t would focus.

Expected Results

Description of the Second-Stage Research at the Provincial Level

Yes

N O

Recommended measures and Implementation of Expected Changes in Internal Processes

3.9 A combination o f criteria was used for the selection o f the six provinces (Buenos Aires, Cbrdoba, L a Pampa, Salta, Santa Fe and Tucumh) for the second stage o f the research. First, the level o f socioeconomic development was considered, in an effort to make the results more representative. The six thus included provinces with a high level o f socio-economic development (Buenos Aires, Cbrdoba and Santa Fe), one relatively wealthy province with l o w population density (La Pampa), and two provinces at the intermediate stage o f development (Tucumhn and Salta).57 I t was decided to exclude very poor, underdeveloped provinces for the purposes o f the study (as clearly little had happened there) and because o f their lesser importance (for reasons o f size, economic impact, etc.) to the overall reform project.

Yes N O

Group (1) o f Provinces

Group (3) o f Provinces

Group (2) o f Provinces

Group (4) o f Provinces

3.10 A second set o f criteria, based o n the work done in the f i rst stage, involved the level o f implementation o f the model, both in terms o f adoption o f the recommended measures and the results achieved in al l o f the systems analyzed. Here provinces were selected to represent four categories: (1) provinces that adopted the measures and obtained the results expected; (2) provinces that adopted the measures but did not achieve the results expected; (3) provinces that did not adopt the recommended measures and obtained the results expected; and (4) provinces that did not adopt the recommended measures and also did not obtain the results expected.

Table 3.3. Schematic Representation of the Four Reform Trajectories

Source: World Bank.

3.1 1 Once the provinces and areas o f emphasis had been selected, the research teams collected additional data in l ine with the criteria set out in Chapter 1 and the methodological annex, reviewing developments in al l five systems in greater detail. This permitted a better comparative understanding o f the implementation o f the recommended measures; the internal changes produced and the results achieved in each province; o f the factors affecting each; and o f the

~

’’ The classification system i s based on that o f Nuiiez Miiiana (1994).

52

reasons for differences and similarities. The teams used the provincial reports already drafted and added supplementary material as required.”

3.12 The f i rst provides a more detailed comparative analysis o f the six provinces, focusing o n advances in each system as regards adoption o f the recommended measures and achievement o f the internal and external results. It also begins to explain differences by identifying gaps in implementation. The second section reviews the interactions between the five systems as a key to understanding their individual and collective advances and their consistency with the model’s predictions based on the four trajectories represented in table 3.3. The third section looks beyond the endogenous factors to consider contextual differences affecting the five sets o f reforms, focusing in particular o n the institutional and political economic setting. Finally, the last section provides some general conclusions as regards the provincial reform programs.

The remaining discussion is structured in four sections.

Comparative Analysis of the Provincial Reform

3.13 As in Chapter 2, this section tackles the topic system by system, covering al l six provinces in each subsection. To facilitate explanation, a comparative chart o f progress i s provided for each system, characterizing each province as to level o f adoption o f key mechanisms, extent o f internal change, and achievement o f anticipated external outcomes. I t should be noted that the analysis uses an abbreviated version o f the init ial matrix, including fewer elements in each o f i t s three stages. This was done to simpli fy the discussion, but also reflects some preliminary determinations (based on the first stage o f data collection) as to where differences between provinces were most notable and most easily compared.

3.14 The provincial reforms began relatively recently, in some cases at the end o f the 90’s and mostly at the beginning o f the present decade. Their late development followed changes effected in the mid 1990s in which many public services, public employees, and a higher proportion o f public revenues were transferred to the provinces. Consequently, the provinces’ financial and other performance became more critical as the national economic situation began to worsen, and the levels o f provincial debt increased. The provincial reforms were also supported by the international financial institutions (IMF, IDB, and WB). For example, in the particular cases o f Cordoba and Santa Fe, the Wor ld Bank made structural adjustment loans in support o f progress in key reform measures, and also included these provinces (along with several others) in investment and technical assistance operations intended to support these same and additional reforms.” Whi le adapted to the specific circumstances o f the respective provinces, the components o f these loans broadly coincide with the elements o f the reform model, and in many cases encourage the adoption o f measures already adopted or at least designed at the federal level. K e y elements were:

For a detailed analysis o f each o f the provinces, see the reports (on f i l e in the World Bank) f i om the: Universidad de San An&& (Buenos Aires), Universidad Cat6lica de C6rdoba (C6rdoba and L a Pampa), Universidad Nacional del Litoral (Santa Fe) and Universidad Nacional de T u c u d n (Tucumhn and Salta). 59 The first loans, known as “Programmatic Reform Loans (PRL),” went into effect between 2000 and 2001; the technical assistance and investment p rogram had begun in the mid 1990s.

53

a) Some o f the same macro-structural adjustments (first generation reforms) undertaken at the federal level: privatization or concessions o f state-owned companies; reforms to the pension system to reduce its drain on public finances; and the reduction o f public debt and the fiscal deficit.

b) Modernization o f the public administration (including reforms in financial management, human resources, procurement, and organizational structure) to improve efficiency, effectiveness and transparency o f services provided to citizens by the provincial governments. Reforms to the control system were generally not emphasized, in part because o f certain constitutional restrictions discussed below. Transparency was a s t i l l later addition.

c) Reforms in the social sectors (education, health and social protection) to achieve more efficient and effective systems for provisions o f goods and services to the most needy populations.

d) Reforms to improve tax collection, also endorsed at the federal level, but not included in the measures reviewed here.

3.15 Thus, as at the federal level, the participation o f the I F I s was an important source o f support and financing for the reforms. In some cases this explains whatever advances were made, although in others, as discussed below, local political leaders were the main initiators.

3.16 Financial Administration: Here the recommended measures pursue two output key objectives: (i) ensuring that real expenditures were consistent with approved budgets and other operational rules, thus reflecting pre-determined priorities and reducing waste and corruption; and (ii) the attainment of long-term fiscal stability through effective limits on spending and indebtedness. Central to the achievement o f the first objective (and also critical to the second) are the approval o f a Financial Administration Law and the adoption o f an automated, comprehensive (extending to al l executive agencies), integrated financial management system (IFMS). The IFMS integrates budget, treasury, accounting, and public debt and i s linked to control, and the systems for managing procurement, physical assets and human resources. This set o f measures also advances the second objective, which i s further reinforced by the enactment o f a Fiscal Responsibility Law.

54

Table 3.4. Financial Administration, 1990 to early 2004

v)

*g 4 3

PROVINCES

Ep RECOMMENDATIONS/ RESULTS

Financial Administration Law No Integrated Financial Administration

No System, incorporating the budgetary, treasury, accounting, public debt and public revenue subsystems Automation o f the Integrated Financial Administration System (IFMS) Linkage o f the IFMS with systems for managing procurement, real assets, and No the human resources system

No Link between the financial administration control systems Comprehensive coverage by the IFMS No (no off-budget agencies)

Fiscal Responsibility Law Yes

No

Recommended Measures

: a u .s

Yes

Partial

Partial

No

No

N o

Yes

Changes in internal

processes

Yes

Partial

Partial

Partial

No

Yes

No

No

No

Yes

No

No

N o

No

I Yes I No Monitoring o f gaps between estimated expenditures and budget execution Incentives and sanctions implemented to strengthen the new budgeting practices (e.g.. assignment o f budget levels for the next year as a function o f results achieved in the present year )

N o I

No

f 3 L

N o

No

No

No

No

N o

No

Yes

No

N o

Yes

Yes

Yes

No

No

3 - 4

No

Yes

Partial

Partial

Partial

Partial

Yes

Yes

No

Yes

No

Yes

Yes

No

Yes

Yes

Yes

Partial

N o I No

3.17 With regard to the first set o f recommended measures, two groups o f provinces can be distinguished: those with a l o w level o f adoption (Buenos Aires, Tucuman, and L a Pampa) and those with an intermediate level (Cbrdoba, Salta, and Santa Fe). TucumPn, enacted a Financial Administration Law (FAL) in 1999, but the secondary laws required to implement the majority o f its articles were not enacted (except for those affecting the Tribunal o f Accounts - Tribunal de Cuentas) and an IFMS was not created. Consequently the province continues to use i t s

55

traditional accounting system, which i s linked to the control system, and has made l i t t le progress towards the next two levels o f change.

3.18 In the province o f Buenos Aires, despite the absence o f a FAL and the lack o f formal integration o f the financial administration subsystems, there are informal linkages among the components (budget, public debt, treasury, accounting and revenue) which operate and advance in parallel. In general terms, three types o f obstacles stood in the way o f the FAL and the more formal adoption o f the rest o f the package.

Obstacles o f an institutional character related both to the need for constitutional reforms and resistance to eliminating the ex-ante controls performed by the Provincial Accounting Office (Contaduria General de la Provincia).

Even with the FAL’s passage, which seems unl ikely in the short term, the immediate implementation o f a new system would be dif f icult because o f the province’s size and i t geographic, economic and political heterogeneity.

Strong intra and inter bureaucratic interests in maintaining the status quo.

0

3.19 Informal coordination did work in L a Pampa, facilitated by the province’s smaller size and less complex political structure. Although it did not adopt any o f the recommended measures promoting integration o f the financial administration system, in practice there i s considerable coordination among the subsystems (budgeting, treasury, accounting, and public debt and revenue) as a result o f informal rules rather than legal directives. Likewise while L a Pampa does not have a hll blown IFMS, the automation o f the budget subsystem allows the Ministry o f Finance, v ia its Accounting and Budget Offices, to track budget execution on a day-to-day basis. The same lack o f an I F M S means that i t is Accounting that maintains the connection with procurement and property management.

3.20 As regards the provinces that have an intermediate level o f adoption, Cordoba enacted a Financial Administration Law in 2003, but by March 2004 had only passed a part o f the necessary implementing regulations. C6rdoba’s financial administration system is not connected to procurement and human resources as this i s not required by the FAL. The delays in enacting the secondary laws and the partial implementation o f enacted reforms can be attributed to a lack o f political impetus. However, the reform process is st i l l at an early stage, and i t i s possible that progress will p ick up later.

3.21 Although neither Santa Fe nor Salta enacted a FAL both provinces have begun to implement an integrated financial management system. Santa Fe has used a set o f complementary norms, replacing the FAL with what can be called locally-adapted substitutes. This led to the introduction o f an automated system at the beginning o f 2003 and i t s termination in 2004.60 Among the six provinces analyzed in greater detail, these are the only ones to have advanced in linking, if st i l l partially, their financial administration system to procurement (Santa Fe) and human resources (Salt a).

Salta began implementation o f i t s own system in early 2004.

Universidad Nacional del Litoral (2004). 60

56

3.22 With respect to the second objective, fiscal solvency, the key measure i s the passage o f a Fiscal Responsibility Law. This occurred in Buenos Aires (Law No. 12,836/02), C6rdoba (Law No. 8836/00), Tucuman (Law No. 6964/99) and Salta (Law No. 7030/99). In all cases, the laws are similar to the national Fiscal Solvency Law 25.153/99, which established limits to debt and public expenditure. None o f the provincial laws included sanctions for noncompliance, which reduces the incentive for effective implementation.

3.23 Although neither Santa Fe nor L a Pampa enacted a Fiscal Responsibility Law, they have both adhered to the fiscal agreements signed between the Nation and the provinces, whose principle objectives were control and reduction o f the fiscal deficit at the national and provincial levels. The “National-Provincial Agreement o n Financial Relations and Basis for a Federal Co- participation Tax Regime” (Acuerdo Nacidn-Provincias sobre Relacidn Financiera y bases de un Rkgimen de Coparticipacidn Federal de Impuestos, Law No. 25.570/2002) included the “Programs for Orderly Financing” (Programas de Financiamiento Ordenado, PFOs). Through these programs, provinces made commitments to improve their fiscal and financial situations as we l l as to introduce structural measures to sustain them. In return the PFOs provided them with funds to reduce their fiscal deficits, cover the amortization o f their debts for 2002, and in some cases to cancel part o f their floating debt. The national government’s contributions were in the form o f loans to be used exclusively for each province’s financial restructuring plan.

3.24 The discussion to this point has focused on the adoption o f recommended measures. As regards changes in internal processes, four practices were tracked (see Table 3.4). Again the provinces can be divided into two groups: those with partial change (Buenos Aires, L a Pampa, Santa Fe and Salta) and those where progress i s less visible (C6rdoba and Tucuman). All the provinces in the f i rst group have made changes with respect to monitoring o f budgetary execution and standardization o f reporting forms (except Salta in the latter regard). Buenos Aires and Santa Fe have also made partial advances in budgetary formulation, using a program format similar to that o f the national budget. In Buenos Aires, the Provincial General Accounting Off ice (Contaduria General de la Provincia) has adopted the new budgetary nomenclature, while Santa Fe uses a short-term financial programming technique linking inputs and expenditures. As noted L a Pampa’s progress i s based on the traditional practice o f dai ly monitoring o f budgetary implementation within each agency and a greater precision in financial information. Finally, Salta stands out as having combined improved monitoring with programming o f the following year’s budget based on the achievement o f physical goals and results.

3.25 Neither C6rdoba nor Tucuman have introduced changes in their internal processes. Even so, there exist differences between the two. C6rdoba has recently adopted some o f the recommended measures, while Tucuman has yet to do so. One other difference worth mentioning i s that C6rdoba has introduced program budgeting, while Tucumin’s budget retains the traditional line-item format. Finally, i t should be noted that, Salta, is unique among the six provinces in having introduced sanctions or incentives to encourage adoption practices.

3.26 Given the limited progress in the f i rs t two areas procedures) the achievement o f the third stage objectives

o f change (measures could be expected to

o f the new

and internal be minimal.

57

Nonetheless there are some surprises. The deficit reduction was more induced by external events than by conscious reform efforts. During the period 1995-2001, a l l six provinces ran deficits. Between 2002 and 2003, Cbrdoba, Santa Fe, Tucumh, Salta and L a Pampa achieved a fiscal surplus. These results are fbndamentally explained by the effects o f the national devaluation and default which provoked a notable reduction in expenditures, in real terms, and a substantial increase in revenues, especially in 2003 and after. The provinces achieved a fiscal equilibrium through the conversion o f their dollar debt to pesos (“pesification”), the postponement o f interest payments, and the refinancing o f debt through the PFOs as discussed above. In Santa Fe, the effects were strengthened by an emergency economic law which redefined and lowered the value o f contracts subject to review, and created a “Public Expenditure Committee”61 (Comite‘ de Gasto Pziblico), allowing additional reviews o f public expenditures. I t is noteworthy that Buenos Aires did not eliminate i t s fiscal deficit, despite having passed a Fiscal Responsibility Law, although its deficit was substantially reduced.

3.27 Other achievements more closely related to reform efforts include increased precision in fiscal information, found in the same three provinces, Santa Fe, Salta and L a Pampa, which also introduced changes in internal processes, especially in the monitoring o f budget execution. L a Pampa did this by improving i t s traditional mechanisms and Santa Fe through i ts own locally- adapted alternatives. Salta and Santa Fe also expanded the coverage o f the budget tracking system, and Santa Fe made the use o f public resources more transparent.62

3.28 Thus, only one o f the six provinces, Salta, followed the reform model in al l details. Santa Fe achieved almost as much, but i t conformed to the model only partially, instead relying o n alternative mechanisms, and in the case o f the fiscal deficit, the use o f additional measures l ike the economic emergency law and the Public Expenditure Committee. L a Pampa, despite a conscious decision not to fol low most o f the model’s recommendations, has a solid fiscal situation and a reliable and systematic budgetary execution. As discussed below i t s status as a successful exceptional case i s not l imited to financial management.

Control

3.29 The conceptual model for the control system reforms arose from National L a w 24.156 on Financial Administration and the Control Systems o f the National Public Sector (Administracidn Financiera y de 10s Sistemas de Control del Sector Pziblico Nacional), enacted in 1992. I t implied a radical change in the control system, replacing the Tribunal o f Accounts (Tribunal de Cuentas) with a Supreme Audit Agency linked to the Congress, introducing an executive audit agency, SIGEN (Sindicatura General de la Nacidn), establishing the primacy o f ex-post control, and making public managers accountable (responsibilizacidn) for a system o f integrated internal controls to replace the previous reliance on ex-ante and concomitant controls. The success o f this transformation was directly related to progress in the financial administration reforms, both as regards the integration o f internal controls through the financial management system, and the broadening o f the coverage o f a l l types o f control. Moreover, the elimination o f ex-ante controls by the Tribunal o f Accounts was to be compensated with the creation or strengthening o f internal audit units and the greater independence o f a l l control bodies.

“ Universidad Nacional del Litoral (2004). For a detailed analysis o f transparency in provincial budgets see Uiia and Bertello (2004).

58

3.30 This new control model implied a series o f modifications to internal practices, including a focus on results and not only legal and financial compliance. The findings o f investigations and audits were to be published promptly and communicated immediately to the responsible agencies. I t was assumed that this would accelerate investigations and the application o f sanctions for those found responsible. Although the national law was not binding on the provinces, i t became the model for their own efforts. As shown and discussed below, the obstacles here were even greater than at the federal level.

