Report No. 42159-BG Bulgaria Resourcing the Judiciary for Performance and Accountability A Judicial Public Expenditure and Institutional Review June 23, 2008 Poverty Reduction and Economic Management Unit Europe and Central Asia Region Document of the World Bank Acknowledgements Assistance, insights and information received from the authorities in Bulgaria and the European Commissionduringthe preparationof this Report i s gratefully acknowledged. This Report was produced in close collaboration and partnership with the Bulgarian authorities. The team thanks at the outset Ms. Miglena Tacheva, Minister of Justice, for her strong engagement and support. This Report hasbenefitedfrom discussions with andadvice from Messrs./Mmes. Ivailo Kalfin (Deputy Prime Minister and Minister of Foreign Affairs); Plamen Oresharski (Minister of Finance); Georgi Petkanov (then Minister of Justice), Ivan Grigorov (then Chairman, Supreme Court of Cassation), Konstantin Penchev (Chairman, Supreme Administrative Court), Boris Velchev (Prosecutor General) and Andrei Ikonomov (then Chairman, Budget Committee of the Supreme Judicial Council). The team's key counterparts comprised Ms. Sabrie Sapundjieva, Deputy Minister, Ministry of Justice; Mr. Georgi Georgiev, Secretary General, Ministry of Justice; Mr. Lyubomir Datzov, Deputy Minister, Ministry of Finance; Ms. Slava Kamenova, Secretary General, Supreme Judicial Council; and Mr. Hristo Manchev, Deputy Prosecutor General, Prosecution Office o f the Republic of Bulgaria. They and their respective teams provided much of the vision and insights into key areas covered in this report. Detailed discussions with counterparts and comments received from the MOJ, the PORB and the Ministry of Finance have been incorporated into the text. The cooperation with the rest of the Bulgarian Government has also been excellent, and the team i s sincerely grateful to officials at all levels, who found time to meet with the team even at short notice, and readily shared their knowledge and insights. The team i s also grateful to the representatives of Bulgaria's development partners, in particular the European Commission (in Sofia and Brussels), USAID Sofia, and the Embassies of Spain and the Netherlands inBulgaria. The report has greatly benefited from these insights. This Report was prepared by a team comprising Messrs./Mmes. Amit Mukherjee, Anita Correa, Stella Ilieva, Jana Kunicova, Kathy Lalazarian, Clelia Rontoyanni (ECSPE); Jiro Tominaga (ISGEG); Albena Samsonova (ECCUS); Mathew Andrews, Eliana hguelova, Natasha Bhandari, David Fagelson, Carlos Ferreira, Yoko Kagawa, Iva Pushkarova and GeraldThacker (consultants). Guidance and comments from Messrs./Mmes. Orsalia Kalantzopoulos (Country Director, ECCUS) and Florian Fichtl (Country Manager for Bulgaria); Luca Barbone (Sector Director, ECSPE); Cheryl Gray (former Sector Director, ECSPE); Bernard Funck (Sector Manager, ECSPE); Satu Kahkonen (SASPR and former Lead Economist for Bulgaria); Richard Messick (PRMPS) and peer reviewers Sebastiaan Pompe, Fernando Ponz Canto, Gene Gibson and SvetozaraPetkova are gratefully acknowledged. BULGARIA BulgariaJudicialPublic ExpenditureandInstitutionalReview CONTENTS Page ExecutiveSummary ............................................................................................................. i 1. BULGARIA'SJUDICIARY:THE SETTING& CONTEXT ............................ 1 Background and Overview......................................................................................... 1 Benchmarking Bulgaria's Judiciary........................................................................... 5 2. THE INSTITUTIONALENVIRONMENT ........................................................ 15 Separationof Powers: A SummaryInstitutional Analysis ....................................... 15 DifferingIncentives. DivergingPriorities., ............................................................. -20 The Dynamics of ResourceAllocation .................................................................... 23 3. THE MANAGEMENT OFJUDICIAL RESOURCES ...................................... 26 The Public Finance Challenge ................................................................................. 26 A Functional PublicFinancial Management System............................................... 32 Public Financial Management Processes InThe Judiciary ...................................... 36 HumanResource Management................................................................................ 37 Judicial Facilities.,.................................................................................................... 42 InformationTechnology/Information Systems ........................................................ 43 4. ACCELERATINGAND SUSTAININGCHANGE ........................................... 50 Improvingthe Judiciary's Public Financial Management Process .......................... 50 EstimatingFacilityFinancing Requirements ........................................................... 55 InformationTechnology.,......................................................................................... 61 Managing Demand But Strengthening Access ........................................................ 63 MonitoringProgress.,.............................................................................................. -63 Concluding Observations......................................................................................... 65 Annex Tables ...................................................................................................................... 66 EXECUTIVESUMMARY 1. The Setting. Bulgaria's accession to the European Union (EU) on January 1,2007 was preceded by important steps to modernize its judiciary. Significant Constitutional, legislative and procedural changes have impacted the judiciary's structure and functioning. These include (i) clarifymg the responsibilities o f the Supreme Judicial Council (SJC) and the Ministry o f Justice (MOJ); (ii) increasing transparency in justice sector functioning; (iii) strengthening the Prosecution Office of the Republic of Bulgaria (PORB) and (iv) enforcing judicial decisions more effectively. In addition, policymakers' consistent commitment to improve judicial functioning has been reflected in increased budget allocations: significant amounts have been spent on salary increases for judges; training o f judges, court staff, prosecutors and investigators; andjudicial infrastructure (premises and information technology). Overall, though, the reforms have concentrated on legislative and procedural changes, while measures to improve judicial performance have so far been somewhat fragmented. 2. Benchmarking Bulgaria`s judiciary indicates that overall it is comparable to other European countries in terms of resource indicators important for judicial functioning. Crucially, though, Bulgaria has a higher case inflow per capita than other new EU members-especially in regard to civil and administrative cases. While the funds appropriated by the legislature for Bulgaria's judiciary have been steadily increasing, they have mainly been used to raise and sustainjudicial salaries. Legislative appropriations for neededcapital expenditures have been consistently less thanjudiciary requests. This seems to have constrained judicial performance which shows modest improvements, but in some areas seems to be deteriorating, demonstrated by indicators pertaining to case disposition, case allocation, and average cost per case. This i s also confirmed by survey evidence on how firms and the public view the performance o f Bulgarian courts, both over time and comparatively inthe region, with respectto efficiency and integrity. 3. Judicial reform therefore remains a key focus o f Bulgaria's policymakers even after Bulgaria's accession to the EU. Inview of weaknesses in the rule of law and the judicial system in particular, the European Commission introduced a special cooperation and verification mechanism to track Bulgaria's post-accession progress, elements of which relate to the judiciary. There have been conflicting opinions between the legislature, the executive and the judiciary on the reasons for slow progress on judicial performance and efficiency. However, policymakers across the three branches of state agree that consensus between all branches of the state onjudicial modernization priorities, financing needs and performance benchmarks i s now essential to accelerate, sustain and track progress on judicial performance. 4. The institutional environment. This report examines why, given the increasing resources allocated to the judiciary, there seem to have been only modest improvements in judicial performance. It lifts the veil on the conflicting opinions on the reasons for slow progress on performance and efficiency by analyzing the institutional environment within i which the judiciary functions and the key incentives propelling the policy stances and actions o fmajor institutional actors. 5. A supply-demand approach is then used to review the challenges behind improving judicial performance, focusing on resource allocation and management issues on the supply side andon caseinflow on the demand side. This perspective enables consideration o f both supply and demand issues impacting judicial performance and offers an opportunity to suggest actions and policy responses that could enable policy makers to manage demand more effectively while strengthening access to justice. 6. Examining the key supplyfactors. On the supply side, resources have actually been flowing rapidly to the judiciary since 2003-suggesting improved financing over the period. Attention to the details o f this financing, on both the revenue and expenditure sides is, however, warranted. 7. Public financial management systems have political, managerial and fiscal significance. There are many entities engaged in Bulgaria's judiciary's public financial management processes. Some process areas are not yet well represented or addressed, however, particularly the foundational strategic planning steps. The lack o f a strategic budgeting element weakens the judiciary's ability to advocate for resources. It would be desirable to fillthis systems gap by introducing a clear strategic planning process in the sector-especially for high-level policymakers. This could be followed by a more operational process in which all budget entities in the judiciary (including the courts) submit a strategic multi-year planthat shows their past performance against set criteria and identifies specific targets for performance improvement inthe coming three years. 8. The new strategic planningprocesses will require highlevels o f collaboration from the key role players inthe sector. Collaboration i s also required inbasic budget preparation itself, whether new strategic elements are introduced or not. In 2007 the SJC, MOJ and MOF began informal upstream consultations for the preparation o f the 2008 budget - and this was reflected inthe lowest variation inyears between the MOJbudget request and the MOF opinion on that request. This process looks set to be repeated for the 2009 budget preparatioqprocess as well - and i s a very welcome development. 