Novos Enfoques do Controle e os Avanços a Administração Pública

1. Fórum sobre Auditoria em Programas Co-Financiados Novos Enfoques do Controle e os Avançosa Administração Pública Michael Barzelay Professor of Public Management London School of Economics and Political Science Executive Director, Center for Transformation and Strategic Initiatives

2. This session is a project • It is a time-limited undertaking • It has multiple objectives • It exhibits organizational complexity • It involves a degree of novelty • It poses risks • It is co-financed

3. Work breakdown structure for project as a whole

4. Work breakdown structure, in greater detail

6. Objetivos (1/2) • Audience gains insights into ‘control’ as part of results-oriented public management • Audience able to relate more thoughtfully to presentations in subsequent sessions • The audience prepares to take insights and advice back home

7. Objetivos (2/2) • Atividade 1: Palestra – 4 steps • Speaker completes delivery of the presentation • Audience can hear the interpreters clearly • Nobody ever feels ‘lost in translation’ • Atividade 2: Debate – 1 step • Participants ask questions of general interest • Speaker responds in a direct and informative way • At least 7 meaningful question-answer exchanges are completed • Atividade 3: Compreensão e reflexão – muitos passos

8. Advice for accomplishing Activity 3 • Identify one or more assumptions in your current thinking about which you now have some reservations (ressalvas) • Select one or more ideas that came up in the session and that you appreciated • Conduct a thought experiment: what novel issue or unexpected question might I raise with colleagues over the next 6 weeks about control and managing for results?

9. Project risk analysis • Business continuity risks - insignificant • Reputational risks – moderate, but mitigated • Source: Insufficiency of speaker’s expertise • Prevention: Topic selected as easy to discuss • Mitigation: Brazilians’ identity as being highly charitable toward unintentional errors will be evoked in the circumstances • Operational risks – significant, but mitigated • Sources: The approach to results based public management and control presented here is not universal – may seem strange and/or irrelevant; untested presentation • Prevention: Audience given advice on how to process the presentation • Mitigation: Brazilians’ cultural identity as gracious hosts will be evoked in the circumstances

10. Finally, on to substance

11. Headlines • The managerial concept of control is not the same as that understood by many experts in public administration, or by the media – it needs to be learned, explained, and reinforced • Managing for results is a developmental journey, not a static aspiration or fixed approach – getting to the future expeditiously requires resourcefulness and ingenuity • Review bodies should be managed strategically, leveraging institutional prerogatives to deliver actions that improve control environments in a growing number of critical sites within the public sphere • Important strategic issues relate to the cognitive and organizational complexity of review activities, as well as institutional positioning • Accomplishing organizational and systemic change requires both leadership and management, working hand-in-glove

12. Step 1 Conceptualizing the domain (6) 1A Control (4) 1B Results-Oriented Management (2) Let’s borrow words from both the professional and university milieux, and use them consistently

13. Step 1AConceptualizing Control (1/3) • Control is accomplished through formalized, recurring processes, during which a considerable number people playing diverse roles in complex undertakings are meant to generate, interpret, and respond to actionable information • Processes are intentionally ordered happenings, which do not always turn out like participants intended (Karl Marx, Donald Rumsfeld) • Complex undertakings include organizations, programs, and projects, generally involving multiple entities, numerous people, distant sites, and ambiguous technologies • Actionable information is information that would tend to evoke appropriate responses – such as taking corrective action – by those who receive it (Simon, March, Lindblom)

14. Step 1AConceptualizing Control (2/3) • A control system is a representation of the built-in features that shape and regulate processes in a particular site • A system exists when all participants in it have similar mental models of its elements, intended functioning, and failure modes • An illustration of features: separation of duties in an organization that manages the disbursement of and accounting for funds • Control environments are systemic qualities of the setting in which control systems operate and control processes proceed • The control environment is a concept that is often stretched to include all influences over control processes apart from control systems • Control environments have systemic qualities in the sense that the effects of one contextual factor (e.g., known or presumed deviation of action from norms by authority figures) from depend on the presence of others (e.g., forensic capabilities of media) in or connected to the site

15. Step 1AConceptualizing Control (3/3) • SImplifying • Control of complex undertakings is accomplished through processes, i.e. an orderly series of defined happenings • Control systems prescribe how, when, and by whom information is generated, presented, and interpreted • The control environment influences what happens in processes, mediating the effect of control systems • You already knew this, perhaps in other terms

16. Step 1AAnd so?(E dai?) • This language is meant to demystify, so that rational analysis and dialogue (across institutional and disciplinary lines) about control in public management can be accomplished • This language is consistent with international conventions in the fields of internal control and auditing • Differences in degrees to which control systems influence processes can be acknowledged, as a step toward thinking concretely about how to circumvent unsatisfactory control environments