PROVINCES

RECOMMENDATIONS/ RESULTS

Control System linked to the IFMS

Broadening the Coverage o f the Control System

rn

E

m

No No No Yes Yes No

No Yes Yes Yes Yes No

Recommended Measures

Concomitant or ex-ante internal controls integrated into No No No Yes Yes No management and IFMS

No No No Yes N o No Supreme Audit Agencies designed to strengthen their independence Creation and/or strengthening o f Internal Auditing Units No No No Yes No No

3.31 The two provinces with greatest progress in financial management, Salta and Santa Fey also made most progress with the adoption o f recommended control measures. The remaining four provinces adopted few o f the control measures, matching their lesser progress with financial reforms. In fact, Salta, the most advanced o f the six in the control area, introduced the new model before enacting a Financial Administration Law. The province changed i t s control system following constitutional amendments in 1998 and, later, through a 1999 organic law created new agencies for internal and external control (Sindicatura General Provincial and Auditoria Externa, respectively). On the basis o f these measures, i t also made most o f the internal changes, with the exception o f the rapid dissemination o f their investigative and audit findings.

Changes in Internal

Processes

3.32 In Santa Fe and in the province o f Buenos Aires, i t proved impossible to eliminate the Tribunal o f Accounts, because o f its constitutional status. For that reason Santa Fe’s Financial Administration Law (which had not been approved by the provincial legislature) found another “locally-adapted” alternative. This consisted o f placing the Tribunal within the legislative branch, strengthening the emphasis on external and ex-post control, and creating the Sindicatura

Control focused on results as well as processes No No No Yes No No

No No Yes No No Yes Results o f special investigations and audits disseminated quickly

Audit results communicated to the responsible organizations Yes No Yes Yes Yes Partial

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as an internal control entity attached to the executive branch. The failure to enact the FAL has meant that neither the Sindicatura nor the internal audit units have been created. In their absence the Tribunal o f Accounts has held o n to a good part o f i t s traditional role. However, the coverage o f the control requirements has been increased, and the Tribunal o f Accounts has adopted a self-imposed restriction on i t s use o f ex-ante and ex-post controls and developed a “selective” management control system to fill in the gaps left by the continued absence o f the Sindicatura. Santa Fe’s ingenuity and the Tribunal’s apparent acceptance o f the spirit o f the new model thus produced good results.

3.33 In the group with a l ow level o f adoption o f the control measures, the province o f Buenos Aires stands out as the one with the most traditional, formalist control system. Both its Tribunal o f Accounts and Provincial General Accounting Office were established under the constitution. The introduction o f operational, management, and results audits was impeded by rigidities in existing legislation. I t s Tribunal has shortened the time for its review o f government accounts, but other structural and procedural changes are constrained by institutional and legal resistance. Local opinion contends that it would be more beneficial to improve the existing systems rather than adopt a drastically different model.

3.34 In the case o f Tucumh, the lack o f progress in adopting the recommended measures i s linked to the absence o f implementing legislation for the Financial Administration Law, and lack o f an automated IFMS. While the control system’s coverage has not broadened, the controls have intensified. A s regards modifications to internal processes, the province has speeded up investigations and ex-ante controls. I t has begun to introduce the monitoring o f results and improve follow-up on audit findings. A continuing problem i s the absence o f sanctions when problems are discovered.

3.35 The province o f Cbrdoba has adopted few o f the recommended measures, implemented l i t t le internal change and, thus, produced none o f the expected results. One exception is the broadening the control system’s coverage, making al l agencies in the public sector subject to review by the Tribunal o f Accounts. Even though the historic Tribunal has not been replaced, its leaders have foreseen the expansion o f i t s functions along the line’s o f the model’s recommendations. Thus, while the Tribunal retains its traditional control functions, there is an internal willingness to begin its transformation, coinciding with the recent enactment o f the Financial Administration Law.

3.36 L a Pampa has again followed its own course. As with financial administration, the recommended measures were not adopted in the area o f control, but internal changes to the traditional model have produced a higher level o f performance. L a Pampa’s most developed control entities and those with the broadest coverage are the Provincial General Accounting Office and the Tribunal o f Accounts. The Fiscalia de Estado, a traditional internal control agency (also found in other provinces) holds a secondary role; a proposed Fiscalia de Investigaciones Administrativas, which would oversee internal investigations, was not yet functioning by the time the field work was completed.63 The framework laws (leyes marcos)

In provinces l ike Chrdoba, which have altered their criminal justice system, a part o f the Fiscalia de Estudo ’s traditional investigative functions have been transferred to an independent Public Prosecutor’s Office, the Public 63

60

which regulate the operations o f the Tribunal and Contaduria date f rom the 1950’s-1960’s. The Tribunal maintains that the laws are good and sufficiently flexible to allow the incorporation o f new elements (e.g. concomitant controls and audits focusing on objectives and results) despite their not being provided for explicitly.

3.37 The Tribunal and other provincial leaders do not, however, foresee a need to end the ex- ante control i t traditionally exercised, let alone to replace it with integrated and ex-post controls. They share a bel ief that ex-ante control is the best means to prevent corruption. A s a matter o f fact, this mechanism, along with the ex-post control managed by the Contaduria General, appears to reduce abnormalities in administrative procedures and has permitted most o f those identified to be rectified by the agencies themselves or with the intervention o f the Tribunal o f Accounts without the need for judicial action.

3.38 Despite L a Pampa’s failure to create an IFMS, the control function is l inked to financial management in two ways: on the one hand, the Contaduria conducts ex-post financial control and then sends its analysis o f expenditures to the Tribunal o f Accounts for a second level o f review. On the other hand, the Tribunal exercises daily ex-ante controls that, according to those interviewed, are necessary and make public management more transparent. The Tribunal’s current efforts to obtain an I S 0 9000 certification also suggest an unusual orientation towards quality and effectiveness. Thus, although i t i s the strongest defender o f the traditional system, i t has taken a nontraditional approach to improving outputs.

3.39 In summary, the control system presents patterns similar to those in the financial administration reforms, consistent with the links the model establishes between the two. The three provinces that have demonstrated the most progress in changing internal processes and results include one that adopted the control model even before it initiated i t s other reforms (Salta); one, which, facing constitutional obstacles to full adoption, has nonetheless found alternative ways to fol low the model (Santa Fe); and one which, despite rejecting the model, appears to have made the traditional system fbnction remarkably wel l (La Pampa). However, when only results are considered, there is an apparent inverse relationship with the adoption o f the recommended measures. As only one results indicator was used, this i s l ikely not a complete test, but it nevertheless has merit. The non-adopters (Buenos Aires, Cordoba, and Tucumb) are more consistent with the model’s predictions, except for Tucumb’s progress in effecting some internal changes. They clearly demonstrate the l i n k s with the financial administration reforms; and they also illustrate the weight o f legal and institutional obstacles in this area in particular.

Procurement and Contracting

3 -40 The reform model for the procurement and contracting system had a legal and a structural component. Structurally, the new system’s emphasis on normative centralization and operative decentralization required the creation o f a central unit to develop rules and oversee their application, and the creation or strengthening o f agency offices responsible for execution. The legal component was the passage o f a new law, which apart f i om mandating the structural changes, also introduced the basic normative principles (competition, transparency, the

Ministry, headed by a Fiscal General. At the national level, following similar changes, the Fiscalia Nacional de Investigaciones Administrativas has also been transferred to the Public Ministry.

61

application o f different modalities linked to the amounts involved, and the prohibition o f certain practices - fractioning o f contracts - commonly used to avoid these rules). The recommended measures critical to the model’s enactment included passage o f a new procurement law, the creation or strengthening o f the units, and the introduction o f information technology to help track performance, facilitate publication o f procedures, and introduce such tools as a supplier’s data base and a standard pricing system (precios testigos). The anticipated internal changes and results al l aimed at increasing competition, transparency, and the value for price.

RESULTS m N o

N o

N e w Procurement and Contracting Law Rationalization o f system to decentralize/centralize

Recommended procurement based on the amounts involved Measures Incorporation o f information and communication technology in Partial

the contracting process Introduction o f databases for suppliers and standard prices No

Table 3.6. Procurement, 1990 to early 2004

No No Yes No No

N o Partial Yes N o N o

No N o Yes No Yes

Yes Partial Yes Partial N o

RESULTS m N o N e w Procurement and Contracting Law

Rationalization o f system to dece ‘‘ ’ Recommended procurement based on the amoux.., &.. . _. . --

Measures Incorporation o f information and communication technology in Partial the contracting process Introduction o f databases for suppliers and standard prices No

No No Yes No No

No N o Yes No Yes

Yes Partial Yes Partial N o I I Reduction o f sDecial or exceutional regimes I NO I NO I NO I Yes I NO I NO I

Changes in Internal

Y I I I I I I

N o No N o Yes N o No Procurement process open to greater participation (more vendnrc)

3.41 Advances in al l o f these areas have been limited, both across the board (the 24- jurisdictions) and in the six provinces analyzed in more detail. What progress has been made i s usually confined to the adoption o f some recommended measures, so far without many changes in internal practices or outcomes.

3.42 The province o f Salta i s the only one o f the six to have adopted a new procurement and contracting law.64 I t also i s unique among the six in having introduced a system for rationalizing the decentralization o f decision-making according to the amounts involved, although L a Pampa has taken a few steps in this direction. Moreover, Salta stands alone in having achieved changes in the internal processes tracked in the research and in making improvements in the outcome indicators o f lower prices and greater competitiveness. Salta’s progress with its procurement reforms i s linked to several factors. The changes made in financial administration and control have clearly helped, as has the novel introduction o f a participatory role for the Chamber o f Commerce in drafting the new law. However, the init ial and continuing support from high level political authorities may be s t i l l more critical in explaining why Salta has advanced so quickly and consistently.

64 Law No. 6838 (1995).

62

3.43 The five remaining provinces can be divided into two groups: those that have implemented a few o f the recommended measures (Cordoba, Santa Fey and L a Pampa), and those implementing one (Buenos Aires) or none (Tucumhn). In Cordoba and Santa Fey the procurement system i s governed by legislation predating the reforms o f the 1 9 9 0 ~ ~ ~ However, Santa Fe has adopted a system whereby procurement procedures are centralized or decentralized depending on the amount o f the individual procurements. Both provinces have published procurement information on the internet, but whereas Cordoba l imits this to the announcement o f proposed procurements o f goods and services, in Santa Fe the minutes and decisions o f the adjudication commissions are also published. Bo th provinces have a database o f suppliers (in Santa Fe since 1992) and standard prices, but Cordoba restricts public access to the contents and its use o f the standard prices does not appear systematic. In both provinces, the anticipated results in reducing the prices o f goods and services or increasing the level o f real competition (i.e. an increase in the number o f vendors actually awarded contracts) have not materialized. This is explained primarily by the partial adoption o f measures and the l imited advances in modifying internal processes. Other impediments in Cordoba include the complex requirements for registering as a state supplier (including fiscal, financial and quality criteria) and the lengthy delays in making payments to contractors.66 In Santa Fey as in several provinces, apparent oligopolistic tendencies o n the supply side work against greater competition.

3.44 L a Pampa has adopted few o f the recommended measures. I t has made some advances in decentralizing smaller procurements done by shopping while larger, formally competitive processes are handled by the Procurement and Supplies Department (Departamento de Compras y Suministros) which operates under the provincial Contaduria. This office, which was created in 1973, s t i l l operates very traditionally, lacking specialized employees, not using annual procurement plans, and not keeping statistics o n procurement methods employed. However, i t does have a database o f suppliers (but not o f standard prices) and utilizes internet publication o f invitations for procurements considered o f international interest. Other than that, and the potential for tracking agency expenditures through the automated budget system, L a Pampa has not incorporated information technology in i t s procurement processes. Therefore it i s impossible to evaluate any results in terms o f lower prices or the participation o f a greater number o f suppliers. A s regards prices, representatives o f the Procurement and Contracting Department maintained that although they have not decreased they have remained stable over the years. This they attribute to the absence o f excessive delays in paying suppliers. In other provinces, suppliers counting on less than prompt payment (and the occasional default) typically raise their prices to cover these risks.

3.45 In the province o f Buenos Aires, the adopted measure is the use o f the internet in disseminating invitations to bid, usually done on the webpage o f each ministry. However, this has not generated an increase in participation or other notable improvement. The province’s traditional procurement system i s heavily regulated, o f l imited transparency, very decentralized, and subject to fiduciary risks. There is no central office to oversee compliance, and the fact that procurement i s done at the ministerial level under traditional rules, discourages innovation.

65 Santa Fe’s procurement system i s s t i l l governed by the Accounting Law (Ley de Contabilidad) dating from 1956. Cordoba has a new Accounting Law, dating f rom 1988, but as regards procurement, it closely follows the procedures in effect since the 1950s. 66 A similar situation can be seen at the federal level. For more details see Rejtman Farah (2004).

63

Although a supplier registry exists in the provincial Contaduria, i t s use is not obligatory. There i s also no system o f standard prices. There has been a growing tendency to use noncompetitive procurements, sole sourcing, and the ad hoc extension o f existing contracts (legitimos abonos). Data provided by the C o n t a d ~ r i a , ~ ~ showed that in 2004, 84 percent o f procurement was done through legitimos abonos, 11 percent by sole sourcing, 2 percent through restricted bidding, and only one percent through open, competitive bidding. The quality and costs o f goods and services are affected because the Contaduria exercises ex-ante and concomitant control, but does not evaluate the results. In April 2004, a new decree was enacted to modify the basic rules. Changes based on this or other initiatives will be a challenge given that Buenos Aires’s procurement system, despite a few modest technological additions, remains “rigid and structured, as a consequence o f i t s legal framework and informal norms.”68

3.46 Although T u c u m h also lacks a new procurement law, in late 2003 it did manage to create a central office to oversee the system (Direccibn de Compras y Contrataciones). Located within the Secretariat o f Government (Secretaria General de la Gobernacibn), the office is charged with proposing policies, norms, systems, and procedures for the procurement o f goods and services throughout the public sector. I t was st i l l not possible to evaluate i t s impact, if any, o n actual practices. Prior to this change, TucumAn’s procurement system had remained static for years, characterized by a lack o f significant changes in the bidding processes, deficiencies in the public works law, excessively complex bidding documents, and tremendous delays in awarding contracts because o f the inevitable legal challenges o f the losers. There i s high reliance on exceptional or ad hoc methods. It was reported that 95 percent o f the procurement was done, in whole or in part, through some exception to the general rules, the usual justification being extreme need and ~ r g e n c y . ~ ’ TucumAn’s rigid rules preclude efficiency in the procurement process and encourage a turn to exceptions that work against competitiveness. The rules do not require laying out clear criteria for evaluating bids, thus further diminishing transparency. The creation o f a new central office is a positive first step, but i t faces challenges to effectively address these problems.

3.47 In summary, Salta stands out as the province to have adopted the recommended procurement reforms, and as a result, to have made visible improvements in outputs. I ts progress was facilitated by the additional reforms to the financial administration and control systems as wel l as the participation o f c iv i l society. Although several provinces have adopted some o f the recommended measures, they show no evidence o f changing internal practices. Many o f the obstacles confronted are similar to those in the control area: the persistence o f traditional norms and organizational structures, overly bureaucratized processes, lengthy delays, and the failure to manage information well or to take full advantage o f the potential for its broader electronic dissemination. External and internal resistance to change, based both on inertia and vested interests, also plays a role, although in the area o f procurement there is no organizational counterpart to the strong traditional audit agencies. Lack o f progress in modernizing the control

6’ Source: “Controlprevio y concornitante de legalidad del gasto pliblico por contrataciones de bienes y sewicios de la provincia de Buenos Aires, Enero-Diciembre 2002”; CGP, Secretaria Legal y TCcnica, Direccibn de Ley de Contabilidad. Cited in Universidad de San AndrCs (2004).

69 Universidad Nacional de Tucumhn (2004b). Universidad de San A n d r C s (2004). 68

64

system i s itself a very large impediment to improving procurement, a topic addressed in more detail in the section on the interrelationships among the systems.

Human Resources

3.48 The suggested model for reforms to this area sought to professionalize and modernize human resources management in order to improve overall public sector performance. The set o f recommended measures includes: the enactment o f a framework law (ley marco) to set out the basic principles; the creation o f a unified data base for al l public employees; and the introduction o f training programs, performance evaluations, and a further set o f tools defining job profiles, merit-based selection and promotion criteria, and overall career development. These measures were intended to change internal processes and increase output through greater productivity, a lower wage bill, and (owing to the gradual elimination o f unqualified staff) a drop in the ratio o f public employeeshhabitants.

Recommended Measures

Changes in Internal Processes

Table 3.7. Human Resources, 1990 to early 2004

PROVINCES

Overall reduction in human resources cost and in the ratio o f employeedinhabitants No No Yes No

Yes

Yes -

Partial

No -

N o

-

Partial

N o

No -

Partial

No -

No

- Partial

3.49 Again the provinces can be divided into two groups: a first group (Salta, Santa Fe and C6rdoba) that adopted the reforms in part, and a second group (Buenos Aires, Tucumhn and L a Pampa) with a l o w level o f adoption.

