ROMANIA Reimbursable Advisory Services Agreement on Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting (P156889) OUTPUT NO. 7 Final Report Presenting the Results of the Reimbursable Advisory Services January 2020 Project co-financed from the European Social Fund through the Operational Programme for Administrative Capacity 2014-2020 This report has been delivered in January 2020 under the Reimbursable Advisory Services Agreement on Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting signed between the General Secretariat of the Government and the International Bank for Reconstruction and Development on June 8, 2016. It corresponds to Output 7 under the above-mentioned agreement. Disclaimer This report is a product of the International Bank for Reconstruction and Development / the World Bank. The findings, interpretation, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. This report does not necessarily represent the position of the European Union or the Romanian Government. Copyright Statement The material in this publication is copyrighted. Copying and/or transmitting portions of this work without permission may be a violation of applicable laws. For permission to photocopy or reprint any part of this work, please send a request with the complete information to either: (i) the General Secretariat of the Government (1, Victoriei Square, Bucharest, Romania); or (ii) the World Bank Group Romania (31, Vasile Lascăr Street, 6th floor, Bucharest, Romania). TABLE OF CONTENTS LIST OF ACRONYMS ........................................................................................................... 5 Executive summary .................................................................................................................. 6 Introduction .............................................................................................................................. 9 Section 1. – Background ........................................................................................................ 10 Section 2. – Methodological framework and deliverables .................................................. 12 Section 3 – Lessons learned from the RAS implementation .............................................. 17 3.1. Positive developments ...................................................................................................... 17 3.2. Main challenges and shortcomings ................................................................................... 21 Section 4 – Conclusions and next steps ................................................................................ 24 ANNEXES .............................................................................................................................. 30 Annex 1. The IT ISP Monitoring and Evaluation IT tool .................................................. 31 Overview of the IT tool .......................................................................................................... 31 Authentication ......................................................................................................................... 32 Planning level page/details (Strategic objective, Program, Measure) ..................................... 33 The indicators’ page ................................................................................................................. 34 Editing content ......................................................................................................................... 36 Importing content .................................................................................................................... 38 Adding content using forms ..................................................................................................... 39 Annex 2. Strengths and weaknesses in implementation at ministry level ........................ 41 LIST OF ACRONYMS ASA Advisory Services Agreement AWPG Annual Working Plan of the Government CoA Court of Accounts CoG Centre of Government CPM Chancellery of the Prime Minister EU European Union FOREXEBUG The Information System for Reporting Financial Statements in the Public Sector GD Government Decision GoR Government of Romania GSG General Secretariat of the Government HRM Human Resource Management IBRD International Bank for Reconstruction and Development ISP Institutional Strategic Plan LA Legal Agreement M&E Monitoring and Evaluation MARD Ministry of Agriculture and Rural Development MBECE Ministry for Business Environment, Commerce and Entrepreneurship MEc Ministry of Economy MEnv Ministry of Environment MIA Ministry of Internal Affairs MLSJ Ministry of Labor and Social Justice MNE Ministry of National Education MH Ministry of Health MoPF Ministry of Public Finance MRDPA Ministry of Regional Development and Public Administration MRI Ministry for Research and Innovation MT Ministry of Transport MTBF Medium-Term Budgetary Framework MWF Ministry of Water and Forests OECD Organisation for Economic Co-operation and Development POCA Administrative Capacity Operational Program PM Prime Minister PPU Public Policy Unit RAS Reimbursable Advisory Services RIA Regulatory Impact Assessment SCPA Strategy for the Consolidation of the Public Administration TWG Technical Working Groups WBG World Bank Group 5 Executive summary The purpose of this report is to evaluate the results of the implementation of the Reimbursable Advisory Services (RAS) on Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting and draw lessons for informing further steps towards introducing a performance-based budgeting system in the Romanian central administration. The project was implemented by the General Secretariat of the Government (GSG) with support from the World Bank. The project was co-financed from the European Social Fund through the Administrative Capacity Operational Program (POCA) for the period 2014-2020. The objective of the RAS was to help the Government of Romania (GoR) to strengthen the planning and policy monitoring processes in the Center of Government (CoG), Ministry of Public Finance (MoPF) and line ministries with the purpose of enhancing the efficiency of public spending. Work undertaken under this RAS was considered a key first step towards introducing elements of performance-based budgeting in the Romanian public sector, which has been an objective on the policy agenda of the Government. The scope of the technical assistance was anchored in the Strategy for the Consolidation of the Public Administration (SCPA) for the period 2014- 2020. The RAS was part of a package of technical assistance operations which support a broader set of complementary reforms promoted by the Government with the aim of enhancing the functioning of the public administration along the lines of the SCPA. The focus of the technical assistance was threefold: a) to strengthen the existing Institutional Strategic Plans (ISPs) development processes in the ministries participating in the project under the guidance of the GSG; b) to build capacity in the Government to monitor ISP updates and implementation with a common IT tool, developed with support from the Bank; and c) to develop a central dashboard in the GSG for reporting on the implementation of the high level ISP priorities of the selected ministries. The three immediate objectives of the RAS were largely achieved. As detailed in the report, the ministries participating in the RAS have essentially developed the capacity to prepare comprehensive ISPs following a common methodology; the IT application for monitoring the implementation of the policy agenda has been installed both at GSG and in the line ministries and is operational and accompanied by a user’s manual; and the central dashboard has been finalized and can be used for reporting and analytics. However, the ISPs have not yet become formally part of the budgeting process, which is not results-oriented. The governmental decision aiming to make the ISP preparation part of the budget formulation process was not passed by the time of this report. Thus, the preparation of the ISPs and the budgeting process largely remain parallel processes, which raises sustainability questions with respect to the long-term results of the project. This risk is partly mitigated by the fact that: a) a second RAS, currently in preparation, will extend the work done under the current project to the ministries which did not participate in the first phase; and b) the GSG, with support from the World Bank and MoPF, will continue to work towards making the ISPs part of the budget process and calendar through legislation. Instilling a performance-driven culture in the Romanian administration, as elsewhere, is a long- term process which requires political leadership and a comprehensive approach to reforms. Both GSG and the Bank were cognizant of this at the time of the preparation of the RAS and launched a series of complementary reforms at a time when there was strong political support for the modernization of the administration. The implementation of the RAS was intended to 6 be complemented by a Bank grant, the Romania Strengthening Financial Accountability Grant (P152568), with the MoPF as beneficiary, with the purpose of piloting in parallel the introduction of program budgeting in two ministries, education and health. However, in retrospect, the expectations of the Government and of the Bank for what these projects could achieve proved ambitious. The technical progress achieved and the capacity built through the support for the preparation of the ministerial strategic plans and the associated tools did not gain the expected traction and had a limited influence on budget formulation. The implementation of the accompanying Strengthening Financial Accountability Grant was stopped before the launching of the pilot due to changing political conditions. The use of the results-oriented instruments and practices can help decision-makers to exercise effective leadership and meet political goals in the context of scarce resources and limited implementation capacity. Experience in both the developed and developing world shows that countries which successfully adopted this type of instruments and practices achieved enhanced transparency and accountability and improved outcomes and impact while operating with scarce public resources. As in the case of Romania, the adoption of such instruments was often motivated by the need to overcome endemic fiscal and capacity constraints. After over a decade of various public sector reforms related to planning and budgeting for the central public administration, the results are mixed. The reasons for these limited results are primarily not of a technical nature. Despite the fact that capacity for program budgeting and performance management remain issues, the knowledge and experience of the Romanian civil servants, to which the Bank heavily contributed, are not below those of their colleagues in the region. It was more the lack of political leadership and clear commitment for budget modernization which made the strategic planning initiative more of a technical planning exercise, largely de-coupled from the reality of the budget preparation. There were however a series of positive developments on strategic planning, budgeting or governance at large that the Bank directly contributed to throughout these years. The main step forward in improving the quality of strategic planning is represented by the comprehensive ISPs that the 13 participating line ministries have prepared with the Bank’s assistance through this RAS and the monitoring IT tools developed in complementarity. This package represents a solid starting base for result orientation and performance budgeting; they include all the elements that one could look for in such a document: a detailed presentation of the strategic objectives of the institution, proposals for budget programs that are aligned with higher level commitments and goals, performance indicators etc. The preparation of the ISPs has also contributed to significant capacity building in the participating ministries, particularly at the level of the Public Policy Units (PPUs). The technical staff in the ministries have become familiar not only with the methodologies for setting priorities and objectives, designing programs or allocating appropriate financial resources aligned with the medium-term budgetary framework but also with the monitoring of outputs, outcomes and unit costs, setting performance indicators and collecting systematically the necessary performance data. The ISPs are currently the only documents presenting a comprehensive and coherent picture of the situation and policy priorities of a sector, including all the proposed budget programs of a ministry, the associated financial resources and the expected results (outputs/outcomes) that are available for consultation by anyone interested. This has contributed to increasing the transparency of the Romanian public sector and constitutes the first step towards linking policy with the budget. At this stage, the ISP preparation is not yet part of budget formulation process. 