Report No. 32851-UY 32851 Oriental Republic of Uruguay Country Financial Accountability Assessment June 29, 2005 Country Management Unit Argentina, Chile, Paraguay, Uruguay Regional Operations Department 1 Financial Management, Operations Support Unit State and Civil Society Programs Latin America and Caribbean Region Division 1 (RE1/SC1) The World Bank Inter-American Development Bank Document of the World Bank and the Inter-American Development Bank TABLEOFCONTENTS PREFACE....................................................................................................................................................... i ACKNOWLEDGEMENTS .......................................................................................................................... .. 11 EXECUTIVE SUMMARY ......................................................................................................................... ... 111 1 . BACKGROUNDAND COUNTRY CONTEXT ............................................................................... 1 A. ECONOMICRECESSION1999-2002................... ........................................................................... 1 B. ECONOMICPOLICY ............................................................................................................................ 1 C. MEDIUM-TERMDEVELOPMENT CHALLENGES ................................................................................... D. RELEVANCEOFCFAATOTHECOUNTRYCONTEXTAND DEVELOPMENT CHALLENGES ...................22 2 2. 1. Prioritization of ResourceAllocation........................................................................................... Reforming Public Institutions and Strengthening Governance.................................................... 3 3. Debt Management Systems........................................................................................................... 3 4. EfSiciency of Public Expenditure.................................................................................................. 3 D. ............................................................................................................. 3 5.OBJECTlVESAND APPROACH Objective...................................................................................................................................... 3 6. 4 E. Scope of Coverage........................................................................................................................ .METHODOLOGY ................................................................................................................................. Data Collection............................................................................................................................ 5 5 8. 7 Questionnaires ............................................................................................................................. 5 9. 10. Interviews..................................................................................................................................... 5 5 I1. Analysis and Recommendations.............................................................................................. Consultation with other Donors.............................................................................................. 6 12. 6 13. Dissemination of the Findings................................................................................................. Government's response........................................................................................................... 6 2. CFAA ANALYSISAND RECOMMENDATIONS .......................................................................... 7 A.14THEFINANCIALACCOUNTABILITY FRAMEWORK .............................................................................. 7 . Legal Framework .................................................................................................................... 7 7 B.15. Organic Structure.................................................................................................................... NATIONALGOVERNMENT FINANCIAL MANAGEMENT INF~RMAT~~N SYSTEM .................................. 9 16. SllF Components................................................................................................................... 10 11 C.17. SIIF Coverage....................................................................................................................... BUDGET ........................................................................................................................................... 12 19. 18. Fiscal Transparency: Budget Classification. Comprehensivenessand Realism...................12 13 20. Budget Formulation .............................................................................................................. Per3eormance Indicators And Spending EfSiciency................................................................. 16 18 22. 21. Budget Execution. Monitoring and Reporting ....................................................................... 19 23. Budget Monitoring ................................................................................................................ CashManagement................................................................................................................. 24. Reporting ............................................................................................................................... 22 21 D. ACCOUNTINGAND FINANCIAL REPORT~G ...................................................................................... 23 25. Accounting Standards............................................................................................................ 23 24 .26. Treasury Management........................................................................................................... E INTERNALANDAUDITINGSYSTEMS ...................................................... 25 27. Internal Control...................................................................................................................... ANDEXTERNAL CONTROL 25 26 29. 28. External Control.................................................................................................................... Internal Audit OfSice (IAO) ................................................................................................... 27 F. DEBTMANAGEMENT ....................................................................................................................... 29 G. LEGISLATIVEOVERSIGHT OFBUDGET ............................................................................................. 30 30. Budget Approval.................................................................................................................... 30 Uruguay Country FinancialAccountability Assessment H.31. Oversight of Budget Execution.............................................................................................. 31 HUMAN RESOURCES PUBLIC FINANCIAL MANAGEMENT FOR .......................................................... 32 3. COUNTRY FIDUCIARY RISK ASSESSMENT ........................................................................... 34 4. PRINCIPALCONCLUSIONS.RECOMMENDATIONSAND ACTION PLAN ...................... 37 ANNEX 1 .REFERENCES....................................................................................................................... 43 ANNEX 2 .INTERVIEWS........................................................................................................................ 45 Urumay Country Financial Accountability Assessment i PREFACE 0 The first draft of this report was presentedto the Uruguayan Government on December 2003, resulting from field work executedduring the year 2003. 0 Discussions and comments from the previous Government resulted into a new draft in Spanishprepared inJune 2004. 0 This second draft was presented to the new Government appointed inMarch 2005 and authorization to disclose was given after a concluding mission inJune 2005. 0 The final version of the document does not present substantial changes from the original draft from December 2003. It should also be notedthat it remains based upon field work executed in 2003. 0 Furtherdevelopments were notedinthe area of budget preparation. These progresseswere presentedinWorld Bank reports preparedsubsequently, notably inthe Sourcesof Growth Report from June 2005 (No. 31737-UY). Uruguay Country FinancialAccountability Assessment 11 ACKNOWLEDGEMENTS This Country Financial Accountability Assessment (CFAA) report was prepared by a team led by Lynnette Asselin (Senior Financial Management Specialist, IDB) and Patricia M c Kenzie (Senior Financial Management Specialist and Co-Task Manager, WB), and included Eduardo Zapico (Senior Financial Management Specialist, WB), Ximena Morey (Country CoordinatorEconomist-Uruguay, IDB), Carmen Palladino (Consultant), Silvia Biglino (Asst. Director- Administrative Policy, Court o f Accounts- Spain), Isaac Umansky (Consultant). Luis A. Zunini (Accountant General, MEF) coordinated the CFAA on behalf o f the Government of Uruguay. Orlando Hernandez (Financial Management Specialist, IDB) and Alfred0 Echegaray (Sectoral Specialist, JDB) provided field support. Suzanne Snell (Consultant) provided advice on presentation and editing. Gilma Unda (Sr. Program Assistant; WB), Pilar Yelcie (Program Assistant, IDB) andMarianella Rivadeneiraprovided administrative assistance. Peer Reviewers are Paul Sisk (Senior Financial Management Specialist, WB), Pablo Alonso (Senior Specialist Modernization of the State, IDB), and IDB's Management Review Committee. The Team also appreciates the extensive collaboration provided by Jamil Sopher (Adviser, WB), Felipe Saez (Lead Country Officer, WB), Paul Levy (Lead Economist and Sector Leader, WB), Daniel Oks (Lead Economist- Uruguay, WB), Luisa Masutti (Senior Country Officer, WB), Veronica Salatino (Country Officer, WB) and Juan Ortiz (Senior Financial Sector Specialist, WB), Gisu Modhadjer, LAC Quality Enhancement andIDBManagement Review Team. Uruguay Countrv Financial Accountability Assessment ... 111 EXECUTIVESUMMARY During the 1990s Uruguay made considerable progress in achieving macroeconomic stability, however the reforms implemented were not sufficient to insulate the financial system and the economy from regional contagion. Since 1999 the economy began a recessionary phase as a result of domestic and external factors but was particularly affected by the Argentinean financial crisis in 2002. GDP declined b y 17.5 percent during this period, the public sector deficit fluctuated at about 4 percent of GDP and public sector debt increased from 34 percent of GDP in 1998 to 92 percent in 2002. However, the short-term outlook for Uruguay has improved significantly, thanks to the successful voluntary debt exchange in May of 2003, which allowed the government to postpone payments on its financial obligations, and to the encouraging early signs that the recession has bottomed out. GDP in the first semester contracted by 6.8 percent year on year but in seasonally adjusted terms grew by 2.2 percent in the first quarter and 3.3 percent in the second quarter (quarter on quarter). Nevertheless, it is expected that GDP will contract in 2003, by about 1percent as exports grow only moderately and demand remains depressed. Uruguay i s an upper-middle income country with social indicators among the best in Latin America. Its highly urbanized and aging population (13 percent of the population i s 65 years of age and older) has the highest adult literacy rate in the region and the lowest percentage of households below the poverty line. The accounting profession i s well developed and the country possessesa cadre of qualified and experienced professionals in both the public and private sectors. State-owned enterprises occupy a dominant position in the economy; most of the essential services (water, electricity, gasoline) are provided by public sector entities. More than 85 percent of total public expenditure is fixed (public sector wages and salaries, social security benefits, debt service and other contractual arrangements), reducing the scope for discretionary spending. The overarching goal of the CFAA is to contribute to strengthening Uruguay's financial administration by identifying weaknesses and recommending remedial action in areas where current systems contribute to poor public management. Summary of Observations: The principal findings o f this CFAA are: 0 The institutional arrangements governing the operation of the General Accounting Office are adequate to ensure that it can discharge the role of rector of the accounting systems, and it has taken an important step forward towards alignment with the InternationalPublic Sector Accounting Standards. Uruguav Country FinancialAccountability Assessment iv Although the Integrated Financial Information System i s fully operational in some of its modules, the lack of the accounting and budget evaluation modules i s impeding good financial administration. Internal Control and External Audit exercised in Uruguay i s focused on legality and compliance and does not provide assurance on effectiveness and efficiency o f operations nor reliability of financial reporting. There are overlaps in duties performed by the Internal Audit Office, the Delegated Accountants, the Court of Accounts, and the General Accounting Office which reduce the efficiency of these control functions. In addition, internal audit units, which are envisaged in the Organic Structure, have not been developed. Implementation of the Single Treasury Account has facilitated an important reduction in idle funds and has provided a mechanism for increased efficiency in the payments to suppliers and other beneficiaries. Unfortunately, inpractice, some of this efficiency i s currently being lost due to serious cash-flow constraints. In the case of the decentralized agencies, there is a delay between the submission of the budget and the approval by the Executive Branch and the Court of Accounts. Since agencies must operate on the previous year's budget, this delay reduces the flexibility of entities to plan and implement their objectives. The legal and regulatory framework for contracting debt i s adequate and clarifies the authority to borrow and to issue debt, invest and undertake transactions on the Government's behalf. Due to the lack o f an interface between the database where the Government's debt obligations are recorded and the Integrated Financial Information System, the real-time information needs of the Ministry of Economy and Finance, the primarydecision-making unit for debt management, are not met. Contingent liabilities (potential financial claims against the Government) are not recorded or tracked in any of the government systems. There i s ample legislation that allows the members of the Parliament to request information from the administration; however, there i s a lack of institutional capacity for oversight o f public financial administration and insufficient access to technical expertise. Uruguay Country Financial Accountability Assessment V Fiduciary Risk Assessment In view of the accountability arrangements and practices, which the CFAA team observed, the CFAA concludes that fiduciary risk in Uruguay (the risk that donor and public funds will be used for unauthorized purposes or that unauthorized uses will go undetected) is low. Public financial management continues to be transparent, but bureaucratic. The principal observed strengths in public financial management are:- a. The existing legal accountability framework embodied in the TOCAF legal framework i s adequate because: (i) it makes the use of SIIF obligatory for all Central Administration entities; (ii)it clearly divides the roles of the Executive and Legislative Branches in terms of financial administration; and (iii) isamandatefortheadoptionofinternationallyacceptedaccounting there standards for the public sector. b. The national budget revenue and expenditure classification is complete and systematic. C. Budget execution i s carried out in a much decentralized manner. d. Important advances have been made in direct capturing of revenue collected by the banking system. e. The GAO has implemented strong internal controls over financial administration through the Central Accountants and implementation of SIIF. f. The legalframework for contractingdebt is adequate. g. Every year, the Budget and Accounting Report i s submitted for consideration by the Legislature. Once the report is approved, it is available without restriction to the general public. The principal observed weaknesses inpublic financial management are:- a. Given the government's current economic problems (scarcity of resources and cash flow limitations), the bulk of budget decisions are directed toward financial discipline, but there is inadequate consideration of the long-term consequences o f these decisions on program goals and objectives. b. Budget allocations do not agree with the five-year planning horizon because of constant economic changes. C. National Budget coverage of fiscal activity excludes public entities performing noncommercial activities, even though they are financed by grants and earmarked taxes. Uruguay Country Financial Accountability Assessment vi d. Financial reporting i s based on fund accounting and is limitedmainly to cash flow reporting. It does not include a comprehensive list of assets (financial and physical), liabilities (accrued, contingent and direct) and capital. e. Overlaps in duties performed by the Internal Audit Office, the Delegated Accountants, the Court of Accounts, and the General Accounting Office and ex-ante controls performed by the Court o f Accounts reduce the efficiency of these control functions and increase bureaucracy. f. Cumbersome operational procedures for debt management inhibit fluid and real-time sharing of information on current and future liquidity needs between the authorities. g. Contingent liabilities are not recorded nor monitored; and h. Systems of oversight are inadequate. The capacity of the legislature is limited and civil society does not play an active role. Recommendations The current economic climate and institutional arrangements governing public expenditures constrain the scope of efficiency-enhancing reforms. Nonetheless, the CFAA recommends some principles for improving efficiency and transparency and risk- mitigation measures, commensurate with the level o f sophistication in the Uruguayan economy. The major recommendations are: 0 National Budgets should include all government entities performing non-commercial activities inorder to achieve comprehensive coverage and ensure compliance with fiscal limits at the aggregate level. 