17. Step 1 Conceptualizing the domain (6) 1A Control (4) 1B Results-Oriented Management (2) Let’s borrow words from both the professional and university milieux, and use them consistently

18. Step 1BConceptualizing Results-Oriented Management • Results-oriented public management (ROPM) is an ambiguous term, an inexact science, and an multi-form movement • As a term, meanings of ROPM vary because of management itself is an interdisciplinary field • Whatever kind of science ROPM is, it is not an exact science • As a movement, ROPM has active followers, whose involvement influences what it becomes

19. Step 1BConceptualizing Results-Oriented Management • It is often presented as in opposition to • No management, large pockets of informality • Traditional French mode of public bureaucracy • Considering the annual budget as the strategic plan • Entity-based planning, programming, budgeting, execution, evaluation • Focus on constraints and risk avoidance (rather than aspirational goals and risk appetite) • Lack of focus on delivery

20. Step 2 Trialling a substantive theory of control Control works well Control works poorly Academic advice Novos Enfoques do Controle....

21. Step 2The control process is inherently complex • Activity complexity: multiple, loosely coupled types of control activity, occurring concurrently, sequentially, reciprocally • Cognitive complexity: largely skill based, interdisciplinary • Organizational complexity: multiple bounded units determining formal process features and operating within each activity

22. Step 2Control works well by • Repeatedly sensing the direction of activity in relation to hoped-for consequences (sentinel effects)  • Routinely producing impartial information (standardization effects)  • Directing the same information to anyone with a need to know (cohesion & alignment effects)  • Exploring implications about how lines of action need to be readjusted (learning & calculation effects)  • Effecting adjustments in value tradeoffs, relationships, and actions (adaptation effects)

23. Step 2Control works poorly by • Neglecting to sense the direction of activity in relation to hoped-for consequences (sensory deprivation effects) • Inviting charges or insinuations that information is biased (ambiguity & cynicism effects) • Compartmentalizing information (fragmentation & suspicion effects) • Elongating information generation and distribution cycle times (perfectionist & irrelevance effects) • Averting periodic reality tests, looking backwards, sideways, and forward (myopia & delusion effects) • Exploiting niche opportunities to balkanize bureaucracies and proceduralize processes (institutional buffering and proceduralization effects)

24. Seek & activate Sentinel effects Standardization effects Cohesion and alignment effects Learning and calculation effects Adaptation effects Avoid & suppress Sensory deprivation effects Ambiguity & cynicismeffects Organizational fragmentation & suspicion effects Perfectionist & irrelevance effects Myopia & delusion effects Institutional buffering & proceduralization effects Step 2Academic advice Performance capability effects Bureaucratic pathology effects

25. Step 3 Case studies LSE Case Study LSE Case Study in Progress ....e os Avanços a Administração Pública

26. Brazil in Action Management System Prior Events Contemporaneous Events Later Events Achieving monetary stability Leading Cardoso Government Restoring Democracy PPA 1995-99 Liberalizing Trade Brazil in Action program Study of Axes of National Integration & Development t 1/95 4/96 1/98 1/99 1991

27. Brazil in Action – Project Portfolio

28. Brazil in ActionConception • The president should visibly lead a national process of development • Macroeconomic stability is not enough • Infrastructure creation is one key to development • Government must lead in this area • Implement a program of presidential priority projects • Carefully selected projects • Program identified with President • Introduce a management system • “The root cause of poor implementation is management, not resources” • “Guarantee” funds in Federal budget • Unifying trademark

29. Brazil in ActionConception • The management system should be based upon project management ideas and techniques • Project definition and goal setting • Project managers – personal responsibility • Real-time management information system • Anticipate problems, eliminate constraints • Use funding mechanisms to incentivize project performance Silveira

30. Insights • Managerial processes are functioning wholes, with interdependencies among parts, such as • Consensus over project priorities • Project manager roles and responsibilities • Real-time management information system • Committed budgets • Budget execution linked to project progress • Access to top-level decision-makers to resolve major conflicts arising in project delivery • Media attention

31. Step 3 Outlining case studies ....e os Avanços a Administração Pública

32. Changing control and auditsystems in the EU

33. Actors • European Commission • College of Commissioners Vice President – Siim Kallas • Deputy Director, D.G. Budget, Brian Gray • D.G. Agri, D.G. Regio, D.G. Research, D.G. Employ • Internal Audit Service • European Parliament-based – Committee on Budget Control • MEPs: Jan Muller (NL), Inge Graessle (D),Dan Jorgensen (DK) • Committee staff • European Court of Audit • Members of the Court (including Caldeira) • Staff • Member States and actors within their borders