3.50 The provinces in the first group have adopted a public employment framework law (ley marco), but only Salta succeed in unifying the existing regimes (except in Health, Education and Security). This was done by executive decree in 1996.70 In C6rdoba and Santa Fe, the multiple regimes remain in effect. A single database on public employees has progressed to a different extent in the three provinces. In Cbrdoba, the system, known as Meta 4, i s not integrated with the financial administration system. Salta's similar system (MAGIC) i s integrated with the

'O Implementing Rule for Decree Law (Reglamento de Ley Decreto) 1178/96.

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IFMS. In Santa Fe, the automated data base (SARH - Sistema de Administracidn de Recursos Humano~)~ ' only incorporates education. However this sector represents 40 percent o f the provincial budget and places a strong emphasis on human resources. With respect to training plans and performance evaluation, al l three have advanced less. C6rdoba did not adopt either measure, while Salta and Santa Fe's adoption i s partial. Although both have training plans, performance evaluation i s not systematic, formalized, or continuous.

3.51 Buenos Aires, L a Pampa and T u c u m h have done l i t t le although there are differences in their particular situations. L a Pampa adopted a framework law, while Buenos Aires and T u c u m h (partially) adopted training plans, but not performances evaluations. Even though these provinces have adopted few o f the recommended measures, they have made certain advances suggesting an intention to change. In Buenos Aires, a Framework Modernization Plan (Plan Rector de Modernizacibn) includes within i t s objectives the modernization o f the human resources management system and proposes to advance competency, competitive selection, performance evaluation, and incentives. The province's Public Administration Institute (Instituto Provincial de Administracidn Pziblica, P A P ) has initiated various courses, albeit with disparate results. Despite this small achievement, there is a basic problem as regards the persisting lack o f incentives for improved performance. Neither j o b retention (guaranteed as a right o f public employees) nor promotion appears linked to training or to any performance criteria.

3.52 Although L a Pampa has not implemented training plans and performance evaluations, there appear to be moves in this direction. The Sub-secretariat o f Planning and Management Control (Subsecretaria de Planzjkacidn y Control de Gestidn), created in December 2003, has among i t s principle objectives modernizing the administrative structure, including the introduction o f performance evaluation indicators, and budgeting by results. Moreover, in exception to the general rule, L a Pampa has introduced training programs for education and health personnel which are implemented by their respective sector offices. These offices have also promised to develop performance evaluation indicators over the short run.

3.53 Although T u c u m h lacks a complete, single and up-to-date database for al l provincial public employees, i t i s exploring the application o f information technology to i t s human resource system. This was a commitment made in the Programa de Financiamiento Ordenado which it signed with the federal government. The dif f iculty and delays in implementation are primari ly attributed to the lack o f IT support, absence o f network communications, and in the majority o f the cases, even o f computers.

3.54 The recommendation on guidelines for public sector managers (definition o f profiles, selection methods, evaluations linked to performance, etc.) has not been adopted in any o f the six provinces. This situation can be explained by problems common to al l public employment. For example, over the last decade, a majority o f provinces have frozen appointments to the administrative career. This also interrupted the process o f competitions, evaluation, and promotions. As regards higher level positions reserved for political appointees, these have generally never been we l l regulated. Instead they are governed in each province by a hybrid

'' This reform was supported by the World Bank through a PRL (Programmatic Reform Loan).

66

collection o f norms adopted by different administrations. These same factors also explain the failure to achieve changes allowing a clear differentiation o f functions between the contracted and permanent personnel. Having frozen permanent appointments, the provinces have increased their reliance on contracted personnel, many o f whom remain for indeterminate periods o f time and perform functions theoretically reserved for permanent employees.

3.55 As regards the two results indicators - reductions in the wage bill and in the ratio o f public employees to inhabitants -- L a Pampa, Santa Fe, and Tucumin show progress. Nonetheless, the three achieved the expected results through a combination o f exogenous factors and emergency measures - salary freezes, the effects o f the devaluation, the suspension o f seniority, and a stop to automatic promotions, among others - and not because o f the adoption o f recommended measures to increase the productivity o f public employment. The otherwise minimal improvements in the human resource situation are due to a number o f common factors: “the combination o f the right to immobil i ty in one’s position, the lack o f systematized information, and the persistence o f incentives schemes contrary to individual and collective improvement has resulted in institutionalizing a human resources system [which is ] highly dysfunctional in terms o f efficiency and effectiveness, combined with various levels o f informality. , ,72

3.56 In summary, the six provinces have advanced partially in reforming their human resource systems. Although Cbrdoba, Salta, and Santa Fe have progressed in the use o f information technology, and Salta has adopted most o f the other recommended measures, none o f this has been geared towards improving the delivery o f public goods and services. The human resource port ion o f the reform model shows a paradoxical disconnect between the recommended measures and the expected results. Although only the effect on the wage bil l and level was considered, this appears equally true o f the other objectives (greater professionalization and productivity). The advances made by L a Pampa, T u c u m b and Santa Fe with respect to the principal indicators were the consequence o f contextual circumstances, not o f adopting the model’s recommendations. Although the problem o f incentives has been aggravated by the economic crisis, change has also been impeded by the high value set on j ob stability, and there are serious questions as to whether in a less restrictive situation, this might not st i l l conflict with some o f the model’s other elements.

Transparency

3.57 The package o f recommended measures in the area o f transparency was based, on the one hand, on the use o f technology to increase access to information, primari ly through the public administration internet sites, the adoption o f assets declarations for public employees, and the creation o f an anti-corruption office or similar entity to manage the system. On the other, i t sought the implementation o f transparent systems for the processes o f procurement and contracting.

’* With respect to the level o f informality, the University o f San AndrCs’ (2004) report notes that in the province o f Buenos Aires, “parallel” contracting methods (pasantias, becas, subvencionad y de dispositivos de refuerzo salarial, vidticos, UWEQ are sometimes superimposed on other mechanisms (horas cdtedras).

67

Table 3.8. Transparency, 1990 to early 2004

Changesin Internal Processes

Recommended

IYU x c b raruai xeb 1 8 5 nu publish information on their internal operations and ou&ts Publication and dissemination o f information on all public No No No No Yes No

No N o No No Partial No Monitoring o f compliance with rules promoting transparency and efficiency in management Controls exercised as regards ru les on assets and conflicts No No Yes No Yes No o f interest o f public employees Implementation o f policies o f detection and control that No No No No Yes Partial allow the identification ouuortunities for cormution

rocurements

I 1 Ministries and other agencies periodically and increasingly I .,- I -,-- 1 I -,-- I -,-- I .,- I

3.58 Within this area, al l six provinces made advances with two measures: the creation o f internet sites by ministries and other agencies, and the adoption o f assets declarations. In contrast, significant advances in the implementation o f anti-corruption offices and o f measures intended to increase the transparency o f procurement lagged far behind. As regards the first set o f measures, most o f the six provinces advanced in the creation and use o f official internet sites in each ministry, with the exception o f Tucumhn which has only a single site for the entire provincial government. However, much o f the information disseminated resembles little more than public relations (Cbrdoba), is updated infrequently, and reveals l i t t le about internal operations (Buenos Aires, Tucuman and L a Pampa).

3.59 Although asset declarations have been universally adopted, they are not publicly available in Buenos Aires, C6rdoba and Tucuman, or they are dif f icult for citizens to access (La Pampa). In L a Pampa assets are declared at their original value and often in currencies not presently in use (Le. currencies in use prior to previous devaluations). Also there may not be institutionalized mechanisms for reviewing the declarations (Buenos Aires) or the controls that exist do not seem adequate (C6rdoba, Tucuman, L a Pampa and Salta). The exception i s the province o f Santa Fey where the mechanism for the submission and control o f officials’ declarations (and o f their spouses) is operational, and i s being extended to the police forces.73

73 The publication on the province’s website o f declarations submitted by police authorities was mandated via a special decree.

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Otherwise the system does not appear to constitute an effective means o f tracking changes in employees’ assets and especially those that might indicate i l l ic i t enrichment.

3.60 Among the six provinces, only L a Pampa has an anti-cormption-office. The organic law for i t s FIA (Fiscalia de Investigaciones Administrativas) was approved in 2001 , although the agency’s head (Fiscal) and other officials were only appointed in 2004. The FIA began effective operations in September o f that year. Part o f the problem arose from the apparent overlap of functions with the Fiscal General (Attorney General), who also i s responsible for investigating alleged acts o f corruption. Even earlier Cordoba had created an Anti-Corruption Office within its Ministry o f Justice. I t was later dismantled.

3.61 The special measures regarding the publication o f procurement actions are consistent with the slow progress in that area. Buenos Aires, Cordoba and Santa Fe have implemented this measure partially. Buenos Aires and Cordoba publish only the requests for proposals, although Santa Fe also publishes the results o f the bidding process.

3.62 With so few advances in the adoption o f the recommended measures, there has been a lack o f progress in modifying internal processes. Where the rules don’t exist, there i s not going to be compliance. The same i s true o f the expected results. Here Santa Fe stands out as the province to have achieved progress. This situation i s explained by i t s having implemented the majority o f recommended measures and made changes to its internal processes. For the others, there was an increase in c iv i l society demands for improved outputs except in T u c u m h where c i v i l society organizations are poorly developed.

3.63 In the particular case o f Buenos Aires, there are additional factors to consider. As part o f is state modernization program which began with the creation o f the Secretariat for Modernization in 2002, a number o f projects related to transparency were proposed. However, they did not progress because o f the Secretariat’s own political weakness and a lack o f consensus within the provincial government. Moreover, although the province has a dense network o f NGOs, the majority operate either at the national or municipal level. Organizations that work at the provincial level are few and relatively new, meaning that their ability to promote these programs remains limited.

3.64 Apart from Santa Fe, the six provinces did not achieve results because they did not adopt recommended reforms in full and they did not adapt their internal procedures. One province recently established an Anti-Corruption Office, but the lack o f progress i s also explained by the absence o f an entity responsible for promoting and monitoring the reforms. Thus, advances depended o n demands from a fairly weak c iv i l society, spontaneous compliance with the rules that were enacted, or pressure from high level authorities. In this context, further progress i s l ikely to be very slow, unless some o f the transparency measures are adopted in support o f reforms in other areas.

Complementarity and Progress of Reforms in the Provinces

3.65 comparative synthesis o f the provinces’ performance in al l five areas.

This section explores the interrelationship o f the f ive lines o f reform. I t i s followed by a

69

Interrelations among the Reforms

3.66 The foregoing analysis focused principally on the changes within each o f the five cross- cutting administrative systems, seeking explanations for intra- and inter-provincial variations in differences in the model’s ini t ial application, subsequent fol low up, and a series o f circumstantial factors influencing both. Nevertheless, the six provincial cases also provide a better opportunity to explore some o f the findings at the federal level as to the relationships among the five reform areas. Three lines o f analysis are further developed below:

1) The influence o f the financial administration system on developments in the other four, and especially on the control system.

2) The special influence o f the control and transparency systems on the procurement reforms as a means o f strengthening the incentives for implementing changes.

3 ) The indirect influence o f the human resources system over the advances in al l areas, including human resources itself.

3.67 With respect to the f i rst area, the most critical steps in the financial administrative reform model were the passage o f a Financial Administration Law (FAL) and the implementation o f an integrated information system. That system incorporated the budgetary, accounting, treasury, public debt and revenue subsystems, and connected them to the systems o f control, procurement, human resources and property management. The implementation o f these measures implied a profound transformation o f control and, if to a lesser extent, in the procurement and human resource systems.

3.68 Reforms adopted in the financial administration area influenced and conditioned, the adoption o f the recommended changes to the control system. The failure to enact a FAL meant that that neither the internal control entity nor the network o f internal control units (MUS) was created in the provinces o f Buenos Aires and Santa Fe. Despite this, Santa Fe did achieve other advances in modifying its control system and improving outcomes. Meanwhile, the enactment o f a Financial Administration Law, but the incomplete implementation o f the IFMS in the provinces o f C6rdoba and Tucumhn meant that the changes to the control system contemplated in the FAL could not be completely realized.

3.69 In Salta, the first reforms in the area o f control, such as the creation o f an executive control agency (Sindicatura General de la Provincia) comparable to SIGEN and o f an external audit agency, were done by constitutional amendments and they preceded the implementation o f an IFMS. The shortfall in anticipated results can be attributed in part to the IFMS’s only partial implementation. Although L a Pampa followed its own reform model, which differed substantially from the set o f recommended measures, i t s computerized budgetary system and the close relationship with the control bodies led to the desired outcomes both in financial administration and control. However, L a Pampa’s success, l ike that o f some other provinces, i s probably not more widely replicable as i t appears to hinge on small size, substantial revenues,74 and fairly tightly concentrated political control.

In the case o f L a Pampa, revenues come f r o m agriculture; the other provinces have income from oi l and natural 14

gas.

70

3.70 The financial administration reforms also had an impact o n the procurement and contracting system. In Salta, where an IFMS was partially implemented and incorporates a procurement module, there were visible positive influences on the adoption and operationalization o f the procurement reforms, even to the extent o f producing measurable improvements in outcomes. Salta’s annual procurement plans are approved along with the budget law, and their execution can be tracked through the financial information system. The opposite applies to Tucumhn, where the failure to produce the secondary regulations needed to put into effect the sections o f the FAL regarding procurement has effectively stopped any further change in that area.75

3.71 The rest o f the provinces have not modernized their procurement systems despite the fact that some have a new FAL, as i s the case with C6rdoba. Thus, the init ial changes in financial administration, and especially the passage o f a FAL and creation o f an IFMS, serve almost as necessary conditions for effecting the control system reforms, and they also have a substantial impact o n the procurement and contracting system. Nonetheless, these preliminary changes are not sufficient to produce the changes in the other systems and, thus, where they exist, additional explanations must be found for the lack o f progress.

3.72 With regard to the influence o f the control and transparency reforms on improvements in procurement and contracting, the impact to date falls short o f the potential. The control bodies o f a l l the provinces analyzed st i l l exercise largely routine ex-ante (e.g. clearance o f bidding documents) and concomitant (approving the adjudications and purchase orders themselves) controls but conduct neither special audits in response to suspected problems nor ex-post audits focusing on the results o f the procurements. Moreover, legal and financial ex-post audits are l imited to competitive bidding and do not review the many purchases o f goods made through shopping. Thus, the control system has affected the procurement reforms, but in a way that reinforces the older traditions in each area.

3.73 Although the last area to be incorporated in the reform package, the efforts to improve transparency have already had some impact on the procurement reforms. The incorporation o f I C T and the internet publication o f procurement processes, especially the invitations to bidders, represent a f i rst step in eliminating opportunities for collusion and manipulation. However, o f the three provinces where this is most advanced (Buenos Aires, Cbrdoba, and Santa Fe), only the latter publishes the outcomes o f the bidding processes and, even here, direct purchases are not made public. Even though the rest o f the provinces have made some progress with transparency, especially with the creation o f ministry websites, the information provided does not include procurements. Although a few provinces have created anti-corruption offices or similar organisms, none o f those reviewed had successfully done so. Thus, in al l cases the potential synergies between transparency and procurement reforms have only begun to emerge.

3.74 The third l ine o f analysis involves the impact o f human resource management on the entire reform package. There has been very l imited change, with the result that current human resource practices, characterized by a tradition o f security o f tenure for permanent staff, an

75 Universidad Nacional de T u c u d n (2004a).

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increasing reliance on contracted personnel to perform functions usually reserved for career personnel, and the suspension o f training programs (for financial reasons) and o f performance evaluations (for lack o f interest), provide few incentives for employees to improve their performance. Whi le a problem throughout the public sector, i t is especially critical to the success o f reforms in the five administrative systems given their dependence on the willingness and ability o f their own staff to respond positively to new rules and structures. The limited advances in human resource reforms have created an obstacle to progress in al l areas. While as at the federal level, some progress has been made with legal and structural changes, their broader impact and sustainability are also threatened by the lack o f progress in human resource issues.

3.75 There are clearly other areas where change or lack o f change in each system has impacts on the others. Even in the three analyzed, the conclusions must be considered as tentative, but they are suggestive o f additional reasons for lack o f progress and to the limits to a unidimensional approach to improving performance. In a later section, the reasons for the apparently greater attention to some areas and components within them are addressed. As a prelude to that discussion, the next section provides a summary o f the six provinces’ overall performance in implementing reforms and producing results.

The provinces ’performance

3.76 This summary i s limited only to the six provinces’ progress in enacting the reform model during the period covered (to early 2004). I t in no sense should be taken as an evaluation o f the overall quality o f their governance or o f the political administrations. To avoid this impression, the provinces have not been placed, as they clearly could be, within the boxes o f table 3.3, matching their level o f adoption o f the recommended measures with their level o f achievement o f the predicted improved outcomes.

3.77 Salta i s the province with the most recommended measures adopted and results produced. I t performance on results i s most notable in financial administration and procurement, where i t is the only province to have produced visible improvements o n the output indicators. I t s performance in transparency i s only partial, and its results in control are minimal (largely due to the incomplete implementation o f the IFMS). Lack o f progress in human resource reforms accounts for the absence o f recordable results there.