7 Nevertheless, more and more ministries use the ISP to inform and articulate their budget requests in discussions with MoPF. The approach taken by the Bank to support the process, focused mainly around the GSG and the PPUs network, contributed to achieving technical results on the pure institutional policy planning side, however lacking the real influence on the budget preparation or execution. These results are a reasonable development for this stage. However, a simple continuation of this approach would not deliver the expected impact on performance budgeting. Moreover, a de- coupled system, where line ministries prepare good institutional plans while the ministerial budgets remain as traditional and input-based as before may negatively affect the credibility of the strategic planning reforms. The focus of future meaningful government reforms needs to be on integrating strategic planning with budget preparation and its monitoring connected to budget execution. Traditionally the Bank provides support to interventions with a systemic impact, and not to isolated policy measures. Strategic planning and budgeting are obviously horizontal in nature and systemic. However, in the Romanian situation, based on the lessons learned to date and best practice of introducing full-fledged performance budgeting, in order to reach across-the- government impact, a sequenced approached is required. The identification of a pilot ministry, securing the political support for budget restructuring from the highest level (i.e., Minister) and the gradual transfer of the program budgeting thinking used for the institutional strategic plans in real budget preparation, monitoring and, finally, execution would be the recommended next steps. A successful case of piloting performance-based budgeting in a sector and in partnership with the MoPF would create the opportunity for gradual replication in the rest of the central administration for a system-wide impact. Any meaningful reform agenda needs to include a clear communication strategy targeting both the public administration and key stakeholders to ensure the buy-in of the reforms, giving their transformational nature. The implementation of the follow up ISP RAS in the ministries which did not participate in the first round can provide an anchor for the continuation of the reforms in planning and eventually budgeting. 8 Introduction The purpose of this report is to evaluate the results of the implementation of the Reimbursable Advisory Services (RAS) on Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting and draw lessons for further steps towards introducing a performance-based budgeting system. The project was implemented by the General Secretariat of the Government (GSG) with support from the World Bank. The objective of the RAS was to help the Government of Romania (GoR) to strengthen the planning and policy monitoring processes in the Center of Government (CoG), Ministry of Public Finance (MoPF) and line ministries with the purpose of enhancing the efficiency of public spending. The project was co-financed from the European Social Fund through the Administrative Capacity Operational Program (POCA) for the period 2014-2020. The focus of the technical assistance was threefold: a) to strengthen the existing Institutional Strategic Plans (ISPs) development processes in the ministries participating in the project under the guidance of the GSG; b) to build capacity in the Government to monitor ISP updates and implementation with a common IT tool, developed with support from the Bank; and c) to develop a central dashboard in the GSG for reporting on the implementation of the high level ISP priorities of the selected ministries. Work undertaken under this RAS was considered a key first step towards introducing elements of performance-based budgeting in the Romanian public sector, which has been an objective on the policy agenda of the Government. The scope of the technical assistance was anchored in the Strategy for the Consolidation of the Public Administration (SCPA) for the period 2014-2020. The work fell under General Objective II of the Strategy, aimed at implementing a performance-based management in the Romanian public administration by establishing an operational institutional framework for policy priority-setting and budgeting in the Government. This framework was based on strengthening the design and implementation of the ISPs and the introduction of program-based budgeting at central government level. The GSG and MoPF are responsible for this component of the Strategy. The RAS was part of a package of technical assistance operations which supported a broader set of complementary reforms promoted by the Government with the aim of enhancing the functioning of the public administration along the lines of the SCPA. Part of this technical assistance was also provided by the World Bank, while other was delivered by other international institutions and consultancies. On the Bank’s side, a Public Investment Management RAS supported the development of a methodology for MoPF to prioritize public investment projects. A Delivery Unit RAS introduced a performance framework for selected short-term policy and tracking mechanisms for results in the cabinet of the Prime Minister. A Strategy Unit RAS was helping GSG to introduce a systematic approach to preparing and tracking high level strategic documents and ensuring policy coordination and harmonization. The Regulatory Impact Assessment RAS supported the development of methodologies and builds capacity for ex-ante impact assessment of policies. The RAS on Developing a Unitary Human Resources (HR) Management System in the public administration helps to update the legal and regulatory framework for the HR function and to modernize and consolidate the HR practices. The report is structured into four sections. Section 1 provides background information on the context in which the RAS was designed and implemented. Section 2 briefly describes the methodological framework, the activities and the deliverables. Section 3 draws lessons from 9 implementation, while Section 4 summarizes the conclusions of the report and makes recommendations for the next steps in the direction of the reforms supported by the RAS. Section 1 – Background Romania launched its first efforts to develop a coherent strategic planning and performance budgeting system in 2006. In 2006, the GoR approved the implementation of a government-wide strategic planning process. 1 The process was coordinated by the GSG in cooperation with the MoPF. Although strategic plans were produced by all ministries, the envisaged links to program budgeting and the decision-making system did not materialize. Government Decision 1807/2006 set out the methodology for strategic planning (under the name “management component”), while Government Decision 158/2008 established the methodology for the “budgetary programming component”. The strategic planning methodology promoted through these government decisions contained guidance on the full range of issues related to the management component of the strategic planning and served as a de facto manual. A new manual developed in 2009 through an EU PHARE project provided more developed guidance in this respect. A step forward in strategic planning reforms took place in 2014 when a pilot Institutional Strategic Plan was prepared by the Ministry of Agriculture and Rural Development (MARD). The project was supported by the World Bank. One component of the project focused on designing an ISP that effectively linked policy priorities to budgetary programs under the constraints of the medium-term budget framework (MTBF) and the allocations were associated with measurable performance indicators. In addition, an IT application was developed to assist with monitoring the plan. The MARD ISP and the IT application were used in 2015 as models for developing a new and improved methodology of strategic planning to integrate and connect the policy side with the budgetary side, prepared also under a technical assistance grant of the World Bank - Harmonizing Strategic Planning & Budgetary Programming in Romania 2. The most complex project to support strategic planning and budgeting was initiated in 2016 under the Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting RAS. The project was co-financed from the European Social Fund through the Administrative Capacity Operational Program (POCA) for the period 2014-2020. The ISPs were prepared for thirteen ministries 3 : the Ministry of Agriculture and Rural Development; the Ministry for Business Environment, Trade and Entrepreneurship; the Ministry of Economy; the Ministry of National Education; the Ministry of Environment; the Ministry of Health; the Ministry of Internal Affairs; the Ministry of Labor and Social Justice; the Ministry of Public Finance; the Ministry for Research and Innovation; the Ministry of Regional Development and Public Administration; the Ministry of Transport; and the Ministry of Waters and Forestry. The ISPs were prepared by working groups in the respective ministries with methodological guidance from the World Bank team. In addition, a common IT application and a dashboard have been designed and tested for monitoring implementation and are currently functional. Moreover, a follow up RAS, currently under 1 Government Decisions 1807/2006 and 158/2008 formed the legal bases for developing the strategic planning system and its linkages with the program budgeting system. 2 Harmonizing Strategic Planning & Budgetary Programming in Romania, prepared by Gord Evans, Costel Todor and Mihai Vilnoiu for the Chancellery, Government of Romania, 2/20/2015, under the World Bank IDF Grant for the Monitoring and Evaluation (M&E) of Policy-making in Romania (2015). 3 The initial number of ministries selected to participate in the project was ten but, in January 2017, three ministries were further divided through a ministerial reorganization. 10 advanced preparation, will extend the ISP framework developed under the current project to the ministries which did not participate in the first round. This RAS is expected to be launched in early 2020 and will ensure this way that the methodological framework and the IT solutions developed under the current project will be uniformly applied by all ministries. This reform effort should be understood in the context of the complex evolutions at international level in planning and budgeting in the last decade. Performance budgeting has been a major subject of debate in public governance reforms during this period. During this time, developed and developing countries and international institutions have focused on identifying new approaches and tools to improve performance and assess results. The general theoretical framework is well synthesized in various recent reports or studies prepared by the World Bank or the OECD 4, some cited in this work (see Box 1). Box 1. The OECD Framework for Performance-Based Budgeting The OECD definition for performance budgeting is “the systematic use of performance information to inform budget decisions, either as a direct input to budget allocation decisions or as contextual information to inform budget planning, and to instill greater transparency and accountability throughout the budget process, by providing information to legislators and the public on the purposes of spending and the results achieved”. The adoption of performance budgeting implies a shift in the focus of budget process, from the management of inputs to a focus on the results of spending and the achievement of policy objectives. The main characteristic elements of a performance budgeting system are the following1: • In the preparation of the budget, spending decisions take account of priority policy objectives as well as past program performance; • The budget is presented to the legislative body as a set of programs. This may be in addition to, or replace, the classic presentation based on functional and economic classification; • Non-financial performance indicators and targets, representing the planned objectives of spending, are presented in the budget and linked to spending programs; • During budget execution, budget managers have the autonomy to manage financial resources, together with the accountability to achieve the planned results. • Performance information is provided to managers together with budget execution information to help them monitor performance. • Reports to parliament on budget execution include performance information and an explanation regarding the reasons for under or over-performance; The OECD classifies the different forms of performance budgeting implemented in its member countries as follows: (a) Presentational Performance Budgeting: this presents outputs, outcomes and performance indicators separately from the main budget document. This is relatively easy to achieve and is appropriate where the objective is limited to demonstrating that budget allocations and actual expenditures are responsive to government’s objectives and policy priorities. On the other hand, by separating performance and budget data it is difficult to connect the two sides: policy and spending; 4Romania is an aspirant to OECD membership, which makes references to OECD guidelines and practices and benchmarking to OECD members natural examples and comparators. 