Executive summary

Public policies that provide key services to citizens, such as education, health, welfare, infrastructure and sanitation, are increasingly developed and delivered involving different levels of government. The expectation is that this decentralisation will lead to better local public service delivery through greater citizen engagement and local accountability. For effective delivery of decentralised policies, adequate multi-level governance conditions are needed, such as a fiscal framework, regulatory processes and local capacity. The lack of effective multi-level governance can lead to gaps, duplication and overlap in policy delivery. This not only results in poor value for public money, but also opens the door to regional disparities in the delivery of public services and the potential undermining of citizens’ trust in government.

Supreme audit institutions (SAIs) are crucial stewards of accountability and builders of trust in government because they provide independent oversight, insight and foresight for the spending of public money and the performance of policies. Beyond their role in public accountability, SAIs have the potential to provide an evidence-based and crosscutting view for parliaments, centres of government and citizens about what works and what does not work in public policies. In a decentralised context, SAIs face complex challenges in fulfilling this role. With many local and regional governments involved in policy design and service delivery, SAIs must gather evidence on policy outcomes across different levels of government. Moreover, to identify issues in policy delivery across levels of government, SAIs also need to assess the multi-level governance system associated with the decentralised policy under scrutiny. The challenge can be even greater in countries where, in addition to the SAI, multiple subnational external audit bodies exist with mandates to audit regional and local government.

Brazil is a federal country with a high degree of local autonomy. All levels of the Brazilian government share responsibilities for decentralised policies in healthcare, education, social security, welfare, housing and sanitation, among others. Regional disparity in the delivery of these services is especially prevalent in Brazil, while multi-level governance arrangements, crucial for ensuring effective co-ordination in the case of decentralised policies, are highly fragmented.

Similarly, the external audit system in Brazil, composed of 33 courts of accounts, is decentralised across levels of government. The Federal Court of Accounts (Tribunal de Contas da União, TCU) is responsible for scrutinising the federal budget and resources, including federal funds transferred to states, the federal district and municipalities. The 26 state courts of accounts (Tribunais de Contas do Estado, TCEs) are responsible for auditing at the state level, and in 23 states, for auditing the municipalities as well. In addition, there are 6 municipal courts of accounts (Tribunais de Contas dos Municípios, TCMs) responsible for exclusively auditing municipalities.

In this landscape of fragmented multi-level governance and overlapping mandates within the audit system, the OECD and Brazil’s Courts of Accounts—collectively called TCs—sought to improve their performance, impact and relevance, through improved collaboration and more co-ordinated oversight of decentralised policies. The OECD and TCs carried out this effort under “Project Integrate” (Projeto Integrar), which led to recommendations for TCs to strengthen tools and practices in three key areas: collaboration, using indicators in audit selection, and assessing multi-level governance in audits. The recommendations in this report, though developed for and with Brazil, are also relevant for other SAIs that oversee decentralised policies and programmes, involving federal and subnational governments.

Systematically sharing knowledge and analysing information within the whole audit system—national and subnational levels—will allow the strategic selection of audits for greater impact, while respecting each entity’s unique context, processes and mandate. TCU and TCs could establish a “national council of external audit,” or alternatively, strengthen existing networks to enhance collaboration and co-ordination among external audit bodes, focusing on the following priorities: 1) define the collaborative selection of audits as a strategic objective of the network; 2) develop a shared methodology for the prioritisation of audits; and 3) integrate the multi-level governance dimension as part of a pre-audit study or preliminary audit phase.

Taking into account regional variations in socio-economic conditions and policy outcomes is critical when selecting audits in decentralised policy areas in Brazil. Data and evidence at the local level are widely available in Brazil and can provide insights into differences among regions. TCs could systematise their risk-based audit selection practices by making better use of these data, develop a common method and build a shared risk-map. Specifically, TCs could select a limited set of available indicators, based on an outcome-oriented logic model of a decentralised policy, to create risk scenarios that would help explain and anticipate poor policy performance. This report provides detailed recommendations for creating and using this methodology to select audit topics. For Projeto Integrar, the TCs selected the field of education as the pilot policy area. Once the approach is an established practice, TCs could extend the method to other decentralised policy areas.

Effective auditing in a decentralised context requires TCs to take into account multi-level governance for each policy sector that will be audited. They can do that by developing a policy-specific multi-level governance assessment framework and using the framework to plan and design audits. This report recommends a generic multi-level governance assessment framework for Brazil with six dimensions that they can assess during an audit, including: 1) assignment of responsibilities; 2) funding of subnational responsibilities; 3) capacities of subnational governments and capacity building; 4) co-ordination among levels of government; 5) performance monitoring and transparency; and 6) fiscal equalisation systems and regional policies to reduce territorial disparities. In addition, the report recommends a specific framework for assessing multi-level governance in education in Brazil, including a methodology, questions and indicators to define maturity levels for each of these dimensions.

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