3.78 The province o f Santa F e has a situation quite similar to Salta, with differences, however, as to the areas in which measures were introduced and results achieved. I t adopted a majority o f the recommended measure in the areas o f financial administration, control, and transparency while effecting some important changes to internal procedures. Consequently i t has produced outcome improvements in al l three areas, especially in transparency, where it i s the province that has achieved the greatest advances.

3.79 Santa Fe achieved a large part o f the results despite a less than complete adoption o f the recommended legal and structural changes, because i t found other ways to produce the desired modifications to internal processes. A clear example i s in the area o f financial administration, where despite not having enacted a FAL, it introduced an integrated financial management system. Another example i s fiscal solvency, where i t s lack o f enactment o f a Fiscal

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Responsibility L a w was compensated other second-best measures. These included adherence to the federal pact establishing the fiscal rules and creating an Expenditure Monitoring Committee (Comite‘ de Seguimiento del Gasto) to reduce the fiscal deficit. Conversely, in the areas o f procurement and human resources, where it has adopted some o f the recommended measures, there was no effective implementation and, thus, no improvements in outcome. Thus, although Santa Fe’s positioning, l ike that o f Salta, would appear to validate the model, a closer examination reveals discrepancies.

3.80 Even though i ts reform process i s recent, it appears that the emphasis to date has been o n the formal side o f the equation, and efforts to promote changes in internal procedures have lagged behind. This is the simplest explanation for the lack o f impacts o n outcomes. I t i s possible that support from the IFIs in encouraging the adoption o f reforms explains part o f the gap.

With C6rdoba the neat one-to-one correspondences begin to break down.

3.81 In the province of Buenos Aires few measures were adopted and l i t t le progress in achieving improvements in output was made. Two partial exceptions are the areas o f procurement (where new regulations were enacted) and transparency (as regards the creation o f websites and a system o f asset declarations). The only changes in internal procedures include some improvements in budgetary practices. I t thus constitutes a strong validation o f the model in that where measures are not adopted, improvements do not occur.

3.82 Tucumin occupies an intermediate position, based on its partial adoption o f the recommended measures and achievement o f some early results. I t adopted partial reforms in financial administration and control and some equally partial improvements in these areas and in human resources. In procurement and transparency, i t neither attempted reforms nor recorded any improvements in outcome indicators.

3.83 The case o f L a Pampa could be considered a paradox. The province did not adopt the recommended measures but performed wel l with respect to the outcome indicators. This i s especially evident in the areas o f financial administration, control, and human resources. Like Santa Fe, but to a greater extent, L a Pampa has apparently substituted its own means for achieving the desired ends, ignoring or rejecting most o f the specific measures included in the model. In this sense, the provincial administration strongly defends i t s traditional accounting system, although admitting that i t does not comply with model promoted by the federal government. Similarly, the Tribunal o f Accounts (Tribunal de Cuentas) has stuck firmly to i t s system o f ex-ante and ex-post controls in effect for the last fifty years. Neither the Tribunal nor the provincial authorities have seen any need to shift to a system o f management audits or replace ex-ante with integrated internal controls, arguing that the change would not help detect c~rrupt ion. ’~ A similar resistance to change affects the management o f human resources. Here, however, traditional practices impede the greater professionalization o f staff and the introduction o f systems to encourage higher levels o f productivity. With this exception, L a Pampa does demonstrate a fairly successful deviation from the reform model; its traditional practices, an emphasis on i t s own formal rules, and the interests o f key political actors have allowed it to achieve relatively satisfactory levels o f performance.

76 Universidad Catolica de Cordoba (2004b).

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3.84 Based o n this brief synthesis o f the six provinces’ experience, i t i s evident that the application o f the reform model to the five management systems was not uniform and there were considerable differences in the level o f adoption and improvements in performance. Most o f the provinces would occupy positions in the two quadrants o f Table 3.3 tending to validate the model (adoption plus results; non adoption without results). However, L a Pampa constitutes a conspicuous counter-example. Moreover, three provinces - Cordoba, Santa Fe and Tucumhn - have adopted reforms, but have fallen short on results. To better understand these differences and the resulting gaps in performance would require a review o f institutional and political factors as they affect organizational behaviors and shape the decisions o f political authorities vis-&vis the reforms. This is not covered in the current report, but a more detailed discussion o f various hypothesized explanations i s found in several o f the background papers commissioned for this work. l7

Summary findings

3.85 The provinces’ initiation o f a reform process guided by the package o f recommended measures began only recently, for the most part at the end o f the last decade. The short time span and the complications added by the economic and political crises make i t difficult to assess the results. Nonetheless it i s possible to offer some preliminary generalizations as to the overall patterns o f adoption, implementation, and results in the five administrative areas.

3.86 Financial administration is the area where the greatest advances have been made in al l three respects. The provinces o f Cbrdoba, Salta and Santa Fey are currently implementing their IFMSs. For their part, Buenos Aires, L a Pampa and Tucumhn lagged behind in this area. The enactment o f a Financial Administrative Law was not always a necessary pre-condition for creation o f an IFMS. Indeed, Salta and Santa Fe were counter examples (no FAL but with an IFMS), and Tucumhn and C6rdoba had FALs but an incomplete IFMS.

3.87 As regards another major legal benchmark, enactment o f a Fiscal Responsibility Law as a means o f controlling the deficit, with the exception o f Buenos Aires (which has one), both the enactors and non-enactors (Santa Fe and L a Pampa) achieved the goal at the end o f 2004 because o f the effect o f the 2001 devaluation. Whether this pattern holds up in more normal times, remains to be seen. With respect to the rest o f the expected result - greater precision and transparency o f fiscal information and inclusion o f a l l expenditures in the budget - Salta and Santa Fe stand out as the best performers, while Buenos Aires and C6rdoba are the provinces with the lowest leve l o f achievement.

3.88 Progress in improving the control systems also varies greatly. The control measures were designed to be closely l inked to the financial administration reforms, and thus not surprisingly, their adoption was directly related to the achievements in this area. In Buenos Aires and Cbrdoba, incomplete advances with their IFMSs explain the lack o f improvements to control processes and results. Salta and Santa Fey which adopted the majori ty o f the recommended control measures, are the provinces with the greatest advances in implementing their IFMSs.

77 This analysis i s based o n the conceptual frameworks developed in Acuiia (2000), and Geddes (1994).

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However, both have a mixed record in changing internal control processes, and despite Salta’s higher level o f reform, i t s outcome indicators are not as good as those o f Santa Fe. L a Pampa, which did not adopt the recommended financial management and control measures, nonetheless has a better than average record in changing internal control procedures and producing outcome improvements. Likewise, while T u c u m h did not adopt any o f the recommended measures, i t made some changes in i t s internal control processes with l imited results. Constitutional restrictions have been an added problem for some provinces but many provinces have found ways to overcome them.

3.89 There have been only l imited advances in the area o f procurement and contracting except in the province o f Salta, which both adopted the recommended changes and achieved the expected results. Salta’s progress was closely related to reforms to i t s financial administration and control systems. I t also benefited from the interest taken by the executive and the participation and support from the local Chamber o f Commerce. In the rest o f the provinces, adoption o f reforms was minimal, with few changes in internal processes and no recorded improvements. The majority has stuck with legal frameworks approved in the 1970s. Their procurement systems are consequently characterized by bureaucratic procedures, poor information management and an absence o f transparency, delays in awarding contracts and paying suppliers, and a resulting tendency to use special, noncompetitive procedures. This is costly to the government, reduces competition, encourages corruption, and eliminates potential benefits to the development o f local economies.

3.90 In human resources, l i ke procurement, there has been little progress. Even where some recommended measures have been adopted (Cbrdoba, Santa Fey and Salta), they have not produced reductions in the public wage bil l or the public sector’s percentage o f a l l employment. In effect, T u c u m h and L a Pampa achieved more in these areas despite not having adopted the recommended measures. However, their results (also seen in Santa Fe) are more a consequence o f exogenous factors, such as the wage freezes and the devaluation. Provinces have tended to focus on the incorporation o f information technology for recording employees and tracking their j o b histories. In some cases, this has helped to eliminate flagrant abuses (ghost employees, those holding multiple, incompatible jobs) but its potential for advancing other objectives has yet to be explored. One common impediment i s the widespread, legally supported system o f guaranteed tenure for a l l but the new contract employees. As at the federal level, this reduces the space for more innovative management policies while also providing no incentive (especially in the face o f wage freezes and the scarce opportunity for promotions) for employees to be more productive. The situation recalls earlier provincial attempts in the 1990s to implement more modem personnel systems and introduce other changes.78 Although backed by the provincial ministries o f finance, the reforms hit a roadblock as they began to affect the areas o f health, education, and police, the sectors with the largest numbers o f employees and thus the greatest potential for organizing protests and threatening to withdraw support from political leadership.

3.91 With respect to the area o f transparency, even though certain advances have been made, many o f these were the results o f pressure from c iv i l society i tself and not from the public sector. Although almost al l the provinces have now adopted agency websites and assets declarations,

78 See Amado (2005).

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both mechanisms remain underdeveloped. Advances in publicizing more sensitive information (assets declarations and procurements) have been few. Although c iv i l society has successfully demanded some changes, i t s own l imited development at the local level has constrained i t s efficacy as a motor for reform.

3.92 Some final comments can be made on the model’s utility as means o f improving public sector performance at the provincial level, and the effects o f the socio-economic and political environment. Firstly, although there were evidently other ways o f altering internal practices and attaining the desired improvements in government outputs, the experience o f the six provinces does not indicate that the model’s recommended legal and structural changes were inherently flawed as a first step. I t does suggest that within each administrative area, some measures may be more critical than others, and that sequencing is important. The construction o f an integrated financial management system thus does not depend on the enactment o f a Financial Administration Law, although some comparable step will be needed to ensure the IFMS i s both integrated and comprehensive in coverage. The locally adapted solutions in this and other areas appear to work in very special circumstances which do not hold in most o f Argentina’s provinces. The bigger the province, the less continuous and centralized the executive’s control, and the less the interest and consensus among the political authorities on the need for change, the less l ikely i t i s that traditional or alternative mechanisms can be adapted to produce different outputs,

3.93 As opposed to the federal level, the provinces demonstrated little evidence o f attempts to enact flawed (as opposed to second best) substitutes. Where there was sufficient support to enact a law, the legislation was sound. More common, and certainly seen both in procurement and human resources, was a focus on measures which, in and o f themselves, were unl ikely to make a substantial difference. The best example was the use o f information technology to improve information on public employees. While an important step o n i t s own, and a means o f combating the most outrageous abuses, its further impact as a planning and management tool has been impeded by other rigidities in the system. Also, as at the federal level, there are doubts as to the viability o f some o f the additional human resource measures without a solution to the problem posed by employees frozen into their positions, and thus lacking any reason to perform better. Here, the model i tself might use some readjustments.

3.94 A s regards the interaction o f the five reform areas, the tightest relationship is, not surprisingly, among the financial administration, control, and procurement systems. A FAL does appear to facilitate changes in the control system, although these too can be achieved separately. However, a failure to reform the control system, in the standard or some alternative fashion, wil l eventually impede advances, even in basic areas l ike deficit control and certainly in more advanced reforms to improve the efficiency and efficacy o f expenditures. An unreformed control system would also appear to affect the downstream impact o f changes in procurement, but there were not enough examples to test that hypothesis. As for human resources and transparency, structural impediments on the one hand and insufficient demand on the other, have obstructed both their advances and their potentially positive impacts o n the other systems. Financial administration reforms seem to have advanced the furthest, and one can posit that for those provinces that have progressed here, the next stage wil l focus on control and procurement, possibly before turning to more advanced financial goals l ike results budgeting or to resolving

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the less tractable problems o f human resources. As for transparency, the relatively l ow level o f local demand, the lack o f a “parent” agency to guide the process, and insufficient progress in improving information management in the other areas are three serious constraints. Possibly a new interest in creating anti-corruption offices can help resolve the f i rst and second problems, and thus provide an impetus both for disseminating information already available and improving or creating databases managed by other systems. Procurement i s clearly a prime target here and one where, as in Salta, the business community might be more easily mobilized to promote change.

3.95 I t also bears mentioning that, as at the federal level, enactment o f a reform measure i s no guarantee o f its effective implementation, le t alone the achievement o f desired results. In some sense, however, the links in the causal chain may be stronger at the provincial level because, at least until now, there has been less reason to indulge in strictly cosmetic change. If governments take the trouble to enact a measure i t generally meant they wanted it to work. In only one o f the provinces surveyed, was it suggested that the situation was otherwise. This could wel l change with more federal or donor intervention inasmuch as provincial governments may begin to find it profitable to produce cosmetic reforms as a means o f accessing more funding or other benefits. Thus, although external incentives may advance reforms, more attention could be paid to what happens after the law is passed.

3.96 There are a few additional aspects o f the provincial reforms meriting at tent i~n. ’~ These efforts were commonly not preceded by any sort o f institutional diagnostic work, especially as regards the political, social, and organizational viability o f the proposed changes, possibly on the incorrect assumption that al l the provinces were starting at the same place. There also was no attention to creating a “critical massyyy o f support or results. The latter, for example, might have been used to establish a demonstration effect for the rest o f the provincial bureaucracy. Moreover, when financed with external loans, the reform design and implementation were frequently entrusted to an executing unit created for that purpose and constituting a sort o f parallel bureaucracy only loosely coordinated with, or inserted within, the existing state structure. In this manner, the processes devolved into a transfer o f generic policies, disregarding the institutional and political economic factors necessary for their success in the distinct provincial realities,

3 -97 On the subject o f exogenous influences, several additional generalizations emerge. The f i rst has to do with the overall level o f provincial development. As a general rule, the impetus for provincial reform has depended on the vision o f political leadership, its capacity for creating consensus among actors with different interests, and i t s ability to implement the changes. Implementation capacity i s strongest where provincial leadership is not divided, but occasionally the mobilization o f other actors has been important. Thus, in Salta, the business community, via the Chamber o f Commerce, did have some involvement in shaping the procurement reforms, and advances in transparency in Santa Fe were the result o f c iv i l society pressures. Large and heterogeneous provinces are at a disadvantage here as their leaders may find it difficult to build an internal consensus and so overcome the normal sources o f resistance.

l9 Martinez Nogueira (2004) addresses several o f these points in the background paper “Revisidn de 10s Informes Provinciales de Nivel I,” written for the Argentina IGR.

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3.98 A special issue concerns the role o f crises in promoting administrative reforms. As mentioned in the last chapter, they played a positive role at the national level, although in retrospect, a role that eventually passed the problems o n to the provinces. In 1989, the provinces were affected by the crisis, but their smaller budgets and fewer responsibilities made them less critical to its resolution. In the next crisis, fol lowing the transfer o f budget, services, and employees to the provincial and municipal level, the local governments played a larger role in i t s creation if not i t s resolution. However, the most immediate effect o f the recent crisis was to halt provincial reforms. I t remains to be seen whether, fol lowing the return to greater economic and political stability, the experience will have more positive results.

3.99 The responsibility for administrative reforms as a means o f addressing complaints about the quality o f the output side o f governance has shifted to the provinces. There are st i l l needs at the federal level, but the federal government’s most important role may now be developing programs and providing incentives for local improvements. As i t does this, and drawing on its own experience, i t needs to be aware o f the reactions external inducements can produce. To date, Argentina’s provincial governance reforms have been a sincere expression o f the political wil l of local leaders, conditioned only by their ability to build the necessary pol icy consensus at the provincial level.

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CHAPTER IV: CONCLUSIONS

Introduction

4.1. This study addressed one aspect o f Argentina’s governance situation by tracking the country’s experience with public sector reforms during the period from 1990 to 2003 or early 2004. I t focused in particular o n efforts to improve five key administrative systems. These efforts correspond to what are called second generation reforms, the changes to the institutions o f governance widely considered to be an essential follow-up to the first generation macro- structural reforms o f the 1980s and 1990s. Even without these prior developments, the improvements sought by the second generation package are important. They coincide with the current consensus on the role o f institutional quality in conditioning the implementation o f policies promoting economic growth and poverty reduction, improving the provision o f basic services by government agencies, and building citizens’ overall trust in their governance systems. As noted in Chapter I, Argentina’s second generation reforms appear not to have produced al l the promised results. As a consequence, the present Argentine authorities have responded to citizen demands with a second attempt to advance this type o f change. The topic explored here was chosen as a means o f providing useful input to that effort.

4.2. In pursing this l ine o f investigation, the study focused on what was termed a “reform model,” as derived from an ex-post analysis o f the measures usually promoted and their explicit or implici t connection to improvements in internal operations and external outputs o f public sector organizations. The research team used this model to develop the analytic matrix that guided its field work, consulting in turn with local experts to ensure a high level o f congruence with program content and objectives*’. Although the contents o f both the model and the matrix broadly coincide with World Bank diagnostics o f administrative systems, the model i s not a Wor ld Bank invention and i t s components have been independently presented by local reformers and experts writing on the themes. As regards the analytic framework itself, the IGR’s main contribution is, thus, in summarizing the reform logic in schematic form. I t s additional and more substantial contributions l i e in comparing actual events to the model’s expectations and thus in assessing i t s utility to promoting the desired improvements in institutional quality and organizational outputs.