11 (b) Performance-Informed Budgeting: this includes performance data within the budget document and involves the structuring of the budget document based on programs. This approach requires considerable effort and is appropriate for governments that want to achieve more ambitious goals such as re-prioritization of expenses linked to performance and increased transfer of budget control to program managers. This type of performance budgeting is common to many OECD countries; (c) Managerial Performance Budgeting: this type is a variant on performance informed budgeting. In this approach the focus is on managerial impacts and changes in organizational behavior, achieved through combined use of budget and related performance information. This depends on a performance culture already existing within government; (d) Direct Performance Budgeting: this type sets a direct link between results and resources, usually implying contractual type mechanisms that directly link budget allocations to the achievement of results, implying a direct budgetary response to over or under-achievement of performance objectives. Based on The OECD Best Practices for Performance Budgeting, Public Governance Committee Working Party of Senior Budget Officials, GOV/PGC/SBO (2018)7, 23 November 2018, page 6-8 The adoption of performance budgeting implies a shift in the focus of the budget process from the management of inputs to an emphasis on results and the achievement of policy objectives. The current Romanian performance budgeting is essentially an OECD type a) (presentational performance) with some elements of OECD type b) (performance-informed). The public budget continues to be a classical one, while the ISP is a separate document with the actual main role to present the priorities of the policy agenda and to show and monitor the results (output, outcomes). At the same time, the ISP is consistently structured into budgetary programs well connected with the annual programmed budget and with the MTBF. A realistic objective for the following 2-3 years on performance-based budgeting would be a successful transition from the current presentational-performance budgeting to fully performance-informed budgeting together with the inclusion of some elements of managerial-performance budgeting. However, before initiating a second phase of a performance budgeting reform, the Government should set clear objectives and expectations for every step. Clear objectives would help to guide the design, manage expectations, and increase the chances of success. The specific objectives should take into account the administrative culture of the country and how civil servants are likely to interpret and respond to such initiatives. The specific objectives for the next years could be: (i) the extension of ISP model to all ministries; (ii) the integration of the ISP model as a full part of budget formulation process in a institutionally solid way, including in the legal framework; (iii) the piloting at the level of a small number of ministries of a full performance-informed budgeting system, which asks mainly for program-based budgetary execution; (iv) the extension of the program-based budgetary execution to the whole state budget; and (v) the introduction of elements of managerial performance budgeting. Section 2 – Methodological framework and deliverables This RAS supported the strategic priority of Romania to strengthen the culture of performance measurement and efficient use of resources in the public administration. The scope of the RAS was aligned to the first pillar of the Country Partnership Strategy for the period 2014-2017, which focused on Creating a 21st century Government in Romania. The methodological framework for the preparation of the ISPs was conceptualized in the Harmonizing Strategic Planning & Budgetary Programming in Romania report of 2015. 12 The ISP reflects the sector-level strategic objectives, programs, measures/initiatives, and activities which are subject to a four-year planning process carried-out by an institution 5 (Chart 1). For this process, the institution allocates funds within the limits of the budgetary resources intended to the sector, as established under the annual budget assigned to the institution and the medium-term budget framework, with the aim to implement the objectives, programs, measures/initiatives and to achieve the expected results. All institutions operating in subordination, under authority or in coordination of a line ministry and performing duties related to public policy regulation, preparation and implementation shall be involved in the development of the ISP. Thus, an ISP is a document developed by each ministry and designated non-ministerial institutions of the GoR setting out the concrete actions to be undertaken and the desired results to be achieved by the institution over the medium-term to realize its vision and strategic objectives. The ISP brings together the policy agenda of the ministry, the medium- term budget envelope available to implement it, and a monitoring framework for implementation. 5 Institution is defined as a ministry, together with the entities under its authority, in subordination or in coordination. 13 Chart 1. Government of Romania’s Planning and Budgeting Architecture The architecture of the ISP reflects a planning hierarchy based on a logical diagram (Chart 2). The planning hierarchy contains a series of cascade-type levels which support the structure of the ISP. As a general rule, the vision and mandate are applied at the level of the institution, programs are applied at the level of general directorates/directorates, while initiatives and measures are applied at the level of operational structures. The logical diagram underpinning the ISP is based upon the planning chain whereby the inputs (resources) produce immediate results/immediate results indicators (outputs), the output indicators (immediate results) produce results (outcomes) and the outcomes generate the impact onto beneficiaries. The initiatives leading to the achievement of immediate results are measured by efficacy and process indicators. 14 Chart 2. Institutional Strategic Planning Logical Diagram – planning hierarchy Source: Harmonizing Strategic Planning and Budgetary Programming in Romania report, World Bank, 2015. A strategic objective is defined as a clear and timely statement on policy impact, aiming to support the achievement of the institution’s vision and which could be feasibly achieved during the implementation of the ISP. According to the architecture of the ISP, a program is defined as a set of measures under the authority of one or several institutions pursuing the fulfilment of results corresponding to strategic objectives for which performance indicators were established to identify the results possible to be obtained within the limitations of financial resources approved by law. The measures are carried-out by means of a coherent set of actions/projects under the authority of an institution The RAS project had four components: • Under the first component, the ISP methodological framework tested under the IDF Grant was extended to the 13 6 participating ministries. The Bank supported the mapping of the ISP content and processes in the 13 ministries with focus on applying the ISP architecture, defining (or improving) the indicators, reviewing the financial and budgetary mechanisms, identifying vehicles to implement the ISP, developing M&E processes and reporting routines, as well as supporting the debates and ISP presentations. Two revisions (2018 and 2019) of all 13 ISP were performed with Bank support. The Bank also provided support for the drafting of the GD making the ISP methodology mandatory to all ministries (which was not approved yet, as explained in the next section). • Under the second component of the RAS, the customised IT tool monitoring the ISPs was developed and rolled out to all selected ministries. This delivered the access ID and password for the administrators of system; provided training on using the application for 6The initial number of ministries selected to take part in the RAS was ten. However, the Government was reorganized in January 2017 and some participating ministries were divided, reorganized or merged. As a result of this reorganization, the number of participating ministries increased to 13. 15 the system administrators; prepared the user manual and tested the scripts for further users. Technical support was also provided for the ministries to introduce the ISPs into the IT monitoring tool and provided training on how to use and maintain the application. A description of the IT tool is presented in Annex 1. • Under the third component, a dashboard was developed in the GSG for the ISP central profiles. The dashboard allows for automatized and simplified reporting from the line ministries to the GSG on their ISPs, which in turn creates space for undertaking diagnostic work on progress and the non-performing areas, with processes for corrective action. The central dashboard allows the Prime Minister and the GSG to request updates and explanations from the ministries on policy implementation (the “challenge” function of the GSG) (see Annex 1 for details). • Under the fourth component, the Bank provided capacity building to the GSG and the participating ministries. The Bank provided extensive coaching and on-the-job training on the ISP methodology and process, the M&E framework and the tools for reporting. Details on the training activities are presented in the seven bi-annual RAS progress reports prepared by the Bank team on the implementation of the RAS. The RAS was launched in June 2016 and will close in February 2020 7. The initial duration was planned for 36 months. Due to a number of factors, the implementation of the project was extended by another eight months; these include the multiple changes of ministers and key decision-makers in the participating ministries; the governmental reorganization; delays in the budget calendar and the approval of the annual budgets; and the extension of other components of the project 8. The project was designed for three annual iterations (improvement cycles). In the first iteration, the ISPs were developed for all the selected ministries based on the policy framework at the time, introduced in the IT tool and reflected in the central dashboard. In the second and third iterations, the ISPs were refined and further developed, based on new policy developments and incorporating feed-back from the GSG, MoPF and the participating line ministries, while the Bank team’s engagement effort was gradually reduced by empowering the working groups in the ministries to take more initiative. The refinement of the monitoring tool in the second and third steps was intended to be aligned with the process of piloting the program-based budgeting launched by MoPF but abandoned in the meantime. All the committed outputs and activities of the RAS were delivered as agreed with the General Secretariat of the Government. The intermediate outcome of the RAS (see table) to help improve the capacity of the GSG to provide guidance on developing the ISPs has been met. The GSG is now in a very good position to provide technical guidance to the line ministries on the preparation and the monitoring of the ISPs. Staff in the GSG, but also in the participating line ministries, are familiar with the methodological framework and with using and administering the tools developed under the RAS and can by themselves continue to monitor the strategic plans without any further assistance. At the same time, however, the RAS implementation has only had a limited impact on the budgeting process, which continues to follow a traditional approach, rather than a performance-oriented one. We discuss these issues in detail in the next sections. 7The project itself will close in July 2020, as other components will continue also after the RAS closure. 8Two other components of the same project were implemented by the Court of Accounts of Romania, respectively the Romanian Academy. 