0 The annual budgets and financial statements of autonomous commercial and industrial entities should be presented to the Parliament at the same time as the National Budget in order to achieve greater oversight and comprehensive coverage of the total fiscal activity. 0 In order to improve capacity for performance budgeting, analytical and cost accounting in the Government, a comprehensive management and budgeting capacity buildingprogram should be designed and implemented. 0 The SIIF Budget Evaluation Module (SEV) should be fully implemented, and a framework for analysis of efficiency and effectiveness of resource utilization created, with the active participation of line ministries and agencies and coordination with OPP, inorder to achieve systematic and efficient allocation of resources and use of the budget as a tool o f expenditure management. Urnmay Country FinancialAccountability Assessment vii 0 Financial accounting and reporting practices should be expanded, given the complexity of operations and sophistication of the Uruguayan economy. Complete financial information, including fixed assets and contingent liabilities, reflects the financial health of the Government and is an indispensable tool for decision-making and management control and for budget formulation in subsequent years. 0 Priority should be given to developing and implementing the SIC accounting module of SIIF in order to convert the budgetary accounting information into financial reporting. 0 In order to promote a uniform control environment, internal audit units of staff reporting directly to the ministries and autonomous entities should be developed. 0 Ex-ante controls performed by the Court of Accounts and its delegates should be removed or limited exclusively to important operations. 0 Areas o f overlap in duties performed by the Internal Audit Office, the Delegated Accountants, the Court of Accounts, and the General Accounting Office should be identified in order to reduce duplication o f effort andpromote efficiency. 0 The Court of Accounts should set the standards for public enterprises audits performed by private sector audit firms in order to eliminate duplicate audits while ensuring that constitutional mandates are complied with. Additionally, the Court of Accounts should be empowered and equipped to conduct audits of debt management activities. 0 Procedures and practices should be established for the identification, recording and quantification of contingent liabilities in accordance with IFAC International Public Sector Accounting Standard No19, in order for the government to have comprehensive information on the future liabilities for decision-making. 0 The Finance and Budget Committee of Parliament should be provided with sufficient resources andits members should receive adequate trainingand have access to the expertise that will allow them to debate and opine on budget execution, control and evaluation. Urugyay Countrv Financial Accountability Assessment 1 1. BACKGROUNDAND COUNTRY CONTEXT 1.1 Uruguay i s an upper-middle income country with social indicators among the best in Latin America. The level of social development is also high, as indicated by three UnitedNations indices. The country's 2002 Human Development Index figure, based on three factors-health and longevity (life expectancy), education (literacy and years of schooling) and quality of life (per capita GDP)-places the country third in the Latin American ranking and 40th overall. The Human Poverty Index, which combines vulnerability to death at an early age, illiteracy, and access to health services, potable water and food, places Uruguay's poverty level among the lowest in Latin America. The Index of Unmet Basic Needs, which measures the population below the income poverty line, fell to 6.6 percent in2000, by far the lowest proportion inLatin America. 1.2 Uruguay made considerable progress in achieving macroeconomic stability during the 1990s and implemented several reforms in the public sector, including education, social security and health. Anti-inflation policy was successful in slowing down annual price increases from three digits in 1990 to a single digit in 1998. Prudent management of public finances and a favorable external climate allowed real GDP to grow by an average of 3.9 percent per year during 1990-1998. Nonetheless, the real effective appreciation of the currency undermined competitiveness of domestic production and the balance of payments deficit on current accounts widened throughout the period. A. Economic Recession 1999-2002 1.3 Due to the recession which began in 1999, Uruguay's per capita income, considered high by regional standards, dropped from US$6,801 in 1998 to US$3,640 in 2002. Over the 1999-2002 period, GDP contracted by 17.5 percent. The recession i s primarilyexplainedby the: (i) inthe terms of trade andloss of competitiveness of decline traditional exports; (ii) devaluation of the Brazilian Real in 1999 and its adverse effects on Uruguay's trade with Brazil; (iii)decline in Argentinean demand for goods and services (tourism) resulting from the economic and financial crisis inArgentina as well as by the floating of the currency in the face of rapidly dwindling international reserves; (iv) adverse climatic conditions and the negative effects o f the outbreak of food-and-mouth disease on beef exports in 2000-2001; and, (v) the 2002 Argentinean financial crisis which spilled over to neighboring Uruguay and the subsequent credit crunch and its negative effects in output.Anti-inflationary policy continued to be successful, reaching in 2001 the lowest inflation rate of the past 50 years. In 2002 this trend was reversed, mainly as a result of the sharp mid-year devaluation, with inflation risingto 26 percent by end-2002. B. Economic Policy 1.4 In the short to medium term, fiscal policy must remain austere, in particular: (i) therateofgrowthofrealpublicspendingbelowtherateofgrowthofreal holding GDP, including adjustments to wage and pension benefits; (ii) increasing the efficiency UrumayCountry FinancialAccountability Assessment 2 of current expenditure, and targeting public sector investment in key areas to support production and social policies; and (iii) continuing the process to deregulate and rationalize public sector prices and rates, improving the climate for private sector development. 1.5 More than 85 percent of total public expenditure i s fixed (public sector wages and salaries, social security benefits, debt service and other contractual arrangements), and this reduces the scope for discretionary spending as well as for efficiency-enhancing economic reforms. The most salient reason for inflexibility includes indexation clauses in the determination of public sector wages and salaries and social security benefits. Moreover, civil service regulations limit the Government's options with respect to downsizing. 1.6 The Government has adopted policies that stimulates employment and economic activity, and at the same time, protects vulnerable groups. These policies include establishing a regulatory framework for water and energy, preparing regulations for electric power transmission and distributions, having the Legislative Power authorize the Government to sell part of its stock in the national airline, and biddingo f concessions for passengers and freight transport at Carrasco Airport. Priority programs in the social sectors are protected against additional budget cuts in 2002 and 2003 by virtue of a World Bank structural adjustment loan and an IDB sustainability and social protection program. C. Medium-term DevelopmentChallenges 1.7 The principal challenges facing Uruguay, as articulated in the WB Country Assistance Strategy and IDB Country Paper are: (i) regaining international and regional competitiveness in order to generate economic growth, overcoming the macroeconomic and financial crises, and ensuring fiscal sustainability; (ii)modernization of the state and governance; and (iii) improving social equality and extending the benefits of economic growth to all of society, especially the most vulnerable groups that are left on the margins of the development process or below the poverty level. D. Relevanceof CFAA to the Country Context andDevelopmentChallenges 1. Reforming Public Institutions and Strengthening Governance. 1.8 An efficient, effective public financial management system and the efficiency of public expenditures are critical elements o f good governance. Good governance i s indispensable for growth, achieving development objectives and ensuring equitable development. One of the objectives o f the WB Public Services and Social Sector Adjustment Loan (with respect to the specific sectors) i s to improve the efficiency of public expenditure by increasing transparency and accountability. As part of the WB's Economic and Sector Work, the results o f this diagnostic review are an important source of information on the efficiency o f the public financial management system and institutional capacity, and will be used to nourish ongoing country dialogue and assistance strategies and to contribute to the development objectives for Uruguay. Uruguay Country Financial Accountability Assessment 3 2. Prioritization of Resource Allocation. 1.9 Reliable records and record-keeping systems are essential elements for analysis and strategic decision-making concerning the prioritization and allocation of resources. The diagnostic review in the CFAA evaluated the extent to which information generated by the integrated financial information system is used for decision-making and supports transparency and accountability. 3. Debt Management Systems. 1.10 The issue of deteriorating public finances also focuses on the need for adequate institutional arrangements for treasury and debt management. Adequate information systems for recording of public debt and contingent liabilities are critical to ensuring the completeness o f information for decision-making. The CFAA assessed (1) the quality of treasury and debt management systems; (2) the degree of integration o f treasury and debt management systems and the integrated financial information system; and (3) the p,roceduresfor identification, reporting and monitoring of contingent liabilities. 4. Efficiency of Public Expenditure. 1.11 Given the fundamental role o f control and independent oversight in effective public financial management, the CFAA assessed the accounting and reporting framework, internal control, internal and external audit, and legislative scrutiny of public sector financial management. Recommendations arising from the CFAA support the further reform and modernizationof the state and improve governance. D. Objectives and Approach 1.12 The WB and the Inter-American Development Bank (IDB), hereafter referred to as the Participating Banks, agreed to joint preparation of this Country Financial Accountability Assessment (CFAA) for Uruguay. The collaboration o f the participating banks included joint mission work; preparation of a single Initiating Concept Memorandum; the use o f single methodology and of the same quality assurance, review and disclosure procedures, and the issuance of this joint CFAA report. 5. Objective 1.13 The CFAA is a diagnostic tool with two principal roles: (1) to identify the strengths and weaknesses of Public Financial Management (PFM) arrangements in Uruguay, so that the potential risks to the use of public finances, as well as international financial institutions' loan proceeds and donor funds, can be assessed and managed and (2) to contribute to .the strengthening of Uruguay's economic governance and associated social and economic development, by identifying weaknesses and recommending remedial action in areas where current cumbersome systems contribute to poor public sector management. Urumav Country FinancialAccountability Assessment 4 6. Scope of Coverage 1.14 The CFAA covered public sector financial management at the national level. The review included the Ministry of Economy and Finance (MEF) as rector organization for the public financial management system; the Office of Planning and Budget of the Presidency (OPP); the Ministries of Health, Education, and Agriculture; a decentralized service, the National Administration for Telecommunications (ANTEL); an autonomous entity, the National Administration for Electricity (UTE); the Internal Audit Office; the Court of Accounts; the Legislative Branch; and the Central Bank's Debt Monitoring Unit. The CFAA team also visited the municipal governments of Montevideo and San Jose to get background information about their relationship with various entities in the Central Administration. 1.15 The CFAA covers the following specific topics. a. Government Budgeting. The CFAA team reviewed the budget process to assess the budget system's capacity to allocate resources, taking into account program and service delivery needs and resource availability, including the extent of participatory approaches, and the existence of effective mechanisms for analyzing and prioritizing spending, and arrangements for programmatic budgeting, including expenditure classification. . b. Accounting and financial reporting systems. The CFAA team reviewed the accounting procedures, principles and systems, assessed the internal controls currently in place, tracked fund flows for the revenue and expenditure processes, and verified the use of and access to financial information at the levels of the spending agencies and municipalities. The team developed an overview of the country's accounting and auditing practices for the purpose o f establishing realistic expectations for the next steps in the improvement of public sector financial management. c. Internal and external control and auditing. The CFAA team interviewed the ministries, the Court of Accounts, and the Internal Audit Office to determine the extent o f audit scrutiny of the public accounts. d. Decentralized services andautonomous entities. The CFAA team interviewed staff involved in the financial accountability arrangements of ANTEL and UTEto determine their accounting and reporting arrangements and practices, internal audit and external audit arrangements, legislative oversight o f their operations, and whether their external debt was included in the stock of national debt. e. Debt management and contingent liabilities. The CFAA team interviewed staff from the Debt Monitoring and Fiscal Affairs Units of the Central Bank, the Ministry of Finance, and the General Accounting Office (GAO) and reviewed the institutional arrangements for debt management and reporting, and mechanisms for coordination, transparency and accountability. f. Legislative oversight of public sector financial management. The CFAA team met with a member o f the Budget Committee of the House of Representatives, and discussed the parliamentary processes for reviewing and commenting on the budget and the Annual Accounting Reports. The CFAA team also met with the director of the Chamber of Commerce, to see how the private sector uses public sector financial information. g. Human Resources for public financial management. The CFAA team reviewed the legal framework for human resource management and the appropriateness of professional staffing levels inthe various entities. E. Methodology 7. Data Collection 1.16 The CFAA team's main sources of information included data existing at the MEF, OPP, some spending ministries, the Central Bank, the municipalities and the two public enterprises; existing reports and outputs of the integrated financial information system; and interviews with key people in the government bodies. A list of documents reviewed i s provided in Annex 1. The CFAA team also reviewed other reports available in the Government, the participating banks and other international agencies. Inparticular, these included the WB Country Assistance Strategy Update, the IDB Country Paper, the WB Public Expenditure Risk Assessment, the IMF Fiscal Transparency Report on the Observance o f Standards and Codes, IMF Safeguard Assessment on the Central Bank of Uruguay, the IDB's Project Completion Report for the Reforms of the State Sector Program (995C-UR), the WB's Program Document for the proposed Public Sector and Social Sectors Structural Adjustment Loan and the Special Structural Adjustment Loan, and the TOCAF, a compilation of Uruguayan public financial management laws. 8. Questionnaires 1.17 In advance of the main field mission, the CFAA team and the GAO asked government agencies participating in the assessment to complete a questionnaire soliciting their views o f the current financial management, their own practices and capacity, and their suggestions for improvements. 