9. It would be desirable for the SJC and MOJ to formalize a collaborative model through which they jointly prepare the judiciary's budget. There is significant room for a collaborative agreement to improve the system as it currently exists, starting with basic documents and processes. A more strategic set o f budget preparation guidelines-jointly issued by the SJC and MOJ-is urgently required and could act as a crucial coordination mechanism. Improved guidelines will also allow more constructive budget negotiations. A more strategic approach to budget preparation can improve budget quality-enhancing the judiciary's ability to advocate for resources. 10. Capacity to budget for capital spending will need improvement. It would also be desirable to strengthen capital management capacity, covering long-term capital planning, developing realistic and targeted budgets, assessing the validity o f capital spending requests, contracting documents pertaining to capital projects, managing project .. 11 procurement and execution, project oversight, developing and maintaining a facilities and project database, and reporting on facility quality. The MOJ may not be able to perform all the required functions on its own-thus a partnership-cum-capacity building approach could split responsibilities across relevant actors. 11. There are some concerns about cash management processes. Consistent answers do not seem to be available about how cash i s distributed across first and second level spending units, and how own revenues (such as court fees) are collected and transferred to the SJC (which i s a requirement). National Audit Office reports suggest that such processes are not standardized for budget users and that system variation does raise concerns about inefficient resource use and accountability breakdowns. Similar concerns have been raised regarding procurement practices. There appears to be significant scope to improve procurement transparency and efficiency. 12. Personnel management policies and processes also seem quite ad hoc, even though there i s a perception o f central control. Evidence indicates that personnel management conditions are highly decentralized. A central review o f staffing and remuneration variations and the development o f a clear judicial personnel management regime is strongly suggested. Accounting, accountability and management functions also require strengthening. Recent steps to strengthen these functions are strongly endorsed. 13. Expenditure patterns do matter, however, and there are various opportunities for improvement in Bulgaria's judicial sector. Salaries and other staffing expenditures have been protected, but other items have not. 14. Staff numbers have risen rapidly, contributing to the increased personnel expenditures. The increased staff numbers have certainly expanded the sector's ability to supplyjustice, though obviously at a cost. Salary increases have been an even bigger cost driver than new positions, however. These expenditures reflect a judicial strategy to expand humanresource capacity, which appears to be purposeful and well-conceived. But evidence suggests unexplained variation in appointment decisions. In the absence o f a weighted caseload formula, quantitative data seem to indicate that the creation o f new judicial positions in courts tend to follow weak management, and that new positions are having a limited impact on results. Salary patterns also reveal less than purposeful variation. 15. It is a matter o f concern that personnel expenditures are budgeted to continue increasing. It would be desirable to reconsider this approach and slow down personnel expenditure increases. Inorder to assess whether there is a need for further increasing the number o fjudicial personnel, it would be important to undertake an in-depth study o f the human resource inputs required for processing different categories o f cases. Such a study would identify appropriate norms (weighted caseload), which - in conjunction with projected trends in demand for judicial services - would provide a clearer notion o f the appropriate levels o f judicial staffing. In conjunction with statistical data on the size and composition o f particular courts' caseload, the weighted caseload norms could also help to allocate staff positions among courts in a more strategic manner, targeted at reducing case ... 111 backlogs and increasing efficiency in the administration o f justice. Finally, weighted caseload norms may also form part o f the performance framework for thejustice sector. 16. Inparallel, a review o f personnel expenditure patterns across Bulgaria's judiciary would be helpful, whereby a benchmarking exercise relates caseload to allocated positions, actually filled positions, positions per square meter in housing facility, and to case completion ratios. Such an exercise could allow identification o f those bodies and courts that are truly in need o f more staff or higher salaries, and those where staff numbers and salary levels are not the major constraint. The exercise could also reveal which courts are strugglingto fill positions andwhich courts appear to have a humanresource management strategy that encourages performance. 17. Such a review could also inform a targeted approach to personnel spending in the sector, which i s urgently needed. Reviewing personnel expenditures will also assist the sector to identify its capital needs. The authorities could gain a fresh understanding o f judicial facilities needs through a review o f why new positions are not being filled and why new staffnumbers are not translating into improved case completion ratios. 18. Insufficient space i s a concern that future budgets will need to address. Past capital budget requests have failed to justify requests for higher capital allocations. It is likely, though, that Bulgaria's judiciary actually required more facilities expenditure over the past decade, and a catch-up may be needed in future budgets consistent within the overall medium-term budget framework. The report suggests approaches to estimate facilities financing requirements. 19. The first step to improve capital budget requests involves being more realistic about how much can be spent. The second step would require real prioritization, and the third would require improved advocacy o f the request. Better arguments can be made for capital requests, even in the short-run. The basic approach involves showing how capital requests provide inputs that one can reasonably assume will improve performance and help the sector meet its objectives. This method would require that budget preparation teams actually use the management and performance metrics at their disposal-something not done inthe past. 20. Beyond 2008-2009 this strategic approach could be formalized into a more programmatic budgeting method. A specific recommendation relates to the need for improved capital planning. There are a number o f components the judiciary will need to putinplaceto develop amulti-year capital investment plan. 21. The potential contribution o f information technology to judicial efficiency and performance is recognized by Bulgaria's policy makers. In the immediate term, it would be helpful for the MOJ to focus managerial, technical and financial resources to complete the four key application systems still under development. Several other actions - most already taken on board by the MOJ and SJC leadership - are clearly desirable. First, progress on standardization o f business processes and technical infrastructure would strengthen provision o f judicial services and judicial governance. Further standardization would be helpful in business processes, key application systems, data management and iv technical infrastructure. Second, urgent steps to strengthen the institutional capacity of the IT Department of the MOJ would be helpful. Third, it would be helpful for the MOJ to identify specific functions that could be outsourced. Even with outsourcing, however, the M O J andjudiciary would still need to maintain a core skill set on business analysis, system design, project management, contract management and vendor management. The M O J and judiciary would benefit from a judiciary-wide policy to assist court managers in managing this special skill set. Fourth, it would be desirable to develop a human resource policy considerate o f the existing market constraints for informatics professionals and appropriate incentives to guarantee a stable and high-skilled set o f informatics personnel for the judiciary's IT needs. Lastly, launching a consultation process to update the IT Strategy for the judiciary could significantly contribute to consensus-based system improvement. 22. The national budget increasingly resources the judiciary-with judicial own revenues playing a diminishing role. The decreasing own revenue share reflects policies promotingaccess tojustice, but these policies also impact the relationship betweenjudicial demand and supply. The data suggests a significant gap between case demand and supply inBulgaria. And this gap is influencedby the pricing effects o f own revenue and central budget subsidy levels. 23, Demand-side policy and process interventions now need to be systematically considered by Bulgaria's policy makers to complement supply-side actions to improve judicial performance and efficiency. Demand-side interventions could take two complementary and mutually reinforcing forms: 0 On the policy front, it would be desirable for the SJC to commission a `demand management analysis' to review the structure and level of judicial fees and other sources of judiciary own revenues. The results could facilitate formulation o f a policy that could permit adjustment of the levels of fees and other charges and thereby manage the explosive rise in the filing and inflow of civil and administrative cases, using higher fees to restrict or reduce the inflow of high- volume small-value cases which may be clogging judicial dockets. Such an analysis could also reveal a need to introduce additional mediation practices for certain categories of cases (e.g. those that have seen major increases in past years such as some appeals in tax cases, traffic fine challenges, and actions firms bring against small debtors) out of the judicial system and perhaps into an administrative or quasi-judicial forum. The argument is strengthened by evidence of a correlation between collected court fees and caseload. 0 In parallel, on the process side, the executive will need to ensure that access to justice, especially for the poor and vulnerable, i s strengthened, including through subsidized legal aid arrangements for eligible categories of litigants. The M O J has begun an initiative on this, including provision of legal aid in criminal cases and some categories of civil cases. This i s very welcome and needs to be scaled up as rapidly as possible, especially inrural and remote areas of Bulgaria. 24. Monitoring progress. Based on the analysis in the report and examples of indicators, it would be feasible for the judiciary to agree on a set of core indicators to track V progress on judicial performance and efficiency. A mix of indicators is suggested, comprising (a) indicators internal to each of the three elements of the judiciary' and those external2to them, and (b) indicators for the system as a whole and also those focusing on individual courts. Other indicators that track systemconditions would also form part ofthe indicator set. All of these are supply-sideindicators as they focus on the supply ofjudicial services. It would be desirable to complement the supply-side indicators with a set of demand-based indicators, such as those in Table 1 at system and individual court levels. This set could also include additional survey-based indicators on the efficacy of legal aid and user-provided feedback on issues such as access to, quality o f and satisfaction with judicial services. 