This report on governance inBrazil's unified health system assesses resourceallocation and management, planning and budgeting functions,and budget execution at different levels of government forpublic expenditures on health services. The emphasis is onunderstanding the incentives generated for serviceproviders, and the overall soundness of the accountabilitiesestablished in the public health services expendituresystem. The analysis seeks to identify weaknesses ofaccountabilities for service provision that stem from thestructure and process of intergovernmental and providerfunding flows and related managerial practices. The paperdraws on and enhances an accepted governance tool, publicexpenditure tracking, in both tracking funding and analyzingthe governance and corresponding managerial challenges thatimpede effective public sector financing. The trackinginstrument was applied to a sample of states, municipalitiesand healthcare facilities in the country in 2004.