9. Interviews 1.18 Interviews were conducted with key officials o f the agencies participating in the assessment. In addition, the CFAA team conducted interviews with a professional association, representatives o f civil society, and members of the Legislative Branch. A list of those interviewed during the preparation and main field mission i s provided in Annex 2. 10. Consultationwith other Donors 1.19 The IDB and the WB are the leading donors in Uruguay. No other donors participatedinthe assessment. Uruguay Country Financial Accountability Assessment 6 11. AnalysisandRecommendations 1.20 The description and analysis of the information collected in preparation for and duringthe main field mission is presented inChapter 2 of the report, including the extent to which systems and processes contributed to transparent and efficient delivery of government services. Chapter 3 provides a Country Risk Assessment. The finding and recommendations of this CFAA are summarized in Chapter 4, which includes an Action Plan presented in matrix form. 12. Disseminationof the Findings 1.21 A draft of this report will be discussed with the Government and the Government's contributions and comments will be taken into consideration in the final version. 13. Government'sresponse The Government of Uruguay stated that inMarch 2005, a new Government took office and aims at: 1) Preparinga Five-year budget including revenues, expenditures and investments calculated inreal terms 2) Adjust annually the five-year budget based upon annual actual execution 3) Develop periodic budget execution evaluations ineach Ministry or Agency. 4) Strongly support the National Internal Audit by developing operational audits in the central administration. 5) Build Congress capacities inbudget process and preparation. Ummav Country FinancialAccountability Assessment 7 2. CFAAANALYSISAND RECOMMENDATIONS A. The Financial AccountabilityFramework 2.1 The existing legal accountability framework embodied in the law on accounting and financial management i s adequate, since it makes the use of the integrated financial information system obligatory and it clearly divides the roles of the Executive and Legislative Branches in terms of financial administration. The financial accountability framework in Uruguay i s made up of two components: the legal framework and the organic structure. 14. Legal Framework 2.2 The legal and regulatory framework for the financial accountability framework in Uruguay i s mainly composed of the Ordinary Text of Accounting and Financial Management (Spanish acronym i s TOCAF), its modifications, and the complementary budgetary and accounting instruments. TOCAF was originally approved by Decree No. 95/991 (February 26, 1991), in accordance with Article 656 of Law No. 16.170 (December 28, 1990). Various modifications were made to the TOCAF until Law No. 6.736, passed on January 5, 1996, systematized and consolidated these modifications into a new framework. 15. Organic Structure 2.3 The organic structure o f the Government of Uruguay includes the three branches of government (executive, legislative, andjudicial), the Article 220 entities, the spending ministries, the autonomous entities and the decentralized services (which jointly are referred to as state- owned enterprises) and the municipalities (see organization chart on next page). 2.4 The Executive Branch i s composed o f the Office of the President of the Republic and of the Ministers and their cabinets. The Office of the President includes the Administrative Secretariat, the Office of Planning and Budget and the National Civil Service Office. The Legislative Branch i s the Parliament, which consists of the Senate and the House of Representatives. During parliamentary recesses, the Permanent Commission represents the Legislative Power. The Judicial Branch i s exercised by the Supreme Court and the lower courts. The Administrative Court hasjurisdictional control over the Public Administration. The electoral Court and the Electoral Assembly are in charge o f dealing with electoral processes. The Court of Accounts, the Electoral Court, the Court o f Administrative Litigation and the autonomous entities and decentralized services (with the exception o f public companies) are known as the Article 220 entities. 2.5 There are 12 spending ministries (defense, interior, economy and finance, exterior relations, agriculture, tourism, transport and works, education, health, social security, housing, sports and youth). - 1--* --. - f"-- r r II I _c- IL 2.6 The state-owned enterprises comprise legal entities which engage in commercial, industrial or financial activities, and which have functional and financial autonomy. Control over their operations i s exercised by the State through majority shareholding. Within the state-owned enterprises are three types of entities with varying degrees of autonomy. There are three entities involved in education (entes autdnomos de ensefianza), which have full and complete functional autonomy, and over which the State exercises minimum control (University o f the Republic, Public Education National Administration and the Institute of Youth). There are other autonomous entities (entes autdnomos) that have full administrative autonomy but are subject to more stringent controls by the State. Some are involved in commercial and industrial activities (such as UTE) and others carry out financial activities (the Central Bank, the Mortgage Bank, the Government Guarantee Bank, the Social Security Bank and the Bank o f the Republic of Uruguay). 2.7 The decentralized services (sewicios descentrulizudos), including ANTEL, have less administrative autonomy than the other autonomous entities and are subject to more rigorous control by the State. 2.8 There are 19 municipalities, whose budgets are separate from the national budget. B. National GovernmentFinancialManagementInformation System 2.9 The national government financial management system i s implemented through an integrated financial information system (SIIF). The GAO i s the SIIF administrator and i s responsible for establishing the requirements for capturing all of the acts and operations included in the TOCAF. The GAO's Systems Division develops and implements the computerized systems using the appropriate platforms that allow for compatible administrative, legal, financial, budgetary and accounting management. This division also processes and maintains the financial and budgetary information of the spending ministries and agencies, manages the data in the SIIF system database, and defines the hierarchical levels of access to the information. Although a central register of public fixed assets was envisioned in the TOCAF, the GAO does not maintain such a register, However, an auxiliary module was developed for public premises and i s under development for the vehicles and other fixed assets. 2.10 The SIIF was designed to summarize information on budgetary, financial, economic and asset management, as well as the overall results of public sector management. 2.11 The implementation of SIIF has been gradual, beginning on January 1, 1999, with the definition of the budget classifications, the expenditure subsystem module, budget modifications, electronic payments directly to the suppliers, and multiple reports for the users. In 2000 the unification of all funds into the single treasury account was achieved, financial availability codes were assigned to each unit in the single treasury account (Spanish acronym i s CUN), and the automatic bank reconciliation module was designed. Uruguay Countrv FinancialAccountabilitv Assessment 10 2.12 In 2001, the resource classification and the sources of financing, economic and operations were defined, with conversion tables, and the resource and accounting modules were developed. In 2002, the bank reconciliation module was integrated into the system with new elements, and debt payments were centralized so that +Central Bank payments were incorporatedinto the CUN. 16. SIIF Components 2.13 The conceptual design of SIlF includes six modules that are related in an integrated manner: a. Budget Preparation module (SIP), which consolidates all of the budget proposals submitted by the ministries and agencies into the proposed budget bill. Once the budget is approved, modifications are entered in real time into the system. The system provides the programming and modification of the National Budget report. b. Budget Execution module (SEG), which captures in real time all the commitments, obligations and expenditures, and accepts requests for budget modifications. c. Resource Information module (SIR), which provides information on cash resources received. It provides information for the cash flow programming; data on collection for the CUN; and interacts with the SEG to ensure that every expenditure has a corresponding resource. d. Treasury Information (SlT) with modules for: i. AnnualCashProgramonaMonthlyBasis, whichpreparesthe initial annual monthly expenditure programming exercise, incorporating modifications that are effected during the year. Agency-owned resources and those with special arrangements are not captured by this system. Their inclusion inthe system i s still to be developed. .. 11. Single Treasury Account (CUN), which concentrates into one account the Central Administration's' collections and payments. The Treasury i s connected online with the correspondent bank, the Bank of the Republic. The Automatic Bank Reconciliation module is also included. ... 111. Treasury Operations subsystem, which allows the Treasury to capture all of the information [various kinds o f financial transactions?] with no budgetary impact, including treasury funds, deposits to be regularized, treasury advances, short-term financing, t& devolutions, earmarked revenues, investment advances, transitory operations, and transfer of funds. Clause 1to 27 of the National Budget Umguav Countrv Financial Accountability Assessment 11 e. Budget Evaluation (SEV) is the module that works with the data that is processed by the other components of SIIF, fundamentally those of SIP and SIT. The reports are done in the form of charts and graphs that evaluate the budgetary management of revenues, expenditures and financing. f. Accounting Subsystem module (SIC) takes the inputs of all of the other systems and converts the data into financial accounting information. Based on the double-entry principal, it generates financial information from the budgetary accounting information through a conversion matrix based on the Chart of Accounts. 17. SIIF Coverage 2.14 The system's coverage includes the Executive, Legislative, and Judicial Branches, the 12 spending ministries, the Article 220 entities, and the autonomous agencies, but not the decentralized services (see Table 1). The number of online connections has increased 15 to 20 percent since the table was prepared and had reached 170 of a possible 220 by March 2003. Over 5,500 government officials are registered to use the system. The volume of transactions i s also impressive. Table 1. SIIF Coverage and Transaction Volume, 1999-2003. No. No. No. ExecutingUnits No. Entities Executing Connected to SIIF Terminals Units Central Administration (a 14 188 115 61% 1,382 ~ Article 220 & I 7 1 29 1 27 I 93% 1 129 Autonomous entities LegislativeBranch I 1 I 3 1 3 I 100% I 53 1999 2000 2001 2002 Jan.-Mar. 2003 Obligations 242,621 309,706 317,049 277,894 24,788 Payments 172,273 228,971 315,623 258,081 59,306 Inquiries 30,030 49,402 43,492 44,953 4,703 Note: (a) The number of online connections inthe Central Administration will never reach 100 percent as some of the offices or entities are too small or have such a small number of transactions that they do not warrant the expense of installing an online connection. Uruguay Countrv Financial Accountability Assessment 12 C. Budget 2.15 A good budgetary system has three objectives: (i) the macro level, maintaining at an aggregate fiscal balance, where comprehensiveness and transparency of public accounts, along with accountability for compliance with fiscal norms and limits, are the main components (ii) at the mezzo level, facilitating an efficient allocation within sectors and among sectors, driven by a budget procedure with clear stages and sufficient time and effective channels of communication for dialogue and consensus building, and (iii) at the micro level, promoting proper public management operations at agencies. 18. Fiscal Transparency:BudgetClassification,Comprehensivenessand Realism. 2.16 The National Budget revenue and expenditure classification i s complete and systematic, however its coverage i s not comprehensive and, due to the recent severe economic situation, the budget figures have not been perceived as realistic by the spendingministries for the last few years. 2.17 The National Budget consists of a budget law plus six annexes called Tomos that include revenue and expenditure projections for five years. There i s one annex each for revenues, operating expenditures, investments, personnel, and strategic management programs and annual management plans, plus a summary. 2.18 The Draft National Budget i s presented to the legislature along with the message of the President, including information on the domestic and international economic situations, the methodological basis and economic assumptions (general projections of GDP growth, domestic consumption, interest rate, inflation), and the fiscal policy priorities. Once passed into law, the budget is published in the Official Journal as well as on the Government's website 2.19 In the National Budget classification system, expenditures are classified by economic category, by executing agency and by program with a five-year projection. A functional classification i s also presented in summary form with a first level of disaggregation (4 categories and 14 groups). Economic classification i s very detailed and well established, following a systematic manual. Targets, activities, and performance information are annexed to the National Budget. 2.20 B y constitutional mandate, the budget classification must be organized by programs. Because the program classification, including activity centers, actually corresponds to the organic government structure, the resulting classification i s in fact an institutional classification, showing a direct relationship between programs and executing agencies. However, the most recent budget reform efforts are in fact introducing budget classificationby activities. 2.21 The National Budget's coverage o f fiscal activity i s not comprehensive. Certain public sector institutions are excluded from the National Budget and are subject to E.Campos y S. Pradhan, 1995. Urumav Country Financial Accountabilitv Assessment 13 different timing and forms of Parliamentary scrutiny. The two most notable are described below: a. Autonomous commercial and industrial entities are required to submit their budgets to Parliament for information, but in practice, they do not, unless there i s disagreement between the Executive Branch and the entity on the budget content. b. PersonasPu'blicasNo Estatales are public entities that are not included inthe organic structure of the government. They usually perform noncommercial activities under private sector law, financed with national budget grants or earmarked taxes. They approve their own budgets and are obliged to provide their financial statements to the central administration for later submission to Parliament. The employees are not considered to be public officials. 2.22 The National Budget includes "own revenues" (user fees and charges) of government entities. Donations, which seem to represent a relatively insignificant amount, are not registered inthe budget. They are however recordedinto SIIF system. 2.23 Due to the recent severe economic situation, spending ministries do not perceive the budget figures as realistic. Budget figures are approved at the beginning of the five- year period and then continuously modified and adapted. Recently, the MEF has had to impose budget ceiling reductions, even lower than the level set inthe five-year budget. At the end o f each year, along with the presentation o f the Budget and Accounting Report (Ley de Rendicidn de Cuentas,), new budget ceilings (topes) and cuts (abatimientos) have been introduced by the Government, reducing ministries' freedom to spend up to the l i m i t s authorized at the beginning of the five-year period. 