4.3. In the fol lowing discussion, the specific findings summarized in the earlier chapters are not reviewed. Instead discussion focuses o n lessons learned as regards the use o f the reform model as a guide to institutional reform. T o anticipate the conclusions, and as has been suggested in prior chapters, the bottom l ine is that the model i s useful in organizing efforts, but that certain o f i t s assumptions or guiding principles appear incomplete or misdirected and so risk not achieving the expected improvements. Whether conceived as a problem o f the model’s design or implementation, these assumptions, thus, lead to:

The apparent expectation that the adoption o f the recommended legal and structural changes would automatically produce modifications to organizational operations and in turn improve the quality o f outputs.

0

’’ The model i s distinguishable from the matrix. The model represents the underlying reform strategy. The matrix i s a tool developed for the present research as a means o f tracking the model’s application to the Argentine context.

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The consequent tendency to assess reform implementation by the level o f compliance with the formal side o f the institutional equation.

A bias toward a single recipe when, in fact, there appear to be other ways o f achieving the desired ends.

0 A failure to recognize the many types o f constraints affecting the completion o f the model’s expected causal chain (point 1 above) and, thus, a tendency to ignore the need to find ways to overcome them.

0

4.4. In conjunction, these four observations provide an answer to the question posed at the beginning - why has Argentina, despite the substantial changes to the rules governing public sector operations, not achieved more in resolving the problems addressed? Before turning to the question o f how things (including the application o f the model) might be done better, the current chapter provides a W h e r discussion as to why these flawed principles have emerged, an exercise that requires looking beyond the research findings to some more general characteristics o f the second generation reform movement. The reason for doing this is a bel ief that future efforts are likely to proceed as before unless the errors are recognized and corrected.

Some Theoretical Considerations as They Affect the Design and Use of the Reform Model

4.5. Some o f the model’s problems arise in i t s theoretical origins as wel l as lingering disagreements as to what is actually being attempted. Because reforms are inevitably political,” a certain vagueness or imprecision as to their aims i s often useful. These characteristics facilitate the formation o f what were termed “ambiguous consensuses” in the previous chapter, a collective decision to support certain measures despite the disparate objectives or understandings o f those participating in the agreement.82 The ambiguity becomes considerably less useful when it begins to impact on what i s actually done and how progress i s monitored. This is where what appear to be academic niceties can have very real effects.

4.6. Definitional Problems: This section reviews some aspects o f the approach to reform which may seem little more than semantic quibbles. However, in this case, semantics are important as they conceal more fundamental disagreements as to what is being attempted and how it i s best achieved. On the one hand, there i s the question o f the meaning o f institutional reform. To paraphrase the usual comment about the weather, everyone talks about institutional reform and indeed may do something about it, but no one seems to agree on what i t is.

4.7. Second generation or institutional reforms would seem to have a clear meaning, derived from definitions provided by theorists l ike Douglass North.83 However, in practice, this appears not to be the case. These reforms are sometimes equated with an extension or refinement o f the first generation changes, moving the macro-structures more into l ine with what the first round didn’t accomplish. Whether this is necessary let alone feasible in the current environment (and especially in Argentina) i s one question but, in any event, i t is a far cry from what most second generation reformers believe they are doing - i.e. altering the quality and quantity o f

’’ In short, they affect the authoritative allocation o f values or, in plain English, who gets what, when, and how. ’* The term i s taken from Lardone (2005). 83 North (1 990).

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organizational outputs by changing the formal and informal rules and practices, incentive systems, and other contextual factors that condition them. First generation reforms worked at the macro level; the second generation focuses on the micro. Institution building has even been equated with concrete construction projects - the building o f buildings. This may be an attempt at humor, but judging from the contents o f some institution-building projects, perhaps not. One problem with these kinds o f misunderstandings, admittedly more often held by outside observers, i s that they can produce additional disappointments as to accomplishments or a sense that what is being tried is not very important.

.

4.8. A more common source o f confbsion, which to the extent possible this report attempts to avoid, is the conflation o f institutions and organizations. Institutions are, as the neo-institutional economists insist, the set o f formal and informal rules, mental models, and incentive systems shaping individuals’ behavior. Collectively they can produce path dependencies, or an inherent preference for certain organizational and normative alternatives - the bel ief that ex-ante control is the best means for combating corruption, or the idea that the only way to produce neutrality in a decision-making body i s to incorporate representatives f rom every competing party. Organizations are the formal rules, structures, and concrete resources defining systems o f collective action. Organizations and the actions o f their members are indeed shaped by institutions, but this means that altering their outputs requires more than modifying formal rules or simply redistributing, enhancing, or augmenting their resource endowments. These changes may affect incentives and mental models, but often are insufficient to move behavior in the desired direction - one o f the reasons why so many training programs, computerization projects, and reorganizations are ineffectual. Alterations to the formal side o f organizations may constitute necessary conditions for change, but absent modifications to the overall institutional parameters for actions, often have limited or even perverse affects (as the frequent fear that automation might be used to make corruption more e f f i ~ i e n t ~ ~ ) .

4.9. As opposed to the first set o f misunderstandings, which largely figure as interesting anecdotes but are not so widely shared as to impede program design,85 this second confusion can have more profound consequences. I t can narrow the focus o f reforms, thus, limiting their impact. This effect can be seen in the reform model’s apparent assumption that formal changes wil l produce the subsequent chain o f events. I t also can be used by those wishing to avoid more profound changes to fool those monitoring results. The commitment i s only to produce the law or the new organization, not to guarantee it operates as assumed. Clearly, monitoring improvements to internal operations and external impacts i s far more difficult, but that issue is further addressed below. Finally, the confusion can and apparently has produced a certain amount o f disillusionment with the entire undertaking - the increasingly expressed notion that improvements in “institutional quality” cannot be produced. They can, but not by focusing only on the formal determinants o f organizational performance. This is admittedly a much harder proposition, but the Argentine experience also provides some suggestions as to how it can be

See also Uiia (2005) for a discussion o f how the strengthening o f the National Congress’s role in Argentina has in turn enhanced the powers o f the provincial governors (because o f their control over the l i s t s o f congressional candidates) thereby complicating the efforts o f the federal government to improve provincial financial management. 85 They can, however, have negative affects if those authorizing the programs do not like what i s proposed because i t does not coincide with their own understandings.

84

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accomplished. simplistic assumptions, as discussed below.

These suggestions, however, require reexamination o f some other overly

4.10. The Problem of Incentives and the Influence of the First Generation Reforms: This section expands o n ideas introduced in a footnote in Chapter I, but worth revisiting because o f their effect on second generation models. Like that note, i t draws on an emerging body o f literature criticizing the second generation reformers for fol lowing a methodology more appropriate to the f i rs t generation efforts.86

4.1 1. As has been wel l documentedYE7 the first generation reforms depended o n a series o f one- o f f changes, which once effected, radically altered the context in which political and economic transactions occurred - events l ike devaluations, reductions in the work force, and privatizations, as we l l as externally enforced agreements (conditionality) limiting the levels o f deficits and public indebtedness. Although questions have been raised as to the balance sheet on their impacts, and especially as regards the weight o f certain negative consequences - corruption in the privatizations, the substitution o f fired employees with an army o f contractors - this report does not pretend to explore these issues.88 Indeed i t accepts that the methods used were appropriate for the primary objectives pursued - cuts in public expenditures, elimination o f public enterprises that inevitably ran at a loss, increases in the provision o f services f rom public utilities and so on. The problem arises in the expectation that similar mechanisms can be applied to alter the institutional basis for more complex public sector operations. Here, the findings o f the present research more closely coincide with the critics in deciding in the negative.

4.12. The crux o f the matter i s that the types o f changes pursued in the two sets o f reforms are different, with those o f the second generation requiring not just that actors stop what they were doing, but that they adopt and execute specific alternative sets o f behaviors and coordinate them with other actors and organizational units. It i s like the difference between forcing a few people o f f the side o f the pool (a simple push will do) and getting them to perform a water ballet (where even incentives may not be enough if they lack the basic skills). Whi le new rules can help, there are questions o f sequencing, fine tuning, and ensuring that each part i s in place and working in coordination with the others. Moreover, as this change process i s inherently longer and involves more discrete steps, there is greater room for slippage along the way as we l l as the risk o f forgetting that the initiating events are only o f value to the extent they lead to the ultimate improvements in outcomes. One does not introduce a Financial Administration Law, IFMS, or external audit agency for i t s own sake, but rather to produce downstream modifications (less waste and corruption, better services provided at a lower cost) in the quality o f government outputs.

4.13. Even the macro-triggers o f the first generation had their problems in this regard - their inabi l i ty to control what actors did once they were forced to abandon former behaviors, and the accompanying assumptions that those actions would take care o f themselves. However, the lesser number o f triggers and their near equivalency with the desired f i rst order consequences

86 As summarized in Santiso (2001).

Geddes (1995); Lora and Panizza (2003), Shepsle (1999); and Vellinga (1998). 88 For others who have, see Azpiazu (2002) and Santiso (2001).

For an overview, see Burki and Perry (1997); for a discussion o f the politics o f these programs, see Eaton (2002); 87

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made timing less o f an issue, facilitated their enactment, and reduced the opportunity for passive resistance. Wage and hiring freezes and reductions in the work force cut public expenditures; devaluations and convertibility forced public and private actors to change their spending patterns. The causal chain was shorter and in most cases almost immediately realized.

4.14. A second difference i s the more uniformly predictable impacts o f the macro triggers, regardless o f where applied. So long as there i s a monetary economy, a devaluation will have similar first order impacts; they are not context-dependent. M u c h the same i s true o f privatizations, reductions in work force, or limits - if effectively applied - o n public debt. As this research has suggested, the presumptive micro-triggers for institutional change are much more context-dependent. This i s partly because they really are not triggers, but rather first steps in a much longer change process, and in part because their efficacy in that regard hinges on many other environmental variables and the willingness o f actors to make admittedly smaller modifications in their behavior o n a more voluntary basis.89 Hence the frequent observation that new laws or organizations have far less predictable effects in different settings.

4.15. What this means i s that second generation reforms are inherently messier (less elegant) than the first generation variety, less predictable, and less conditioned by a single set o f f i rst order changes. Many o f those involved in promoting them understand those differences, but to simpli fy matters may design their interventions as though this were not so. Were they to admit at the start how dif f icult the task is, they might never get approval in the first place. Moreover the “triggers” do constitute a sort o f down payment on the process, creating room to carry out the rest. However, the simplification, reinforced by the lessons o f the f i rst generation model, can too easily be accepted as a good enough approximation on i t s own. The amplified matrix developed for the present research i s a far better description o f the reform process, apart from any assumptions as to the automatic nature o f i t s causal links and the accompanying neglect o f the role o f informal institutions in strengthening or weakening them. Yet, i t s effective application requires greater attention to the middle and last steps, considerably more time, and consequently a more continuing push for change than the usual focus on the initiating measures implici t ly suggests. For al l the difficulties first generation reformers may have faced, one obstacle they were spared was the need to maintain and exercise their resolve over a far longer period. For second generation reformers the issue o f political impetus takes a very different form.

4.16. The Limits of Neo-institutional Economics and the First Generation Model as a Guide to Producing Change: The second generation reforms owe much to neo-institutional theory, which, in effect underwrote their importance. However, the neo-institutional economists have been much better at explaining why things remain as they are than why they f inal ly change. When addressing this topic in his now classic work, Douglass Nor th attributed the transformations in existing institutional models (path dependencies) to the impact o f politic^.'^ This raised the question to another level - how to explain changes in politics in what appears to be a self-reinforcing system? Obviously, as the examples discussed here demonstrate, one answer i s the effect o f crises.” When path dependencies become so counterproductive as to

89 Again comes the difference between being pushed into the pool and executing a water ballet - the f i rs t action i s involuntary, the second i s not.

North (1990). See for example, Eaton (2002); Grindle (1996); and Tommasi (2002).

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threaten system survival, leaders will search for alternative arrangements and followers wil l be more inclined to accept them. The downside to relying o n this motor for change i s its unpredictability, its other negative consequences, and the fact that once the crisis appears resolved, change will halt and backsliding may even occur. Crises are by definition too short to change more fundamental institutional forces. They can, as with the first generation structural reforms, provide an init ial impetus, but their impact i s inherently short-lived and thus not sufficient to sustain second generation programs.

4.17. The challenge then is how to sustain changes in a post-crisis environment or how to initiate them absent a crisis.92 Argentine scholars have pointed to the difficulty o f effecting “inter-temporal agreements,” which is to say continuing programs across political administration^.^^ The problem is not unique to Argentina, and one universal solution i s to build constituencies for reform that extend beyond the ranks o f the small group o f leaders currently in power. Another related answer is to empower those most interested in reform to continue the process by creating protected reform enclaves. Whether done intentionally or not, this second method explains the more continuous progress in the financial administration reforms. Where ministries o f finance retained a small core o f technocrats overseeing system evolution, the coincidence o f their institutional interests and powers with the expansion o f the reform process worked to this end. Unfortunately, this effect was not sufficient to overcome the contrary agendas o f national actors as regards deficit control. In the other areas, there has rarely been a comparable entity, and where one existed (e.g. the traditional control authorities) i t s members too often interpreted their interests as keeping traditional practices in place. Although in the other four systems, one immediate step was the creation or reengineering o f a central office to oversee the process, this has proven dif f icult to realize. Successful reforms in these other areas have, thus, been highly dependent on a direct interest being taken by the highest level authorities, and the inter-temporal agreements in turn conditioned by a single individual or political faction remaining in control.

4.18. Thus, successful second generation reforms are often dependent on top-down technocratic or political control in their origins or trajectories. O f course much the same i s also true o f the f i rst generation successes, the difference lying in their faster realization - there the only consensus required was the decision to delegate powers and responsibilities in the interest o f confronting an emergency situation. Here, and this is the main argument o f the critics, the danger lies in the delegation lasting longer than absolute necessity might requireqg4 At the provincial and federal level there are, nonetheless signs that less tightly centralized systems can move changes ahead, if more slowly, especially if they can alter the perspectives and powers o f the key agencies in each system (e.g. the provincial Tribunals o f Accounts that have taken a different approach to their jobs) and begin to build a common understanding among a broader group o f bureaucratic and political insiders. Salta’s involvement o f the local Chamber o f Commerce in designing the procurement programs, or Santa Fe’s development o f locally adapted alternatives (what the research teams called “impure substitutes”) are thus two cases worth further exploration o f their internal dynamics.

92 These and related questions have begun to be explored in similar fashions. See for example, Graham and Na im (1998); Pastor and Wise (1999). 93 Spiller and Tommasi (2003). 94 Still, there are those who believe it should be permanent for economic policy. See Girishanker (2001).

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4.19. In summary, if the neo-institutional economists’ identification o f “politics” as the source o f change i s accurate for both types o f reforms, i t s application to those o f the second generation i s more problematic because o f their longer duration and the greater number o f decisions involved. As some o f the factors facilitating reform progress either in certain administrative areas or specific provinces are not easily replicated elsewhere, and may also be less desirable for other reasons, there is clearly a need for developing strategic alternatives for managing the change process.

The Risks of Excessive Formalism, the Inversion of Means and Ends, the Many Routes to Rome, and Other Problems in the Model’s Application

4.20. In this section, some o f the problematic aspects o f the reform model deriving from i t s theoretical origins are further explored. These are cautionary tales, leading to a final section reviewing how things might be done differently.

4.21. Excessive Formalism: Despite their recognition o f the importance o f informal rules and procedures, analysts often end up focusing only on the formal side. They frequently argue for this approach o n the grounds o f the greater dif f iculty o f tracking the informal ha l f o f the equation.95 Whi le this is true, i t complicates the task o f explaining the consequences o f formal institutional change, runs the r isk o f an inaccurate attribution o f impacts, and ignores the potential role o f what was not studied. Absent a consideration o f institutions in the broader sense, i t becomes very dif f icult to explain the frequent observation that the same law or organization wil l operate very differently in different national settings, and one may wel l end up recommending “best practices” for environments where they are unlikely to be successful. A similar problem afflicts the reform model which is based o n formal legal and structural changes, and o n the implici t assumption that these wil l be sufficient to push the rest o f the causal chain. This induces a tendency to measure reform achievements in terms o f the formal measures adopted - which i s easier, but not in line with the reasons for adopting the model in the first place.

4.22. Formalism worked for the first generation reforms, because the formal changes were so closely linked to the ends pursued. For second generation reforms, this is not the case, and formalism, however much easier, r isks undermining the chances o f producing the anticipated output improvements. Clearly those most imbued in the reform efforts understand the difference and the dangers. The concern instead applies to external actors attempting to assess the need for reform or monitor its progress, local supporters (including political authorities) not directly involved in reform implementation, or would- be, but not very experienced designer^.'^ For the first group, who often find themselves promoting reform where i t may not be desired, the problem is that their successes may be largely cosmetic. A s Argentina’s national government attempts to promote administrative reforms in the provinces, i t i s one that would benefit from being taken seriously. Formalism also affects needs assessments in that they are often done in so

95 World Bank (2002e). 96 While none were identified in the research, there are ample examples outside Argentina o f countries adopting laws or new organizations in the apparent expectation that they would fix some problem, only to discover that it was not that simple.