25. A performance framework for thejudiciary. Together such an indicator set could constitute a performance framework for the judiciary to track the impact o f reform and modernization actions. Published and updated on an annual basis, the performance framework would be a powerful tool for the judiciary to strengthen its advocacy for resources and demonstrateits commitment to performance and accountability. 26. A different approach. Overall, therefore, improving judicial performance now requires a shift from increasing the overall level o f resources to approaches that do not increase the burden on the central budget. The key challenge now confrontingBulgaria's judiciary is to build on the reforms so far by developing, financing and implementinga judiciary-wide modernization program to sustain the transformation and demonstrate impact through monitorable indicators of performance. The information and analysis in this report - much of it familiar to the leadership of Bulgaria's judiciary, executive and legislature- could facilitate a consensus between the three branches of power on the resources that the judiciary could realistically expect to receive, and on the results that it can be expected to achieve, given existing resource and capacity constraints. In this dialogue, an exclusive focus on judicial independence could risk diverting attention from concrete measures needed to ensure that the judiciary i s adequately resourced and that mechanisms to ensure the efficient use of resources and improved performance are in place. Indeed, judicial independence i s a fundamental principle guaranteed by the Constitution and laws o f Bulgaria, and unconditionally respected with regard to the judiciary's adjudicative functions. However, sustained focus on the achievement of performance goals could have important potential long-term benefits for the judicial system, not only interms of increasedbudgetaryresources, but more importantly interms of increasedpublic trust and confidence. E.g. process-based indicators (average case disposition rates, timeliness o f disposition); indicators pertaining to the efficiency o f resource use (average cost per case disposeddecided); etc. E.g. survey-based indicators such as those used in BEEPS pertaining to efficiency (speed), integrity (honesty/cormption; fairness and impartiality), cost (affordability) and whether the judiciary is considered a hindrance indoing business. vi 1. BULGARIA'S JUDICIARY: THE SETTING& CONTEXT BACKGROUND OVERVIEW AND 1.1 Bulgaria's accession to the European Union (EU) on January 1, 2007 was preceded by important steps to modernize its judiciary. Chapter 6 o f the Constitution deals with the judicial power, comprising o f courts, prosecutors and investigators3, and specifies the functions and structure o f its constituent elements (Box 1). Article 117 guarantees the functional and budgetary independence o f the judiciary. The years preceding accession were notable for two phenomena in the justice sphere: (a) significant Constitutional, legislative and procedural changes aimed to improve the structure and functioning o f the judiciary's constituent elements, and (b) a consistent commitment on the part o f policymakers to improve the functioning o f the judiciary, reflected in increasing budgetary resources allocated to it. 1.2 The Constitutional, legislative and procedural changes together constitute a significant package of reforms. These included a new Judicial System Act (JSA) which, with the Constitution, constitutes the core legal fiamework for the administration o fjustice (Box 2). Chapter 6 o f the Constitution ("Judicial Power") defines the judiciary as comprising judges, prosecutors and investigators. The term `judiciary' is used inthis sense throughout the report, unless stated otherwise. 1 1.3 In the run-up to EU accession, significant amounts were spent on raising judicial salaries; training judges, court staff, prosecutors and investigators; and upgrading information technology. Between2001 and 2007, thejudicial budget more than doubled in nominal terms - an increase of 223 percent, while actual expenditures increased by 180 percent between 2001 and 2006 (Figure l).4 Most of this increase was financed from the central budget, whose share in the judicial budget grew from 62 percent (2001) to 84 percent (2007). In 2007, the judiciary's budget allocation Figurel. Bulgaria:JudicialBudgetTrends (2001-2008), BGN million reached BGN313 million 450 (about 2 percent of government 400 JudicialSystem Budget expenditure and 0.6 percent of 350 Appropriations,State GDP), comprising BGN262.5 BudgetAct 300 Central BudgetSubsidy, million from the budget and 250 SBA BGN50.5 million from the 200 Actual Expenditure,b F judiciary's own income from Reporton SBA 150 fees and other sources. In the 100 ActualSubsidy,b F Repo 2008 budget approved by the 50 Parliament in December 2007, 0 2001 2002 2003 2004 2005 2006 2007 2008 the appropriation for the I judiciary was BGN385 million (approximately 2.2 percent of government expenditures) - a nominal year-on-year increaseof 23 percent. 1.4 Personnel costs have absorbed most of the increased expenditure - mainly due to consecutive salary increases and, to a lesser extent, an expansion in staff numbers. Source: SJC. However, MinistryofFinance data on budget execution indicate somewhat higher figures. 2 Judicial salaries have increased to levels sufficient to attract young, well-qualified candidates and to retain experienced magistrates5 The average salary in the sector rose by 169 percent from 2001 to 2006 (from BGN435 to BGN1,173), with salary increases being the biggest driver o f increased judicial expenditures. On the staffing front, overall judicial staffing rose by more than 30 percent between 2004 and 2007. The number o f judges increased by 15 percent (257 new positions) and that o f prosecutors doubled (513 new posts) between 2004 and 2006. During the same period the number o f investigators declined by 43 percent due to the transfer o f most investigative functions to the police. In 2006 some 500 investigators left the service to become prosecutors. Furthermore, SJC administrative capacity has been progressively strengthened: between 2003 and 2006, the number o f SJC full-time staff almost doubled from 40 to 76. 1.5 Weak enforcement of decisions has undermined confidence in the judiciary for years, but recent innovations to the enforcement regime have begun to yield results. Bulgaria introduced private enforcement agents alongside public bailiffs in late 2006. The introduction o f this system was assessedby the World Bank's 2006 Doing Business Report as one o f the ten most successful reforms in the world. By end-2006, 168 private bailiffs were working in all judicial regions but two; these private bailiffs took on 37,280 cases, executed 5,500 and collected BGN90 million. The system's rapid development led to a considerable increase in the number o f judicial decisions executed in 2007: data from the MOJ indicate that the 250 state bailiffs handled 2.25 times fewer cases than private agents, andtheir collection rate per case was one-fifth that o fprivate agents. Lncreasing public and business satisfaction with private bailiffs' performance has led to higher demand for their services (80 more are being appointed) and fewer legal complaints about their functioning compared to state bailiffs. The new Code o f Civil Procedure enlarges the competence o f the private bailiffs to include the serving o f documents - this i s also contributing to speeding up judicial processes. The assignation o f public and private debt collection to private bailiffs i s also under consideration; if this happens it could lead to the elimination o f the State Receivable Agency and save taxpayer funds. The 2007 amendments to the Private Bailiffs Act clarified ambiguities in the legal regulation o f private bailiffs, established a Chamber o f Private Bailiffs (with a Discipline Commission on which the MOJ has 4 representatives), strengthened MOJ oversight (the Minister o f Justice can directly submit cases o f misconduct to the Commission for consideration) and introduced financial inspectors parallel to the existing judicial inspectors. The success o f this initiative has prompted the M O Jto aim for 1private bailiffper 30,000 inhabitand. 1.6 Overall, though, judicial performance and efficiency appear to have improved marginally: judicial reform hence remains a focus for Bulgaria and the EC. The reforms were to an extent driven by the requirements for Bulgaria's accession to the EU. On the other hand, it has been argued that it has been difficult to translate the reforms into concrete results interms o fjudicial performance and efficiency gains. ABA CEELI, Judicial ReformIndexfor Bulgaria, April 2006, pp. 34-35 Additional data on the impact of the introductionof bailiffs is at Annex Table 2 (source: MOJ). 3 1.7 On the eve o f accession, the EC identified the justice system as an important area regardingBulgaria's capacity to effectively implement its accession obligations. Therefore, it introduced a special cooperation and verification mechanism to track progress with reference to six benchmarks, o f which three directly relate to the judiciary (Box 3).7 The remainingbenchmarks require decisive action to combat organized crime and corruption, in which the judiciary also plays a part. 1.8 The first EC Report on the cooperation and verification mechanism, of June 2007, acknowledged Bulgaria's commitment to judicial reform, but called for reform efforts to continue* - the June 2008 EC Report will be important for Bulgaria. The EC interim report issued inFebruary 2008 notes several steps that the Bulgarianauthorities undertook to meet the benchmarks, while reserving more substantive conclusions on actual 1.9 There are conflicting opinions on the reasons for slow progress on performance and efficiency. Bulgaria's judiciary argues that (a) chronic under-resourcing continues, and still constrains judicial performance, and (b) expectations arising from EU accession for more effective judicial performance will continue to require sustained increases in the judiciary's budget to perform to enhanced standards. At the same time, pressure i s mounting on the judiciary to demonstrate clearer links between justice sector policies, budgets and outcomes. Analysts can find a long history o f differences o f opinion between 'EC Decision o f December 13,2007. Such a mechanism was also introduced for Romania, which joined the EUat the same time as Bulgaria. * The European Commission, "Communication from the Commission to the Council and the European Parliament: Report on Bulgaria's progress on accompanying measures following Accession", June 27,2007. Published inthe State Gazette No. 6417 August 2007. loEuropean Commission, "Interim Report from the Commission to the EuropeanParliament and the Council OnProgress inBulgaria under the CooperationandVerification Mechanism", February4, 2008. 