2.24 The National Budget includes incomes and outlays corresponding to the institutions comprised within the Budget (items 1 to 4) and excludes resources for institutions that do not belong to the Central Administration (transfers to municipalities, Social Security Bank, etc.). Inversely, financial planning programs include incomes and outlays for all commitments. Therefore, for comprehensiveness and consistency with accounting, the budget should include all available resources and all expenses. 19. BudgetFormulation 2.25 By constitutional mandate, the National Budget is prepared by the Executive Branch during the first six months following elections. It i s approved for the entire five- year term of the president. The five-year budget i s adapted to changes in the economic situation on an annual basis according to the financial projections and budget scenarios prepared by the MEF. First, a general macroeconomic map (covering GDP, price index, currency and interest rates, and so forth) and revenue projections are estimated. Spending by sectors is projected on the basis of historical data under the policy assumption that spending will be limitedto current levels. 2.26 Early in the year, a first meeting takes place among central budget authorities (MEF, GAO, OPP, Treasury) and ministries in which the new annual spending ceilings Uruguay Country FinancialAccountability Assessment 14 are transmitted. Ministries prepare their own proposals according to their needs and on the basis of expected cuts. The main reference for this exercise i s the previous budget execution. Budget proposals are then reviewed by the OPP (for compliance with guidelines, investments, new initiatives) and the GAO, which mainly verifies that there are no deviations incurrent spending from the ceilings established by the MEF. 2.27 New initiatives or proposals for spending must be accompanied by a new financial source or reduction of spending in another program. The budgeting process responds to a revenue budgeting style: the amount finally authorized for spending i s driven by the availability of resources. In this time of recession, during the year or at year-end, National Budget authorizations (five-year projections with annual spending ceilings) are adapted b y issuing new reduced ceilings determined on the basis of revenue collected or resources available. 2.28 Two offices jointly prepare the National Budget: the Planningand Budget Office (OPP) of the Presidency and the General Accounting Office (GAO) at the MEF.The OPP reports to the President of the Republic. The Constitution envisages that the OPP be headed by a commission of representatives o f ministries involved in development, chaired by a Director with ministerial rank, and appointed by the President. In practice however, the commission of representatives is not functional. The OPP advises the Executive on the formulation of plans and strategies, the evaluation of budget programs and management performance, and investment program decisions, among many other responsibilities (such as modernization o f the State, decentralization, follow-up of decentralized entities). It also provides advice to the GAO and other public entities on the design of goals and performance indicators needed for proper evaluation. 2.29 OPP has direct access and communication with all the ministries and public entities. Ministries and agencies are obliged by law to present annual performance targets. The OPP i s responsible for the follow-up o f actual performance. Performance information i s monitored twice a year and sent to Parliament along with the Budget and Accounting Report. 2.30 Investment information flows directly from ministries or agencies to the OPP, which i s responsible for preparation and coordination of the Investment Budget. Normally the Financial Administrative Units (FAU) located in each ministry compiles this information. Arrangements for external aid donations are made directly by the ministries. The OPP has a unit to deal with external cooperation for coordinating investment and externally financed projects. 2.31 The GAO's Budget Division prepares the technical norms for the formulation, modification, follow-up and execution of the National Budget. It sets the calendar, standards and procedures for the formulation o f the draft budget and prepares the proposed budget bill. It prepares the budget procedures manuals, the opening balances, modifications and follow-up of budget allotments, whatever the source o f financing, and controls the budget variations. Jointly with the OPP, it analyses the proposed budgets of the autonomous entities and decentralized services and proposes the adjustments that are considered necessary 2.32 The GAO i s also responsible for the 17 Central Accountants, GAO staff who sits in the various ministries and agencies to verify that the budget guidelines are being followed (mainly compliance with abatimientos or budget cuts) and assess the cost implication o f new proposals during the formulation of the operational or current budget. In addition, the Central Accountants control the legality of expenditures on behalf of the Court of Accounts. 2.33 Budgeting i s based on incremental behavior (or in fact decremental, in times of recession). Insufficient consideration i s given to exploring the strategic alternatives for reducing specific budget programs or initiatives during budget formulation. There i s not much discussion during budget preparation on the possibility of eliminating potentially obsolete or secondary programs. More than 85 percent o f spending i s on salaries, pension, and other fixed categories. However, the OPP's Center for the Reform of the State (CEPRE) has recently been successful in identifying some cost reductions in executing agencies. Revenues 47,835,183 Tax 40,788,980 Investments 5,154,148 -BudgetExecutionResult, at year-end -12,941,846 Other Expenditures 21,597 CentralGovernmentBalance,at year- end :12,963,443 Financing 12,963,443 2.34 The assessment of impact o f spending cuts proposals on service delivery needs appears to be insufficient. Rules and criteria for budget resource allocation are focused on restrictions and cuts and the main tools are the cash ceiling guidelines, which must be complied with by ministries and agencies. Some priorities are set by Government's political preferences, such as concern with social targets and marginal groups (children, food, education) or broad economic goals (reduction o f the State, increasing competitiveness, regional integration). Inan effort to cut expenses, there is pressure to cut salaries b y implementing early retirement initiatives. Such incentives can only produce limited savings, and could simply shift pressure to pension benefits, both administration and costs. 2.35 Although the budget system is firmly focused on cutting and limiting spending, some tools and mechanisms help managers to respond to service needs. Examples include a contingency reserve that can be used when justified. This reserve cannot be greater than 12 percent o f operating plus investment spending. There are usually more requests than funds available for this reserve account. There are some responsesto actual ministerial or sectoral level budget needs during the process of resource allocation or cost distribution. For instance, the Ministryof HealthFAUtakes into account the estimated level of service production (trend in the number of patients, interventions, consumption of medicines.) in projecting future budget needs, along with the estimated price index and currency exchange rate trends. 2.36 In September 2002, the Budget and Accounting Reports Act (Law 17.556) was approved with a proposal for an almost across-the-board reduction of 8 percent of current spending and a 28 percent reduction in investment from the amounts set for 2003 and 2004. The new act has been used to introduce new cost reductions. Annual and within- year limitations and adjustments are imposed by the MEF on the ministries, thereby reducing their capacity to execute the budget above the new ceiling, which may be lower than that authorized inthe original five-year budget. 2.37 The autonomous commercial and industrial entities and the decentralized services have a different treatment of their budget. Their budgets are individually prepared and submitted to the Executive Branch and to the Court of Account five months before the beginning o f each exercise with the exception of the year following elections, in which they can be presented at any time. The Court of Accounts opines within 30 days of receiving them. The Executive Branch with advice from OPP can make observations, and these, along with the observations of the Court o f Accounts, return to the respective entity. 2.38 If the entity accepts the observations, it will return the document to the Executive Branch for budget approval and its inclusion for information purposes in the five-year National Budget. In the contrary case, the Parliament, injoint meeting of both chambers, will resolve the discrepancies by a two-thirds vote of all the members. A similar procedure i s followed for the annual budgets. Given the number of stages of review (Court of Accounts, OPP, Executive) there are delays in the approval process. The entity cannot execute the current budget unless approved and must operate with the last available approved figures. These delays can be major (in one instance the 2001 budget was not approved until 2003) and can result in a lack of flexibility of entities to plan and implement. 20. Performance Indicators And Spending Efficiency 2.39 The OPP has been at the forefront of introducing performance indicators into the budget management process in Uruguay. Several reform initiatives have focused efforts on introducing performance management information and evaluation in government. A management budget evaluation module for SIIF (SEV) and a system to distribute costs and their potential connection with budgeting (performance budget or budget by results) have been and still are some of the main areas of interest in the budget reform efforts of Uruguav Countrv Financial Accountabilitv Assessment 17 the last few years. These systems are coordinated by the CEPRE. They are based on the budget and management performance information produced by the ministries and institutions. The five-year budget for 2000-2004 was used to encourage the performance budget or budget by results technique. Performance information i s incorporated in an annex to the National Budget 2000-2004 called the Strategic Management Program (PEG)andAnnual Management Plans (PAG). 2.40 The initiative to introduce performance management in government covered a wide spectrum of institutions and the methodology proposed was relatively sophisticated. All ministries and institutions were requested to present PEGs for the five-year projections of the National Budget and PAGs for each year. PEGs included objectives and strategic results (main products or services) to be reached and financial resources needed for the five-year period. PEG goals were reflected in PAG annual objectives. The cost of annual objectives was obtained by adding the cost of the activities contributing to its achievement. General or overhead costs were allocated to activities by estimates based on the application of specific factors such as number of personnel, vehicles, and square meters of buildingused. 2.41 All programs and activities were to be assessed in order to reallocate resources toward Government priorities. An annex to the instructions for the National Budget formulation included a systematic methodology to guide the description and assessment of programs and activities. This methodology included several tests on the adequacy of programs vis-&-vis strategic objectives such as decentralization, efficiency, and fiscal feasibility. 2.42 Important efforts and advances have been made so far. A systematic database with goals and performance information i s now available at CEPRE. Goals and performance information i s processed and formally connected to the budget through the SIIF. More experience and know-how has been accumulated at the center for next steps inthe performance budget reform. 2.43 The system needs to gather more relevant data and to be better connected with the strategic decision-making process and resource allocation, at both the central and agency level. The time and resources available for the preparation of plans (PEG and PAG) during the formulation process of the National Budget was very limited. Inmany cases, performance management information was not gathered on time. 2.44 In general, the types of indicators or measures presented are not very relevant for budgeting. There are no impact indicators, only activity or output-related indicators. Efficiency indicators are set in relation to factors such as number of personnel or vehicles. Often performance information was set at very specific operational levels. For instance: hours allocated to updating regulations, number of administrative documents or cases handled (expedientes tramitados), number of visitors, number o f buildingsrepaired. Indicators of quality are also related to operative aspects, for instance, waiting time for documentation processing. Urumav Countw Financial Accountability Assessment 18 2.45 The impact on budget formulation and allocation of resources has not been achieved as originally envisioned. Some important reasons explaining the limited success with performance budgeting are: 0 The current economic situation has not been favorable for a performance-oriented budget exercise. Since the main interest now i s cutting and limiting spending, continuous spending adjustments and tightened budget ceilings distort activities and performance projections and may discourage rational budgeting and performance programming. 0 Although important efforts for participation and consultation were made by OPP, there i s a widespread opinion among agencies that the design and implementation of the system does not sufficiently consider their management needs and interest. This has lead to a lack o f ownership by ministries and other potential users. Neither ministers nor members of the Parliament have felt committed to the reform initiative. They do not use the information for decision-making. 0 Management capacity for performance budget at both the agency and central level i s weak. However, CEPRE is making an effort to develop this capacity, but has been hampered due to its lack of human and financial resources. Given the economic context, this i s a realistic approach. 21. Budget Execution, Monitoring and Reporting 2.46 The budget execution and expenditure transactions processes are carried out in a much decentralized manner and are accompanied by the appropriate legal controls. Budget execution i s subject to the TOCAF legal framework. The successive adjustments and modifications in TOCAF, as well as in the five-year Budget Law and the annual Budget and Accounting Reports Acts, have resulted in a highly complex normative framework. 2.47 Based on the 1995 Government Administration Reform, the Financial Administrative Office (FAU) of each ministry i s responsible for the execution of all budget stages: authorized allotment; modifications; commitments; obligations and payments. The SIIF-Budget Execution module (SEG) i s used to capture transactions on a real-time basis and provide information on the central administration, Legislative and Judicial Branches and autonomous entities. Decentralized Services (public enterprises) are not included inthe system. 2.48 Each ministry or agency determines the procedures for expenditure execution within the entity. The recording o f transactions into SIIF i s done at the individual spending agencies, and the Central Accountant validates the transactions. First a budget allotment i s given to the agency. Depending on the particular procedures of each agency, a commitment i s issued. Once the corresponding contracts are signed, the obligation i s recorded. It i s impossible to enter commitments or obligations without a corresponding budget allotment. Expenditures are accrued when the obligation for the payment of the services and goods i s entered. The appropriately delegated officials approve the expenditures. 22. Cash Management 2.49 In the current economic situation, the funds available determine the payment amounts and cash limits are given to each spending agency. Available cash i s first assigned to the priority areas such as health, nutrition, and social assistance. Then the remaining amounts are divided among the spending agencies to cover the remaining obligations. Once the monthly allocation i s determined for each spending agency, the FAUof each of these agencies establish the priorities for paying the obligations, with the Central Accountants reviewing the legality. Most funds are used to pay salaries and social expenditures. 