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l i t t le time that only the formal arrangements can be covered. As the findings o f the present study indicate, a focus only on formal structures (e.g. the presence or absence o f a FAL or a “modern” external control agency) may not be the best way o f assessing the quality o f outputs in the respective areas. For political authorities and others supporting reforms within their own systems, the risk i s a failure to stay the course and to provide the necessary additional resources and impetus for ensuring that measures, once enacted, have real impacts. Just creating a central procurement office i s not enough; both i t and the ministerial units must have the resources with which to work. For inexperienced designers, the risk i s expecting and promising too much, and thus investing a l l their resources (and especially their political capital) in promoting the enactment o f a series o f laws they will be in no position to implement or perhaps not even realizing this extra step i s ne~essary. ’~

4.23. The Inversion of Means and Ends: Excessive formalism is closely related to a second tendency, the confusion o f the means used with the ends pursued - reform comes to be equated with i t s initiating steps and not with their efficacy in producing the changes ultimately desired. Although again those most directly involved in the reforms probably recognize the difference, for various reasons they may not combat this misunderstanding. I t i s easier for them too, to let evaluations rest o n the f i rst formal changes. I t i s far simpler to explain their goals in terms o f a few easily described formal measures; and as dif f icult as it may be to enact them, they might provoke s t i l l more opposition with disclosure o f the full plan. The challenge o f inter-temporal pacts also may encourage this tendency, as a process only started under one administration is declared completed by its successor because o f a lesser dedication to finding real solutions, or a more limited understanding o f what i s entailed. Thus, for al l its shortcomings, the schematic matrix may serve a usefb l purpose in reminding al l those involved that this i s a process and that i t is not concluded until the desired outputs are realized. Clearly better, more complete, and more context-specific indicators could be found for the second and third levels o f change, and o f course, there should be no assumption as to their automatic occurrence.

4.24. The Many Routes to Rome and the Many Stopping Places along the Way: As has been shown in the review o f the six provinces, the ends desired, that is to say the improvements in outcomes, can be reached by means other than the faithful adoption o f the model’s ini t ial recommendations. These alternative routes may be less broadly applicable, but that should not detract f rom recognizing their success in more particular settings. Both formalism and the inversion o f means and ends tend to discourage this recognition. Interpreting the reform model as a universal recipe would thus also be inadvisable, especially because it st i l l tends to be most precise in its statement o f the init ial steps, and far vaguer and less complete as regards internal changes and the full range o f outcome goals.

4.25. Here a word o f caution i s needed as regards the analytic matrix developed for this research, and i t s omission o f some desired outcomes because o f the dif f iculty o f tracking them - for example a reduction in corruption, or higher levels o f efficiency in the use o f resources. This i s not to say that they could not be tracked, but only that for the purposes o f the present research it was not considered feasible. In fact a more complete matrix could invest more effort in describing outcomes and the intermediate changes in behaviors associated with their attainment.

’’ There are many cases, within the region and outside, o f apparently sincere reformers promoting laws without adequate thought as to how they would be implemented.

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The successful departures from the model seemed to arise f rom a greater attention to these details whatever their reasons for rejecting the recommended steps for initiating them. For those interested in understanding why reforms are undertaken and how the necessary political impetus i s achieved and maintained, these cases, and especially those l ike Santa Fe with i t s locally- adapted alternatives and more complex political setting, are especially important.

4.26. The less successful departures from the model - provinces adopting the recommended measures without the predicted effects - are also interesting as another reminder that the process only ends when the improvements are made, and as a way o f understanding why i t gets o f f track. One explanation is the role o f external actors in promoting an “insincere” reform which i s only pursued until the external inducements lets up (or until the external reward i s delivered). Reforms adopted insincerely may eventually convince the adopters that they are o f value for their own sakes. Still, those relying on this tactic need to recognize that the results are not guaranteed, especially if the formal changes require no other modifications to business as usual. They may need to set the bar a l i t t le higher, insisting on more than the init ial enactment o f a law or formal adoption o f a new practice.

4.27. A second, more common explanation for failure i s the inability to overcome the various sources o f active resistance, the interests vested in the preservation o f things as usual. Some o f these interests are purely organizational or cultural, the agency which stands to lose power with the change or a more broadly shared preference for the way things have always been done. Others appear linked to political and economic interests, and in some cases to corruption, in short the exogenous benefits derived from a dysfunctional system. Here the three means o f avoiding reform mentioned in the first chapter come into play: preventing enactment o f the measures; manipulating their content so as to sabotage their impacts; and simply circumventing their requirements after the fact.

4.28. As al l systems face similar kinds o f active resistance, the more interesting question is why some have managed to overcome them. Tribunals o f Accounts could be expected to resist the creation o f new audit agencies and practices everywhere. Why were some successful? Why were others defeated, and why did a few seek to adapt to the new processes as a survival strategy? Other questions have to do with why the init ial measures were more easily enacted in some administrative systems and provinces than in others, and how the answers might be used to make advances where they have not yet occurred. Circumvention i s not a device l imited to reform’s opponents, and has also been used by proponents to overcome the less tractable obstacles by altering the starting points or postponing confrontations until later in the process. Reformers need to be good tacticians as wel l as strategists. So long as they remember where they want to go, they can introduce considerable flexibility in how they get there.

4.29. Another logical, but less adequately explored explanation for lack o f progress arises in passive resistance and purely material constraints. As regards the latter, i t i s clear that the failure to provide the inputs necessary for successful implementation i s a common occurrence - whether in the form o f inadequate resources, insufficient training, or even the lack o f a simple explanation o f how things could be done. The three are often connected; the office made responsible for overseeing the development o f a new procurement or human resources system lacks staff, funds, and sufficient political backing to do its j o b and, as a result, is hardly in a

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position to encourage others to do theirs. This failure also increases the impact o f passive resistance, or the forces o f inertia. Those expected to change their behavior may not derive any exceptional benefit from doing things as usual, but lack both the incentives and the skills and knowledge to do otherwise. Inertia i s not an irrationally perverse reaction. I t is highly logical given that change requires additional effort, and it may also be motivated, absent convincing demonstrations to the contrary, by a bel ief that things as usual are the best way o f getting a j ob done.98 Added to this is the wel l recognized fact that higher level officials tend to be replaced frequently. Thus even should political appointees adopt the new reforms, wise permanent bureaucrats may hedge their commitments. As interviewees in the Paraguay IGR succinctly stated,” “we wil l be here long after they leave.” Overcoming passive resistance requires work and resources, but as pure inertia i s not based in more deeply vested interests, the expenditure o f political capital to combat i t i s less.

4.30. I t is worth mentioning that inertia i s often erroneously interpreted as active resistance, thus producing less appropriate programs for dealing with it, and in the process possibly effecting a self-fblfil l ing prophecy. Thus, understanding why people resist is very important, if only to ease the reformers’ burden. There i s an enormous difference between sticking to noncompetitive contracting procedures because the new rules are too dif f icult to follow, especially when disbursements are not predictable, or because o f collusion with the favored vendors. If compliance with rules on publishing information electronically seems at best half-hearted, i t may represent an effort to deceive or only the absence o f better statistics. Knowing which explanation applies where i s ha l f the battle o f developing remedies.

What was once passive does become active.

Rethinking the Model and Second Generation Reforms

4.31. In making’these comments and criticisms, the intent has not been to invalidate either the ends pursued or the reform model’s recommendations for getting there. A s a set o f measures to initiate reform processes, the model, in its Argentine or other versions, i s a good start. While none o f its recommendations proved to be necessary and sufficient for future change, some come very close to that status. Certainly this i s true o f the various laws establishing the integration o f the financial management system, mandating a single account, removing some o f the more onerous forms o f ex-ante control and emphasizing ex-post control o f results, specifying the preference for open competitive procurement, defining and prohibiting conflicts o f interest, requiring assets declarations, and requiring that information be collected by public agencies and made available to al l citizens. However, a law neither guarantees these results nor i s the only way o f achieving them. The automated collection and processing o f information on expenditures, procurements, employment, and other critical administrative processes i s arguably st i l l more essential, although again there is no guarantee that i t will be used to the desired ends.

4.32. The creation or reengineering o f central offices responsible for the regulation and oversight o f key functions is also critical although, as has been shown, they are sometimes born

98 Change i s always costly to the system and i t s individual members. Individuals run risks and must invest more effort in doing things differently. Moreover, any change process i s virtually guaranteed to lower overall productivity over the short run. 99 World Bank (2005).

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ineffectual, lacking both resources and further political support. Moreover, they can create their own obstacles to further progress, based o n their narrower definitions o f the objectives pursued and their own interests in retaining the control they traditionally or currently hold. Tribunals o f Accounts that resist the shift to an ex-post role, or ministries o f finance that come to focus only o n expenditure control are two cases in point. In the case o f the ministries, the narrower emphasis may only be a logical reaction to the difficulties o f moving into the second and third levels o f budgeting (efficiency and efficacy o f expenditures) but it also may arise in the decrease in centralized control (and threat to their primary goal) this inevitably implies. Although procurement offices have yet to attain the powers o f the other two, they may already be undercutting their efficacy by a failure to simplify the rules they enforce and so encourage compliance. The principle underlying al l the reforms - centralized rule setting and decentralized execution - i s an extremely hard balance to reach and, thus, its imperfect realization i s not surprising.

4.33. In some sense, the various steps or recommended measures incorporated in the reform model can be reduced to three critical components: the introduction o f new operating principles, the creation o f an office staffed, funded, and empowered to oversee their further development and application, and the better collection, management, and use o f information o n the processes covered. The order and means o f their introduction can vary, but one way or another they need to be accomplished. Although i t appears that the financial management system deserves the highest priority, both for i t s impact on the other systems and its intrinsic importance to political authorities, i t s development wil l be truncated absent attention to the other systems, and most particularly to procurement, and control. One o f the biggest impediments to advances in al l areas is the human resource system, o f which more wil l be said below. Advances in transparency are also critical, although restricted by the lack o f a clear strategy or an agency to promote it. Transparency i s really not a system, but a principle to be incorporated in the others. Aside from its intrinsic importance, i t can also provide an impetus for the development o f the other systems and help ensure i t remains o n track. Until a better means can be found to encourage this incorporation, i t s evolution through a series o f ad hoc measures may be the most that can be done.

4.34. Still, the model i s only a heuristic device, and its utility could be improved by certain immediate changes, by a continuing testing against the results produced, and by the recognition that any generalizations as to how it works are at best based o n the law o f averages. There wil l always be negative and positive exceptions. As regards the lessons to be drawn from the present study, the fol lowing are some further recommendations as to how Argentina’s current reform efforts could use this kind o f model more productively.

4.35. Some possible modifications to the reform model: While principles, information, and a normative and supervisory center may be the constant elements across the five reforms, there are evidently alternatives for achieving them, and also some possible variations in their content. Two areas where the latter may be the case are control and human resources. A s noted, the human resource model rests on a preference for merit-based, permanent career appointments. However, at both the national and provincial levels, the use o f contract employees i s growing, while the stability accorded to regular employees has worked against the adoption o f measures intended to increase their productivity and professionalism. One obvious need, across the board,

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i s to regularize the treatment o f contractors, ensuring they are hired and retained on the same merit-based principles presumably used for permanent employees. On the assumption that they are an undesirable and short term phenomenon, the model in fact assigns a far lower priori ty to these issues. A more practical revision, obviously attainable only over the medium term, might be an explicit shift to a mixed employment model, featuring a combination o f permanent career staff, contractors, and outsourcing. I ts application would feature the same general principles underlying the reform model - merit selection, evaluations and promotions based on performance, and clear divisions between the functions performed under each labor regime.

4.36. Control poses an equally challenging question, but o f a different type. One o f the frequent reasons for rejecting the new model’s emphasis on ex-post control is the belief that it i s not an effective means o f combating corruption. The argument overlooks the proposal that ex- ante control be integrated into the ordinary management function, but there the simple fact i s that this has not happened. Resistance to the standard recommendations has been reinforced by the perception that at the national level, the absence o f ex-ante controls has facilitated corruption. Over the longer run, one cannot fault the model’s recommendations, but it i s also evident that their impacts were undercut in their national-level application by the incomplete implementation o f the new internal control model, as wel l as by certain unforeseen modifications to the design o f the control agencies (especially the AGN and the internal control units). Perhaps what i s lacking in the model i s a transition strategy, to avoid the abrupt elimination o f ex-ante control as at the national level, and to ensure the implementation o f the integrated internal controls (meaning among other things, legal changes to locate responsibility for improprieties occurring within an agency with i t s head, and to impose realistic sanctionsloo). I t might also be wel l to specify what integrated controls look l ike - so they become more than an automated version o f the multiple clearance required before.

4.37. As currently construed, the composition and especially, the relative independence o f the external control agency and the internal control units are challenges. An insistence on candidates meeting well thought-out professional criteria, combined with congressional appointments based on a two-thirds majority could further enhance autonomy and professionalism within the control authorities. Applying s t i l l stricter merit criteria to the selection o f professional staff would also be beneficial. Other changes to enhance the AGN’s efficacy might include the requirement, backed by sanctions, that heads o f audited agencies respond within a reasonable timeframe to the observations and recommendations o f control agencies, and further clarification o f the committee’s role in modifying audit contents.

4.38. The situation o f the internal audit un i t s also faces challenges. There i s a choice between two models: one increasing their independence from the agency head and having them report directly to SIGEN (with rules similar to those for the AGN as regards each agency head’s responsibility for responding to their findings), and the other leaving them in their current status, but increasing the sanctions o n the agency head for any problems encountered (via a SIGEN or AGN audit) in his or her agency. The former system would appear technically easier to implement in Argentina, although the resistance to the change i s l ikely to be intense.

loo This would not absolve those directly engaging in the improprieties from their own responsibility, and probably stronger sanctions, but does provide an incentive for the agency head to keep track and to engage in preventive action.

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4.39. These changes at the national level might be replicated in the provinces, and even in those retaining their traditional Tribunal o f Accounts. Here there i s a chance to make a smoother transition, and to ensure that the elimination o f ex-ante controls does not create the real or perceived problems it did at the federal level. The lack o f adequate transition strategies in this and other areas may be another product o f the influence o f the first generation reforms. N o t only are second generation reforms inherently slower, they also require more fine-tuning along the way.

4.40. In summary, whereas in human resources, the model may require readjustments, in control, some o f the problems in implementation could be resolved through the application of deliberate and persistent measures to ensure the professionalism o f the agencies’ leadership and staff. The one other area where some revision may be needed i s transparency. Here the problem lies in the question o f who wil l oversee the development and implementation o f the new rules and principles. There i s no easy or uniform answer, but clearly things will not go far without one. Possibly the increasing emphasis on the dissemination o f information (and the enactment o f freedom o f information laws) wil l provide an opportunity or at least greater urgency for addressing the problem. As groups become more insistent o n having information, and less content with what i s provided, the need to coordinate a strategy and monitor its execution wil l become more intense, and some capable entity wil l be needed to perform this function. Otherwise, disgruntled citizens may head straight to the courts, judicializing a process more adequately handled administratively.

4.41. Reversing the Current Priorities: A second revision to the model i s the option to reverse the priorities in the sense o f putting more emphasis o n the objectives pursued, more attention to the changes in internal processes, and taking the recommended measures for what they really are, convenient, but not necessary first steps for getting the process started. This approach implies an increased emphasis o n the strategic management o f the reform effort. I t requires much more precision as to what i s being sought and what changes in internal processes are required for i t to occur, as wel l as the development o f indicators for each step. Over the short run, the much more complex (and less easily measured) internal changes are al l that can be monitored, but if these intermediate benchmarks do not soon produce improvements in external outcomes, they may also have to be revised. In both regards, the matrix used here i s only a f i rst approximation. As noted, it was simplified to facilitate the research, but in reality, i t should be far more complex, including goals and processes whose measurement i s inherently more challenging. At least in real life, those doing the monitoring have far more than four months to effect it. However, to do this well, they need a much better understanding o f the institutional and political dynamics o f the behaviors they seek to change.

4.42. Toward More Effective Sequencing and Interactions: Comprehensive or holistic reform models overlook the inevitable reality that you cannot do everything at once, that some changes are more important than others, and that sequencing does matter. True, as one works on parallel reforms, at some point, lack o f advances in one area may paralyze progress in another. This has clearly occurred at the federal level, where the lack o f progress in areas l ike procurement and control (and also in human resources and transparency) has begun to limit advances even in the more developed financial management systems, reinforcing i t s promoters’

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tendency to focus exclusively on deficit control, and even there accounting for some losses in ground as agencies seek to exit the system, or simply circumvent the controls in the other areas. However, the lesson here i s that at some point, highly unequal rates o f development matter, not that a l l must progress apace.