4 the three branches o f the state over the governance arrangements for the judiciary; the performance and accountability implications o f the judiciary's functional and budgetary independence; and on the delineation o f prerogatives and responsibilities for budget formulation, execution and oversight. 1.10 Bulgarian policy-makers agree that consensus between the three branches of the state on judicial modernization priorities, fmancing needs and performance benchmarks i s now essential. The Bulgarian authorities requested World Bank support to analyze the increase in the resources allocated to the judiciary and nature and extent o f improvements in judicial performance. In particular, they requested that the analysis (i) review the links betweenjudicial resource allocations, incentives and performance, and (ii) identify institutional issues to be addressed for Bulgaria's judiciary to set itself on a trajectory which, through the achievement o f verifiable benchmarks, could sustain efficiency and performance improvements. 1.11 The objective of this report is to suggest options for Bulgaria's policymakers for more efficient and effective management and use of resources to strengthen judicial performance and accountability. This report reviews selected judicial budget, human resource, incentive and infrastructure issues; suggests a process to strengthen management o f judicial resources; and proposes some benchmarks to track progress on performance and efficiency.l1 The key audience comprises policy-makers in the SJC, the MOJ, the Ministry o f Finance (MOF) andthe National Assembly. BENCHMARKING BULGARIA'S JUDICIARY 1.12 Against the above backdrop, this section attempts to benchmark Bulgaria's judiciary on selected aspects o fresourcing andperformance. 1.13 Bulgaria compares increasingly favorably with European countries in terms of annualjudicial budget per capita and spending on the judiciary as a percent of GDP. Bulgaria's spending on the judiciary innominal terms per capita has been rising and i s now `middling' compared to other European countries (Figure 2). This is perhaps not surprising given that Bulgaria has a lower income per capita than most EUmembers. And Bulgaria's spending on the judiciary as a share o f GDP compares favorably with other European countries (Figure 3). It i s important to enter a caveat here: the latest data available for the countries come from the 2006 CEPEJ report and relate to 2004 while both 2004 and 2007 data have been used for Bulgaria. Nevertheless, the comparisons remain relevant because inthe `older' EUmember states such data tend to berelatively stable over time. l1This Report is supplemented by three Technical Annexes, pertaining to (i)Budgeting and Financial Management; (iii)Facilities and (iv) Information Technology. They contain more details on the issues examined inthis Report. The Annexes were shared with counterparts inOctober 2007. 5 Figure 2. Judicial Budgets (excluding legal aid) IIFigure 3. Spending on the Judiciary (excluding legal aid) Judicial budget 8s %of GDP Source: CEPEJ2006. Source: CEPEJ2006 Bulgaria 2007data: WorldBank staff estimates Bulgaria 2007data: WorldBank staffestimates (Figure 4). However, caution is warranted Figure 4. Number ofprofessionaljudges here. First, the definition and composition (per 100,000 inhabitants) 0 5 i D 15 XI 21 30 3s Source: CEPEJ 1.15 Reform efforts and increased resources resulted in modest improvements in courts' effectiveness in terms of case disposition. Between2002 and 2006, the following positivetrends can be discerned (Figures 5 and 6): 0 Despite a 13.7 percent increase in overall annual caseload, the annual number of resolved cases increasedby 25.5 percent; The rate of case disposition increasedfrom 72 percent to 79 percent; 0 The annual number of cases resolved within 3 months increased from 51 percent of all cases to 59 percent in2006; and 0 The annual backlog decreasedfrom 25 percent of cases in2002 to 20 percent in2006. Cumulatively, the backlog was reducedby 8.4 percent. 6 Figure 5. Trends inCaseDisposition2002-2006 (Except SupremeCourts) (Source: SJC) Figure 6. Trends in Overall Careload (Except Supreme Courts) 2002-2006 (Source: SJC) 600 500 400 shareof total 300 within 3 months as 200 100 0 2002 2003 2004 2005 2006 13 Caseload(thousands) Resolved cases (thousands) 0 Cases resolved within3 months(thousands) 2002 2003 2004 2005 2006 t3 Casebacklog (thousands) 1.16 Data for 2005-2007 indicate a continuation of the above trends (Figures 7 and 8): The courts' total caseload increasedby 11.7 percent while the rate of case disposition increased from 65.3 percent to 70.7 percent of total caseload (with the share of cases completed within three monthsrising from 47.2 to 52.9 percent); and Though the total case backlog increased in nominal terms, their share of the total caseloaddeclined from 31.6 to 29.2 percent. Figure 7. CaseloadTrends (2005-2007) Figure 8. Case DispositionTrends (2005-2007) I , I 450 400 350 300 Completedcases (no. of 250 200 150 Cases completed in 3 100 months (no. of cases, 50 0 First half First half First half (no. of cases, thousand) 2005 2006 2007 u- I I 1st half 2005 1st half 2006 1st half 2007 I I I I 1.17 Survey data reveal a mixed picture about judicial functioning and efficiency. The most recent round of the World Bank-EBRD Business Environment and Enterprise Performance Survey conducted in 2005 (BEEPS 2005) discloses a mixed picture (Figure 9). On the positive side, compared to the region as a whole and also South East Europe (i) a higher proportion of Bulgarian firms have been to court in the past 3 years; (ii) lower a and decliningproportion o f firms inBulgaria state that the functioning of the judiciary is a problem doing business; and (iii)higher or similar proportion of Bulgarianfirms state that a courts are affordable, honest, uncorruptedand able to enforce their decisions. 1.18 Firms view specific aspects of the functioning of the judiciary inBulgaria as a problem doing business - in particular its speed, fairness and impartiality. It i s instructive to compare the sample of all firms with the sample of only those firms that have used courts in the past year, which approximates the difference between the public perception of courts andthe impact ofjudicial reforms on the users o f thejudiciary. 7 Figure 9. Bulgaria: Firms' Responseson Legal and Judicial Issues Bul SEE ECA Buf SEE &A Ail Firms AI1Firms ~, ource: BEEPS 2005. (Note: Bul= Bulgaria; ECA , , , - _ . - - ~ =Europe and Central Asia; SEE= South-East Europe) 1.19 The speed of the judicial process - the biggest complaint in both samples - improved slightly from 2002 to 2005, according to firms that have used courts. The perception o f fairness and impartiality, however, has declined among both groups, and by a wider marginamong the users of courts. On the other hand, the perception of corruption in the judiciary among all firms seems to have declined, but the opposite i s true among the firms that use courts: a lower percentage o f those firms in 2005 thought the courts were 8 more honest and uncorrupted compared to 2002. This could imply that while the general image of judicial integrity may be improving, it has not yet translated into noticeable improvements for those who actually use the courts. 1.20 Incomparative terms, the performance of the Bulgarian courts appears to lag behind that of the EUS, though it tends to compare relatively well with Romania and other South East European countries, according to both BEEPS 2005 and the Doing Business Report (2008). The tardiness of the courts comes to the forefront again as the main drawback of the Bulgarianjudicial systemcompared to other countries. 1.21 According to the `Doing Business 2008' Report'* Bulgaria was one of 14 countries globally that reformed contract enforcement in 2006-07. Two key efficiency and governance-enhancing reforms comprised: (a) the introduction of private enforcement agents which contributed to a significant reduction of the time taken to enforce a contract (from 150 days in2006 to 125 days in2007); and (b) the introductiono f random allocation of court cases which beganto reducejudicial corruption. 1.22 However, enforcing commercial contracts in Bulgaria remains more cumbersome and time-consuming than the average for European and OECD countries (Figure 10). Enforcing contracts in Bulgaria requires more procedures and i s costlier as a share o f the disputed amount than the average inOECD countries and the new member states (NMS--all countries that acceded to the EU since 2004 excluding Cyprus and Malta), though somewhat quicker than the NMS average. And enforcing commercial debts through the courts inBulgariainvolves 40 procedures and takes 564 days on average, of which 105 i s the average filing period, 334 days the average adjudication period, and 125 days the average enforcement period. A new Civil Procedure Code (CPC), which was enacted in July 2007 and became effective from March 1, 2008, addresses this issue, and the MOJ has established a Working Group chaired by a Deputy Minister to monitor its implementation. The MOJ believes that these measures will, over time, result in further efficiency in enforcing commercial debts. Overall, therefore, while the enforcement of court rulings seems to have accelerated, other indicators do not yet appear to show an improvement since 2003. 1.23 The BEEPS and Doing Business indicators do not cover all aspects relevant in assessingjudicial performance. Inparticular, these indicators focus on the performance o f the courts and do not consider the work of the prosecution and investigation services. It i s precisely these branches of the judiciary, whose work is especially important in addressing the key weaknesses in combating corruption and organized crime, which are highlightedin EC reports. Moreover, the above indicators do not provide information on the professional competence of the judiciary, the quality of judicial decisions, judicial transparency or the accessibility of thejustice system to the public at large. l2 `Doing Business' is an annual World Bank report that presents quantitative indicators on business regulations and their enforcement across 178 countries. The enforcement o f contracts is one aspect o f the business environment assessed in the report. Indicators on enforcing contracts measure the efficiency o f the judicial system inresolving a commercial dispute. The data are collected through study of the codes o f civil procedure and other court regulations as well as surveys completed by local litigation lawyers (and, in a quarter o f the countries, byjudges as well). The 2008 Report is based on 2007 data. 9 1.24 The most recent Judicial Reform Index by the American Bar Association Central European and Eurasian Law Initiative (ABNCEELI) published in 2006 notes improvements in some aspects of transparency such as access of the public and the media to judicial proceedings, but finds no change in important aspects such as the publication o f judicial decisions.l3 Figure 10:DoingBusiness 2008 -Enforcing Contracts(Data for 2007) I 1 50 H Bulgaria 40 0 NMS 30 0 OECD 20 10 0 No. of Procedures Time (months) Cost (%of debt) 1.25 The productivity of the courts overall does not seem to have increased. Between 2004 and 2006, the average annual caseloadperjudge decreasedfrom 372 to 343 cases (a drop of almost 8 percent), Figure 11:Caseload per occupiedjudicial post while the average number of er personmonth worked) completed cases per judge went 45 down from 292 to 272 cases (a drop 40 of almost 7 percent). In conjunction 35 with the steady increase of judicial 30 salaries and other budgetary 25 Occupiedjudicial allocations during this period, the 20 position 15 Completed cases average budgetary cost of resolving a 10 per occupied case also increased. Data for the first 5 half of 2007 indicate that the trend 0 First half First half First half towards a decreasing caseload per 2005 2006 2007 judge continues with a drop o f 7.5 percent between mid-2005 and mid- 2007 (Figure 11). 