2.50 Inthe current economic situation, Treasury programming is realizedby the MEF based only on available resources. As a consequence of the lack of synchronization between the expenditure program and Treasury programming, outstanding liabilities have been generated, both monthly and yearly. (Uruguayan pesos) Entity 1999 % 2000 % 2001 % 2002 % Central 13,522,255 9.53 281,931,302 74.10 510,563,458 54.21 1,974,487,784 47.29 Administration Entities 20 to 112,869,795 79.57 62,821,052 16.51 144,831,456 15.38 1,409,665,250 33.77 24 (a) Judicial 13,663 .01 17,094 0.00 20,218,532 2.15 66,465,188 1.59 Branch court of 4,522 0.00 3,146 0.00 6,277 0.00 4,655,188 0.11 Accounts Electoral 19,719 0.01 17,309 0.00 9,260,113 0.98 15,543,271 0.37 court Administrative 0 0.00 2,460 0.00 5,166 0.00 2,070,033 0.05 court Public 10,725,569 7.56 2,818,779 0.74 43,049,940 4.57 389,168,177 9.32 Education State 2,141,341 1.51 14,182,417 16.88 151,988,088 16.14 152,717,833 3.60 University National Inst. 2,149,003 1.52 11,007,186 2.89 40,294,806 4.28 62,021,959 1.49 for Youth Legislative 400,250 0.28 909,794 0.24 21,531,529 2.29 98,055,100 2.35 Branch Total 141,846,117 100.0 380,457,305 100.0 941,749,365 100.0 4,174,849,629 100. 0 Note: (a) Entities 20 to 24 in the budget include mainly various credits, subsidies and subventions, and transfers to social security. 2.51 There i s adequate flexibility, through the approval of budgetary modifications, to permit budgetary execution by the spending agencies. The high number of budget modifications made yearly (8,000 on average), are caused by (i) variations in Uruguayan peso prices; (ii) legislative actions that mandate increased expenditures, especially in the area of personnel costs; (iii) the necessity to adjust to ever-changing social costs that have proven to be difficult to estimate during the budget preparation stage; and (iv) across-the board cuts that have been instituteddue to cash flow constraints. Uruguay Country Financial Accountability Assessment 21 Table 4. Modificationsto Budget Table, FiscalYear 2002 I I I Operations Investments % Mod../ %Mod./ Administrative Court 0.00 -8.98 National Public Education 5.63 -8.77 University of the Republic 0.16 -44.98 National Youth Institute 0.12 -9.00 23. BudgetMonitoring 2.52 The responsibility for control and follow-up of budget execution i s shared between the GAO and the OPP. The GAO's control function is limited to the Central Administration. In addition to the Central Administration, the OPP also oversees the decentralized services, but the primary focus i s on programmatic analysis rather than on budgetary control. 2.53 The GAO's Budget andFinancial Control Divisionverifies the administrative acts related to financial and budget management through its Central Accountants. This division controls the procedures related to budget management, validation of transactions that are entered into SIIF, the accounting reports of funds transferred to the ministries, and legal and regulatory requirements for Article 220 entities. 2.54 The OPP i s responsible for evaluation of budgetary operations and focuses on the achievement of objectives. Due to OPP's size limitation, the evaluation of operations and the degree of achievement o f programmed objectives and goals consists of a review of documents and self-evaluations prepared by the individual entities, without quality assurance. Control over the execution o f investment projects i s performed by the Investment Project Department of the OPP. Semi-annual reports on investment projects Uruguav Country FinancialAccountabilitv Assessment 22 are prepared b y the executing agencies within the line ministries and periodic meetings are held to follow up on achievement of project objectives. This close follow-up has resulted in a satisfactory achievement of the investment programs' objectives. 2.55 Lack of linkage between GAO's and OPP's controls reduces the budget's effectiveness as tool of expenditure management. These arrangements restrict the effectiveness of the system, since a thorough evaluation requires the simultaneous consideration of both financial and programmatic aspects. In practice, OPP works without the participation of the ministries and agencies. This lack of participation by the spending agencies reduces the sense of ownership andeffectiveness of the process. 24. Reporting 2.56 On a monthly basis, the GAO prepares a summary report on the principal causes of budget modifications and expenditure increases. The monthly information i s not published in the press nor i s it currently available on the Internet. Information available on the Internet i s limited to annual budget execution by line ministries. Quarterly reports on achievement of goals and objectives are distributed internally to the President. The spending agencies do not have access to these quarterly reports. The GAO, inresponse to special information requests from Parliament, also prepares ad-hoc reports. 2.57 The budget evaluation module (SEV) i s in very early phase of implementation and i s used to produce charts and graphs evaluating management of revenues, expenditures and financing. At the ministry and agency level, the SEV module i s not used for follow-up and control, since each agency has implemented its own stand-alone system. This results induplication of effort and inefficient use of resources. 2.58 There is no real-time recording o f debt service obligations; instead these are incorporated based on periodic reports received from the Central Bank, after the payments have been made. 2.59 Information on revenue collection i s registered by GAO in SIIF through the resources information module (SIR) introduced in2001. Revenue collection i s carried out by revenue collection entities, which include large tax collectors (Tax General Directorate, Customs, Lottery Directorate and National Casino Directorate); State Funds such as Banco Prevision Social, Caja de Profesionales Universitarios or Caja Militar; other tax collectors. GAO collects detailed monthly information from the large tax collectors andthe State Funds. 2.60 Revenue collection systems are not connected to SIIF. Although the aggregate revenue figures are received daily, details of the type o f revenues collected are introduced manually, with a time lag o f two to three months. The GAO exercises adequate control by comparing the information submitted by the collection agency with the information provided by the banking system. Independent o f these controls, all contributors that pay their debt through the banking system receives receipts for payments made. It i s foreseen that by 2004 the data of large tax collectors will be available through SIIF and reports will be automatically generated. Uruguay Country FinancialAccountability Assessment 23 D. AccountingandFinancialReporting 2.61 The institutional arrangements governing the operation of the GAO are adequate to ensure that it can discharge the role of rector of the accounting system. According to the TOCAF, the government accounting system includes the group of technical principles, organizations, norms and procedures used to compile, evaluate, process and show the economic and financial activities of the Government. Uruguayan Generally Accepted Accounting Standards are applied within the guidelines o f the professional accounting framework. 2.62 The GAO coordinates the technical actions and operations with the institutions responsible for planning of resource assignments, income collection, credit, treasury, internal control and external audit. The GAO, with the concurrence o f the Court of Accounts, also defines the principles, standards, and procedures as well as the auxiliary records that are necessary and form part of the obligatory recording for all public organizations. Together with the Treasury, it prepares the Source and Use of Funds Statement for the non-financial public sector. 2.63 Although SIIF i s fully operational in some of its modules, the accounting module (SIC) is still in the design and definition stages. The SIC, once it becomes operational, will take the inputs of all of the other systems and convert the data into financial accounting information. Based on the double-entry concept, it will generate financial information from the budgetary accounting information through a conversion matrix. At present, accounting information for the Central Administration i s prepared manually using auxiliary accounting spreadsheets that capture the information from the SIIF database. The information i s only used for internal procedures, to check and validate the budget information. 2.64 The Court of Accounts control of certain type of expenses (public debt services, expenses exceeding certain amounts, etc.) instead o f the Delegated Accountant implies a delay in processing the obligations and prevents the accounting and the financial reporting to reflect the expenditures in a timely manner. 2.65 The execution of the Legislative budget i s currently carried out b y charging global budget lines instead of issuing obligations for each expense incurred. This procedure prevents to link budget execution with the accounting module. The Legislative Power should register the detail of each expense into the budget. 25. AccountingStandards 2.66 In the Uruguayan private sector, there exist three types of accounting standards: professional, institutional, and legal. A Permanent Commission, created in 1991, approves the legal accounting standards. The Commission i s headed by the Internal Audit Office and has the following responsibilities: (i) study o f the accounting standards for the the government commercial enterprises; (ii) the preparation of accounting standards projects; and (iii) dissemination o f the standards and publication of examples for better understanding. Article 220 entities use these standards. Uruwav Countrv Financial Accountability Assessment 24 2.67 The Government does not prepare financial statements because it uses a budgetary accounting and financial accounting system. Financial reporting i s limited and i s mainly geared toward the monitoring of budget execution. 2.68 Inthe public sector, the GAO drafts the standards; the Court of Accounts reviews and concurs, and then issues them as obligatory. The Court of Accounts recently approved Ordinance No81 (January 10, 2003) that established the criteria, norms, and procedures for the preparation of Public Sector Financial Statements, including the adoption of financial accounting. This i s an important step towards the adoption of the IFAC Public Sector International Accounting Standards. The scope of this decree includes all entities of the central administration, decentralized services, autonomous entities, municipal governments, and private accounting entities that receive public funds or act on behalf of the Government. 2.69 The GAO prepares the Annual Budget and Accounting Report with inputs from both OPP and the ministries. The document includes: (i) a report on the achievement o f goals and objectives, prepared b y the OPP, based on information provided by ministries and agencies on a quarterly basis; (ii)a comparison of actual versus planned expenditures, extracted from SIIF; and, (iii) information on the evaluation of investment projects from OPP's Investment Projects. 2.70 The Budget and Accounting Report i s submitted annually to the Parliament. Once approved, the information i s available for public use, with no restrictions. Prior to December 31of the following year, the consolidated financial information for the Central Administration, Article 220 entities, Social Security Bank, and municipalities i s also published. The Fiscal Statistics are also made available for the Annual Statistical report and the IMF's Yearbook. 2.71 The OPP annually prepares a consolidated financial statement of public enterprises, which i s not published. However on an individual bases, these entities publish audited financial statements. Financial Statements for decentralized services are prepared in accordance with generally accepted accounting standards in Uruguay that are compatible with International Accounting Standards. There i s no connection between the accounting systems of these entities and the SIIF. 26. Treasury Management 2.72 The Treasury System i s composed o f the group of entities, techniques, standards and procedures that are related to the collection of revenues and the payments to be made as well as custody of the available resources that are generated. The Treasury has the following functions in Uruguay: (i) coordination of all Central Administration treasury units; (ii)centralization of revenue collection and payments; (iii) flows; (iv) fund formulation of the Cash Program; and (v) custody o f government stocks, funds, and instruments of value. 2.73 In 2000, the Single Treasury Account (CUN) was implemented, unifying all of the public sector funds in one account. The CUN i s structured in such a way that it Urumay Countrv FinancialAccountability Assessment 25 includes payment and collection accounts, since the entities that collect directly deposit the collection into the CUN. The CUN i s the central cash account of the Government and i s responsible for payments to be made by check or electronically. 2.74 Regulations have been adopted, which: (i)create third party funds as funding sources of expense and enable them to remain outside the CUN; and (ii) authorize to deposit these funds inbank accounts distinct from the CUN's. 2.75 Implementation of the CUN has facilitated an important reduction in idle funds. Through the simplification of procedures and use of e-payment systems, the C U N has provided a mechanism for increased efficiency in the payments to suppliers and other beneficiaries. Unfortunately in practice, some of this efficiency i s lost due to cash-flow constraints duringthe current recession. 2.76 The Treasury determines the monthly financial allotment according to the collection and distribution of expenses and according to the participation of each spending agency. Based on the financial allotments that the Treasury provides to the spending agency, each spending agency prioritizes its obligations, determining whom to pay, which may be based on time or urgency o f the payment. This payment prioritization i s communicated to the Treasury so that it may make the appropriate payments. Unpaid obligations by the Treasury at the end of the exercise constitute the off-balance sheet or treasury debt and include all that i s recorded but unpaid. 2.77 The government funds flow i s preparedjointly by the Treasury and the GAO, but i s not produced directly from SIIF since not all of the information i s available. Likewise, the bank reconciliation that the GAO does i s still 80 percent through the SIIF system and 20 percent manually. E. Internaland ExternalControland Auditing Systems 2.78 Internal control functions for the entities included in the National Budget are carried out by the GAO and the National Internal Audit Office, but neither uses the Committee o f Sponsoring Organizations Guidelines (COSO), which would help to provide a uniform control environment. 2.79 Although the organic structure provides for the existence of internal audit units of staff reporting directly to the ministries and autonomous entities, these internal audit units have not been developed. Instead, the internal control function i s fragmented and often duplicated among the Internal Audit Office, the General Accounting Office and even the Court of Accounts, which carries out ex-ante controls through its DelegatedAccountant. 27. Internal Control 2.80 Two of the most important mechanisms for internal control are the Central Accountants and the SIIF system. Within each line ministry is a Central Accountant (approximately 17 in all) who reports to the GAO Budget and Accounting Division and performs key internal control functions. Central Accountants also execute control Uruguay Country Financial Accountabilitv Assessment 26 activities on behalf of the Court of Accounts3. In the case of Article 220 entities, the Central Accountants are also delegated authority by the Court of Accounts to perform preventive control. The Central Accountants verify availability of funds; reconcile the bank accounts; carry out ex-ante control; document opposition to payments or expenditures that are considered irregular. 2.81 As delegates of the Court of Accounts, some Central Accountants review transactions for legality and the adequate application of budgetary costs. At the same time these employees are also involved intransactions recording and budget control. 2.82 SIIF has built-in functions that serve as mechanisms for internal control by prohibiting commitments for which no budget allotments have been made and automatically calculating current budget allotments taking into consideration budget modifications. It also has controls of maintenance of SIIF beneficiaries and applies information security measures. 28. InternalAudit Office (IAO) 2.83 According to TOCAF, the role of the Internal Audit Office i s to perform ex-post budgetary, economic, and financial, asset and performance audits, as well as the evaluation of programs and projects. It i s responsible for the internal audits of both the Central Administration and the Article 220 entities. 2.84 The IAO i s functionally and financially dependent on the MEF. It has technical autonomy in the performance of its responsibilities. It has unlimited access to financial records, including budgetary reserves and military expenses. It has the power to investigate the use of funds assigned to the legislature as well as the collection of revenues. It ensures that there are adequate follow-up mechanisms when instances of fraud or corruption are detected. The reinforcement of the IAO autonomy and functional independence could be considered. Options such as linking it directly to the President Office could be analyzed. 