16 Intermediate Indicator Outputs Outcome Improved capacity Number of new strategic plans (ISP) • 13 ISPs applying the sectoral in the GSG to developed with guidance of the strategic planning methodology provide guidance dedicated staff in the GSG that • 1 Consolidated dashboard for on developing complies with the pre-conditions and ISP M&E at CPM level institutional minimum standards for strategic • Ready M&E IT tool for strategic plans plans 9 and are monitored by using IT uploading the ISP of selected tools line ministries Source: Concept note of the RAS. Section 3 – Lessons learned from the RAS implementation After over a decade of attempts to introduce a performance-oriented culture to public governance, including strategic planning and budgeting, the results are mixed. The RAS itself has largely achieved its objectives, which represents an important first step forward in the introduction of a performance budgeting system in Romania. The obvious significant technical progress achieved on the strategic planning side through the preparation of the ISPs for 13 ministries, following a clear methodological framework, has not been matched by and did not drive the budgeting process. Despite the fact that a well-structured and coherent performance information is prepared through the ministerial strategic plan, the direct influence on the budgeting process remains limited. At this stage, few budget programs from the ISPs are fully integrated within the budget documentation of the respective institution and formally approved. Nevertheless, the support provided under the RAS for the preparation of the ISPs has led to a number of positive achievements. At the same time, it has highlighted a number of challenges. Both the positives and the challenges are summarized below. 3.1. Positive developments Among the core elements that represent positive developments for the overall strategic planning process and steps forward in public sector reform, the RAS has contributed to the following: Increased transparency and clarity over institutional roles, policy commitments and the medium-term sectoral policy agenda. The ISP has increased the transparency and accountability of the medium-term public policy agenda in connection with the financial resources and the results committed to by the 13 participating ministries. The ISP is the only document where the policy agenda of a ministry/sector for the current year and next three years ahead is consolidated and publicly available 10, including in English. Thus, all the proposed budget programs of a ministry, the associated financial resources and the expected results (outputs/outcomes) are available for consultation by anyone interested. Even though, from the budgetary perspective, the budget programs in the current budget documentation differ from the ones in the ISP –the latter follow rigorous definitions of programs-- their detailed presentation in the ISP provides a clear picture on the objectives, results and performance 9 Developed with support of the IDF Grant, see the report on Harmonizing Strategic Planning and Budgetary Programming in Romania. 10 https://sgg.gov.ro/new/planuri-strategice-institutionale/ 17 indicators that the ministry plans to achieve with the allocated resources and consistent with the MTBF. The ISPs provide a comprehensive portfolio perspective, as they cover the line ministry together with the main subordinated/coordinated agencies operating in the sector. Many agencies outside ministries are important in terms of the policies promoted and the budgets allocated, and the ISP offers to the public a view on how programs belonging to different subordinated institutions within a sector come together under a common strategic objective. For example, the Health Sector ISP also covers the programs financed through the Health Insurance Fund besides those financed through the budget of Ministry of Health. The ISP provides valuable support to the senior management of the ministry to understand priorities, monitor progress and coordinate efforts. The ISP is a valuable management tool that improves coordination within a sector/ministry. In this respect the ISP offers a systematic breakdown of the objectives, programs, measures, actions together with the resources allocated by departments or by agencies within a ministry. It offers to high-level officials a valuable working matrix for implementing and monitoring different specific policies. It remains however for the decision makers to make full use of the potential provided by the ISP in steering their sectors. The IT application developed under the RAS can be an effective and user-friendly tool for the ministries to prioritize their medium-term policy agenda and monitor its implementation within the Medium-Term Budget Framework. The IT tool has been designed to monitor the implementation of the ISPs and can produce reports on impact, results, process, and efficiency indicators for the management of the ministries. The tool has been designed based on the structure of the ISPs and can track progress at four levels: strategic objective; program; measure; and project or activity. The application includes a large library of indicators which can be easily consulted and it is scalable to respond to changes in the structure of the Government. All ministries participating in the project have received training in the use of the application, and designated administrators participated in uploading the 13 ISPs in the application. A user’s manual has also been developed. A more detailed description of the functions of the tool is presented in Annex 1. When designing the RAS architecture, the Bank team was cognizant that developing a performance culture in the public sector was a long-term process. Such a process requires incremental steps and it is particularly cumbersome in countries with immature public institutions. However, doing nothing is not an alternative. While an increasing body of evidence shows that, around the world, reforms aimed at strengthening the results orientation of the budget process only partly lived to their expectation, the literature also shows that linking funding to results has proven useful in the management of public agencies and in improving the dialogue between ministries of finance and line ministries on aligning priorities and deciding budget appropriations 11. Drawing on the lessons from the literature (see the Box) and on the experience accumulated in the early stages of implementation, adjustments were made with focus on building a constituency for change in the participating ministries in support of the reforms promoted and on equipping civil servants with the appropriate tools to assess the effectiveness of the linkages between results, policy and resources. 11 See for example Beazley I, and Moynihan I. “Toward Next-Generation Performance Budgeting, Lessons from the Experiences of Seven Reforming Countries”, World Bank, 2016 18 Box 2: Toward Next-Generation Performance Budgeting Question Classic pitfalls Next generation Where to start? Requirements for reporting on A differentiated approach governmentwide budget that emphasizes the most performance that are formalistic, crucial service delivery areas onerous, and rarely met. and strategic policy priorities What are the expectations? The budget process as the main Changes to the budget engine of a governmentwide process as one part of a effort to introduce performance- comprehensive performance based management. management toolkit, aimed at changing attitudes and incentives in the public sector. Incremental change in step with other reforms that support performance orientation. When and where are In theory, when the budget is At multiple decision points, performance data used? prepared and at year-end, though not just during budgeting rarely in practice. but also in management and policy routines throughout the year, such as periodic spending reviews What are the most likely Budget Officials Program managers in line users? ministries What administrative Assumes that administrative Seeks to make performance capacities are needed? capacities and norms are in place, budgeting consistent with although often there are contextual capacities and considerable administrative needs; performance data cannot deficiencies create the capacities necessary for their effective use on its own What is the timeline for Short-term approach: prioritizes Long-term approach: values change? an individual reform initiative, consistency across multiple which will often be abandoned, reform efforts and to be replaced by something incremental adaptive change similar on the basis of experience Source: Beazley I, and Moynihan I. “Toward Next-Generation Performance Budgeting, Lessons from the Experiences of Seven Reforming Countries”, World Bank, 2016 The RAS therefore aimed at contributing towards gradually introducing a performance culture in the Romanian central public administration. The RAS has developed tools and has attempted to institutionalize processes to enhance the results orientation of the budget process. These include i) a methodological framework to prioritize policies, set objectives, design programs, allocate financial resources by programs and identify performance indicators and set targets; ii) an institutionalized process for preparation of the ISP – procedures, working arrangements, roles of focal points in the process; and iii) an IT M&E tool integrated in the systems of the Government for monitoring the implementation of this policy framework. 19 The project focused on working towards changing the attitudes and behavior of civil servants. Working closely with representative groups of decision-makers and technicians from all participating agencies, the project aimed to instill a change of attitude among civil servants vis-à-vis the culture of performance. Thus, 13 sectoral technical working groups (TWGs) were established through ministerial orders and a work schedule was approved. The TGWs consisted of decision-makers and technicians of all relevant departments in the respective ministries who received extensive training in performance budgeting and the ISP framework. The TGWs worked together and actively drove the preparation of the ISPs, although with differences from ministry to ministry with respect to the level of engagement. Heads of departments participated in the validation discussions with the TWGs and at key junctions in the preparation of the ISPs to discuss the definition of programs, the indicators selected and the targets agreed, as well as to provide oversight to the project. The Bank team gradually stepped down the level of effort in the preparation of the ISPs, placing more responsibility on the working groups. Thus, in the second and third years of implementation, the level of Bank effort was cut in half. At the end of the project, all the participants in the 13 sectoral working groups are familiar with performance frameworks and most of them have become supporters of the envisaged changes, particularly the members of the PPUs. A summary of the strengths and weaknesses identified in the implementation of the project at the level of each ministry is presented in Annex 2. The RAS promoted capacity development, exchange of best practices and worked towards building a critical mass for changes towards performance management in the public sector. Capacity development was at the core of the strategic planning initiative which the RAS supported. Based on the experience accumulated during implementation, adjustments were made with focus on building a critical mass for change in the participating ministries in support of the reforms promoted. It also provided civil servants with the appropriate tools to assess the effectiveness of the linkages between results, policies and resources. In this sense the participating technical staff have become familiar not only with the setting of priorities and objectives, designing programs or allocating appropriate financial resources aligned with the medium-term budgetary framework, but also with the monitoring of outputs, outcomes and unit costs, setting performance indicators and collecting systematically the necessary performance data. Considering the capacity constraints in the participating public institutions, the project put emphasis on transferring knowledge through tools, institutionalized processes and training. Throughout the implementation of ISP extensive training was given to around 300 members of the 13 TWGs on performance planning and budgeting. The training curriculum included the ISP methodological framework and the IT monitoring tool, while the training sessions were interactive, allowing the ministerial staff to gradually play an increased role in the preparation of the ISPs. It is expected that the monitoring tool will be routinely used for data collection and analysis in support of assessing results. The project revived the network of PPUs from the 13 participating ministries. The network members met and continue to meet and share lessons. They also provided to the World Bank team proposals for enhancing the effectiveness of the project: for example, to improve the IT monitoring system, and the design the ISP documents. Learning from the countries more advanced in developing a performance culture in the public sector was also an objective of the project. Two study tours of ten days each were organized in France in 2017 and Austria in 2018 for the PPUs. During the visits, the members of the network talked to relevant high-level officials and technicians, academics, parliamentarians, Court of Accounts, think-tanks etc. about the respective performance-based budgeting systems, their achievements and failures. 