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

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

Work breakdown structure for project as a whole Conducting and Participating in this session 1 Palestra: Delivering and hearing presentation in understandable languages 2 Debate: Creating and following exchanges between speaker and audience 3 Compreensão e reflexão: Grasping and taking ideas from the session

Work breakdown structure, in greater detail 3 Compreensão e reflexão 3-1 Imagining what speaker means by what he says 3-2 Reformulating what is heard into points of relevance from audience perspective 3-3 Forming intentions about follow-up reflection and action

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

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

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?

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

Finally, on to substance Conducting and Participating in Michael Barzelay’s session 1 Converting prepared remarks into audible Portuguese 2 Creating and following exchanges between speaker and audience 3 Grasping and taking ideas from the session

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

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

Step 1A Conceptualizing 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)

Step 1A Conceptualizing 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

Step 1A Conceptualizing 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

Step 1A And 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

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

Step 1B Conceptualizing 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

Step 1B Conceptualizing 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

Step 2 Trialling a substantive theory of control Control works wellControl works poorlyAcademic advice Novos Enfoques do Controle....

Step 2 The 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

Step 2 Control 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)

Step 2 Control 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)

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

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

Brazil in Action Management System Prior Events Contemporaneous Events t 1991 Later Events Study of Axes of National Integration & Development Brazil in Action program 4/961/981/99 PPA Restoring Democracy Liberalizing Trade Achieving monetary stability Leading Cardoso Government 1/95

Brazil in Action – Project Portfolio

Brazil in Action Conception 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

Brazil in Action Conception 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

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

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

Changing control and audit systems in the EU

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

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

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

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

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

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

Work breakdown structure Conducting and Participating in this session 1 Palestra: Delivering and hearing presentation in understandable languages 2 Debate: Creating and following exchanges between speaker and audience 3 Compreensão e reflexão: Grasping and taking ideas from the session

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

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?

Step 1A Conceptualizing 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

Step 1B Conceptualizing 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

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

Step 3 Insights 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

Step 4 Conclusions 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

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

Michael Barzelay Professor of Public Management London School of Economics and Political Science Executive Director, Center for Transformation and Strategic Initiatives Fórum sobre Auditoria em Programas Co-Financiados