2.85 The IAO uses International Organization of Supreme Audit Institutions (INTOSAI) and Uruguayan Generally Accepted Auditing Standards for audits of the Central Administration. For Article 220 entities, IAO uses the standards promulgated b y the Permanent Committee. The latest pronouncements from this Commission were in 1993. The IAOdoes have a Code o f Ethics. 2.86 The IAO has developed some audit manuals. An Annual Work Plan i s prepared and periodically progress against the plan i s measured. Reports are published in summary form in the OfSiciaZ Daily newspaper, and every semester the IAO publishes a report on the audits carried out. The IAO does not participate in the preparation of financial statements. Court of Accounts Decree Nr 74 from 23 May 1997 to executethe requirementsof the ConstitutionArt. 211b) and TOCAF Art. 96 Urumav Country Financial Accountability Assessment 27 2.87 Among IAO's strengths i s its staff, which although few in number, are highly professional, independent and objective. IAO staff rotates to various spending entities. At the institutional level, the IAO has an important role in ensuring the proper utilization o f resources and good administrative practices that ensure transparent management. Also it acts as an advisor to the Executive Branch in the efficient use of public resources and in the sensible reduction of public expenditures. Its activities contribute to the positive perception that the Government i s acting responsibly through the publication o f information on its audits. 2.88 Even though the organic structure provides for the existence o f internal audit units of staff reporting directly to the ministries and autonomous entities, in addition to the internal auditors placedby IAO, these internal audit unitshave not been developed due to financial restrictions. 2.89 The IAO also carries out special controls (Law 17.292 dated 25/1/2001) over those internal control bodies that supervise companies or organizations where autonomous and decentralized services entities (Article 220 entities) are involved (shareholding, etc). 29. External Control a) Court of Accounts 2.90 The Supreme Audit Institution i s the Tribunal de Cuentus,the Court of Accounts, which reports to the Parliament. The Court o f Accounts performs legal and compliance audits of the Central Administration, the decentralized services and autonomous entities, the municipalities, personas pziblicas, and the executing agencies of projects financed by international financial institutions. 2.91 The legal framework of the Court o f Accounts i s found in the Constitution, TOCAF, and various other legal instruments issued by the Court. It i s functionally independent but not financially independent. The operational framework i s found in a series of manuals and guidelines, which are comprehensive and provide quality assurance. 2.92 There i s an annual work plan prepared in accordance with INTOSAI standards, which provides for logical and rational control coverage. However, the observations and findings of the Court of Accounts are not taken into consideration by the Legislative Power. Therefore, the mechanisms for follow-up o f Court of Accounts audit recommendations are weak and compliance i s not enforced. A semi-annual report on outstanding recommendations by the Court o f Accounts should be provided to the Parliament in order to put pressure on the audited entities to comply with their recommendations. 2.93 There i s a Manual o f Job Descriptions and Responsibilities and periodic performance evaluations are conducted. Professional staff i s required to prepare a conflict of interest declaration. The Court of Accounts subscribes to the Code of Ethics issued in January 2003 for all public officials. Uruguay Country Financial Accountability Assessment 28 2.94 The Court carries out ex-ante control of expenses and disbursements as well as selective ex-post audits of budget execution and financial statements. The Court of Accounts prepares an annual report on the observations of the Delegated Accountants during the year, as well as the Audit Report and the opinion on the National Budget Execution. The Annual Report i s submitted to Parliament within the timeframe established. Inthe interviews conducted for this report, the consensus was that Parliament does not act on this information. Any other follow-up i s performed during the subsequent audit of the entity. 2.95 The Court may delegate its ex-ante duties to the GAO Central Accountants in autonomous entities and decentralized services. Although they depend organically on the GAO, for the pre-control functions they report directly to the Court of Accounts. These Delegated Accountants are posted for periods of two to four years to one ministry or agency. The staff of the Court of Accounts also performs external audits on the central administration and Article 220 entities and submits the reports to the Parliament and the individual entities. In cases where corrective action has not been satisfactorily taken, it has the right to recommend appropriate punitive actions to the Parliament. 2.96 The Delegated Accountants prepare reports that are submitted to the corresponding spending agency covering the deficiencies detected. If the observations are not acted upon, the Court of Accounts can revisit the issues. The Delegated Accountants do not have the authority to prevent the spending that has been observed. b) Audit Arrangements for Decentralized Services and Autonomous Agencies 2.97 The Court of Accounts i s responsible for ex-ante expenditure control in the decentralized services. These functions are sometimes carried out by personnel from the Court of Accounts placed in the enterprises directly, while in other cases these functions are done by the personnel of the individual enterprises. The Court of Accounts carries out ex-post control by performing annual financial statement audits in all public enterprises, even though the public enterprises are also subject to audit by private firms. According to constitutional interpretation, the Court of Accounts must review and approve the annual financial statements audited by the private firms, prior to publication. 2.98 In additional to these controls, public enterprises in general have internal audit unitsthat operate with a more operationalfocus. The effectiveness of this control depends on the individual capacity o f the particular unit. In general, the public enterprises have strong internal audit unitsthat carry out functions oriented toward management control. 2.99 Executive Branch control i s exercised through the public enterprises' annual submission to the OPP of budget execution and financial statements. Additionally, the enterprises submit a monthly statement o f cash expenditure. In order to prepare the financial programming, monthly joint meetings are held b y the enterprises, OPP, MEF and the Central Bank. Profit-generating public enterprises transfer a part of these resources to the Treasury. This transfer is done monthly, based on an annual amount set UrumayCountw FinancialAccountability Assessment 29 by the Executive Branch. The Executive is also responsible for approval of changes in tariffs and modifications inthe organizational and salary structure. F. DebtManagement 2.100 InUruguay, significant progress has been made inthe separation andcoordination o f debt and monetary management objectives and accountabilities among government agencies involved in debt management. The MEF's Macroeconomic and Financial Advisory Unit makes projections of the Government's financing and payment obligation needs, finds alternatives for managing financing gaps and for mitigating financial risks, analyses the conditions under which new debt can be raised and the impact on the debt profile, and analyses debt sustainability. 2.101 The legal and regulatory framework for contracting debt i s adequate and clarifies the authority to borrow and to issue debt, invest and undertake transactions on the Government's behalf. The OPP i s responsible for coordination of the process of access to external credit as well as follow-up of the execution of investment projects. Prior to December 31 each year, the entities of the Central Administration, the decentralized services and autonomous agencies are required to communicate all plannedborrowings to the OPP. 2.102 The Executive, on the advice o f the MEF, i s responsible for prior approval of debts to be contracted by the central administration, autonomous entities, and decentralized services. 2.103 The Central Bank advises the Executive concerning the terms under which public entities can enter into obligations with international agencies. Its International Operations Unitis responsible for ensuring that the financial terms of the external debt contracts are complied with and acts as the paying agent. In addition, this unit manages the central repository of information (FINEXT), which records the Government's debt obligations. FINEXT does not interface with SIIF, but is integrated into the Central Bank's central accounting system. The internal controls over management of the FINEXT database are strong and monthly reconciliations are performed between system data and data provided by lenders and borrowing entities. 2.104 The Central Bank's Fiscal Affairs Unit is responsible for generation and publication of information on debt. Data i s extracted from FINEXT and sorted to provide information on the stock and composition of debt and financial assets including currency, maturity, and interest rate structure. Prior to publication, the Fiscal Affairs Unit undertakes exhaustive quality control checks, most of them manual or spreadsheet driven, which are time-consuming and lead to delays in publication of data. 2.105 Due to the lack of interface between FINEXT and SIIF, the real-time information needs of the MEF, which is the primary decision-making unit for debt management, are not being met. The GAO within MEF maintains data on debt in a stand-alone spreadsheet system exported from FINEXT through Standard Query Language software. This i s used to generate manual accounting entries to record debt obligations. Inorder to have data for Urnmay Country FinancialAccountability Assessment 30 decision-making, MEF also maintains other stand-alone systems, with data derived from various sources (FINEXT, OPP, GAO). Data manipulation at the various entities increases the risk of human error and of incompatibility between the various sources, and diverts scarce resources that could be redirected to analytical activities. 2.106 The Central Bank's current audit mechanism requires an annual audit by the Court of Accounts. According to the IMFSafeguards Assessment on Uruguay (December 30, 2002), the audit does not comply with International Standards of Audit (ISA), the level of substantive testing i s low and does not enable the Court of Accounts to express an opinion on the bank's internal control environment. The IMF had proposed that the audit of the Central Bank be contracted to a private firm by end o f 2002, but at the time the CFAA was prepared, authorities had deferred this process to later in 2003. 2.107 Contingent liabilities, which are potential financial claims against the Government, are neither recorded nor tracked in any of the Government's systems. Contingent liabilities of any nature can have a significant impact on the Government's financial position, including its overall liquidity. 2.108 Debt management could be improved through 0 Creation of an accounting module within SIIF to act as interface between the stand- alone systems maintainedby the Central Bank (International Operations and Fiscal Affairs), the Financial Advisory Unit of the Ministry of Economy andFinance and the GAO, and 0 Regularaudits of debt managers' performance and of systems and control procedures by the Court of Accounts. G. LegislativeOversight of Budget 2.109 Legislative oversight i s carried out by the Parliament (the two chambers the Senate and House of Representatives). The functions include approval of the five-year budget and annual budget modifications; review of budget execution duringthe five-year term; approval of the Audited Annual Budget and Accounting Report; and investigation of allegations raised inreports of the Court of Accounts. 30. BudgetApproval 2.110 The Executive sends the draft five-year budget proposal to Parliament within the first six months after the new administration takes office. Each o f the two chambers (Senate andRepresentatives) makes a statement within 45 days of receiving the proposal, otherwise it i s considered rejected. If there are modifications proposed by one chamber, the other chamber has 15 days to present its opinion. After approval or rejection of any modifications, Parliament has another 15 days to present its opinion; otherwise, the draft budget i s likewise considered to be rejected. Uruguay Country Financial Accountability Assessment 31 2.111 There i s ample provision in the legislation for representatives to request information from the administration, carry out parliamentary investigations, and obtain all the information needed to make decisions. 2.112 The budget i s discussed in the Finance and Budget Committee (CHP) in the House of Representatives. This committee meets most frequently during the first of the five years o f the budget exercise. Budget analysis focuses mainly on the articles of the law, not so much on the financial figures or on the annexed performance information. During the remaining four years, there is little legislative attention to budgeting; for example, there are no discussions or questions on past budget execution experience. 2.113 Budget modifications that require increases in total spending will only be approved as proposed by the Executive if proposals are simultaneously made to offset the increase either through cuts inother spending initiatives or increases on the revenue side. 2.114 The Budget Committees of both chambers listen to the proposals of the different ministries during the budget formulation stage and count on the technical advice of the Executive Branch (GAO, OPP and MEF). There i s a lack of institutional capacity for oversight of public financial administration. The Committees do not have access to the level of professional support that would allow them to effectively oversee the budget process 2.115 Oversight of the Article 220 entities follows a different procedure. These entities prepare their respective budgets andpresent them to the Executive Branch to be included in the Budget Bill. The Executive Branch may modify the original proposal and submit these and the modification to the Legislative Branch. 2.116 The autonomous entities and the decentralized services (commercial and industrial public enterprises) also have a different treatment of their budget in terms of legislative oversight. If the entity accepts the observations of the Executive Branch and the opinion of the Court of Accounts, it will return the document to the Executive Branch for budget approval and its inclusion for information purposes in the five-year National Budget. In the contrary case, a joint meeting of both chambers o f Parliament will resolve the discrepancies by a two-thirds vote of all the members within 40 days from reception. Without an answer from the Legislative Branch, the budget proposal will be approved with the observations of the Executive Branch. 2.117 The actual budget of the Legislative Branch itself falls outside the purview of the OPP, since the Constitution clearly states that each chamber will pass its own budget within the first two months of each legislature by a three-quarters vote of its members, and will advise the Executive Branch of the budget so passed, so that it may be included inthe National Budget. 31. Oversight of Budget Execution There are substantialweaknesses in the legislative oversight of the execution, control and evaluation of the budget. The Legislative Branch does not utilize the Court of Accounts Uruguay Country Financial Accountabilitv Assessment 32 reports as it should and often depends on reports from the Executive. The lack of technical capacity of the Legislative Branch impedes the use of information, even though it has unrestricted access to the information, to carry out its oversight responsibilities. Surveys carried out in 1997 with the legislators demonstrated the shared opinion about the need for better budgetary advice, yet it still remains a serious weakness in the system. It shouldbe notedthat in the 2002 fiscal year, the GAO provided training courses on the SIIF to representatives of the Legislative Power. 2.118 In terms of the information flow, the system i s highly open in terms of analysis and dissemination of the information and this has been richly increased in recent years by the use of information technology in both chambers. The resources made available to the budget committees are equal to those made available for other legislative committees and are considered sufficient. Fifty-three terminals are available to access SIIF online and for consultations. Nevertheless, the legislators, their advisors, and civil society in general need better training and specialization as well as greater access to user-friendly information. H. Human Resources for PublicFinancialManagement 2.119 The legal framework governing human resource management in the public sector includes standards for the designation, promotion and incentives of public officials (Law No. 16.127, August 7, 1990). The law also contains standards on the redistribution of officials to promote adequate staffing of organizations, andhorizontal mobility. 