1.26 Average caseloads per judge vary widely between different types of courts and among individual courts. The data suggest that courts whosejudges face a lower caseload tend to have higher disposition rates (Military Courts, District Courts, Courts of Appeal), but the correlation i s not symmetrical nor does it hold for all courts. For example, while judges o f Regional Courts have a much higher average monthly workload compared to their peers inDistrict Courts (incities where there is a District Court), District Courts have only amarginallyhigher disposition rate comparedto Regional Courts. Inthe case of Sofia, while the Regional Court has a higher average caseload per judge compared to the City Court, it [the Regional Court] also has the higher disposition rate (Box 4). The Administrative Courts, which started functioning from March 2007, have a low average l3ABMCEELI, Judicial ReformIndex for Bulgaria, Volume 111,April 2006, pp. 49-58. 10 caseload per judge (10.8 cases per month), but the share o f cases completed within three months was 53 percent - the same as the average for Bulgarian courts as a whole for the first half o f 2007. Their overall disposition rate (completed cases as a share o f total caseload) o f 57 percent was significantly lower than the average for all Bulgarian courts (70.7 percent for the first half o f 2007). However, the low disposition rate may be due to common start-up problems such as insufficient space for hearings. 1.27 Moreover, there are wide disparities in average caseloads per judge among courts of the same type, even among courts within the same judicial district, which seems to indicate inefficiencies inthe allocation of judicial posts. For example, while the average monthly caseload per judge in Regional Courts is 31.6 cases, it varies from a low o f 28.5 cases in Silistra RC to highs o f 57 cases in the Sliven RC or 58.4 cases in the Razlog R C (Blagoevgradjudicial district). There are wide disparities even within the same judicial district due to a mismatch between courts' caseloads and the number o f serving judges. For example, in Gabrovo district, the Dryanovo R C has two judges who have a caseload o f 54 cases per month each; the Tryavna RC in the same district also has two judges with a caseload o f 26 cases per month each; and the Sevlievo RC inthis district has six judges with a monthly caseload o f 26 cases each. Such disparities can also be observed among District Courts, from a low o f 11.3 cases per judge per month inthe Yambol DC to a higho f 29.7 cases inthe Varna DC. Figure 12: Average monthly caseload perjudge & average monthly case disposition rate by court type (2006 100 90 80 70 60 50 40 30 20 10 0 r - , 11 1.28 Data on prosecutors depicts an increasing trend in caseload, and certain indicators suggest that the work of the prosecution has become more effective. In particular, the following broad trends are evident: Between 2000 and 2006 the total PORB caseload increased by 49 percent, while the case completion rate within one year rose from 87 to 90 percent duringthis period; Between 2000 and 2005, the number o f prosecution cases brought to court almost doubled (49 percent increase) and conviction rates increased from 71 percent in 2000 to 84.7 percent in2005.14 Figure 13: Trends inthe caseload o f the prosecution 500 450 400 350 300 I 250 Total cases (thousand) ICompletedcases(thous 200 150 100 50 0 I 2000 2001 2002 2003 2004 2005 2006 I 1.29 The recruitment of a large number of former investigators as prosecutors in 2006 has led to a reduction in the average caseload per prosecutor, but there are wide differences in average caseloads of prosecutors across tiers of PORB offices. Notwithstanding methodological difficulties in accurately calculating trends in average caseloads per prosecutor over time'5, increased staffing appears to have significantly reduced the average number o f cases a prosecutor works on per year, from over 371 in 2004 to 280 in2006. At the same time, the average caseload per prosecutor reported by the PORB for 2006 varies from one prosecution office to another at the same level. In addition, there i s perhaps also justification for examining the high level o f 722 cases per prosecutor in the Sofia Regional Prosecutor's Office. While data on timeframes for case completion are not available for all years, data for cases opened in 2006 show that a third were completed within 7 months, while 30 percent were pending after a year. This suggests that tardiness affects not only the courts but the judiciary more broadly. However, the high dependence o f PORB work and success on efforts o f the police and the investigation service makes it very difficult to assess PORB effectiveness inisolation. 1.30 Data on average caseload per magistrate need to be treated with caution for individual performance review purposes. In fact such data i s being collected to monitor and track the impact on caseload due to the implementation o f the new Codes o f Criminal, l4 These rates are calculated as the ratio o f defendants to convicted persons, as available data do not permit calculation o f the rate o f accusatory acts resulting inconvictions. l5 PORE3 data for some years report workloads as number o f acts rather than cases per prosecutor. The EC Interim Report o f February 2008 also points to insufficient reliable data particularly regarding the follow-up o f cases inthe pre-trial phase. 12 Administrative and Civil Procedures. However it has been argued by the MOJ that this indicator is "significant interms o f career development o f the magistrates" and that data on individual magistrates could be presented - including in comparison with data on "average caseload per court" and "average caseload for the country" - before the SJC Proposals and Attestation Committee for individual magistrates' performance evaluation and promotion. This approach i s fraught with risk. It would be desirable to proceed cautiously and take account o f the experience o f EU and OECD member countries on this complex issue. Timely disposal o f cases i s also dealt with in the new JSA, which obliges all chief administrators o f judicial entities to present to the SJC Inspectorate and the Minister o f Justice, every six months, aggregate data on inflow, processing and disposal o f cases and on `acts.. .finally overruled by higher instances'. The MOJ rightly observes that this new provision now requires the development o f uniform data collection and presentation standards and business processes, and that such data should ideally be integrated into a broader performance management framework for thejudiciary16. 1.31 A framework and a methodology for weighted caseload analysis is now urgently needed to develop meaningful performance indicators for the judiciary. Differences in the complexity o f cases handled by different types o f courts and PORB offices account for a considerable share o f the variation in caseload data. However, the absence o f a weighted caseload analysis, which could suggest appropriate average timeframes for the disposition o f different categories o f cases according to complexity, does not allow us to identify the relative importance o f this factor on the efficiency o f courts. The elaboration o f a weighted caseload formula would allow the SJC to compare workloads more effectively and thereby make decisions on the allocation o f judicial positions and financial resources to courts andPORB offices ina more strategic manner. 1.32 Insum, while public funding for the Bulgarianjudiciary has steadily increased, judicial performance seems to be showing modest improvements while in some areas it is perceived to be deteriorating. This appears to be a key finding on the basis o f quantitative indicators, such as rates o f case disposition, overall caseload trends, increased budgetary provision versus declining average caseload per judge. These findings appear to be corroborated by survey evidence on how firms and the public in general view the performance o f the judiciary with respect to efficiency and integrity. 1.33 This discrepancy may be attributable to some extent to the time required for institutional reforms and investments, particularly in human resources, to take root and begin to demonstrate verifiable results. For example, the administrative court system has been functioning for only a year: it would be unrealistic to expect the new system to be working at full capacity. The recent transfer o f responsibility for business and real estate registration from courts to the executive may also show results in alleviating the workload o fregional and district courts and thereby accelerate the administration o fjustice. Likewise, newly recruited magistrates may attain full effectiveness only after sufficient on-the-job experience. And new procedures may take some time before they are fully implemented and translated into more efficient judicial practices. l6In its comments on this issue the MOJ has suggested a joint effort between the World Bank and Bulgaria for this purpose and also requested grant-based support from the World Bank if possible. The team intends to discuss this issue with MOJand SJC counterparts during its next mission to Bulgaria. 13 1.34 However, perceptions about judicial functioning and efficiency appear to have generated questions about the advisability of further increases in the judicial budget without significant performance and accountability improvements. This skepticism is manifested inthe substantial gap between resource requests by the judiciary and the budget appropriations approved by the National Assembly. The authorities are also under pressure fromthe public andthe EUto deliver results infightingcrime andcorruption. 1.35 This chapter has summarized the status of judicial reforms and Bulgaria's position against its comparators on selected indicators of judicial resourcing and performance. The next chapter reviews the institutional environment within which the judiciary functions, setting the stage for examining the complex issue of the judiciary's resource management challenges. 14 2. THE INSTITUTIONALENVIRONMENT SEPARATION OF POWERS: A SUMMARY INSTITUTIONAL ANALYSIS 2.1 The apparent tectonic collision in Bulgaria between the principles of judicial independence and accountability points to the need for a closer understanding of the judiciary's institutional environment and dynamics. This chapter examines the differing priorities, responsibilities, and incentives o f the relevant institutional actors responsible for allocation and use o fjudicial resources. The first section considers the division o f functions related to the governance o f the judiciary with a special focus on resource allocation. The next section outlines the internal dynamics of the SJC to understand the considerations of the main interest groups within this body. The final section analyses the factors underlying the upward pressure on the judicial budget, particularly with regard to personnel costs - with particular focus on the courts. 