WATER P-NOTES ISSUE 46 AprIl 2010 52278 Template for Assessing the Governance of Public Water Supply and Sanitation Service Providers A Tool for Understanding Water System Effectiveness T he template is a tool to assess the performance mental sustainability, and affordability to provide of an urban water supply and sanitation service reliable data about the quality of WSS service and provide by taking into account the governance, the performance of WSS service providers. This tem- policy, and management context it operates in. plate complements IB-NET by providing a standard appraisal methodology for the governance of the WSS service provider and its environment. The Template: A Reality Based The performance of a WSS service provider is Assessment Tool obviously influenced by its corporate governance and the environment it operates in. Too often the This P-note introduces a template to assess the functions of policy formulation, regulation of the governance of urban WSS service providers and its WSS service, ownership of WSS assets, financing impact on the quality of service and performance of WSS infrastructure development and provision of operations. The template can be used for diverse of WSS service are governed by unclear and unen- WSS service delivery models including decentral- forceable mandates and/or contracts. It has been ized autonomous public corporations and other developed to help improve assessment effective- institutional arrangementsranging from government ness and efficiency, on a per city or country basis, departments to autonomous public WSS asset hold- including making performance comparisons over ing companies sub-contracting operations to pro- time (e.g. before and after certain interventions). fessional operators. Although not a benchmarking tool per se, it also The template complements extensive work allows to make cross comparisons--at least within done on comprehensive performance indicators countries if not between countries. through the International Benchmarking Network for Water and Sanitation Utilities (IB-NET). These metric indicators measure service coverage, effi- Building on lessons learned and ciency, reliability, financial sustainability, environ- field testing This template is based on the body of research re- cently carried out by the World Bank on public utili- What is a template? ties and the environment in which they operate .The A template is a document or file having a preset draft template was reviewed by sector profession- format that can be used as a starting point for a als across the World Bank.The draft template was particular application so that the format does not field-tested in threeWest African countries (Benin, have to be recreated each time it is used. Guinea, and Togo) This note summarizes a template developed in late 2009 by Alain Locussol and Meike van Ginneken for the World Bank. Readers may download the complete paper from www.worldbank.org. WATER P-NOTES Using the template The template contains an organized list of questions that guide the assessor through a com- The template can be used as terms of reference prehensive review of the service provider and its (TOR) for a team of consultants assessing a WSS environment, including: service provider. It offers a set of questions to facili- · Identifying the main actors of the urban WSS tate the organization of reviews for a meaningful sector and clarifying their exact mandate; understanding of any given WSS service provider rather than a rigid checklist. The templatelooks at · Clarifying the contractual arrangements that the institutional set-up of WSS service providers, allow the actors to interact between each other; how they relate to their environment and customers, and and how key functions are carried out. · Assessing the adequacy of the instruments (or procedures) used by the actors to fulfill their mandates. What is covered The questions result in the definition of the The Template includes a set of questions and simple accountability framework within which WSS service instructions on how to attain the answers. It focuses providers operate. on two main governance aspects: mapping the WSS service provider in its environment and key functions of WSS service provision. How are the Key Functions of the WSS Service Performed? Mapping WSS Service Providers The second section of the template reviews how and their Environment key functions are performed. The template provides a number of questions to review the following This focuses on the overall legal and institutional functions (i) development of the WSS infrastructure; environment where WSS service providers operate (ii) operation of the WSS service; (iii) financing of and on their internal functioning. Official policies the WSS service and WSS infrastructure; and are often not fully carried out in countries with weak (iv) economic regulation. governance regimes. Studying the actual function- ing of institutions, rather than just the paper policy framework, is critical. Better mapping of WSS service Presenting the results of the providers begins with a review of the overall policy assessment environment of the urban WSS sector with particular attention to: (i) discrepancies between official poli- The template includes tools for presenting findings cies and their actual implementation; (ii) incentives to experts and decision makers. These tools include that could affect the quality of the WSS service and snapshot descriptions, graphs of benchmarks illus- the performance of WSS service providers; and trating the performance of the utility in relation (iii) the vested interests that may be affected by to similar operators and visual aids to show the changes in the way the WSS business is carried accountability framework. out thus tempted to block their implementation. 2 ISSUE 46 · APRIL 2010 Example of an Accountability Framework The graph below describe a fairly unbundled account- · This financing institution raises funds mostly from the ability framework of a WSS sector where: central government, international financing institu- · A central ministry in charge of the urban WSS sec- tions and local capital markets; tor primarily: (i) sets urban WSS policies; · The public WSS service provider utility sub-contracts (ii) provides grant financing to autonomous WSS the technical and commercial operations of the utilities to support specific projects, such as pollu- WSS service to a professional operator through an tion abatement; and (iii) directs targeted subsidies affermage contract; to low income residential customers; · The customers are under contract with the WSS ser- · A provincial government, responsible for urban WSS vice operator; in its territory, delegates the provision of the WSS ser- · The central government transfers to an independent vice to an autonomous public WSS it owns; regulator the responsibility for setting customer tar- · An autonomous public WSS utility finances its opera- iffs; tions from cash generation, grants provided by the · A separate central government agency is respon- central government for specific projects and debt sible for allocating water entitlements to water users. provided by a public financing institution. Example of Highly "Unbundled" Accountability Framework Performance Monitoring Ministry in Appraisal Appraisal Public Charge of Regulator Lending WSS Agency Perf. Monitoring Tariff Setting Grant Loan Feedback Agreement Agreement Application Application Provincial Other Customers WSS Utility Trading Water Users Customer Affermage Deligation Water Contract Contract Agreement Entitlement Provincial WRM Operator Government Agency 3 WATER P-NOTES List of focus areas for each Key Function of the WSS Services Development of the WSS Infrastructure Financing of the WSS Infrastructure Development · Mandate of WSS infrastructure developers. · Mandate of the financiers of the WSS infrastructure · Demand assessments. development. · Infrastructure development plans · Central and regional government financing mecha- · Financing applications. nisms. · Project designs. · Government owned lending institutions. · Procurement. · Local capital markets. · Project implementation procedures. · International (and bilateral) financing institutions. · Suspected corruption associated with WSS infra- structure development Economic regulation of the WSS Service · Mandate of the regulator Operation of the WSS Service · Operations of the regulator · Mandate of WSS service operators · Tariff setting principles. · Technical operations · Tariff resetting. · Commercial operations and customer relations · Performance monitoring. · Affordability · Service to the poor. · Service to the poor · Public-private partnerships · Suspected corruption associated with WSS service provision The Water Sector Board Practitioner Notes (P-Notes) series is published by the Water Sector Board of the Sustainable Development Network of the Water World Bank Group. P-Notes are available online at www.worldbank. Sector org/water. P-Notes are a synopsis of larger World Bank documents in Board the water sector. 4 THE WORLD BANK | 1818 H Street, NW | Washington, DC 20433 www.worldbank.org/water | whelpdesk@worldbank.org