This Country Financial AccountabilityAssessment (CFAA) is also a "fiduciary"assessment, given it examines Brazil's Public FinancialManagement system, to form a judgment on the risk to Bank,and country funds within the Brazilian budget, and the levelof accountability and transparency concerning such spending.Moreover, this CFAA will feed into the Bank's lendingprogram, in particular a second Fiscal Reform and StructuralAdjustment Loans in FY03. Partly reflecting the lack of aPublic Expenditure Review, this CFAA also focuses onupstream budget development issues, including linkages withthe government planning systems, as well as downstreambudget execution issues. The Brazilian Government appearsstrongly committed to improving its public financialmanagement, in particular, two major initiatives have beenrecently undertaken, which significantly impacts on publicfinancial management: a) the Multi-Annual Plan for 2000-2003adopted a new approach, aimed at improving resourceallocation through a program-based approach covering allbudget expenditures, involving the setting of programobjectives, and measuring performance; and, b) the Law onFiscal Responsibility, which appears likely to significantlyimpact on reinforcing commitments to fiscal discipline atthe federal government level, and enforcing greater fiscaldiscipline on sub-national government. Nevertheless, thebudget system is fragmented, and complex, hampering resourceallocation in line with stated priorities, and, itsexecution does not reflect program priorities.Notwithstanding needed improvements, the overall conclusionof this assessment is that the Brazilian public financialmanagement system, provides reliable information, adequatesystems exist to manage funds at the national level, and,there is a high level of fiscal transparency, bothsupporting an adjustment lending program.
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