4.43. Empirically and theoretically, the lead taken by the financial management system makes sense. I t i s the area where the reforms effectively started and where most advances have been made. The accomplishments are not only the result o f an early start. The greater progress is also logical because even the most retrograde government wants to know where money i s being spent, and, under the current situation, has motives for controlling i t s deficit. I t i s also a natural result o f the usually greater technical capacity and political power o f ministries o f finance or economics. So long as they control the purse, they can make and enforce the rules. However, even their powers have limits, and thus are enhanced by a well-functioning control and procurement system. Both can catch irregularities not captured in an IFMS. Additionally, when procurement and control operate by imposing convoluted and onerous requirements, they may be a principal reason for agencies attempting to escape the entire system.

4.44. Given their direct impacts o n further advances in the financial administration reforms, and the difficulties inherent to the human resource and transparency systems, the most logical next steps are thus pushing for faster progress in the procurement and control systems. Here closer coordination with financial management is desirable, both because o f the pressure it can provide, and to ensure that what i s done in the other two areas i s compatible with the overall aims -- Le. facilitates compliance with the new norms, rather than adding more complexity. As both systems, as wel l as the sector offices for a l l three, wil l have to be staffed up, there may also be room for experimenting with human resource measures here. Especially as regards procurement, measures to increase transparency could be an integral part o f the package.

4.45. H o w these next steps evolve in each jurisdiction will be shaped by the contextual constraints and facilitating factors, including any specific legal obstacles. The reformers in short need more than an intellectual plan, but also a strategy for moving i t ahead, and a set o f tactics for surmounting, circumventing, or postponing conflicts they foresee in their path.

4.46. Developing Better Change Management Strategies to Overcome Sources of Resistance and the Problem of Inter-temporal Continuity: The suggestions here depart from the research findings in that they are based on what was not observed - practices that apparently were not adopted, but which might have produced better results. Clearly efforts start with the recognition that both types o f obstacles exist, impede the progress o f the reforms, and thus need to be dealt with. In undertaking any reform, it i s always useful to start with as much information as possible - not only on the problems one wishes to resolve - but also o n their origins and the source o f resistance to their elimination. For al l the reasons discussed above, this is s t i l l more necessary in complex processes o f institutional change. A logical first step i s an assessment o f the current situation as regards the gaps between actual and desired levels o f performance. This is the init ial problem analysis which sets the output goals. Working back from those goals, one next identifies the characteristics o f actual operations impeding their realization, and only later the set o f steps needed to change them. Again the matrix i s reversed - one doesn’t begin by asking whether a financial administration law exists, but rather whether financial administration i s

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working adequately. Certainly, in some o f the cases reviewed, starting with the presence or absence o f a law, would lead to erroneous conclusions o n the rest.

4.47. The reform plan derived from this init ial analysis is, however, incomplete without a better understanding o f the forces supporting the current patterns o f operations, including formal and informal institutions, and their relationship to the broader political economic environment. The purpose here is to identify l ikely sources o f active and passive resistance as wel l as other types o f constraints (largely related to legal and resource barriers), to begin to consider ways the plan might be modified to deal with them, address issues o f sequencing and transitions, and to develop a change management strategy and tactics.

4.48. The term “change management” as currently used i s often taken to mean a process o f consensus building aimed at converting participants to reform supporters. This may indeed be part o f it, but far more i s involved. Some resistance is not going to be converted for the obvious reason that i t i s based on real losses. Thus a more political approach may be effective. Interest based resistance can also be addressed by building strategic alliances either across or within the systems targeted. These alliances may themselves require further modifications to the plan, either changing details not acceptable to the potential allies, or adding others to make adherence more attractive.

4.49. Passive resistance (inertia) may be more susceptible to conversion to the cause, but that method will not get far absent other changes to ensure actors can perform the new roles. Here more attention might f i rs t go to what they lack to effect the change and then to addressing those gaps with skills training, better explanations and instructions, and possibly more resources. Positive and negative incentives (and knowing they are monitored) would also help, but altering these, absent attention to the more mundane impediments to compliance, can be counterproductive. More important i s frequent feedback to check how things are going and to facilitate adjustments as required.

4.50. A change management strategy thus has many elements, and i t s own internal plan for sequencing o f both substantive and political-institutional elements, monitoring o f both kinds o f results, and identifying alternatives routes. While i t may be more practical to develop strategies for each o f the reform areas, some mechanism for coordination among them is also desirable. This can help prevent contradictions, utilize synergies, and be a means o f providing more impetus to the lagging areas. No matter how we l l thought out, the strategy requires political support, whether from the highest levels or from well-placed enclave reform agencies. Support is especially important for areas where the lead agency is ini t ial ly weak or adverse to the program. In these cases, intelligently applied external recommendations can be usefu l in convincing political leaders to turn more attention and resources to addressing that problem. External inducements can also help address the issue o f inter-temporal agreements, convincing new leaders o f the need to stay with the program. Reformers can also beat the odds by building strategic alliances.

4.51. The bottom l ine i s that beyond developing a technically sound sequence for introducing change, the reformers must also operate politically. They cannot assume that the logic and inherent goodness o f their aims wil l be sufficient to push their programs ahead. Furthermore, as

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the Argentine experience demonstrates, the areas where the reforms advanced most were those where political leaders also prioritized the changes. Unfortunately, while the present research revealed some potentially interesting examples o f how the politics o f reform have been managed, i t did not permit a further exploration o f the details. Revisiting a few o f the cases to investigate these points might be a useful means o f developing further lessons. The reform model, treated as a tool and not a recipe, with an appropriate inversion o f i t s sequencing, and the elimination o f any assumptions about automatic causal links i s a good place to start, but i t s successful application requires an equal attention to reform politics, and how to promote change.

4.52. Finally, i t must be recognized that the efforts o f the last decade have produced positive results. Important progress has been made both in i t s own right and as a base created for future advances. Those organizing the current reforms would thus do well to recognize this fact and to use the lessons derived from the past efforts to improve their own work. One o f the principal objectives o f the current study was in fact to foment this type o f dialogue among those interested in promoting reforms to further advance Argentina’s progress in these areas.

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ANNEX 1: RESEARCH METHODOLOGY

Because o f the novelty o f the approach used, some further explanation i s in order. This should also be useful for those with questions as to how the scoring system was developed. Conducting the IGR required the fol lowing steps:

Identifying and defining a “reform model” and summarizing i t s schematically as a sequenced package o f recommended organizational and legal changes in each o f five targeted administrative systems (financial management, control, procurement, human resources, and transparency), along with their anticipated effects on within-organization behavior (here called internal results) and o n overall performance (external outcomes). It should be noted that because the reforms were conceived o f as a package for each administrative system, there i s a certain amount o f overlap as regards the anticipated effects o f individual measures on internal behaviors and especially on outcomes.

Reviewing the application and effects o f the model at the national level and in each o f the provinces as defined by gaps at each stage o f the process: anticipated and actual level o f adoption o f the recommended measures; anticipated and real level o f changes in internal behavior; and predicted and actual level o f alterations in the quality o f outcomes.

Characterizing the interrelationship o f the three stages o f the process for each system, noting where the anticipated causal sequences held and where they did not.

Determining the extent to which the model “worked” and where i t did not, providing explanations for the deviations from the anticipated course o f events.

2

3

4

The first step is produced the accompanying analytic matrix. I t provided the framework for the rest o f the research. For each o f the five administrative systems, the recommended measures, anticipated changes in internal behaviors and predicted impacts on outputs are depicted schematically. This matrix was checked with local experts to ensure i t s conformity to actual practice and thinking.

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3 l-im i vi 4 6

Q 8

El E B

3

E

P

3

i 9 8 ru 0

b u $

3 I e u A

4 c)

3 4

To facilitate the collection and coding o f data, a 360-item checklist was also developed (see Annex 2 for examples), elaborating the specific characteristics or activities associated with each entry in the matrix. This was intended to help the research teams determine whether the specified events had occurred in the anticipated form and to add more consistency to their answers. The checklist thus permitted a more objective “measurement” o f the variables analyzed as wel l as their comparison across the twenty-five jurisdictions included (the federal government, the twenty-three provinces, and the Ci ty o f Buenos Aires). Argentina is a country characterized by considerable heterogeneity as regards the social, economic and political development o f its regions, al l o f which obviously affects public sector performance. Thus, especially in the provincial part o f the study, it was important to provide a means o f standardizing the responses.

Data collection and analysis were done by individual experts and teams o f consultants. See Annex 3 for the complete l ist. At the national level, one expert was assigned to each system. These experts were asked to fill out the relevant matrix and summarize the material in a report, drawing on their own knowledge, interviews, additional data collection, and available studies and documents. For the provincial studies, seven universities were contracted, and each o f the teams was asked to undertake the same exercise for several provinces.’O’ Given the lesser amount o f available studies on the provincial situation, the provincial teams had to rely much more on f ield work and guidance provided in the questionnaire. In general, the work proceeded as follows:

1. In assessing the level o f formal implementation o f the recommended measures, the researchers relied o n the legally recorded acts (laws, decrees, and resolutions) through which the measures were adopted, supplemented by government reports, and where available other published materials.

2. The researchers also evaluated the extent to which the legally adopted measures complied with the spirit o f the reform paradigm (Le. their consistency with the additional details provided in the questionnaire). Gaps and contradictions in the formal rules were identified which, in themselves, might suggest early efforts to undercut the reforms’ impact. Here the experts’ own observations were again supplemented with analysis found in published documents, government reports, and interviews.

3. In assessing the extent to which the predicted changes in internal processes and external impacts occurred, the researchers drew from a series o f sources: off icial reports; information available in public sector records and web pages; statistical series; and interviews with those presently or formerly responsible for the systems. Again works by other authors, experts or analysts supplemented their own observations, and the checklist served as a means o f standardizing the assessments.

4. In their preliminary explanatory analyses o f the trajectory o f change in each area, the researchers were expected to focus primarily o n points o f breakdown in the model - areas where the predicted causal chain stopped and the actions o f commission or omission

lo’ The universities and the provinces covered by each were: Universidad Catolica de Cordoba (Cordoba, Catamarca, La Pampa, and Santiago del Estero); Universidad de San Andrts (Buenos Aires Province and the City o f Buenos Aires), Universidad Nacional del Litoral (Santa Fe, Entre Rios, Chaco, Corrientes, Formosa, and Misiones); Universidad Nacional de T u c u d n (Tucumin, Jujuy, and Salta); Universidad Nacional de Cuyo (Mendoza, L a Rioja, San Juan, and San Luis); Universidad Nacional del Comahue (NeuquBn and Rio Negro) and Universidad Nacional de la Patagonia San Juan Bosco (Chubut, Santa Cruz, and Tierra del Fuego).

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appearing to account for this. However, they also began to introduce a broader number o f contextual factors as a means o f explaining these breakdowns: timing and sequencing o f events; the identity o f within government groups promoting the changes and the effects o f their own perspectives and interests; and the role o f active (interest-based opposition) and passive (based on inadequate resources, other capacity-based limitations, conflicts with established practices or with more urgent priorities) constraints to the model’s successful implantation. These additional explanations would become the focus o f the second and third stages o f the research.

The result o f this f i rst stage o f the exercise i s a descriptive overview o f the actual process o f reforms in the f ive administrative systems within the national executive, twenty-three provinces and the Ci ty o f Buenos Aires. Gross0 modo it combines three levels o f analysis -what was adopted, what changed or did not change, and what accounts for any deviations from the model’s anticipated trajectory. As regards the national executive, the findings build on commentaries and analysis already circulating prior to the IGR, but for the first time consolidate the treatments o f the individual subsystems and place them within the context o f a single reform paradigm. For the provinces, the material is largely new, especially as regards the non-financial aspects o f the reforms introduced and their impacts on administrative performance. However, in recognition o f the necessary superficiality o f some o f the analysis and in the interests o f promoting critical discussion o f the findings, two further stages were added.

In the second stage, the experts working at the national level were asked to deepen the analysis, focusing on two subsystems (financial management and procurement). Further work was as follows:

1.

2.

3.

4.

Collection o f additional empirical information and, where possible, statistics on the workings o f the procurement system, especially as regards the anticipated internal changes (e.g. increased use o f competitive bidding) and impacts (increase in vendors offering services, decrease in prices paid), and i t s interaction with the transparency system vis-&-vis the adoption o f more transparent procedures and mechanisms to facilitate external monitoring.

Further analysis o f the structure and composition o f the central procurement offices, and procurement bodies in some ministries, as wel l as the interactions between the two levels.

Analysis o f the relationship between the procurement system and the financial, human resources, and control systems as regards the impact o n the former o f changes adopted (or not) in the latter.

Further analysis o f two trends affecting financial management identified in the f i rst stage exercise: the l imited development o f mechanisms to evaluate the quality o f expenditures and the tendency to exclude certain executive agencies (e.g. fiduciary funds and public, non-state entities) from the integrated financial management systems. Although both were first detected in the financial management system, the analysis also included attention to their impact on and interaction with principles adopted within the other four systems.

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5. A more in-depth analysis o f the contextual and political factors providing the impetus for or the constraints on the model's evolution, with particular emphasis on financial management, procurement, and transparency.

In the case o f the provinces, the second stage was handled somewhat differently. Six provinces were selected for more in-depth analysis o f developments in al l five administrative systems, and an abbreviated form o f the matrix was used to guide the work. Design o f the condensed matrix was based on the results o f the f i rst stage o f work, leading to the selection o f items appearing most critical and those where data appeared most complete and reliable.'02 On the basis o f the init ial reports and some additional field work, the teams were also asked to focus more specifically o n the socio-economic, political, and institutional factors influencing the decisions to undertake reforms and their fbrther implementation.

Using this additional information and analysis, a final set o f reports reviewed the reform process as a package, adding to the previous system-by-system treatments: a consideration o f the interactions among the five subsets o f reform measures; the identification o f common constraints and facilitating conditions affecting progress in al l o f them; an assessment o f alternative routes; sequencing (including those achieving some desired impacts outside the reform paradigm); and some final recommendations as to fbture steps to be taken. Among the latter, it was noted that despite the logic o f beginning with financial management, improvements in that area wil l be truncated absent eventual attention to the others; that legal and structural change cannot get far without greater attention to and more detailed monitoring o f internal responses; and that while deviations from the reform model are generally the result o f political and bureaucratic interests, they are usually successful in improving outcomes only in very special circumstances @re- existing centralized control, a small jurisdiction).

I t was also noted that although actors' efforts to avoid the rules (sometimes recognized formally as selective exemptions) can have questionable motives, they are also a s ign o f the latter's counterproductive application. When as one interviewee noted, i t requires as much effort to purchase a water dispenser as it does for a new software system, those wanting to get something done may opt for expediency. Admittedly, as the research was done in the aftermath o f the economic crisis, and sti l l under the impact o f hiring freezes and unpredictable budget disbursements, some o f the irregularities identified (especially in procurement and human resources) reached high levels for those reasons. However, they are also indicative o f a certain excessive rigidity in the new rules, and thus lead to recommendations that this problem be addressed as well.

In the third andfinal stage, the findings and explanations were reviewed by three additional local experts and their comments were used to modify the final reports. The latter were then validated through individual interviews with experts or those (formerly or presently) responsible for the systems and in workshops in Buenos Aires and two provinces, with officials from al l branches o f government, academics, and c iv i l society groups. As noted, although the workshops were

I t should b e noted that even the in i t ia l matr ix was designed with the second criterion in mind. Especially in the l i s t s o f internal changes and external outcomes, items were selected on the basis o f their susceptibility t o objective evaluation. A more complete matrix would and should include more outcomes and more internal changes.

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intended as the last step in a participatory IGR, the participants’ interest in having access to more details and a written report led to the CMU request to produce this as well.

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ANNEX 2: THE GUIDE TO DATA COLLECTION

A s noted above, f ield research at the federal level was done by individual experts, while data collection and analysis for the provinces relied on six teams o f members of local universities. To ensure more consistency in the ranking o f systems, internal changes, and outcomes, al l the researchers were provided with a 360-question guide outlining the criteria to be applied in making their evaluations. Below a few sample questions are provided to demonstrate how the system worked. The entire guide, s t i l l in Spanish, i s on f i le in the Wor ld Bank.

Guide to Provincial-Level Research

I 1- Financial Administration I Normative and Technical Administration

1. Identify articles o f the provincial constitutions related to the following: Budget Process

0 Budget Time-line 0 Congress’ role in the budgetary process 0 Fiscal Discipline 0 Limits regarding Public Debt

2. legislative changes and, if possible, in electronic format):

Where available, obtain the fol lowing provincial laws (updated according to the latest

0 Financial Administration or Accounting Law 0 Fiscal Responsibility/Discipline Law 0 Framework Public Budget Law (Ley Permanente de Presupuesto Priblico) 0 Budget L a w currently in-force

3. budgetary systems and detail the following points:

Provide a time-line for recent normative changes in the financial administration and

3.1 Does an Integrated Financial Administration System exist that takes into account the Budgetary, Treasury, Accounting and Public Debt systems? If so, what year was i t implemented and how developed i s it?

3.2 If an Integrated Financial Administration System exists, does it incorporate procurement, assets and human resources management as well as the internal and external control system? Elaborate.

Budget Formulation

4. the macroeconomic assumptions underlying the budget?

