« Public Investment Management in East/West Africa – Self-Assessment | Main | Top Ten PFM Blog Posts of 2016 »

January 11, 2017

Implementing a Public Services Cost System in São Paulo (Brazil)

SauPaulo

Posted by Mario Pessoa and Gerardo Uña[1]

Para acessar a postagem no blog em português clique aqui
Acceder a la entrada del blog en español haga clic aqui

The Government of the State of São Paulo, Brazil, is implementing a sophisticated new public services costs system (PSCS). The system aims to improve the efficiency of public services, strengthen budget realism, generate savings, and increase the transparency of public spending. The PSCS seeks to influence both the macro level of budget management, and decisions at the micro level, i.e., in relation to the final services provided to citizens by each cost center. For example, in the case of the State Secretariat of Education (SSE), PSCS would calculate the costs associated with the provision of basic education per pupil at the level of each of the 5,500 schools, each of which is a center cost. In the case of the Secretary of Penitentiary Administration, cost reports for each of the 166 state penitentiaries are routinely produced by PSCS already.

International experience has shown that implementing cost systems in the public sector is not a simple task. Challenges include the complexity of public administration; the lack of a standardized and widely proven cost methodology in the public sector; the need to implement a continuous training process for users; and the scale of financial information to be processed. The huge volume of public services provided by the State of São Paulo also generate major challenges for the PSCS.   Paulo is the most developed state in Brazil with a population of 41.4 million people, and a GDP (2011) that represents approximately 30 percent of Brazil, which is equivalent to the size of the largest countries in Latin America.

Since 2011, the IMF’s Fiscal Affairs Department has been supporting the São Paulo Secretary of Finance (Secretaria da Fazenda do Estado de São Paulo - SEFAZ) in the preparation of PSCS’s conceptual design and methodology, incorporation of cost information into the integrated financial management information system (SIAFEM[2]), and the implementation of the PSCS in four key sectors of public administration[3]: education, health, penitentiary administration, and youth correctional services. Most of these sectors have been generating and using cost information in their budget management since 2015.

The "Public Services Cost System Manual: A Guide of Implementation", published in 2016, is intended for use by officials of SEFAZ and other state secretariats in order to guide the adoption of the SCSP. The manual presents the main concepts, procedures, criteria and instruments to be used in the implementation of the cost system. It comprises seven sections:

  1. PSCS: Main characteristics
  2. PSCS: Implementation process: general methodology and organizational aspects
  3. Stage 1: State secretariat and other entities - profile and definitions
  4. Stage 2: Cost centers and services matrix definitions
  5. Stage 3: Procedures and criteria for cost estimation and allocation
  6. Stage 4: Identification and use of services’ - quantitative indicators
  7. Stage 5: Acceptance of the PSCS

The manual also contains four annexes with relevant information: I. Models of cost reports; II. Accounting cost procedures; III. Questionnaire for assessing the complexity of entities, and IV. References.

The progress made in implementing the PSCS shows that the experience of São Paulo is relevant to other national and sub-national governments. The approach adopted and the ability to generate cost information based on the accounting information processed by the public financial management integrated information system – are both innovative and practical. The success of PCSC demonstrates that it is feasible to implement a solution which, though technically demanding, is less complex than Activity-Based Cost (ABC) systems, which are both costly and difficult to maintain in the public sector.

To access the Manual click here

To access the PFM book in Latin America click here

For more information on the Secretariat of Finance of Sao Paulo, visit http://www.fazenda.sp.gov.br/

[1] Mario Pessoa is Deputy Division Chief, and Gerardo Uña a Technical Assistance Advisor in the PFM M2 Division of the IMF’s Fiscal Affairs Department.

[2] Sistema de Integrado de Administración Financiera para los Estados y los Municipios.

[3] For more information, see J.L. Chang and Pessoa M.  “Finding the Costs of Public Services: The Experience of the State of São Paulo in Implementing a Cost System”, Chapter 6 in C. Pimenta and M. Pessoa (Editors), Public Financial Management in Latin America: The Key of Efficiency and Transparency, IADB/IMF Washington DC (2015).

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.

Back to top of page
©2007 IMF. All Rights Reserved. About Us | Terms of Use