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Brazil Strengthens Oversight of Public Expenditures

April 4, 2014

Brazil’s Office of Controller General (CGU), with Bank support, strengthened its fiscal transparency and the efficiency and accountability of public finances by refining the role, methodologies, and work tools of the Secretariat of Internal Control (SFC). Bank intervention helped modernize the SFC’s audit, compliance, and investigative tools, and develop two prototype information systems.

Challenge

The Brazilian Government has a fairly robust internal control framework; however, in the context of the recent establishment of subnational control units and the supreme audit institution’s responsibility to audit federally transferred funds, there were gaps in oversight responsibilities for large federal programs that transfer financial resources to sub-national governments and entities. The Government needed to clarify the roles of all the involved entities, avoid overlap of functions, promote stronger collaboration, and eliminate gaps in the framework for oversight and control.

Solution

In support of the Government’s effort to modernize its audit, compliance, and investigative tools, the project supported the following activities:

  • Diagnostic work with the SFC.
  • Work with the CGU to prepare a diagnostic and assessment report of the principle types of audits.
  • A re-design of the integration of CGU information systems, audit and review procedures, and allocation of resources.

The project also supported the development of two prototype information systems in areas identified as CGU priorities:

  • Follow-up on previous audit findings.
  • Administration of documents and working papers.

The project contributed to an institutional strengthening plan that is a key element of the CGU Strategy for 2012-14. One vivid example is the new requirement for CGU to measure the impact of its audits, including the implementation percentage of the recommendations issued.

Results

By 2012, Brazil had modernized its audit practices, tools, and key institutions. A more robust internal control system now enables greater transparency of public sector expenditures. The new system now meets the International Standards on Auditing. The project activities contributed to this institutional strengthening plan, which is a key element of the CGU Strategy for 2012-14. The functional scope of the office of the Controller General expanded from technical review of audits to include advisory support with respect to the overall efficiency of public sector expenditures. At the subnational level, there are positive spillover effects, as the internal control agencies adopt the new paradigm. One vivid example is the new requirement for the CGU to measure the impact of its audits, including the implementation percentage of the recommendations. This derived from a detailed recommendation that emerged from the Project activities. 

Bank Group Contribution

The Bank supported a wide range of analytical and advisory services between May 2009 and March 2012. The project’s goals included:

  • Identify gaps in audit practices.
  • Improve audit procedures, tools, and lines of responsibility.
  • Strengthen institutional capacity and skills of audit practitioners.
  • Improve the efficiency and effectiveness of the oversight of public expenditures, in light of the increasing complexity and comprehensiveness of expenditure programs. 

Partners

The Bank financed the project activities through a grant of US$350,000 from the Institutional Development Fund (IDF). The CGU is also using funds from its own budget to implement the recommendations.

Moving Forward

Some of the the recommendations that emerged from the Project activities have been adopted. For example, an electronic management system for Working Papers and a Monitoring and Evaluation system of institutional results have been introduced. Going forward, Brazil will need to address a significant need for further capacity building and additional support for internal control agencies to implement fully its strategy for 2012-14. The Project provided what could be potential directions for Bank support for the strengthening of internal controls, particularly actions to support plan implementation and capacity building at the sub-national level.

Beneficiaries

The primary beneficiary was the Office of the Comptroller General of Brazil (CGU) and its Federal Secretariat of Internal Control (SFC)

“The project enabled the directors and staff of SFC to review our activities, enabling better planning and a realignment of activities; all this contributed significantly to improving internal controls in Brazil.”

Ronald da Silva Balbe

Director of Planning and Coordination of Control Actions, Federal Secretariat of Internal Control (SFC), a key unit of Brazil’s Office of Controller General