2.120 Under the 1995 Reform, CEPRE prepared a group of proposals for the Budget Law 2000-2004 in the area of human resource management with the objective of improving responsibilities, remunerations, and management capacity in the civil service. The proposals were linked to the simplification and modernization of the job classification system, the definition of a horizontal salary schedule consistent with the required talent needed in the context of technology incorporation, the definition o f a remuneration system that was competitive with the market, career paths and performance evaluation linked to products and results by the organization; and an information system. 2.121 Despite Budget Law 16.736, which introduced reforms in the remuneration, qualification, promotion, training, and other personnel systems, salary structures remain excessively detailed and fragmented. Even though there have been several attempts to rationalize the civil service situation, there continue to be impediments. The issue of public sector human resources cost (salaries, pensions, social security) i s one of the most difficult issues facing the Government because of its budgetary impact. Additionally, the legal framework is rigid and resistance by the professional organizations i s strong. 2.122 Determining the total revenue of each civil servant is difficult and obstructs the payroll control. This i s due to the existence of different working hours' rules, the costly and confusing system of job classification and the multiplicity of complementary salary allocations (salaries passedas operationexpensesor chargedto projectsfinanced by international organizations,etc). 2.123 The Government faces structural constraints to attract full-time good academic or highly technical specialists in the civil service, despite the reform approvedby Law 16.736. The career Urumav Countrv Financial Accountability Assessment 33 scale and the level of salaries do not encourage full-time employment of relevant profiles for high level officials. Despite the reduction of `double employment' cases, qualified civil servants are looking forward to reduce working hours and obtain greater flexibility to balance the salary constraints. This affects the civil servants commitmentto their work and duties. 2.124 Most workers in the public sector are older than those in the private sector. This gap has widened during the last decade as the result of a hiring freeze in the wake of a deteriorating economic situation and the decrease inpurchasing power. 2.125 In terms o f university degrees (level of qualification), Uruguay i s close to the level of developed countries. The percentage of public sector officials with degrees in Uruguay i s similar to that in the OECD countries. The difference is in the distribution within the public sector, where the central government workers have higher degrees in Uruguay than in OECD countries. 2.126 In the central financial administration entities that the CFAA team visited, the general level of professionalism and expertise of public sector employees was good. For examples, the OPP has a staff of about 140 intotal of which 6 professionals are dedicated to the National Budget, 3 professionals deal with investment, and 44 with the reform of the State. Of GAO's 400 employees, about 140 (35 percent) are professionals and 260 (65 percent) are administrative. GAO's Budget Division has 120 professionals, of which 40 at headquarters plus the 17 Central Accountants sitting in the ministries and agencies. The Court of Accounts has a total staff of 360 o f which 248 are professionals. There i s a mix of audit professional and legal personnel. Uruguay Country Financial Accountability Assessment 34 3. COUNTRYFIDUCIARYRISKASSESSMENT 3.1 Fiduciary risk, or the potential loss of development benefits when donor and public funds are used for unauthorized purposes or unauthorized uses go undetected, arises when there i s divergence between good practice in public financial management that promote transparency and accountability and those instituted and/or practiced by the country. 3.2 In view of the accountability arrangements and practices that the CFAA team observed and analyzed in Chapter 2, above, the CFAA concludes that fiduciary risk in Uruguay i s low. The foregoing assessment demonstrates that in general, public sector management inUruguay continues to be transparent, although bureaucratic. 3.3 There are several good practices that have been observed by the CFAA Team. a. The existing legal accountability framework embodied in the TOCAF legal framework i s adequate because: (i) it makes the use of SIIF obligatory for all Central Administration entities; (ii)it clearly divides the roles of the Executive and Legislative Branches in terms o f financial administration; and (iii)and there is a mandate for the adoption of internationally accepted accounting standards for the public sector. b. The national budget revenue and expenditure classification is complete and systematic. C. Budget execution i s carried out in a much decentralized manner. d. Important advances have been made in direct capturing of revenue collected by the banking system. e. The GAO has implemented strong internal controls over financial administration through the Central Accountants and implementation of SIIF. f. The legal framework for contracting debt is adequate. g. Every year, the Budget and Accounting Report i s submitted for consideration by the Legislature. Once the report i s approved, it i s available without restriction to the general public. 3.4 Other due diligence work on transparency and accountability in Uruguay has also concluded that fiduciary risk i s low. Uruguav Country FinancialAccountabilitv Assessment 35 a. Transparency International Index rated Uruguay as 5.1, the second highest after Chile in Latin America on a scale of 1 to 10, with 10 indicating a perception of the most transparent environment; b. The WB's Country Policy and Institutional Assessment rating for Uruguay is 4.0, one of the best inLatinAmerica; c. Both the W B ' s and the IDB's experience with respect to financial management in funded investment projects has been good. The Court of Accounts audits 80 percent of the IDB loans and submits nearly 100 percent o f the audit reports by the due date of April 30. Compliance with the financial covenants and accountability arrangements in WB-financed projects has been satisfactory with 87 percent of projects receiving unqualified audit opinions d. According to the IMF Reports on the Observance and Standards and Codes dated March 2001, progress i s being made in improving the transparency of fiscal policy setting and budget management. The quality of fiscal data and public procurement procedures have substantially improved, performance o f the operational units of the public sector i s more closely monitored and administrative regulations governing competition in the private sector are being revised. e. The internal control structure, the accounting system and the internal audit mechanisms within the Central Bank of Uruguay are appropriate to ensure integrity of operations. 3.5 There are however, some observed practices that increase fiduciary risk. The Recommendations and Action Plan (detailed in the following chapter) suggests some mitigation measures to reduce risks arisingfrom these practices. a. Budgeting i s not oriented toward facilitating and efficiently allocating program spending cuts. This is aggravated b y the lack of coordination between the timing and quantum o f budgeted expenditure and the allocation of resources by the Treasury. b. National Budget coverage of fiscal activity excludes public entities performing noncommercial activities although they are financed by grants and earmarked taxes. c. Financial reporting i s based on fund accounting and i s limited mainly to cash flow reporting. It does not include a comprehensive list of assets (financial and physical), liabilities (accrued, contingent and direct) and capital. d. Overlaps in duties performed by the Internal Audit Office, the Delegated Accountants, the Court o f Accounts, and the General Accounting Office, and ex-ante controls performed by the Court of Accounts reduce the efficiency o f these control functions and increase bureaucracy. Uruguay CountryFinancialAccountabilityAssessment 36 e. Use of funds out of the Treasury Single Account f. Contingent liabilities are notrecordednor monitored. g. Systems of oversight are inadequate. The capacity of the legislature i s limited and civil society does not play an active role. 3.6 During the review, feedback was sought on perceptions of transparency and efficiency o f public financial management practices in Uruguay. These discussions confirmed many of the conclusions of the diagnostic review. 3.7 The Private Sector: Members of a private sector trade association stated that, as a purchaser of goods and services, the Government's procurement practices were largely fair. However, inordinate delays inreceivingpayment reduce incentivesto provide goods and services. Those interviewed are of the opinion that, as a facilitator o f the business environment, the Government i s slow in making information available on forecast debt and interest rates as well as business trends. Corruption i s not perceived to be a serious concern inthe Government. 3.8 Civil Society: It appears that there are neither organized civil society interest groups nor legislative bodies actively seeking government financial information. However, there i s constant coverage of financial accountability issues in the daily newspapers. This information i s generally related to the debt situation, IMF reviews, banking problems, and cutting o f services because of payment arrears. Uruguay Countrv FinancialAccountability Assessment 37 4. PRINCIPALCONCLUSIONS, RECOMMENDATIONS ANDACTION PLAN 4.1 The principal findings of the CFAA are: Stronger linkage between budget decisions and program goals would improve public resource use, There are good rules and procedures for formulating the budget, but apart from aggregate fiscal policy, there i s neither a centralized policy nor a related analytical framework for making budget choices. Most resource reallocation decisions are not driven by related strategic thinking on economic growth. Given the government's current economic problems (scarcity of resources and cash flow limitations), the bulk of budget decisions are directed toward financial discipline, and there is inadequate consideration of the long-term consequences of these decisions on program goals and objectives. Budget tradeoffs are not based on systematic analysis or grounded in clearly articulated policy. The lack of linkage between financial and programmatic control (undertaken b y the GAO and the OPP respectively) reduces the budget's effectiveness as a tool of expenditure management. Implementing SIIF financial accounting subsystem would provide a powerful toolfor decision-making. Although the integrated financial system was designed to provide tools for budgetary, financial, economic and asset management, the financial accounting subsystem has not been implemented. Financial Statements (consolidated assets, liabilities and capital position) are not prepared and financial reporting i s limited mainly to cash flow reports. Spending ministries do maintain lists o f obligations (such as accounts payable, salaries, pensions payable, interest due). However, these lists are not integrated into the financial reporting system and it i s therefore difficult to relate the extent of these obligations to the size and scope of government operations. Given the complexity of operations and sophistication of Uruguay's economy, complete financial information that reflects the financial health o f the government i s an indispensable tool for decision-making and management control and for budget formulation in subsequent years. The implementation of a financial accounting system i s a necessary pre-requisite for moving forward with the commendable initiative begun by the GOU, toward alignment with InternationalAccounting Standards. Uruguay Country Financial Accountability Assessment 38 Control and audit functions could be directed towards efficiency gains and not just compliance. Internal Control and External Audit exercised in Uruguay i s focused on legality and compliance. Delegated Accountants within the line ministry and agencies are involved in operations recording and budget control (transactional activities) as well as preventive control. This could lead to conflicts of interest, which increase the risk of errors and omissions going undetected. Evaluation of efficiency and effectiveness in government entities i s not addressed. The Internal Audit units envisaged in the organic structure have not been developed. Resources used by the Court of Accounts for conducting external audits of decentralized agencies can be better used tofocus on enforcement. Executive control over the Decentralized Services and Autonomous Entities (UTE, ANCAP, ANTEL) is focused toward the regulation and guarantee of market prices and programming the flow of funds from the enterprises to the National Budget, rather than on oversight of financial accountability arrangements and practices. The capacity for financial accountability i s variable among entities. Given the scarcity of resources, the duplication of external audits by the Court o f Accounts and private audit firms cannot be justified. Efforts of the Court o f Accounts should be oriented towards ensuring timely publication of audited financial statements and ensuring that appropriate corrective actions are taken on a timely basis. Cash Management is efficient but slow supplier payments discourage participation and raise costs. The legal and regulatory framework for cash and debt management i s sound. Implementation of the C U N has facilitated an important reduction in idle funds. Through the simplification of procedures and use of e-payment systems, the CUN has provided a mechanism for increased efficiency in the payments to suppliers and other beneficiaries. Unfortunately in practice, some of this efficiency i s lost due to cash-flow constraints. This has a dampening effect on the private sector's willingness to serve as supplier to the government and often-inflated prices are quoted to cover the cost o f extended non-payment. Consolidation of debt reporting responsibilities would release resources for analysis andfront office efficiency. Cumbersome operational procedures for debt management (maintenance of parallel spreadsheets, multiple reports by different entities) inhibit fluid and real- time sharing of information on current and future liquidity needs between the authorities. Rationalization of responsibilities for data management and reporting would reduce duplication of efforts and resources could be reoriented towards increasing analytical capability for debt management and agility in decision- making. Contingent liabilities, potential financial claims against the government, Urumav Countrv FinancialAccountability Assessment 39 are not recorded nor tracked in any of the Government's systems. Unquantified contingent liabilities can have a significant impact on the government's financial position, including its overall liquidity. Access to technical expertisefor members of Parliament would allow them to better advocatethepublic interest on budgetpriorities. The Parliament has structural constraints (insufficient access to technical expertise) that prevent it from exercising effective oversight over public financial management. The quality and capacity o f humanresources for public financial management are very good. However, there i s a need to rationalize activities undertaken by the various entities to ensure deployment of resources in accordance with institutional priorities and in order to promote pubic sector efficiency. 4.2 The current economic climate and institutional arrangements governing public expenditures constrain the scope of efficiency-enhancing reforms. The CFAA has recommended some principles for improving efficiency and transparency and risk- mitigation measures that are commensurate with the level of sophistication in the Uruguayan economy. 4.3 In view of the accountability arrangements and practices that the CFAA team observed, the CFAA concludes that fiduciary risk in Uruguay (the risk that donor and public funds will be used for unauthorized purposes or that unauthorized uses will go undetected) i s low. 4.4 The major recommendations are: 0 National Budgets should include all government entities performing non-commercial activities inorder to achieve comprehensive coverage and ensure compliance with fiscal limits at the aggregate level. 0 The annual budgets and financial statements of autonomous commercial and industrial entities should be presented to the Parliament at the same time as the National Budget in order to achieve greater oversight and comprehensive coverage of the total fiscal activity. 