2.2 InBulgaria, institutional arrangementsfor the governance and management of the `judicial power' reflect the Constitutional guarantee of judicial independence. Since its establishment in 1991 the SJC has been tasked with primary responsibility for judicial governance and therefore - to an important extent - for the performance o f the judicial system. Its powers are broad and extend to issues o f judicial policy, resource management, personnel and discipline (Box 5). 2.3 Amendments to the Constitution in 2006 and 2007 altered the division of competencies between the SJC and the executive, particularly with regard to budgetary powers and accountability for performance. The Third Constitutional 15 Amendment o f 2006 limited the SJC's powers with regard to the management o f judicial resources by transferring responsibility for the preparation of the draft judicial budget and the execution o f the judiciary's capital expenditures to the MOJ. According to the Constitution, the SJC retains the authority to "adopt the draft budget o f the judiciary" (Article 130.4), while the MOJ i s responsible for proposing the draft budget and submitting to the SJC for consideration (Article 13Oa.l). As the amendments to the JSA were adopted in July 2006, the new budget process was applied for the first time inpreparing the draft judiciary budget for 2008. The SJC's actual level o f discretion in revising the draft budget prepared by the MOJ remains unclear. 2.4 The Constitutional amendment of February 2007 aimed to strengthen judicial accountability without compromising judicial independence. In particular, the amendment further qualified magistrates' immunity from criminal prosecution and introduced a requirement for the SJC to report annually on the activities o fjudicial bodies to Parliament. Importantly, it also sought to strengthen the judicial inspection function while safeguarding judicial independence by establishing an Inspectorate "with the SJC" with powers to inspect the administrative activities o f judicial bodies; the processing o f judicial cases and their disposition within legal deadlines; the enforcement o fjudicial acts; to approach relevant authorities in cases o f violations o f rules; to propose the imposition o f disciplinary measures on magistrates; and to discuss the draft budget o f the judiciary. Inspectors are elected by the National Assembly from among those complying with high- level qualification requirements laid down in the Constitution and the JSA. Thus, this Amendment transferred the inspection o fjudicial bodies from the M O J to this Inspectorate "with the SJC", with the MOJ inspectorate responsible for oversight o f state and private bailiffs andnon-magistrate notaries. 2.5 The judicial governance arrangements in Bulgaria combine elements of two major models found in Europe today: the so-called Northern European and Southern European models17(Box 6). This i s not surprising, given that the institutional development o f the judiciary in Bulgaria has taken place during a period o f considerable change in judicial governance, not only in Central and Eastern Europe, but throughout Europe. Since the late 1990s there has been a trend towards increasing judicial self-governance, when many European countries established Judicial Councils as self-governing judicial bodies, independent o f the executive and the legislature, with the objective o f guaranteeing judicial independence. 2.6 Bulgaria's current judicial governance and management arrangements are still influx and couldbe subject to further revisions, includingthrough CC decisions. The division of powers between the SJC and the MOJ with regard to budget preparation and the management o fjudicial property has been prone to changes, as the judiciary has contested, through the CC, legislation seeking to limit its autonomy inthis area. The role o f the CC as arbiter o f such disputes throws light on its unique position in the Bulgarian state. Box 7 summarizes the CC's composition and role. l7As definedbyProfessorWimVoermansofLeidenUniversity. 16 2.7 The authority of the SJC to manage judicial resources - and of the National Assembly to adopt legislation on this issue - has a contested history. The Third Amendment o f 2006 had been interpreted by experts as going beyond the constitutional powers of the legislature. It had been argued that the National Assembly did not have the authority to introduce constitutional restraints to the powers o f the SJC over the management o fjudicial resources. This argument was based on the interpretation that such a transfer o f powers from the SJC to the MOJ would affect the balance o f power between the judiciary and the executive and constituted a change in the "form o f state structure or form o f government". According to the Constitution (Article 158.3), any such changes may be adopted only by a Grand National Assembly. In earlier cases, the CC has tended to uphold the judiciary's arguments.18 Some experts believe that the long history o f disputes between the SJC and the MOJ over the judicial budget and management o f assets with the In 1992and 1995 the Constitutional Court upheldthe SJC's independent budgetary authority by rulingthat the executive may not alter the SJC budget request before it is submitted to Parliament nor hold budgetary accounts on behalf o f the SJC. In 1999 (decision 01/99),the Court ruled that the provision o f the Judicial Act that gave the MOJ responsibility for the management o f judicial property was unconstitutional, since the Constitution required that thejudiciary have an independent budget. 17 CC as the arbiter is due to the vague formulation o f the relevant Constitutional provisions that do not clearly specify and delimit executive andjudicial competencies. 2.8 However, this trend seemed to change in2007. InMay 2007 the Prosecutor General challenged the newly introduced Article 130a o f the Constitution, which regulates the division o f property management powers between the SJC and the MOJ, before the CC. The Prosecutor General argued that the principle o f separation ofpowers required that MOJ fiW of Members of rosecutor~enerd). nie. CC decisionsare f d authorityto reviewthe competence should be understood to comprise only powers with regard to the immovable property of the judiciary, with movable assets being left within the powers o f the SJC. 2.9 The 2007 Constitutional Court decision on management of judicial assets and resources, while significant, seems to leave room for future disputes and uncertainty. The CC disagreed with the Prosecutor General's interpretation". It ruled that property l 9CC DecisionNo. 08/2007. 18 management was an executive function which included different actions, incapable o fbeing exhaustively listed. The CC interpreted judicial property to comprise all categories o f assets allocated to judicial entities. These assets were therefore state property subject to management by the Council o f Ministers. On this basis, the CC ruled that the right o f the MOJ under paragraph 2 o f Article 130a to manage such property may not be restricted either to immovable, or to movable, property. The CC expressly stated that the constitutional limit to the management powers o f the M O J emanated from the interest o f Bulgaria's citizens and society, which include a genuine separation o f powers and an independent judiciary. According to the Court, judicial independence did not imply only non-interference in the adjudication o f cases but also required financial security such that there was no possibility o f the judiciary being influenced by the executive through the allocation or non-allocation o f funds. The Court ruled that in order to execute its constitutional functions in appropriate and timely manner the judiciary must be given operational autonomy to spend funds according to its actual needs. The CC concluded that MOJ management powers overjudicial property did not contradictjudicial independence as long as they did not constitute an obstacle to the normal functioning o f the judiciar did notjeopardize the efficient exercise o f its powers, and did not injure its independence. & 2.10 Judicial budgetary independence has enabled the SJC to diverge from budgetary and performance monitoring practices applicable to other budgetary entities across government. Inview o f thejudiciary's budgetary independence, the SJC is not legally bound to comply with the budget circulars issued by the Ministryo f Finance, which have only a recommendatory character in respect o f the SJC. Unlike executive agencies, the judiciary's budget requests are not compulsorily limited by budget ceilings guided by the MOF's fiscal planningnor i s it required to include performance information following the Government's adoption o f program-based budgeting. In exercising its independent budgetary authority, the SJC has tended to request substantial year-on-year increases inbudget allocations. And its autonomy injudicial budget execution has also led to a unique level o fjudicial flexibility inre-allocating budgetary funds among categories o f expenditure to cover mid-year priorities, which i s not possible for executive agencies. 2.11 These practices have complicated the judiciary's relations with the executive and the legislature. Concerns have been expressed about the judiciary's performance and ability to ensure efficient management o f financial resources. On the other hand, the National Assembly's refusal to grant the judiciary the level o f funding that the SJC deems necessary for the judiciary to exercise its functions more effectively appears to have fostered the perception among the judiciary that it remains under-resourced. At the same time, the institutional mechanisms to collect judicial statistics and inspect judicial offices have so far been too limited inscope to allow for meaningful tracking o f performance. 2.12 As a result, a significant gap appears to have emerged in recent years between the perceptions of the judiciary, on the one hand, and those o f the executive and the legislature, on the other, regardingthe priorities required to improve judicial performance. 20The CC decision, by not establishing criteria to assess whether these conditions are respected in particular cases, seems to have left scope for hture disputes and uncertainty. 19 DIFFERINGINCENTIVES, DIVERGINGPRIORITIES 2.13 From the SJC perspective, investing in human capital has taken priority over other resource inputs into the judicial system for the past few years. Increasing staff numbers and raising salaries were considered necessary to redress the dire situation that emerged during Bulgaria's difficult transition in the 199Os, when magistrates' salaries - like those of other public employees -- declined in real terms and many magistrates left the judiciary for the private sector. Though minimum salaries for junior magistrates were set by law at double the average salary in the public sector, low pay was widely reported as a key factor undermining the judiciary's to attract and retain qualified personnel and to maintain standards o f ethical conduct. 