20 Reports on the visits were produced for each respective ministry and discussions on the lessons learned took place in the PPU network. The RAS provided a platform for a broader approach to performance management by relating to other important actors within the Romanian public sector. Beyond the revival of the PPU network, which had been marginalized in some institutions, the project developed cooperation with the Spending Review Unit in MoPF whose staff was familiarized with the framework of the ISP. The Spending Unit has been using the Education and Health ISPs for guidance in conducting their reviews of the respective sectors. Moreover, the project reached out to the Court of Accounts (CoA), presenting the proposed approach for strategic planning and performance budgeting. The reactions of the CoA have been positive, and cooperation is likely in the future as the Court is interested in using this instrument for their own performance audits. The process also relied on the significant efforts made by the Romanian Academy’s team of experts, who analysed the reports of the CoA for the 13 selected sectors for the 2005- 2015 timespan. The conclusions and recommendations of the reports were then compared to the concrete policy measures of the 13 line ministries in order to observe if and how the conclusions and recommendations of the CoA were integrated into the activity of the institutions. The Romanian Academy made concrete proposals on how this process could be better integrated in the ISP process. The ISP project is a systematic attempt to link the policy agenda with the budget process. At this stage the ISP preparation is not yet formal part of budget formulation process. Nevertheless, more and more ministries use the ISP to inform and articulate their budget requests in the discussions with MoPF. The ISP stimulated the joint work and communication among technical departments with the budgetary-financial department of the ministry. However, the use of the ISP for budgeting purposes is still limited for reasons that will be presented below. 3.2. Main challenges and shortcomings Beyond these positive developments, the implementation of the RAS uncovered a number of challenges which were not overcome and undermined the intention of the project to integrate the ISPs into the budget formulation process These challenges are presented below: Lack of political leadership and frequent changes of Government impeded a coherent medium-term planning process. In 2017 GSG and the World Bank team presented the project to the cabinets of two Prime Ministers (PMs), who received it with interest, and twice an agreement was reached with them to present the scope of the work to the entire Government in a governmental meeting. However, the respective PMs fell victims to the high turnover of decision-makers in the meantime. The next Cabinet had different short-term priorities and Romania’s leadership of the European Council during the first semester of 2019 made the high- level political decision-makers even less accessible for discussions about the project. This is unfortunately a symptom characteristic to all RAS focusing on institutional reforms, including RIA, Strategy Unit or HRM. Nevertheless, the GSG, the World Bank team and the PPU network have continued to emphasize the importance of political leadership for success and have tried to actively engage with high-level political decisions makers whenever the opportunity arose. The political changes which took place at the beginning of November 2019 represent a new opportunity for engagement on improving the strategic planning and budgeting system. 21 Further institutional constraints encountered during the project implementation were the frequent changes in the structure of a ministry and its portfolio. This issue has a twofold dimension: first, it leads to the fragmentation of a coherent policy area based on political criteria, usually with the purpose to have more ministerial or state secretary positions; second, it risks excluding whole policy areas from the focus of a ministerial ISP. In the first instance, the excessive fragmentation of a policy sector generates difficulties in designing budgetary programs and defining boundaries, in identifying the accountable managers and in the coordination of the whole ISP, since budgetary programs should reflect individually coherent areas of the respective sector; that would not be the case for some narrowly defined policy areas. In the second instance, the effectiveness and impact of budgetary programs would be negatively influenced by the difficulty of identifying concrete interventions/measures in connected policy areas. The coordination of the ISP implementation and, often, even preparation processes remain issues. The often fragmented, vertical and hierarchical structure of line ministries creates challenges to coordinate a coherent implementation of the ISP. On the other hand, performance-based budgeting as well as the overall strategic planning approach reduce the scope for ad-hoc and discretionary policy decisions. This is not well appreciated by some political appointees, who are used to enjoy more ad-hoc decision-making and access to public resources. In these circumstances, the interest and support of the respective decision-makers for the implementation of a well-structured and evidence-based institutional plan would remain low or they may even oppose it. Strategic planning and budgeting remain so far parallel processes. Despite the efforts of the GSG and the targeted technical assistance provided by the Bank in an integrated manner, the institutional strategic planning process remains largely de-coupled from budget preparation. The failure to use the structured program approach of the ISP to influence more deeply the preparation of ministerial budgets represents a lost opportunity for performance budgeting for the time being. There are however ministries where the ISP is used as guidance in the preparation of the budget; the Ministry of Labor or the Ministry of Internal Affairs are examples. Nevertheless, at this stage, the ISPs remain technically solid institutional documents, proposing detailed budget programs, connected to higher level objectives and policy commitments, proposing performance indicators and targets that are unfortunately not being fully utilized for budget preparation. The legal framework for ISP approval and for making it part of the budget formulation process was not completed at the time of this report. In spite of significant efforts from the GSG, the government did not approve the Government Decisions (GD) to make the preparation of the ISP legally part of the budget formulation process. This is probably the most important shortcoming of the project. The GSG drafted the GD with support of the Bank team and there were two attempts to have it formally adopted. The approval process was rather cumbersome, and it had been severely affected by the high turnover of ministers; around 90 ministers and four PMs were in office during the duration of the project. The law requires the approval of all relevant ministers, and the change of one of them during the approval process automatically leads to the re-launching of the cycle. The GSG did not abandon the effort and continues to work towards having the GD approved. Failure to approve the strategic planning framework was due to inconsistency in the law but also due to resistance to change. In the first approval attempt, all ministries, including MoPF, approved the draft. However, a flaw in the budget law for 2017, which suspended an article in the Public Finance Law, did not allow the Government to pass the GD and the process 22 had to be re-launched. In a second attempt, the GD was approved by the line ministries, but with comments by the MoPF. There appears to be resistance from within the public administration to the introduction of a results-oriented approach in the budget preparation and execution process. The GSG, in coordination with the network of PPUs is currently looking also at ways to link the ISP preparation process to the Annual Working Plan of the Government (AWPG) or to legislation regarding decisional transparency in the public sector. The prevalence of a traditional, input-based budget process with little emphasis on results hinders a more performance-oriented budgeting culture. The period 2017-2019 was characterized by political and legislative instability and large differences between the planned and executed budgets, both on the revenue and expenditure sides, and an inconsistent medium- term budgetary framework. Key challenges were, among others, the consistency of the projected medium-term and annual macroeconomic framework, the permanent over-estimation of the projected budgetary revenues and the dramatic increase in the recurrent spending at the expense of public investment in the context of a pro-cyclical fiscal policy throughout the implementation of the project. This situation resulted in endemic uncertainty with respect to the budgetary appropriations associated with the budget programs. As a result, the credibility of program budgeting was affected by the conduct of the fiscal policy. This policy behavior reduced the credibility of and the interest for performance-based budgeting, dependent on a reliable and effective annual and medium-term planning, at the level of political decision-makers, and stimulated the ad-hoc and discretionary approach with respect to policy and budget-related decisions. As discussed above, these processes were negatively impacted by the high political turnover, leading to ever-changing priorities. The traditional budget preparation process allows for little focus on performance information. From this perspective, the ISP preparation was more of a transformation of the medium-term policy agenda of the Government into a program-based one and not a fully new conceptual re-design and approach towards performance budgeting. Performance-budgeting is a challenge also for the budget departments in line ministries, which seem to be more de facto accounting departments. Among the difficulties generated by the current budget process is also the short cycle of the annual budget preparation, which starts in practice late in the year and it is often finalized and approved after the beginning of the next year. For example, the 2019 budget was not approved before the end of 2018, but rather in April 2019, adversely influencing the next year’s budget preparation. The introduction of a complex performance budgeting process requires a long-term holistic approach with focus on capacity building and complementary measures. Building on the knowledge accumulated during the implementation of the RAS, the participating ministries likely have now the capacity to prepare good ISPs by updating the existing ones following the methodological framework applied. However, this by itself will not go far towards the establishment of a coherence performance-based budgeting process. The authorities should think of advancing program-based budgeting by starting with a pilot, building on the recommendations of the Strengthening Financial Accountability Grant. In addition, there is a strong need for building the capacity to upgrade key complementary activities, such as human resources for conducting serious macro-economic analysis; preparing impact assessments; strengthening the public investment management cycle; conducting policy analysis and design and spending reviews; strengthening monitoring and evaluation of policies; using big data for analysis; and advancing the digitalization of the public sector. These are all difficult multi-annual reforms which in turn require political leadership and ownership, as well as guidance and resources. 