As “market referees”, regulators contribute to the delivery of essential public utilities. Their organisational culture, behaviour, actions and governance are important factors in how they, and the sectors they oversee, perform. The OECD Performance Assessment Framework for Economic Regulators (PAFER) looks at the institutions, processes and practices that can create an organisational culture of performance and results. This report uses PAFER to assess both the internal and external governance of Brazil’s National Agency for Water and Basic Sanitation (ANA). The review offers recommendations for the regulator to build upon its strong technical reputation and good practices. It proposes an integrated set of recommendations to help ANA best fulfil its roles relating to water resource management and water-use regulation, dam safety, and water supply and sanitation.
Driving Performance at Brazil’s National Agency for Water and Basic Sanitation
Abstract
Executive Summary
Brazil’s National Agency for Water and Basic Sanitation (Agência Nacional de Águas e Saneamento Básico, ANA), an independent federal regulatory agency, has seen its mandate expanded significantly in recent years. Initially focused on water resource management (WRM), it now also covers aspects of dam safety, and, since 2020, water supply and sanitation (WSS). In the WSS sector, ANA contributes to ambitious national policy goals such as universal service provision, despite the challenges of Brazil’s uneven water distribution, external shocks affecting water security and availability, and the country’s complex multi-layered governance system. To support ANA at this important juncture, this review identifies six issue areas and provides recommendations.
Clarifying ANA’s role and addressing misalignment between ANA’s mandate, mission, and regulatory powers
To effectively fulfil its duties, ANA must have powers that align with its mission and mandate, and it is crucial for both ANA and its stakeholders to have a clear understanding of the regulator’s role and expected contribution. ANA’s wide-ranging activities reflect national policy ambitions, however, a mismatch between roles and regulatory powers in WSS – notably the lack of enforcement powers – may impede its ability to improve consumer outcomes. In WRM, the agency must co-ordinate with subnational stakeholders to align efforts and influence regulatory outcomes.
Key recommendations
Identify and use alternative approaches and channels to increase ANA’s impact and encourage compliance with the standards set by the regulator.
Manage expectations around the results that ANA can deliver and when, given the scope of the agency’s role and powers, as well as its level of resources and capacity.
Building analytical capabilities in the economics of water and sanitation
ANA has developed a strong reputation and expertise in water resource management. To fulfil its expanded responsibilities in the WSS sector, ANA needs to build analytical capability in the economics of water and sanitation. At the same time, ANA’s access to a large amount of data presents an opportunity to further enhance its analytical capacity and support regulatory quality.
Key recommendations
Prioritise the hiring of staff to increase ANA’s capacity and capabilities in line with the requirements of a professional economics function.
Redefine the attributes of senior-level positions at ANA, including at the board level, to include economic expertise when relevant, and in a proportional manner.
Direct ANA’s current and future analytical capacity toward developing the required evidence base and commit to disseminating and promoting its use by stakeholders.
Designing an organisation that supports accountability and the efficient delivery of outcomes for citizens
ANA’s mandate spans three sub-sectors: water resource management (including water-use regulation), water supply and sanitation, and dam safety. However, neither ANA’s current organisational structure nor its governance framework is set up to operate effectively in all three areas. A lack of clear accountability and whole-of-organisation approach to achieving results potentially undermines the efficient management of resources.
Key recommendations
Map how resources are currently being allocated and used to achieve regulatory objectives in order to identify synergies across work areas and opportunities for greater efficiency in the delivery of outcomes for citizens.
Assess the feasibility of adjusting ANA’s organisational structure or governance framework, by introducing new divisions or matrix governance, to help align the work to the three core business areas and enable clearer lines of accountability.
Operating within financial and human resource constraints
ANA faces constraints relating to the management of its human and financial resources due to rules governing the collection and use of sector revenues, fiscal management, and civil service hiring procedures. These constraints create concerns around ANA’s ability to carry out its new duties, to react to emerging challenges and ensure an efficient use of resources, and to act independently in the future.
Key recommendations
Advocate for legislative changes to secure the revenues necessary to perform functions relating to the regulation of WSS and to increase the regulator’s flexibility and autonomy in using resources.
Advocate for further approval of the hiring of permanent civil servants and the modernisation and increased flexibility of civil service hiring practices.
Promoting a culture of independence and integrity during a period of organisational change
Recent evolutions in ANA’s mandate, organisational structure and leadership have proceeded at a fast pace – four new directors joined the organisation in 2022, just two years after ANA’s new mandate in WSS was adopted. Change has affected staff and organisational identity and generated a degree of uncertainty. In this context, ANA faces the challenge of designing new units and governance processes that function in an inclusive and effective manner, whilst respecting high standards of integrity.
Key recommendations
Create institutionalised channels of communication connecting ANA’s integrity structures to the board and wider organisational decision making.
Consider new initiatives as part of a consolidated strategy to boost ANA’s resilience during periods of institutional change. This strategy could strengthen ANA’s internal culture and identity by targeting issues related to integrity, staff morale, and uncertainty, especially when roles and expectations around behaviour and outcomes are changing.
Advocate for a return to staggered appointments of board members in line with legislation, and adherence to best practice in terms of selection procedures.
Boosting transparency and access through data and digital transformation
Digital tools, data and technology – underpinned by robust governance – can enable new ways of working and enhance ANA’s ability to meet the needs of regulated entities and citizens. ANA must ensure digital and data governance remains fit for purpose. Additionally, ANA ensuring information, reporting and data resources are easily accessible and tailored to stakeholders’ needs is essential.
Key recommendations
Improve the accessibility of regulatory decision-making using jargon-free language, easy-to-read guidance on decisions, visualisations, summaries, and other accessible formats.
Engage with other regulatory agencies in Brazil and abroad to exchange on good practices in the use of digital technologies.
Design monitoring and evaluation practices that focus on the organisation’s main data processes to allow the regulator to assess the costs and benefits of data collection and use.
Assess the use of data and technological capabilities in developing ANA’s programme of work and identify opportunities to extend their benefits to more areas, whilst avoiding duplication within ANA, and among other institutions.