I s there a mechanism or procedure for discussion, inside and outside the public sector, o f

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5. a new budget?

Does the Executive publish the macroeconomic assumptions that i t uses when designing

6. that is, is i t abased on historical distributions?

I s the allocation o f the budget based o n government’s priorities or is i t basically static --

7. Does the budget law cover al l the organizations in the public sector?

Approval o f the Budget

8. executive provide adequate information to the Parliament and public about these changes?

Where there were substantial changes to the budget during i t s execution, does the

9. participate effectively in the budget approval process?

D o the legislators on the budget commission have the technical capacity and tools to

10. discussion o f the contents?

Does the calendar for the approval o f the budget grant sufficient time for analysis and

11. proposal?

In what way has the legislature used its powers to substantially modify the executive

12. I s the process o f formulating and approving the budgets done within the legal deadlines?

Implementation o f the Budget

13. budget’s implementation?

D o mechanisms or instruments exist that allow parliament and the public to monitor the

14. I s the disbursement o f public funds to executing agencies linked to a financial plan?

15. the budget’s implementation with sufficient disaggregation?

Does the budget office / public expenditure committee periodically publish the state o f

16. in the implementation o f the budget’s?

Does the budget office / public expenditure committee periodically publish the advances

17. the level and composition o f public debt?

Does the budget office/ public expenditure committee regularly publish information on

Results o f the Financial Administration System

18. Identify and quantify, where possible, tax exemptions and extra-budgetary operations.

19. I s there a mechanism for periodic review o f accounts and performance evaluation?

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20. Do mechanisms exist which provide transparency on the use o f public funds? -- e.g. internet publication o f the budget law with al l the schedules annexed, website for the implementation o f the budget.

Tota l Income Implemented Budget

Absolute Difference

Relative Difference

21. for the 1995-2003 period:

Use the table below to identify gaps between real and approved expenditures and income

Tota l Expenditures Financial Result

I 2 - Control I Normative and Technical Framework

22. entities:

0

General Accounting Off ice

If they exist, identify articles in the provincial constitution creating the fol lowing control

Tribunal o f Accounts (or General Audit Agency or Provincial Executive Control Agency)

Inspector General’s Off ice (Fiscal del Estado) Legal Advisor (Asesoria General de Gobierno)

23. changes):

0

Inspector General’s Organic Law 0 Legal Advisor’s Organic L a w

Where applicable, obtain the fol lowing provincial laws (updated with the latest legislative

Accounting or Financial Administration Law Tribunal o f Account’s Organic Law

24. Where applicable, obtain the fol lowing (or similar) regulations: L a w on legal and financial control by the Tribunal o f Accounts, or similar entity. If an external auditing agency exists in the province, obtain external auditing manuals. In the case that a provincial executive control agency exists, obtain internal control norms. Internal by-laws o f the Tribunal o f Accounts, or similar entity. If the General Accounting Office, the Inspector General and/or the Legal exercise ex-ante control over administrative actions, obtain regulatory norms or control regulations.

0

0

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Analvtical Framework for the Analysis o f Provincial Control Systems

25. f rom 1992 onwards.

Provide a time line for legal or constitutional changes to the provincial control systems

26. If ex-ante controls for administrative acts existed before 1992 for the Tribunal o f Accounts, Provincial General Accounting Office, the Inspector General and/or the General Government Adviser’s Office then:

0 Determine whether those controls continue, have diminished, been eliminated and replaced by ex-post controls, or if they have increased. Reference the respective laws or regulations. If ex-ante external controls have diminished or been eliminated, has this resulted in greater responsibility for heads o f sector agencies? D o heads o f sector agencies demonstrate greater or lesser automatic compliance? Has the use o f ex-post audits with random samples been adopted?

0

0

0

27. Has the coverage o f the control system broadened to al l the state entities (decentralized organisms, companies, autarkic bodies, inter-jurisdictional bodies) and parastatals (social works, non-state public entities, fiduciary funds, executing units, agencies with external financing, foundations created by the state)? Have exemptions disappeared or has coverage diminished or not been extended to newly created entities?

28. In this case, has the number o f fiscal reports increased-whatever their modality? --e.g. Accounting reports, audits, evaluations o f internal controls, as wel l as, depending o n the case, recommendations for improvement.

29. Has the use o f management and results audits increased? If so:

0 Identify the Tribunal o f Account’s (or Audit’s) constitutional or legal power to realize audits o f effective practices or competencies. Determine if those management controls involve a public pol icy and budgetary process that prioritizes objectives and defines results.

30. Where the province has approved a financial administration (or a similar) law: Have internal control systems been created which are linked to the IFMS? Have technical norms been created or systems o f integrated control developed?

0 I s there a governing organization in charge o f setting the principles and criteria for internal control linked with IFMS? What i s the level o f development and implementation o f the new principles and criteria for internal control?

0

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3 1. and IFMS exist:

Where internal concomitant controls, or ex-ante controls integrated into the management

What is the role o f the General Accounting Office, Tribunal o f Accounts, General Auditing, Executive Control Agencies, Internal Auditing Units (depending on the case) in evaluating their reliability? Has ex-ante external control been replaced by ex-post external control? H o w has this affected the actions o f the General Accounting Office, Tribunal o f Accounts or Inspector General, the Internal Auditing Units, Tribunal o f Accounts or General Accounting Office. If these changes have occurred, are the ex-post controls (audits, juicios de cuentas’”) exercised in real time (Le. is there time between the occurrence o f the acts and the time the audit reports are emitted)? Are there fewer redundant controls? Have the times for management and financial administration processes diminished as a

consequence o f the elimination o f redundant controls, or increased? Do the control entities get a response from the audited entities in the form o f improved administrative and management practices?

0

0

0

0

0

0

32. Have the external Supreme Audit Institutions (Tribunal de Cuentas, Auditoria) strengthened their organization and political independence from the Executive? Indicate where vested interests influenced the constitutional or legal reforms in the 1990s to strengthen or weaken the independence o f external Supreme Audit Institutions. If they have adopted the audit model, evaluate the influence o f political criteria on the technical content o f the control processes exercised.

33. Are the audit reports, reconciliation o f accounts (juicios de cuentas), or reports o f special investigations done by the external control agency published o n the internet? If so, is this done immediately?

34. Have Internal Auditing Units been created? If so:

0

0

0

Has this been done for a l l agencies? Have the profiles for the Internal Auditor been established? What is the selection and tenure system?

35. What is the percentage o f professionalshon-professionals in the Tribunal o f Accounts, General Accounting Office or External Control Agency? What are the percentages o f the fol lowing specialties: economics, law, engineering, architecture, medicine, social sciences? I s

Thejuicio de cuentas i s the traditional form o f ex-post control, involving an integrated financial and legal audit o f monies managed by an office head or other individual public official. This might be done annually or when the official leaves his or her post. Because it was conducted by the semi-judicial Tribunal de Cuentas, this body could also determine and impose sanctions where irregularities were found. Here it i s translated as reconciliation o f accounts, but there i s no real equivalent in English.

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there any tendency toward multidisciplinary professionalization o f personnel in the Supreme Audit Institutions?

36. Identify the changes over the past decade in the rules for determining patrimonial, administrative, political and criminal responsibilities o f public functionaries. Identify changes in the disciplinary system and in the criminal code and, specifically, in that related to thejuic io de cuentus. What impact do the changes to the accounting laws or the adoption o f a FAL have on the disciplinary regime or the criminal code?

37. Are the results from the juicios de cuentus, disciplinary investigations, special investigations, and audits exchanged among the Supreme Audit Agencies themselves and between them and the Legislative and Executive branches? Has their number increased or decreased? Are there more or fewer administrative or criminal sanctions for those functionaries found responsible? Determine the efficiency and efficacy and the processing times given the demand for transparency.

38. Have the control organs or the control paradigm promoted by the FAL been adopted? If so, describe them and obtain additional background information. Evaluate in which ways the change models have improved any o f the following:

Financial control Legality o f acts

0

Public opinion on transparency Efficiency and effectiveness o f management and administrative processes

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ANNEX 3: LIST OF PARTICIPANTS IN FIELD RESEARCH

Consultants

Gerard0 Ufia Marcel0 Barg Gisell Cogliandro Juan Sanminetti

Consultants

Area

General Coordination General Coordination Assisted in Coordination Federal Level Financial Administration

I Federal Level Control U Nacional de San Martin - Master in Public Sector Control

I

Mario Rejtman Farah I Federal Level Procurement and Transparency

I Alejandro Rodriguez I Federal Level Human Resources System I Provinces -- University Research Teams

Region

City o f Buenos Aires, Province o f Buenos Aires

Cbrdoba, Santiago del Estero, Catamarca, L a Pampa

Mendoza, San Juan, San Luis, L a Rioja

Corrientes, Misiones, Chaco, Formosa, Santa Fe y Entre Rios

University

U. de San A n d r t s - Masters Program in Administration and Public Policy

U. Catdica de Cbrdoba - Faculty of Political Science and International Relations

U. Nacional de Cuyo - Faculty o f Social Sciences

U. Nacional del Litoral - Masters Program in Public Administration

Research Team Carlos H. Acuiia Antonio Camou DCborah Diet1 Jimena Rubio Maria Cecilia Peluffo Mario Riorda Sofia Conrero Alejandra Ruiz Diana Tuma Lucas Ultrera Silvia Cabrera Gabriela Mattausch Paola Ninci Hemhn Perin Francisco Leiva Lorena Vifiuela

Miguel Angel Asensio Jose Carlos Farias

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Region

Oscar Oszlak

Salta, Jujuy, Tucuman

Level I1 National Reports

Neuqudn, Rio Negro

Chubut, Santa Cruz, Tierra del Fuego

University

U. Nacional de Tucuman - Faculty o f Economics

U. Nacional de Comahue - Faculty o f Economics

U.Naciona1 de la Patagonia San Juan Bosco - Faculty o f Economics

Roberto Martinez Nogueira

Internal Reviewers

Research Team Cristina Mirabella Lidia Rosa Elias Liliana Alicia Macian Adela Josefina Cosentini Franco Eugenio Nanni Oscar Alberto Dip Maria Alejandra Bidondo Graciela Landriscini Maria Elisa Fiorito Elda Martinez Carina Opazo Mabel Alvarez Eduardo Abraham Alejandro Bustos Carla A.Giambelluca

Areas

Level I1 Provincial Reports

I Marcos M a k h Level I1 Reports on Financial Administration and I Procurement I

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REFERENCES

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Acuiia, Carlos H. (2001), “Problemas politico-institucionales que obstaculizan mejores politicas publicas en la Argentina de hoy,” Reforma y Democracia (Caracas, Venezuela), CLAD, 19, February.

(2000), “Tensiones de la estructura gubernamental Argentina,” Escenarios Alternativos, Buenos Aires, 4 (8), pp. 95-102.

Alvarez, Gladis S. and Elena I. Highton (2000), “Resolucion alternativa de conflictos estado actual en el panorama latinoamericano,”California Western International Law Journal, 30 (2), pp. 409-428.

Amado, Jorge (2005), “Los PrCstamos de 10s Organismos Multilaterales para las Reformas de 10s Estados Provinciales: una Evaluation Politico- Institucional del cas0 Provincias I”. Revista de la Asociacidn Argentina de Presupuesto y Administracidn Financiera Ptiblica; ASAP. No 39. Buenos Aires, August, pp. 9-47.

Alesina Albert0 y Roberto Perotti (1 996), “Budget Deficits and Budget Institutions”. National Bureau o f Economic Research, NBER .Working Paper Series No 5556.

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(2004~) “Informe sobre Transparencia N i v e l I,” Buenos Aires, April.

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Uiia, Gerard0 y Cogliandro, Gisell (2004) “Anhlisis comparativo del Nivel Provincial. Un estudio de casos de las provincias de: Buenos Aires, Cbrdoba, La Pampa, Salta, Santa Fe y Tucumhn”. Buenos Aires, July.

Universidad Nacional San Martin (2004a) “Practicas Institucionales de Control del Sistema Compras y Contrataciones, Fondos Fiduciarios y la Evaluaci6n de la Calidad del Gasto Publico”, Buenos Aires, June.

(2004b) “Informe Preliminar sobre Sistemas de Control a Nivel Federal I” Buenos Aires, April.

Universidad Cat6lica de C6rdoba (2004a) “Informe Final Nivel I - Provincias”, Facultad de Ciencia Politica y Relaciones Internacionales, Cbrdoba, July.

(2004b) “Esquema de Anhlisis Nivel I1 Provincia de C6rdobaY’, Facultad de Ciencia Politica y Relaciones Internacionales, Cbrdoba, June.

(2004~) “Esquema de Anhlisis Nivel I1 Provincia de L a Pampa”. Facultad de Ciencia Politica y Relaciones Internacionales, Cdrdoba, June.

(2004d) “ Infonne de la Provincia de C6rdobaYy, Facultad de Ciencia Politica y Relaciones Internacionales. Cdrdoba, April 2004.

(2004e) “Infonne sobre la Provincia de Catamarca” Facultad de Ciencia Politica y Relaciones Internacionales. Cbrdoba, April 2004.

(20040 “Informe sobre la Provincia de La Pampa” Facultad de Ciencia Politica y Relaciones Internacionales. Cbrdoba, April 2004.

(2004g) “Informe sobre la Provincia de Santiago del Estero” Facultad de Ciencia Politica y Relaciones Internacionales. Cbrdoba, April 2004.

Universidad de San A n d r k s (2004a) “Matriz Analitica Nivel I1 Provincia de Buenos Aires”, Maestria en Administracih y Politicas Phblicas. Buenos Aires June 2004.

(2004b) “Informe sobre Ciudad de Buenos Aires” Maestria en Administracibn y Politicas Publicas. Buenos Aires, April.

(2004~) “Infonne sobre Provincia de Buenos Aires” Maestria en Administracih y Politicas Phblicas. Buenos Aires, April.

Universidad Nacional de Comahue (2004a) “Informe sobre la Provincia de Neuqukn”, Facultad de Ciencias Econ6micas. Neuqukn, April 2004.

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Universidad Nacional de Cuyo (2004a) “Informe sobre la Provincia de La Rioja”, Facultad de Ciencias Politicas y Sociales. Mendoza, April 2004.

(2004b) “Informe sobre la Provincia de Mendoza” Facultad de Ciencias Politicas y Sociales. Mendoza, April 2004.

(2004~) “Informe sobre la Provincia de San Juan” Facultad de Ciencias Politicas y Sociales. Mendoza, April 2004.

(2004d) “Informe sobre la Provincia de San Luis” Facultad de Ciencias Politicas y Sociales. Mendoza, April 2004.

Universidad Nacional del Litoral (2004a) “Informe Analitico sobre Aspectos Institucionales y de Gobemancia. Provincia de Santa Fe”. Maestria en Administracion Publica. Santa Fe, June 2004.

(2004b) “Informe sobre Aspectos Institucionales y de Gobernancia Provincia de Chaco” Maestfia en Administracion Publica. Santa Fe, April 2004.

(2004~) “Informe sobre Aspectos Institucionales y de Gobernancia Provincia de Corrientes” Maestria en Administracion P~blica. Santa Fe, April 2004. .

(2004d) “Informe sobre Aspectos Institucionales y de Gobernancia Provincia de Entre Rios” Maestria en Administracion Publica. Santa Fe, April 2004.

(2004e) “Informe sobre Aspectos Institucionales y de Gobemancia Provincia de Formosa” Maestria en Administracion Publica. Santa Fe, April 2004.

(20040 “ Informe sobre Aspectos Institucionales y de Gobernancia Provincia de Misiones” Maestria en Administracion Publica. Santa Fe, April 2004.

(2004g) “Informe sobre Aspectos Institucionales y de Gobemancia Provincia de Santa Fe Nivel I” Maestria en Administracion Publica. Santa Fe, April 2004.

Universidad Nacional de Tucumhn (2004a) “Informe Nivel I1 Provincia de Salta,” Facultad de Ciencias Economicas. Tucumhn June 2004.

(2004b) “Informe Nivel I1 Provincia de Tucuman,” Facultad de Ciencias Economicas. Tucumhn June 2004.

(2004~) “Informe Nivel I Provincia de Jujuy,” Facultad de Ciencias Economicas. Tucumhn April 2004.

(2004d) “Informe Nivel I Provincia de Salta,” Facultad de Ciencias Economicas. Tucumhn April 2004.

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(2004e) “Informe Nivel I Provincia de Tucumh,” Facultad de Ciencias Econ6micas. Tucumh April 2004.

Universidad Nacional de la Patagonia San Juan Bosco (2004a) “Informe sobre la Provincia de Chubut Nivel 11,” Facultad de Ciencias Econ6micas. Chubut, June 2004.

(2004b) “Infonne sobre la Provincia de Chubut Nivel I,” Facultad de Ciencias Econ6micas. Chubut, April 2004.

(2004~) “Informe sobre la Provincia de Santa Cruz Nivel I,” Facultad de Ciencias Econ6micas. Chubut, April 2004.

(2004d) “Infonne sobre la Provincia de’Tierra del Fuego Nivel I,” Facultad de Ciencias Econ6micas. Chubut, April 2004.

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