23 Section 4 – Conclusions and next steps In hindsight, it is clear that some of the early expectations of the project team were too ambitious. In particular, project ownership at political level and the ability to rapidly integrate the ISP preparation into the budget process were overestimated. These initial higher expectations were motivated by i) the strong political support for the project enjoyed in the design phase and early in implementation; and ii) by the execution, in parallel with the ISP project, of the Bank-managed grant to support the reform of the budget process by making it more results-oriented. In the meantime, however, multiple changes in the Government which came to power after January 2017 and shifts in their political priorities diminished the interest of the high level political decision-makers in the project, while the implementation of the grant for budget reforms started late and showed limited interest in parts of the MoPF to implement the recommendations of the Bank. These contrast with the continued support and leadership for the ISP project provided by the GSG and good traction in most of the participating ministries. At the same time, the new cabinet which came to power in November 2019 may revive the interest for advancing the performance-based budgeting reforms. In the OECD classification presented in the first section, Romania’s budgeting system would fall under “presentational performance” category, with some elements of “performance-informed budgeting”. This is mainly due to the fact that the official public budget continues to be a classical one and the ISP is a separate document with the actual main role to present the priorities and programs and monitor the results (output, outcomes). Of course, since the detailed budget programs in the ISP are not being used for the budget allocations, there is no program-based budget execution. Consequently, the budget appropriations and their annual rectifications are not formally informed by the performance information in the ISPs. The current medium-term strategic planning framework does not need further major improvements nor additional technical support; the focus needs now to be shifted to the budget process. The focus of the Bank’s technical assistance under this RAS was to strengthen the strategic planning framework by improving the quality of the ISPs, under the coordination of the GSG and the PPU network. From that perspective, the objective of preparing quality ISPs and transferring the knowledge to the participating ministries to update them in the future has largely been achieved (with the caveats explained above). In addition, the follow-up RAS which will provide technical assistance for the preparation of ISPs by the ministries which did not participate in this round will anchor further improvements if needed. However, the ISP preparation has at this stage little real influence on the budget preparation or execution. Therefore, a simple continuation of this approach would not deliver the expected impact on enhancing the performance orientation of the budgeting process. Moreover, a de-coupled system, where line ministries are preparing only good institutional plans while ministerial budgets remain traditional as before risk to negatively affect the credibility of the strategic planning reforms. It is therefore critical that the focus of future reforms should be on integrating strategic planning with budget preparation and linking the monitoring of the results to budget execution. 24 A number of steps can be considered by the Government towards the continuation of the reforms introduced through the RAS: First, the ISP preparation should be integrated into the annual budget formulation process. To avoid the situation with two systems running in parallel and strengthen the policy dimension of the budget process, the ISPs should be part of the yearly budget preparation process. The draft GD already prepared by GSG should be submitted for Governmental approval when the opportunity arises. The MoPF should be consulted again on the scope and content of the GD. Ideally the GD should be co-promoted by the GSG and MoPF. The budgetary programs prepared for the ISP will then become the budgetary programs of the ministry’s budget submission and the ISP drafting will be part of the budget calendar. A careful assessment of the Law on Public Finance is needed to ensure that it allows for the piloting of budgets on programs. The Law on Public Finance (Law 500/2002) suffered hundreds of amendments in the last 17 years. The main purpose of the analysis would be to ensure that the provisions of the law allow for a pilot phase for the budgetary execution based on programs to be launched. The window of opportunity opened by the new Government, which recently stated its intention to update the Law on Public Finance and the Law on the Fiscal-budgetary Responsibility12 could be taken advantage of. In the meanwhile, the ISP process can be connected with the Annual Working Plan of the Government (AWPG) and with the preparation of strategies. The Government has the responsibility to prepare the AWPG according with the main policy priorities of the Cabinet for a particular year. As GSG is responsible for the coordination of the ISP preparation and also acts as the secretariat for the drafting of the AWPG, the two processes should be harmonized. The GSG also works on revising the architecture of strategic planning system with the view of linking the preparation of strategies to the ISPs, which will operationalize them, including with the use of the IT tool developed for monitoring the ISPs. The architecture of the system will be explained in a GD to be issued this year and accompanied by an explanatory guide. Year 2020 can be used for technical preparations in this respect. Since after the general elections scheduled for November 2020, a new cabinet will be installed, with a full four-year government program and new strategic priorities, 2021 should be targeted to roll this out. These could easier be linked to a performance-based budgeting exercise that allows also timely monitoring of priority measures, results obtained, and resources allocated. Procedures for the monitoring and evaluation of the Institutional Strategic Plans should be established in ministries. The monitoring of the ISP implementation should be built around the IT tool designed for this purpose, and the PPUs should coordinate the M&E process. The draft GD which establishes the framework for the preparation and use of the ISPs includes provisions for the monitoring of the strategic plans. However, further steps should be taken in ministries to ensure an effective monitoring and reporting process. These steps require: i) the establishment of an internal monitoring plan, which would explain how each institution and its senior management will monitor commitments from ISP and the annual action plan, the role of senior management and PPUs, the establishment of a reporting network in the institution and accountability mechanisms to support strategic planning; ii) the identification of the monitoring requirements once the ISP has been approved, with all relevant data and information needed to facilitate results reporting entered into the IT tool to establish the basis for regular monitoring of results for all relevant commitments set; 12 Law no 69/2010 on the Fiscal and Budgetary Responsibility. 25 iii) the establishment of the monitoring network of departments, directorates, deconcentrated offices, public bodies (agencies) and other organizations, etc. required to report results. A mechanism, ideally automated, and procedures must be established to collect and convey results in a timely manner. iv) the reporting of the results and the identification of the potential problems. Although the formal reporting cycles are annual or semi-annual, institutions are advised to institute more frequent (at least quarterly) internal monitoring cycles. The PPUs should identify areas where targets are not met and alert senior management, request explanations for underperformance and seek advice on remedial actions from those responsible for delivering the relevant program or service. v) the initiation of pre-emptive problem-solving measures. It is recommended that senior management closely monitor efforts to resolve problems. The GSG or MoPF (involving for example the Spending Reviews Unit) can advise on appropriate methods and may request the preparation of a performance improvement plan by the ministry (or lead institution) if results do not meet targets; vi) the fulfillment of formal reporting requirements. Annual and semi-annual reports must be submitted to (or extracted by) the GSG for all ISPs from the IT tool. Ideally, through more frequent monitoring within institutions and regular communication with the GSG, few surprises will arise from the reports. In parallel, the authorities should move to consolidate the medium- term budget formulation process, building on the ISP framework. The MoPF and the line ministries need to change their approach for the budget preparation. The first step in this direction would be to increase the reliability of the annual budget plan, on both sides, planned revenues and planned appropriations. This is not solely the responsibility of the MoPF, which plays a key role on the revenue side, but also an issue for the line ministries. Line ministries need to work on setting their budgetary requests in a realistic way, based on programs and informed with key performance information for more credibility. The ISP programs, indicators and estimated budgets by programs are good starting points in this exercise. The second step is to strengthen the reliability and credibility of the MTBF. The biggest challenge in this respect is the endemic difference between the ceiling set by the budget in year N for the year N+1 and the effective appropriation set by the annual budget in the year N+1. Without improvements in the preparation of the MTBF aimed at lowering (and explaining) the difference margins between the forecast in MTBF and the effective annual budget appropriation, it will be difficult to increase the credibility of medium-term and performance-based budgeting. This is key especially for anchoring the implementation of the public investment projects and the programs funded from the EU structural funds. The ISPs, which apply a unitary and rigorous methodology, should thus play an important role in further strengthening the MTBF. The technical pre-conditions regarding the budgetary classification, financial reporting and public accounting should be met for piloting the budget on programs. A key step is to assess whether the current IT systems used by the MoPF, and especially the FOREXEBUG application, are fully operational and whether they can be used for a real program-based budgetary execution. Other important steps are to adapt the budgetary classification and financial reporting forms to the requirements of the performance-budgeting systems and especially program-based budgetary execution. It is also important to improve the programming system for multi-year budgeting, to have an effective mechanism of multi-year budgetary commitments, especially in the field of public investment management, together with a clear progress in implementing a full accrual accounting system in public administration. 