0 In order to improve capacity for performance budgeting, analytical and cost accounting in the Government, a comprehensive management and budgeting capacity buildingprogram should be designed and implemented. 0 The SIIF Budget Evaluation Module (SEV) should be fully implemented, and a framework for analysis of efficiency and effectiveness of resource utilization created, with the active participation of line ministries and agencies and coordination with OPP, inorder to achieve systematic and efficient allocation of resources and use of the budget as a tool of expenditure management. 0 Financial accounting and reporting practices should be expanded, given the complexity of operations and sophistication of the Uruguayan economy. Complete financial information, including fixed assets and contingent liabilities, reflects the financial health of the Government and i s an indispensable tool for decision-making and management control and for budgetformulation in subsequent years. 0 Priority should be given to developing and implementing the SIC accounting module of SIIF inorder to convert the budgetary accounting information into financial reporting. 0 In order to promote a uniform control environment, internal audit units of staff reporting directly to the ministries and autonomous entities should be developed. 0 Ex-ante controls performed by the Court of Accounts and its delegates should be removed. 0 Areas o f overlap in duties performed by the Internal Audit Office, the Delegated Accountants, the Court of Accounts, and the General Accounting Office should be identified inorder to reduce duplication of effort andpromote efficiency. 0 The Court of Accounts should set the standards for public enterprises audits performed by private sector audit firms in order to eliminate duplicate audits while ensuring that constitutional mandates are complied with. Additionally, the Court of Accounts should be empowered and equipped to conduct audits of debt management activities. 0 Procedures and practices should be established for the identification, recording and quantification of contingent liabilities in accordance with FAC International Public Sector Accounting Standard No19, in order for the government to have comprehensive information on the future liabilities for decision-making. 0 The Finance and Budget Committee of Parliament should be provided with sufficient resources and its members should receive adequate training and have access to the expertise that will allow them to debate and opine on budget execution, control and evaluation 4.5 The tables on the following pages outline the specific actions to address weaknesses in public financial management. The CFAA team believes that the Government of Uruguay has the professional capacity to implement these reforms, which the team considers both appropriate and affordable. Once the Government's comments and suggestions have been taken into consideration, the Participating Banks will be willing to fund the preparation of a detailed costing. 4.6 Activities have been prioritized intwo categories, (1) immediate actions needed to mitigate fiduciary risk and (2) medium-term efficiency enhancing reforms. Target dates will be set in conjunction with the Government, taking into account its institutional priorities. Uruguay Country Financial Accountability Assessment 41 4.7 Immediate actions to mitigate fiduciary risk, in order of priority:- AREA SPECIFICACTIONS BUDGETEXECUTION Co-ordination of Expenditure Set up a taskforce to improve the coordination between Management budget preparation andbudget execution ACCOUNTING AND FINANCIAL Completeness o f Financial Implement the accounting module in SIIF. Statements Align the chart of accounts in accordance with international norms (GFISM). Develop and implement a Fixed Asset System within SIIF. Prepare and publish quarterly financial statements (assets, liabilities, capital). Debt Management and Contingent Implement the accounting module in SIIF, including liabilities capability to act as an interface with FINEXT and report generation capability. Establish procedures and practices for the identification, recording, quantification and disclosure of contingent liabilities in accordance with IPSA 19. System Integrity and Data Increase SIIF capacity to comply with and include the audit Reliabilitv trail INTERNALAND EXTERNAL CO TROL Compliance with external control A semi-annual report on outstanding recommendations by the recommendations. Court of Accounts should be provided to the Parliament in order to put pressure on the audited entities to comply with their recommendations. LEGISLATIVE 0VERSIGHT ~Capacity for oversight 0 Conduct needs assessment for strengthening technical secretariats of the Finance and Budget Committee. Form a technical committee that will review the annual reports of the Court o f Accounts. Define working practices that will ensure adequate briefing of the legislature on issues of finance, financial accountability and financial planning. 0 Design and implement a dissemination strategy to communicate findines to the wide Dublic 4.8 MediumTermefficiency-enhancing reforms inorder of priority: rAREA SPECIFICACTZONS INTERNAL AND EXTERNAL COP TROL Rationalization of control activities Create and adequately staff the Internal Audit units within line ministries and autonomous entities (in accordance with Decree 88/00). Implement Internal controls in line ministries and entities, based on the principles and guidelines outlined in the Committee of Sponsoring Organizations (COSO) or INTOSAI Internal Control: Providing a Foundation for Accountability in Government. This will provide assurance of effectiveness and efficiency in operations, reliability o f financial reporting and compliance with applicable laws and regulations. Uruguay CountryFinancialAccountability Assessment 42 Discontinue ex-ante controls of expenses and disbursement, currently performed by the Court of Accounts. Debt Management BuildCapacity inthe Court of Accounts to perform . - annual audits of debt management activities. ACCOUNTING AND FINANCIAL EPORTING Measures supportingthe 0 Establish a cost accounting module in SIIF to link implementation o f performance expenditures with results Wide dissemination of public Design and implement a public awareness campaign on finance information transparency and accountability targeting the civil society Disclose annually on Internet the results of parliamentary discussions on annual budget and public sector financial statements 0 Publish quarterly summary information on major budget variations (revenues and expenditures) causes and impacts CAPACITY BUILDING Budgeting, Analytical and Cost Design of a comprehensive management and budgeting Accounting, evaluation of efficiency capacity building program including curricula, length of of resource allocations program, distribution channels. The program should include budget formulation, evaluation of the efficiency of resource allocation, analytical and cost accounting. Select candidates based on institutional priorities. 0 Implementcapacity buildingprogram. DECENTRALISED andAUTONOA Rationalization of external audits Commission capacity assessment of private audit firms to conduct audits of public entities. 0 Establish terms of reference for audits of decentralized entities. Draft and implement regulatory framework which would re- orient responsibility of Court of accounts from performing the audits to ensuring quality control and oversight of work performed by private audit firms. Improved oversight and scrutiny by Present and Discuss Annual Budgets of entities. Parliament Present and Discuss Annual Financial Statements of entities. BUDGETING ~~ Evaluation of the resources Include the program budgeting provisions in the budge) allocation efficiency preparation guidelines Set up sector budget units to reinforce inter-sector co- ordination Performance budgeting For the next five-year budget cycle, establish budget preparation guidelines and sector strategies to optimize resources allocation Establish a strategy and incentives to encourage the legislativc and executive powers to take ownership of the performance budgeting initiative Establish an analytical framework for the efficiency and effectiveness o f resources allocation Include in the next budget cycle, activity and expenditure reviews supporting the budget priorities Comprehensiveness and compliance Include Non-State Public Entities (Personas Pu'blicas No with fiscal limits Estales) in the next formulation exercise of National Budget. ANNEX 1 REFERENCES - ASSE, Infome ejecucidnpresupuestal ejercicio, 2002. BCU, Endeudamiento Pdblico Metodologia, 2001. BCU,Normas Contablespara Empresasde Intermediacidn Financiera. Centro Latinoamericanode EconomiaHumana,Parlamento y Presupuesto. CEPRE,Informe de Gasto ejecutado en el aAo 2002. CEPRE, Instructivo para el Costeo de Productos en Unidades Ejecutoras (octubre de 2002). CEPRE,Instructivo para el Sistemade Distribucidn del Gastos V.2 (octubrede 2002). CEPRE, Instructivo para la Evaluacidn de Metas e indicadores del DesempeAo. CEPRE, Instructivos elaborados en relacidn con 10s sistemas SEV y SDG. CEPRE, Presentacidn del Sistemade Distribucidn del Gasto (SDG). CEPRE, Presentacidn del Sistemade Evaluacidn (SDG). CEPRE, Tom0 VIdel Presupuesto 2000-2004; www.cepre.opD.buY.uy. CGN, Clasifcador de Tip0 deModificacidn Presupuestal. CGN, Deuda de Tesoreria a128 defebrero 2003. CGN, Informacidn de ejecucidnpresupuestal ejercicio 2002. CGN, Informacidn de ejecucidnpresupuestal-; Deuda de Tesoreria. CGN, Informe ejecucidn presupuestaria del SIIF deproyecto de inversidn. CGN, Instructivo para modificaciones de crbdito. CGN, La Colaboracidn Interinstitucional en las Fuses del Presupuesto Nacional. CGN, Modelo de Comunicacidn de Modificacidn de Crbdito. CGN, Presentacidn del SistemaIntegrado de Informacidn Financiera. Constitucidn de la Reptiblica Oriental del Uruguay. Cumplimiento de objetivos y metas (SEV) aiio 2001 (Rendicih de Cuentas); www.cepre.opp.buy.uy. Decreto 166/1997; Reformulacidn de la Estructura Organizativa de Auditoria Interna de la Nacidn. Uruguay CountryFinancialAccountability Assessment 44 Decreto 32711997; Reformulacidn de la Estructura Organizativa de la Contaduria General de la Nacidn. Decreto 9111997; Reformulacidn de la Estructura Organizativa de la Ofcina de Planeamiento y Presupuesto. Decreto 91.1997;Estructura Organizativa de la Ofcina de Planificacidn y Presupuesto. Instmctivo Interno # 2 Procedimiento para efectuar el seguimiento del proceso de discusidn parlamentaria del Proyecto de PresupuestoNacional,2000-2004. Instmctivo para Formulacidn y presentacidn del Presupuesto,2000-2004. Ley 16. 060; Sociedades Comerciales. Ley 16.736, de 5 de enero de 1996;Disposiciones para la Reforma Administrativa del Estado Uruguay0 en la Ley del Presupuesto Nacionall995-1999. Ley 16.736;Aprobacidn del Presupuesto 2000-2004. Ley 17.040,Empresas Publicas. Ley 17.556,Rendicidn de Cuentas 2001. OPP, Manual del Modulo de Sistema de Informacidn y Seguimiento de Inversiones. OPP, Administracidn Presupuestaria de la Empresa Publica Uruguaya. OPP, Cuadro No. 3 EmpresasPu'blicas Orgknicas y principales normas. OPP, Cuadro resumen de rkgimen presupuestario y de control Ministerios y Entidades Autdnomas y Sewicios Descentralizados. OPP, Instructivo Presupuestal: Empresas Industriales y Comerciales del Estado, 2000/2004. OPP, Instructivo Presupuestal: Instituciones Financieras del Estado, 200012004. OPP, Protagonistas del proceso Presupuestal. OPP, Relacidn de Personas Juridicas de Derecho Ptiblico no Estatales. Ordenanzasdel Tribunal de Cuentas. Organigrama Institucional de la Repdblica Oriental de Uruguay. Rendici6n de Cuentas y Balance Presupuestal- Ejercicio 2001- Tom0 I, Resumen Sistema de Distribucidn del Gasto (SDG) afio 2001 (Rendicih de Cuentas); www.cepre.opp.buv.uy . Texto Ordenadode la Ley de Contabilidad y Administracih Financiera, 2001. Uruguay Country Financial Accountability Assessment 45 ANNEX 2 INTERVIEWS - ~~ ~~ Personasentrevistadas Cargomnidad Adriana Arostemiberrv Asesora TCcnica. Tesoreria General de la Naci6n. Alicia M.L6pez Oficina de Asuntos Internacionales; Tribunal de Cuentas Quintana Contadora Central, Sistema de Salud ~ Alicia Martins, Alicia Rossi Gerente financiero, Sistema de Salud Alvaro Onetto Director Divisi6n de Control Presupuestario de Contaduria General de la Naci6n Alvaro Rossa Coordinador de la Asesoria Econ6mica. Direcci6n General Impositiva Ana Inks Balarini Gerente Administracibn y Finanzas, Ministerio de Ganaderia y Agricultura - Proyecto BID en Ganaderia - Oficina Programa AEroDecuario Angela Medina Directora del Departamento de Presupuesto Nacional de la Oficina de Planeamiento y Presupuesto Presidente del Colegio, Colegio de Contadores, Economistas y ~ Antonio Deus Guardia Administradores del Uruguay Ariel Davrieux Director, Oficina de Planeamiento y Presupuesto Azucena Arbeleche Asesor del Ministro, Ministerio de Econom'a y Finanzas Beatriz Martinez Encargada del Departamento de Contaduria. Direcci6n General Impositiva Carlos Bray Director Divisi6n Auditoria Tribunal de Cuentas Directora Divisi6n Contabilidad, Contaduria General de la Claudina Conde Naci6n Claudio Parodi Jefe del Departamento Contable de Vialidad del Ministerio de Transportes y Obras P6blicas Cristina Coppola L6pez Gerente de Contabilidad Patrimonial; ANTEL Eduardo Ermano Subcontador General. Contaduria General de la Naci6n Eduardo Galicia Tesque Gerencia General de Planeamiento y Gesti6nEducativa ~~ Elisabeth Nuesch Gerente General de Programacih y Presupuesto; Consejo Coates Directivo Central Direccih Nacional de Educaci6n Pdblica; ANEP ~~ Graciela Otonello Contadora General, Intendencia Municipalde Montevideo Uruguay Country Financial Accountability Assessment 46 Personasentrevistadas CargoAJnidad Graciela PCrez-Montero Directora del Departamento de Empresas Wblicas de la Gotusso; Oficina de Planeamiento y Presupuesto Gustavo Costa Rega TCcnico I. Tribunal de Cuentas en UTE CR.; Gustavo M.Bernasconi Auditor Interno de la Naci6n Horacio Fernindez Subdirector de Departamento; Tribunal de Cuentas. Nego Hugo Edelman Director de Departamento; Tribunal de Cuentas en UTE Iganette Mailhe; Directora de Formulaci6n Presupuestaria de la Contaduria General de la Naci6n IsabelMartinez Directora de Asesoria financiera del FONPLATA, Ministerio de trabajo. Isabel Real Gerente, Banco Central Isaac Alfie Director Asesoria Macroecon6mica y Financiera del MEF Ivan Posadas Diputado Nacional, Integrante de la Cornisi6n de Presupuesto de la Cimara de Representantes JosC Luis Corbo Auditoria Internade la Naci6n Cervieri JosC P. Garcia Bol6n Contador Central del Ministerio de Transportes y Obras Pdblicas Juan Carlos Herrera Jefe de Departamento. Contador Delegado del Tribunal de Cuentas en UTE Juan Ottavianelli Gerente de k e a , Banco Central Juan Peiialva Gerencia de ContabilidadPatrimonial; ANTEL Julio Franco Asesor Principal de la Cimara Mercantil de Productos del Pais. Julio L6pez Planeamiento Operativo de Recaudaci6n. Direcci6n General Impositiva Laura Tabarez; Asesor de Formulaci6n Presupuestaria, de la Contaduria General de la Naci6n Subdirectora Divisi6n Contabilidad, Contaduria General de la Liliana Pedetti Naci6n Linder Reves Contador Delegado, Intendencia Municipal de San Jose' Lorena Olmedo Gerencia de Contabilidad Patrimonial; ANTEL LuisM.Sisto; Director Divisi6n de Presupuestos de la Contaduria General de la Naci6n Luis Zunini Contador General, Contaduria General de la Nacidn Uruguay Country FinancialAccountability Assessment 47 Personasentrevistadas Cargomnidad MaCristinade Prado Direcci6n de Formulaci6n de Presupuesto, Codificaci6n, Clasificadores y Programaci6n de Contaduria General de la Naci6n Magela Manfredi Asesora del Ministro de Economia y Finanzas Marcos Bazzi Subgerente Administracibn Acreedores. Contador Delegado del Tribunal de Cuentas en UTE ~ Maria del Pilar Torrado Asesoria de Planificacidn Organizaci6n y Control. Direcci6n General Impositiva Maria InCs Aguerre Asesoria en Planificacibn, Organizaci6n y Control, Direcci6n General Impositiva Maria Lilia Lopez Coordinadora del Area de Prepuestos de Trabajo de la Contaduria General de la Naci6n Mariella Maglia Directora del Depto. de Politicas de Inversi6n de la Oficina de Planeamiento y Presupuesto Monica L6pez Subcontadora General de la Intendenciade Montevideo Nohra Berretta ComitC Ejecutivo para la Reforma del Estado de la Presidencia (CEPRE) Osvaldo Dohir Mazzoli Subdirector General, Divisidn de Auditoria; Tribunal de Cuentas. Pedro Albert0 Jefe del Departamento Convenios Internacionales, Banco Pezzolano Central Raquel Remersaro Convenios Internacionales, Banco Central Roberto Villamil Gerente General de l a Cimara de Industria. RubCnTransini; Secretario Ejecutivo del Comit6 Ejecutivo para la Reforrna del Estado de la Presidencia (CEPRE) Secretaria del Colegio, Colegio de Contadores, Economistas7 Selva Alonzo Alonzo Administradores del Uruguay Sergio Fuicas Tesorero General, Tesoreria General de la Naci6n. SusanaCalcagno Subdirectora de Contaduria de la Secretaria, Gerencia fiinanciera del Ministeriode Transportes y Obras Piiblicas SusanaDiaz Experto de la Divisi6n de Control Presupuestario de Contaduria General de la Naci6n I Walter Guinovart iGerente Financiero, Ministerio de Ganaderia y Agricultura Zoraida Tomas Direcci6n Divisi6n de Presupuestos de la Contaduria General de la Naci6n MAP SECTION