2.14 Successive increases in personnel allocations and expenditures have allowed increased recruitment and raised judicial remuneration to levels deemed appropriate to attract and retain qualified personnel. Bulgaria's judicial staffing indicators now compare favorably with other European countries. Inparallel, consecutive salary increases, the major driver of increased personnel costs, have reportedly strengthened the judiciary's ability to attract and retain qualified staff. Anecdotal evidence indicates that the previous tendency of experienced magistrates leaving the profession for private legal practice appears to have been diminished and the appeal of a judicial career to law graduates has increased. Recent recruitment competitions for entry-level positions have reportedly attracted applications from highly qualified candidates. 2.15 However, the number of candidates per judicial vacancy increased between 2003 and 2005, but has since declined, suggesting that the effect of higher salaries in attracting more (if not better) candidates to the judiciary might be somewhat overestimated. Between 2003, when centralized competitions organized by the SJC were first introduced, and 2005 the number of candidates per vacancy rose from 14 to 20 candidates. However, this ratio appears to have declined since. There were 8 candidates per vacancy in 2006, perhaps due to an unusually large recruitment for the new Administrative Courts, while preliminary data for 2007 point to a ratio of 11 candidates per vacancy (Figures 14 and 15). Figure 14: Candidates per vacancy incompetitions Figure 15: Candidates per vacancy byjudicial profession organizedbv the SJC 60 50 -junior judges 40 .candidates per mcancy -total -junior candidates per post of 30 prosecutors entry l e d judge 20 junior investigators 10 0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 21 World Bank, Bulgaria Judicial Assessment, March 1999, pp. 11-12; ABA CEELI, Judicial Reform Index for Bulgaria, July 2002, pp. 23-24 20 2.16 The steady increase in the fiscal weight of the judicial wage bill has begun to raise concerns about affordability and sustainability. Actual personnel costs rose by 208 percent in nominal terms between 2001 and 2006. The share of staff costs in the judicial budget has risen from 82 percent in 2001 to 85 percent in 2007 (but from 70 percent o f actual expenditures in 2001 to 77 percent in 2006). Between 2004 and 2006 the average salary in the judiciary increased in nominal terms by 23 percent - a faster rate o f increase compared to the earnings o f other public employees, which grew by 16 percent during the same period.22This trend could pose three main risks - in terms of fiscal discipline in the judicial branch, the technical efficiency o f judicial expenditures, and public perceptions of the judiciary. 2.17 From the perspective of fiscal discipline, further substantial increases in the judicial wage bill could affect the sustainability of judicial expenditures, and also have longer-term implications including on pension liabilities. Ensuringthat thejudicial wage bill is affordable and fiscally sustainable has so far been difficult due to the exemption o f the judicial budget from the control mechanisms that the MOF exercises with regard to executive agencies. In view o f its legal authority to determine personnel numbers and magistrates' remuneration levels, the SJC has been able to budget for an increasing wage bill without regard to MOF guidelines which apply to the rest of the public sector. In addition, in recent years the SJC has granted mid-year salary increases (unforeseen in the budget), which have taken personnel costs over the ceiling set by the State Budget Act for this category o f expenditure. By contrast, such ad hoc increases are not possible for executive agencies whose budget execution is subject to MOF oversight. 2.18 Secondly, increased personnel expenditure could come to the detriment of other categories of expenditure, thereby undermining technical efficiency. This principle is particularly important in considering which resource inputs could have the greatest potential to improvejudicial performance. On the other hand, decisions to increase salaries and/or expand staff numbers may limit the judiciary's flexibility in planning resource allocation inthe future. Staffing and/or salary increases lead to increased recurrent costs, which are very hardto adjust inthe short run except through staff attrition. Possibly, a reduction in the judiciary's personnel costs could be achieved by transferring staff responsible for business and property registration as well as enforcement functions (recordation and executionjudges) to the executive.23 But this would be a zero-sum game for the state budget as a whole. Otherwise, increases in expenditure categories, which may be required to improve the administration o fjustice, could occur only with further increases in the size o f the judicial budget. For example, increased capital investment may be required for premises (e.g. to address the current shortage o f courtroom space, cited as a major cause o f delays in the scheduling o f hearings, especially inthe busiest courts such as the district and regional courts in Sofia) and/or information technology (e.g. to roll out functioning judiciary-wide case management systems) . 2.19 The SJC has so far attempted to address this issue by increasing the size of its overall budget request. However, while the National Assembly has allocated - to a large 22According to SJC data, the average monthly salary in the judicial system (including magistrates and administrative staff) rose from BGN953 (Euro 487) in2004 to BGNll73 (600) in2006. 23The function of business registration was transferred to the executive (under the MOJ) as of July 2007 and real estate registration was transferred as of January 2008; however, recordationjudges, who do not have the status o f magistrates, have not beentransferred to the payroll o f the executive. 21 extent - the requested funds to cover recurrent costs, especially personnel costs, it has sought to contain the expansion o f the judicial budget by constraining appropriations for other categories o f expenditure such as capital investment. The judiciary could question whether this will change after the transfer o f responsibility for capital expenditure to the MOJ. The SJC's response o f covering financing shortfalls by reallocating across categories o f expenditure or over-spending during budget implementation could heighten executive andlegislative concerns overjudicial budget execution. 2.20 Thirdly, consecutive pay rises for magistrates could give rise to questions of perceived fairness, especially when judicial performance i s not seen to be improving. Judicial remuneration does need to be periodically reviewed to ensure its relative competitiveness in attracting and retaining high-quality personnel. However, once agreed remuneration levels are inplace, further self-awarded ad hoc increases could injure judicial credibility. On the one hand, the judiciary's unique independence in setting remuneration levels for its own members has allowed magistrates' pay to rise faster than, and widen the income gap with, that o f other categories o f public employees. On the other hand, as shown inthe previous chapter, indicators o fjudicial performance disclose a mixedpicture. There could therefore be a risk o f the judiciary being perceived as privileged and unaccountable, as had reportedly been the case before the constitutional amendments o f 2003 and 2007 limitedthe scope o fjudicial immunity.24 2.21 Questions could therefore be raised about the utility and fiscal sustainability of further increases to the judiciary's budget envelope, in the absence of evidence confirming performance improvements. The recently introduced constitutional requirement for the SJC to report to Parliament on the performance o fjudicial bodies may offer the judiciary an opportunity to publicize its efforts to improve its services and strengthen its case in requesting additional resources. At the same time, given the budget constraint and financing needs for large infrastructure projects financed by EU funds2', it i s becoming clear that the highrate o f increase inthe judicial budget observed inrecent years may not be fiscally sustainable in the future. According to MOF forecasts, the judicial budget i s estimated to remain at around 0.6 percent o f GDP for the coming years, implying that annual budget increases would not exceed the rate o f growth o f GDP.26 While the MOF has no authority to impose limits on thejudicial budget, but only to attach its opinion to the draft judicial budget submitted to the National Assembly, overall fiscal discipline seems to havebeen preferred over the judiciary's claim to increased resources. 2.22 Improving judicial performance seems to now require a shift from increasing the budget envelope to increasing efficiency and productivity. This suggests that further improvements in judicial performance may be driven by increases in efficiency and productivity rather than additional recruitment. 24Prof. PlamenKirov, Judge at the Constitutional Court of Bulgaria, "Amendments of the 1991Constitution of the Republic ofBulgaria andAdapting of the Constitution to EUMembership", p. 4 25There is acap of40 percentofGDP onoverall governmentspending. Republic of Bulgaria: Convergence Program (2007-ZOIO), November 2007. 26MOF, "Report on the Three-Year Budgetary Forecastfor the Period2007-2009", June 2006, p. 61. 22 THEDYNAMICS RESOURCEALLOCATION OF 2.23 As the body responsible for managing the judiciary, the SJC is in charge of allocation of resources to judicial bodies and has a critical role in monitoring judicial performance. This section examines the impact of the composition on the SJC on the management o f the judiciary and the allocation o f resources. The key institutional actors in the resourceallocation process are schematically depicted inFigure 16. Figure 16. Judicial Resource Allocation andManagement - Key Institutional Actors 2.24 Albeit under the overall responsibility of the SJC, the mechanisms for the allocation of resources to judicial bodies and for performance monitoring differ considerably across the three judicial professions. The allocation of resources, including personnel, to individual courts by the SJC presents wide variations that do not appear to correspond to caseloads. Arguably the use of a weighted caseload formula, which i s currently under elaboration, could explain some of these disparities interms of variations in the composition of different courts' caseloads. While 65 percent of new posts in2006 were indeed created in courts with higher-than-average caseloads, there were also cases where new posts were created in courts with comparatively low caseloads and with outstanding vacancies.27 Comparable disparities may be noted in the allocation of material resources, notably funds for buildingor upgrading court premises. 