26 Introduce the function of program managers. To allow for the proper steering of the budget program and enhance accountability for performance, the position of program manager, as the one responsible for managing the budget program, needs to be introduced. This role, with clear responsibilities and tasks ought to be defined by law, potentially within the changes envisaged in the Public Finance Law, and accompanied by complementary secondary legislation and special training programs to develop the necessary skills. In line with the current structure of the civil service in Romania, the top management positions, such as general directors or directors, are the best suited for being promoted as program managers. Pilot a program-based budget in a ministry. Once the MoPF and GSG have validated that the appropriate technical pre-conditions are in place, a ministry should be identified for piloting a budget cycle based on programs. When selecting the pilot ministry, attention should be given to the previous experience with strategic planning, including the active engagement in the preparation of the ISP, and to the political commitment of the decision makers in the respective ministry towards this initiative. Piloting would allow the Government to identify potential weaknesses and address them, such as capacity constraints, and test the capacity of the civil servants to adapt to a performance culture. Once the appropriate conclusions are drawn, gradually expand the practice of performance-based budgeting to all other line ministries on the basis of a realistic implementation plan. Drawing on the experience acquired in the implementation of the RAS, a successful implementation of a performance-based budgeting system hinges upon a number of critical factors: Anchor expectations and focus on the results to be delivered. The next steps in this reform should be results-driven with a clear objective of advancing towards a genuine performance budgeting process at a speed which is consistent with the realities on the ground. As explained above, the focus of the next steps should be on strengthening the performance dimension of the budgeting process, at the beginning by piloting it in one or more ministries. From the planning and policy angle, the starting point should be the updated ISPs for the respective ministry(ies). One could even consider a more simplified approach in the beginning, for example by budgeting at the level of strategic objectives, i.e. one level above the programs, if that would be more feasible in the short run, even though that would lose on the current detailed approach for the description of the budget programs. One of the key principles in implementing performance-budgeting system is “keep it simple”. This means essentially the following: a) to limit the number of programs; b) to limit the number of sub-programs; c) to limit the number of performance indicators, while these should reflect strategic priorities and the more important spending areas; and d) the most suitable for measuring performance are the indicators expressed in quantitative manner, as explained in the ISP methodology. The Ministry of Public Finance is central to any meaningful budget reforms. The MoPF should co-lead the next steps in the introduction of performance-based budgeting and should drive the modernization of the budget process, including by ensuring that the technical preconditions listed above are in place. The GSG will play the key role in the preparation of the strategic planning framework and the monitoring of results, as designated by the law, and should work closely with the MoPF. Political leadership is key for the success of the reforms. Worldwide experience shows that successful budget reforms hinge upon strong political leadership actively driving forward the agenda. Moving forward with the next steps would require therefore gaining in advance the support of the Government for such an initiative. In the case of the pilot in one ministry, the 27 first step is to ensure that the political leadership of the institution is on board and is prepared to lead the process. The GSG and MoPF should present the initiative to several ministries and pick the one(s) willing to test it and with the capacity to deliver, building on the lessons learned during the RAS implementation. The role of the Public Policy Units in policy design, implementation and monitoring at the level of ministries should be enhanced. PPUs should play a central role in the strategic planning process in all ministries, as requested by law 13. However, the law is implemented unevenly across ministries and, in some, PPUs have been marginalized. As revealed by Annex 2, the involvement of the PPUs in the coordination of the strategic planning processes at the level of the participating ministries unquestionably improved the quality of the exercise. In a number of ministries, the PPUs effectively mobilized the working groups and drove the ISP preparation process. Strong PPUs, acting as focal points, also facilitated the interaction between the ministerial working groups and the World Bank experts. Ministry leadership, with support from GSG, which is cognisant of the importance of the PPUs in strategic planning, should therefore ensure that the PPUs fulfil in practice the role assigned by the law. Set clear objectives for the next steps. Before initiating the next phase of the performance budgeting reform, the CoG (GSG and CPM) and MoPF should clearly agree upon the objectives and pathway. Clear objectives will help to guide the design, manage expectations, and increase the chances of success. The objectives should take into account the administrative culture of the country and how civil servants are likely to interpret and respond to such initiatives. The main objective for the coming years ought to be to integrate the ISP preparation as a full part of the budget formulation process in an institutionally solid way (in Romania this includes anchoring it in the legal framework); the extension of the ISP model to all ministries so that they are ready to embrace performance budgeting when rolled out; and the piloting at the level of a limited number of willing ministries of a full performance-informed budgeting system. Complement performance budgeting with other supportive reforms. Performance budgeting is more likely to perform well when it is part of a broader-based government effort to introduce a more performance-oriented culture rather than being an isolated reform promoted by the CoG or MoPF. For performance budgeting to work well, human resource management systems need to recognize and encourage good performance; monitoring and evaluation systems need to provide meaningful analysis; data collection and reporting systems need to be timely and reliable; and audit processes need to validate performance reports. Spending reviews are also an important complementary tool to performance-budgeting that should be extensively used by MoPF through their already established Spending Review Unit in cooperation with the line ministries and GSG. Invest in capacity. Results and budget analysts typically need new skills to deal with program structures, performance indicators, and the costing of programs. The investment required in this respect both in the MoPF and line ministries is often underestimated, resulting in inadequate program design, poor quality indicators, inattention to problems, and a passive approach to using data. In addition to classroom training, capacity can also be built through peer learning, so that good practices developed in one area of the Government can be replicated by others. The budget departments need to build the skills to enable it to understand how the budget instrument can be used to enhance performance. 13 Government Decision 775/2005, with the subsequent amendments. 28 Communicate the reforms. Giving the transformational nature of the planning and budget reforms, they have to be accompanied by a clear communication strategy with the purpose of mobilizing the public support for the reforms, both within the public administration and at the level of the key stakeholders. Information on the reform agenda has to be publicly available and easily accessible, and progress should be communicated widely by the decision-makers. 29 ANNEXES 30 Annex 1. The IT ISP Monitoring and Evaluation IT tool The IT application developed by the RAS allows the line ministries (LM) to monitor progress on the implementation of the ISPs. The design of the IT tool follows the format and logical structure of the ISP and supports the reporting of impact, results, process, and efficiency indicators to the institution's management. The ISP application has 4 levels: (i) the first level covers the Strategic Objectives with Impact Indicators; (ii) the second level is the Program with Result Indicators; (iii) the third level is the Measure with Output Indicators; and (iv) the fourth level is the Project or Activity with Process Indicators (see Chart 2 above). The application is flexible and allows to expand the number of lines/indicators at each of the four levels. The IT system is accompanied by a manual of utilization, which explains in detail how it functions. Ministries use the IT system to monitor their strategic plans, the results being directly reported in a standard format to the General Secretariat of the Government, the Ministry of Public Finance, and each line ministry in charge of the respective policy agenda. The data stored in the application allows for the preparation of evaluation reports at either sectoral or governmental level. Overview of the IT tool 14 The main steps 15 that the ministries and other institutions responsible for monitoring and reporting the activities concerning their ISPs must follow in order to upload, modify and update the progress with implementation, are the following: The start page In order to access the IT application, type http://psi.gov.ro/initiale_minister in a web browser and the page of the respective ISP appears on the screen (only for information not for editing) (Image 1) 14 The screen captures exemplifying the functioning of the IT application belong to the ISP of the Ministry of Labour and Social Justice (Romanian acronym MMJS). All ministries have identical pages, the only differences being (i) the visual/branding (logo, specific images and colours), each solution being aligned to the visual identity of each ministry; and (ii) the content: strategic objectives, impact indicators, programs, measures, results indicators, output indicators, product indicators, which are of course specific to each ministry. 15 These steps are presented in detail in the utilization manual. 31 Image 1: The start page The start page offers a bird’s eye view of the planning hierarchy, showing strategic objectives, programs and measures, together with the relevant information. Here one can also filter the strategic document (ISP) by planning level type/code, tile or description. Authentication The authentication link can be found under the user menu, on the start page. Once the authorized user clicks on this link, he/she can either authenticate or reset the password. New accounts are created by the system administrators. The username and password are communicated to the user (Image 2). Image 2: Authentication screen The start page after the user logs in Once the user logs in, the start page offers four new options/links under the user menu. These options allow the user to import an ISP (word, excel format), add a planning level, manage the user account or logout (Image 3). 32 Image 3: Start page, after login, with the user menu open Planning level page/details (Strategic objective, Program, Measure) Clicking on a planning level will show the user the respective detailed page. The structure is the same for all planning levels (Image 4): - Coding and title of the planning level; - The planning level that lies above the current one (i.e. the “parent” level in the planning hierarchy); - The description of planning level; - The associated budget (if it was filed in); - Relevant indicators specific for that planning level; - Planning levels that lie below the current one (i.e. the “children” levels in the planning hierarchy) 33 Image 4: The planning level page The indicators’ page When the user clicks on an indicator name, she/he can see the details of the page with the following information (Image 5): - Coding and title of indicator; - The planning level description (that is measured by the respective indicator: Impact, Outcome, Output); - Indicator description, reference value and the unit of measurement; - A table with annual targets, actual recorded values for each year, comments and the percentage of target fulfilment; - A chart with the progress towards meeting the target. 34 Image 5: The indicators’ page 35 Editing content If the user is authenticated as having editor rights, she/he can modify the content of the ISP (planning level, indicator) using the editor bar. All changes are recorded to see the history of the edits, while changes can be compared using the “revision” function (Image 6a; Image 6b; Image 6c): Image 6a: Edit a planning level 36 Image 6b: Edit an indicator Image 6c: Content history/revisions 37 Importing content The IT tool allows the user to quickly import content using CSV files (Image 7a; image 7b; Image 7c) for appropriate transfers of data and for the easiness of using the tool. Image 7a: Import feeds Image 7b: Import feed types Image 7c: Import file selection 38 Adding content using forms The IT tool allows the user to add content using templates in order to develop a uniform structure of content dissemination (Image 8). Image 8: Planning level form by using templates 39 Reports and data export The IT tool allows the user to generate and export reports (Romanian -„rapoarte”) from sections in the main menu. The user can use filters (on the right) in order to generate a report for a single year or for a specific period. The „CSV” button at the end of the report allows the user to export the data in CSV format or to print or save it as PDF (Image 9a). The application also allows the user to export indicator charts and data (Image 9b). Image 9a: The reports page Image 9b: Export options of charts 40 Annex 2. Strengths and weaknesses in implementation at ministry level Ministry of Agriculture and Rural Development The strategic planning process benefited from the direct coordination of Strengths the PPU, which acted as technical secretariat. The ISP development process was proactive and counted on the large participation of the ministry’s specialists, including the budget division and its heads. The budget of the ISP could be considered as best practice and reference for other ministries and benefited from the compliance of the measures and programs with the requirements of the EU Common Agriculture Policy (CAP). The ISP was more an information tool than a management tool. Weaknesses The ISP implementation, monitoring, and evaluation was affected by the lack of ISP institutionalization (approval) at the level of ministry. This reflected the tensions between the Government Program’s priorities and the focus of the ISP. Ministry for Business Environment, Trade and Entrepreneurship The ISP benefited from the experience and knowledge of the sectorial Strengths groups in all the phases on the ISP process. The state budget was transposed to the ISP budget template under the guidance of the sectorial groups which provided qualitative financial and technical information. Lack of a functioning PPU posed additional burden on the sectoral Weaknesses groups. Lack of interest and capacity to develop multiannual ISP budget programs (2020-2022). Partial overlapping with other strategic planning and reporting – Government plan, internal managerial control etc. Ministry of Economy The ISP benefited from the experience and knowledge of the sectorial Strengths groups in all the phases on the ISP process. The State Budget was transposed to the ISP budget template under the guidance of the sectorial groups which provided qualitative financial and technical information. 