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More Effective and Efficient Public Expenditure Management in Chile

June 3, 2015

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A city view of Santiago, Chile.

World Bank / Istock.

Building upon previous advances in public financial management in Chile, continuing work at the central and subnational levels contributed to the increased efficiency and transparency of public financial management. Between 2007 and 2014, the national financial administration system (SIGFE II) was upgraded and implemented in approximately half of central government agencies, and a municipal financial information system (SIFIM) implemented in 100 municipalities.

Challenge

In 2002, the Chilean government began work on a financial management information system that would shift its budgeting practices from controlling expenditures towards promoting effective and efficient resource use. By 2007, this system, called the Sistema de Información para la Gestión Financiera del Estado (SIGFE), had become a major feature of the government’s budget management system. Although it represented a significant advance in Chile’s financial management system, further efforts were pending. The system needed technological updates that ensured scalability, adaptability, and interoperability with other systems, linking of the budget administration system, and mainstreaming the SIGFE team into the government structure. Due to the government’s decentralization efforts, municipalities were taking on more responsibilities for service delivery.  Given many municipalities’ weak financial administration and a lack of aggregate municipal financial data, it was necessary to strengthen financial administration and make the mechanisms for collecting information easier to use, more efficient, and accurate.

Solution

The Second Public Expenditure Management Project was designed to support the further consolidation and expansion of SIGFE, improvements in budget procedures, and the strengthening of financial administration at the municipal level. 

Building upon advances made under the first Public Expenditure Management Project, the activities of this project focused on developing and rolling out an upgraded SIGFE system (SIGFE II), which shifted the management model and the operation of the government’s financial management information system from accounting transactions to administrative/financial transactions. Additional activities included preparatory work for the development of an updated budget administration system (SIAP 2.0), as well as the development and implementation of the municipal financial information system (SIFIM) and a municipal information aggregator.

Results

Project activities supported the increased efficiency of financial management, budget formulation and execution operations, and the transparency of public expenditure management at the central and municipal levels.   

  • SIGFE II was developed and implemented in 86 (half) of the central government institutions.  The new system simplifies processes, reduces the requirement of high accounting skills to operate, and provides better performance management information for decision making.
  • With the roll-out of SIGFE II, government agencies have real time, online access to their information. Oversight agencies have access the day after the end of the period, facilitating transparency and accountability. 
  • SIGFE is now automatically updated with information on each year’s initial budget law from the budget administration system (SIAP), and information entered into SIGFE’s payments module is automatically reflected in budget execution.
  • SIFIM, which facilitates medium-term financial planning, was rolled out to 100 municipalities. The system covers budgeting, accounting, recovery orders, treasury, procurement, personnel and remuneration. It ensures timely access to information and the compatibility of the information provided to central government agencies, while also saving participating municipalities from having to enter information in multiple systems.


Bank Contribution

The Bank loan of US$24.8 million loan built upon previous support to public financial management in Chile. It continued work undertaken by the first Public Expenditure Management Project and built upon experience at the municipal level through the First and Second Municipal Development Projects.

Partners

The Project was implemented by the Budget Directorate in the Ministry of Finance (Dirección de Presupuesto – DIPRES), the Sub-secretariat for Regional Development within the Ministry of the Interior (Subsecretaría de Desarrollo Regional y Administración - SUBDERE), and the Office of the Comptroller General (Contraloría General de la República – CGR).  These entities provided strong support to project implementation, proactively adjusting to circumstances encountered.  Work benefited from strong financial support from the Government; having disbursed more than 99 percent of Project funds by December 2011, the Government continued activities to advance on Project objectives through local financing.  Over the course of implementation local support totaling U.S. $56.76 million was provided, demonstrating a clear commitment to objectives well-beyond the scope of the loan.

Moving Forward

The Bank does not currently have immediate plans for a follow-up project; however, the topics addressed are highly relevant and are expected to continue to remain such, with more government entities being expected to join SIGFE II and additional municipalities expected to be incorporated within SIFIM in the near future. SIFIM also expects to incorporate additional municipalities.  The government has defined short term timelines to complete pending work on an updated budget administration system (SIAP 2.0) and the municipal information aggregator.

Beneficiaries

By reducing the lags in the generation of information, the project benefitted policy-makers at the central and sub-national levels. By strengthening financial management and expenditure effectiveness, the project also benefits taxpayers and users of public services. However, the project’s immediate beneficiaries were the municipalities using SIFIM and the Ministry of Finance, the Office of the Comptroller General, and the other government agencies, in which SIGFE II was implemented. 





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