34. Contexts • Macro context (motivators) • Treaty, Euroscepticism • Net payer’s attitudes • Ascendancy of EP • Barroso reappointment candidacy • Installed base of practices (platforms, problems) • Internal control practices within the EC • Declaration d’assurance (DAS) methodology • Change management practices • Learning environment (beliefs, models) • Progress in DG Agri • Single Audit Opinion • Windows of opportunity (attributions of opportunity, focus of effort) • New Commission • Revision of Financial Regulation • Financial Perspectives • 2006 Discharge Procedure

35. How it happened Contemporaneous Events Constitution/Treaty; Financial Perspectives; Cocobu Prior Events Episode Forming Barroso College (2004-05) Maastricht Treaty  ECA – DAS (1992)  Annual DAS reports Developing, authorizing, and following up on the Action Plan toward an Integrated Internal Control Framework Santer Commission Prodi-Kinnock reforms Closing ‘control gaps’ in spending areas Changes in Agri Control Conducting the discharge for FY 2006 (2008) Related events ECA Single Audit Opinion Revising the Financial Regulation Sanctioning Member States for not providing audit summaries

36. Insights • Changing the direction of control system development and control environment evolution begins by discrediting the past • Processes through which control is accomplished are influenced by control environments and control systems, which co-evolve • The concepts of integrated internal control and the single audit are workable, even though hard to apply fully • A focus on legality and regularity of underlying transactions is not free of greater evils: it tends to diminish opportunities to practice risk-based auditing, suffers from high costs of control, and may distort the control environment from a results-oriented perspective

37. Insights • The co-evolution process can be guided by smart projects as well as energized by political leadership • Systemic change requires multiple such projects, in some relation to each other • Control systems adopted by external auditors may not fit program conditions: e.g., the declaration of assurance is reported annually, while most of the money is spent on multi-annual EU programs

38. Step 4 Review and conclude Novos Enfoques do Controle e os Avanços a Administração Pública

39. Work breakdown structure

40. Objetivos (1/3) • Audience gains insights into ‘control’ as part of results-oriented public management • Audience able to relate more thoughtfully to presentations in subsequent sessions • In exercising their responsibilities back home, the audience is motivated to consider the relevance of the developmental trajectories of other Tribunais de Contas, SAI’s, controlling organizations, and management agencies

41. Advice for accomplishing objective 3-3 • Identify one or more assumptions in your current thinking about which you now have some reservations (ressalvas) • Select one or more ideas that came up in the session and that you appreciated • Conduct a thought experiment: what novel issue or unexpected question might I raise with colleagues over the next 6 weeks about control and managing for results?

42. Step 1AConceptualizing Control (3/3) • In sum • Control of complex undertakings is accomplished through processes, i.e. an orderly series of defined happenings • Control systems influence such processes, especially by features that prescribe how, when, and by whom information is generated, presented, and interpreted • The control environment influences what happens in processes, mediating the effect of control systems

43. Step 1BConceptualizing Results-Oriented Management • It is often presented as in opposition to • No management, large pockets of informality • Traditional French mode of public bureaucracy • Considering the annual budget as the strategic plan • Entity based planning, programming, budgeting, execution, evaluation • Focus on constraints and risk avoidance (rather than aspirational goals and risk appetite) • Lack of focus on delivery

44. Seek & activate Sentinel effects Standardization effects Cohesion and alignment effects Learning and calculation effects Adaptation effects Avoid & suppress Sensory deprivation effects Ambiguity & cynicismeffects Organizational fragmentation & suspicion effects Perfectionist & irrelevance effects Myopia & delusion effects Institutional buffering & proceduralization effects Step 2Academic advice Performance capability effects Bureaucratic pathology effects

45. Step 3Insights • Changing the direction of control system development and control environment evolution begins by discrediting the past • Process through which control is accomplished are influenced by control environments and control systems, which co-evolve • The concepts of integrated internal control and the single audit are workable, even though hard to apply fully • A focus on legality and regularity of underlying transactions is not free of greater evils: it tends to diminish opportunities to practice risk-based auditing, suffers from high costs of control, and may distort the control environment from a results-oriented perspective

46. Step 4Conclusions • The managerial concept of control is not the same as that understood by many experts in public administration, or by the media – it needs to be learned, explained, and reinforced • Managing for results is a developmental journey, not a static aspiration or fixed approach – getting to the future expeditiously requires resourcefulness and ingenuity • Review bodies should be managed strategically, leveraging institutional prerogatives to deliver actions that improve control environments in all critical sites within the public sphere • Important strategic issues relate to the cognitive and organizational complexity of review activities, as well as institutional positioning • Accomplishing organizational and systemic change requires both leadership and management, working hand-in-glove

47. Step 4 Review and conclude Novos Enfoques do Controle e os Avanços a Administração Pública

48. Fórum sobre Auditoria em Programas Co-Financiados Novos Enfoques do Controle e os Avançosa Administração Pública Michael Barzelay Professor of Public Management London School of Economics and Political Science Executive Director, Center for Transformation and Strategic Initiatives