41 Ministry of Economy The lack of a functioning PPU posed additional burden on the sectoral Weaknesses groups. The lack of interest and capacity to develop multiannual ISP budget programs (2020-2022). The partial overlapping with other strategic planning and reporting – Government plan, internal managerial control etc. Ministry of Environment The ISP provides a solid basis for the medium-term budgetary programs Strengths and a unitary approach to the operationalization of strategies, by correlating the policy component with the budget component and ensuring a framework for monitoring the performance indicators. The institutional framework for the elaboration and annual updating of the ISP was set up and fully operational over the three-year exercise conducted within the project. The PPU facilitated and mediated the entire process of elaborating and updating the ISP, playing an active role in communication with the working groups. The ISP was not formally approved at the level of the ministry (e.g. by Weaknesses Minister’s order). There is no operational structure at the level of the ministry to coordinate the implementation, monitoring and evaluation of the measures included in the ISP. The cross-cutting environmental initiatives need to be better tackled in the next ISPs, by enhancing the inter-ministerial dialogue at the technical level and by setting up an inter-ministerial coordination structure to promote the inclusion of environmental related measures in the ISPs of other ministries. Ministry of Health The commitment to the ISP process at the decision and the policy level Strengths until 2019; a deputy minister was tasked with overseeing the process and the PPU coordinated the entire process. The representation and involvement of the National Health Insurance House (NHIH) was consistent. The Ministry of Health (MoH) and NHIH shared statistical and budgetary data for the substantiation of the ISP. No leadership and ownership were exerted for the ISP review in 2019. Weaknesses The draft ISP was not debated and disseminated within the ministry and NHIH and the ISP is not used in the budgetary process. Planning in the MoH and NHIH is ad-hoc and uncoordinated with no reference to the ISP or the Health Strategy . 42 Ministry of Internal Affairs The ministry has good experience in working with strategic planning Strengths documents, including ISPs, the staff are familiar with strategic planning concepts and with the monitoring process. The document was drafted through an intense and extensive consultation process, which benefited all the structures of the ministry, as they became more familiar with the challenges faced by their colleagues. The PPU had the necessary know-how and acted as single focal point of contact for the WB experts, facilitating all the processes. The ISP is not seen as an umbrella for all the strategic documents Weaknesses generated by the ministry, but rather as another document that needs to be monitored and reported. The PPU is a fragile structure which lacks the power to push forward such a document, leading to a lack of political commitment in implementing the document. The ministry works with sensitive information that cannot be shared with the public, e.g. the budget, limiting the amount of detail delivered in the ISP and the possibility to create a link between activity/results and budget. The ministry underwent a serious staff retirement process, which led to loss of institutional memory and track-record. Ministry of Labor and Social Justice Strong institutional support and adoption of the ISP as a management and Strengths analytical tool. The ISP achieved important steps in fulfilling its role in the budgetary process in terms of transposing the State Budge to the ISP budget template. The ISP process is almost complete at the level of The Employment Agency (ANOFM). The budget department of the ANOFM developed the annex with the budget programs for 2019-2022 in line with their ISP programs and is committed to report budgetary execution on programs. The leadership, albeit exceptional, concentrated around a small PPU, Weaknesses which limited its ability and potential of promoting and developing the ISP. The IPS and the strategy programs/documents (international, European, Government) are not harmonized and cross-fed. The institutionalization of ISP procedures is not complete in terms of reporting on ISP implementation; mapping of the budget execution on the ISP budget programs and adoption of the ISP as a routine practice. Ministry of National Education The strong commitment of the PPU towards the coordination, Strengths elaboration, and revision of M&E of ISP. The support from the Director of the PPU in coordinating and validating the ISP process. The existing interest and openness to learn and train and to the ISP process overall, especially regarding the development of performance indicators. 43 Ministry of National Education The lack of institutional structures to effectively deal with the Weaknesses elaboration, implementation, and monitoring of the ISP in the long run. The development process relies too much on individual commitment rather than institutional processes. The overwhelming investment of time and resources in doing the administrative business as usual and resistance in adopting the ISP programming philosophy. The low interest in shifting from an input base budgeting to program base budgeting. Rather conservative approach and resistance to change from the finance department. Ministry of Public Finance The ISP development process was based on two structures: the working Strengths groups set according to the ISP strategic objectives and the Quality Management Committee endorsing the ISP components (programs, measures, indicators), which were pivotal in aligning the internal processes and secure the formal acknowledgment of ISP. The ISP revisions was characterized by wide participation and facilitated the improvement of content – consolidating strategic objectives, redefining programmes, and setting the performance indicators in accordance to the monitoring needs and data availability. The revisions of the ISP have been prepared and conducted by ministry’s staff and required minimum guidance from the technical assistance. The PPU needs to be better staffed or a dedicated strategic planning unit Weaknesses should be established to guide the ISP development process. The ISP should be approved at ministry level and become a management tool to ensure a more coherent implementation and performance monitoring processes. Ministry of Regional Development and Public Administration The ministry has good experience in strategic planning, an ISP was in Strengths force at the beginning of the planning process (last version was drafted in 2014) which was visible in the management of the ISP process, institutional support and expertise. Intra-institutional systematic consultation is one of the strengths of the ministry. Each iteration of the ISP document was formally transmitted to the competent structures of the ministry, which provided valuable feedback. The ISP has started to be used in the communications and reports of the ministry in relation to the Government or other institutional partners. 44 Ministry of Regional Development and Public Administration The mandates reshuffle (eg, the integration for one year of the structures Weaknesses of the former Ministry of European Funds), created difficulties in finalizing the document, due to: the need to eliminate and change budgetary programs, the need to train and inform personnel related to new structures and sometimes the quite major budgetary changes. The ISP process took longer at the micro-management level, mainly for specific objectives and indicators associated with concrete measures and budgets and for the institutional structures not used to work with performance indicators and targets. The PPU must be strengthened and supported to ensure the strategic planning of the ISP, especially for the monitoring and evaluation functions. Furthermore, the employees responsible to manage the process were not yet appointed at the level of different structures to ensure the reporting and monitoring of the budget programs. Ministry for Research and Innovation The strategic planning process benefited from the direct involvement of Strengths the PPU in terms of coordinating and facilitating the elaboration, revision, and M&E of the ISP. The ISP benefited from the experience and knowledge of the sectorial groups in all the phases on the ISP process and from the strong core team (2 persons), which remained consistent throughout the 3-years implementation process ensuring the institutional memory. The State Budget was transposed to the ISP budget template under the guidance of the sectorial groups which provided qualitative financial and technical information. The lack of trust in the ISP process, as it had been promoted previously Weaknesses and then abandoned. The lack of interest and capacity to develop multiannual ISP budget programs (2020-2022). The partial overlapping with other strategic planning and reporting – Government plan, internal managerial control etc. Ministry of Transport The transport ISP accurately overviews the ongoing policies in the Strengths Ministry of Transport (MoT). The transport ISP shows to which extend the strategic priorities are supported by the relevant public expenditures, or, on the contrary, not implemented. The very strong technical support from working group (all sectors) from MoT. 45 Ministry of Transport The ISP still offers limited support for budgetary planning and budget Weaknesses execution assessments adapted to the needs of the technical departments of the ministry and requires further iterations to take advantage of the collected information. The ISP could have benefited from more attention, guidance, and support of top-level decision makers of the ministry, for instance at the Secretary of State level. The ISP preparation could have benefited from the presence of the minister in charge of Budget/EU funds to explain the financial constraints and opportunities, and also, express any particular need. Ministry of Waters and Forests The ISP integrates the policies in the field of waters and forests, Strengths providing a solid basis for the medium-term budgetary programs. The institutional framework for the elaboration and annual updating of the ISP was set up and fully operational, over the three-year exercise conducted within the project. The PPU had an active information, facilitation, mediation and integration role and ensured: the technical coordination of the activity of the working groups; the analysis and correlation of the documents elaborated by the technical staff from the working groups and coordination of activities related to the IT tool. The ISP was not formally approved at the level of the ministry (e.g. by Weaknesses Minister’s order). There is no operational structure at the level of the ministry to coordinate the implementation, monitoring, and evaluation of the measures included in the ISP. The ISP is currently considered more of an information document than a management instrument. 46 Competence makes a difference! Project selected under the Administrative Capacity Operational Program, co-financed by European Union from the European Social Fund 47