2.25 Such instances suggest that the allocation of human and material resources to courts could be influenced by subjective factors such as the activism, persuasiveness, 27Technical Annex on Budgeting, pp. 15-16 23 and personal connections of individual court presidents within the SJC. It is so far unclear whether the transfer of responsibility for the execution of capital expenditure to the MOJ will changethis pattern with regardto the allocation ofinvestmentsinjudicial facilities. 2.26 The decentralized structure of the court system could be a significant factor accounting for the lack of more systematic mechanisms for determining the allocation of resources to courts. The structure o f the court system gives individual court chairpersons significant leeway in managing their courts and in formulating and pursuing requests for additional resources. On the other hand, the Prosecution Service has a clear hierarchy with the Prosecutor General at the top, as does the National Investigation Service. Data on the breakdown of material resources allocated to territorial divisions of the prosecution or the investigation service were not available. But anecdotal evidence indicates that resource allocation in these two judicial professions does indeed occur in a more centralized, top-down manner than is the case for the courts. 2.27 On the other hand, the composition of the SJC does not seem to result in imbalances in the allocation of resources among the three judicial professions. It could be hypothesized that the hierarchical organization of the prosecution and investigation services might place them in an advantageousposition vis-&-visthe decentralized courts in formulating and pursuing resource requests. However, budgetary data do not appear to confirm such a hypothesis. For example, in2006 the budget of the Prosecution Service was half o f that allocated to the courts, broadly proportionate to the respective staffing levels of the two judicial branches. The staffof the Prosecution Service stood at 49 percent ofthat of the courts, though it included a higher share o f magistrates (51 percent of all staff compared to 28 percent inthe courts), which impliesrelatively higher salary costs. 2.28 Differences in the structure of the three judicial professions may, however, complicate the exercise of the SJC's functions in assessingjudicial performance. This relates both to the systems for monitoring the performance of judicial bodies and for evaluating individual magistrates. In line with the hierarchical structure o f the Prosecution Service, the allocation of workloads, cases, and evaluation of individual prosecutors' work i s conducted in a top-down manner throughout the Service, reaching down to its territorial divisions. This centralized system presents advantages in terms of more uniform standards for the allocation o f workloads, accountability for performance, and the career progression of individual magistrates. Inthe case of the court system, individual court presidentshave a more influential role in monitoring the caseloads and performance o f judges working in their courts. This appears to be corroborated by the diversity o f management practices across courts, which may be an important factor underlying the variation in courts' case disposition rates and timeframes as well as other dimensions of court performance. At the same time, the influence of court presidents over the career development ofjudges working within their courts underscores the importance of clear and transparent performance appraisal and career progression criteria consistently applied acrossthe court system. 2.29 There are also some concerns among judges that the presence of prosecutors and investigators in the SJC commissions deciding on promotions could potentially constrain judges' independencein adjudicating cases. However, there does not seem to be any hard evidence of judges having been penalized in terms of career progression as a result ofhavingadjudicated against the position of the prosecution. 24 2.30 Representative associations of the three judicial professions comprise a key group of institutional actors, some of whom have played a significant role in judicial reforms. The reforms have been accompanied by a parallel process o f formation of professional organizations o f magistrates, which ingeneral aim to protect their professional interests, improve their qualification and working environment, and contribute to the development of a democratic rule-of-law-based civil society and transparent, effective and trustworthy jurisprudence. 2.3 1 Bulgariahas two professional organizations for judges, two for prosecutors and one for investigators. The Bulgarian Judges Association (BJA) i s the larger and older, established in Sofia in 1997 as a successor to the Union o f Bulgarian Judges, founded in 1919 and active until 1945. In 2007 the BJA consisted o f more than 800 judges fiom all regions and tiers o f the court system and had developed 10 local sections in all court districts. Having fulfilled the international standards for a representative, independent and democratic judges' organization, it acquired membershipinthe International Association of Judges, effective 2005. The BJA has been active in reforms, e.g. the establishment and development of the Educating Center for Magistrates (later transformed into the NIJ), the drafting and enforcement of the Code of Professional Ethics for Judges, the introductionof public relations agencies and press attaches in courts, the creation and implementation of mediation practices in legislation, and the improvement o f the professional and ethical qualifications of judges. Through its statements and public initiatives the BJA exercises influence over jurisprudence, legislation and the public image o f thejudiciary. 2.32 Bulgaria's EU accession intensified the necessity o f improving judges' knowledge of EU law. This was the basis for the establishment in November 2006 o f the second judges' association - the Judges for Integral Europe. Formed by several BJA members (who continue to maintain their BJA membership), it currently comprises 100 judges. It has not yet beenrecognized as a representative o fthejudicial community. 2.33 Prosecutors are organized into two national associations: the Association o f Prosecutorsin Bulgaria and the National Union of Bulgarian Prosecutors. The Association i s the older of the two, founded in 1997 and currently having between360 to 400 members. The National Union was formed when the independence of the Association fiom the Prosecutor General was questioned, but more recently, the two organizations have embarkedon cooperative efforts, especially intrainingfor prosecutors. 2.34 Investigators are united in the National Chamber o f Investigators, formed in 1999. Presently it has more than 650 members from all district and specialized investigation offices, organized in28 local sections. The Chamber aims to promote modern investigating processes, improve investigators' professional qualifications, develop practices for protection of human rights, and safeguard investigators' independence. After recent legislative amendments substantially reduced the legal powers o f investigators and transferred manyo f their functions to the police, the Chamber's influence has decreased. 2.35 The foregoing discussion on selected institutional characteristics of Bulgaria's judiciary can now illuminate an examination of the conceptual and process issues pertaining to judicial resource management inBulgaria the focus ofthe next chapter. - 25 3. THE MANAGEMENT OFJUDICIAL RESOURCES THEPUBLICFINANCE CHALLENGE 3.1 The contentious issue of judicial financing highlightsthe collision in Bulgaria between the two tectonic plates of judicial independence and judicial accountability. The constitutionally guaranteed principle of functional and budgetary independence i s invoked by the judiciary to exercise its prerogative to formulate requests for increased budgets and execute them to perceived priorities including increases in salary and staffing levels. The principle of judicial accountability is invoked by the legislature and the executive to seek justification for the judiciary's highspending requests and for the manner inwhich thejudiciary's authorized budget appropriations are actually executed. 3.2 Many in Bulgaria's judiciary claim it i s under-funded. This is the perspective of a recent expert report, which reads: "It seems necessary to improve the budget funding for staff, new investments for infrastructures and for the modernisation of the facilities where the public service o f justice i s rendered. However a trend in the opposite sense i s evidenced in the budgets for Justice in the last years which show the disregard by the Executive o f the requests made by the SJC in order to allocate and improve resources for the Administration of Justice,yy28The claim i s also manifest inthe following motivational introduction to the SJC's 2008 budget proposal (initial draft): "The approved 2007 judiciary budget i s only 0.61 percent o f GDP while in EU country members [it] is 2 percent (the SJC proposed 2007 budget is 1.07 percent o f the GDP)." The judiciary has also argued that Bulgaria faces inordinate service provision pressures (reflected in high court caseloads) and limited resources (in the form o f judicial staff, physical facilities and information technology), 3.3 This report proposes a supply-demand model to examine this contentious issue. Figure 17 shows a basic model of the issues examined in this report, starting from common supply inputs (such as financing, staffing and infrastructure) and factors driving Sector demand (case demand and other service demands such as processing affidavits). The model indicates that both supply and demand factors are influenced by policy and management and together lead to judicial results and outcomes. The results focus in the model i s in keeping with the general thrust of this report in arguing for a more strategic orientation to budgeting and financial management for Bulgaria's judiciary. 3.4 Comparatively, Bulgaria's demand and supply numbers do not indicate a major resourcingfailure. It is instructive to compare Bulgaria with other N M S of the EU on selected indicators (Table 1). The data are not exhaustive and do not provide a final statement on whether Bulgaria's judiciary is appropriately financed or not, but they do indicate that the judiciary i s not lagging behind as much as some interlocutors suggest, especially in terms of the supply factors. The MOF, for example, understands that it i s an "indisputable fact that during the compilation of its budget, the Supreme Judicial Council 28"Budgetary Management inthe Judiciary inBulgaria" - an output of a PHARE engagement (Component 9 of the Twinning Project BG-04-IB-JH-04). 26 i s not limited by an obligatory ceiling of expenditures, while the executive branch of governance must produce the final draft of the State Budget, taking also into account the specificity of the judicial system within the framework of limited expenditures under a consolidated fiscal program"29. Figure 17. A supply-demand model for analyzing finances inBulgaria's judiciary Su 1 Factors Demand Factors StafJing Buildings Finances Case demand Other services Mana ement Mana ement 3.5 Bulgaria has a higher ratio ofjudges to inhabitants than five other NMS.Itsjudicial facilities are located in more geographic locations (as a ratio o f inhabitants and territory) than most of the other NMS.Its budgetaryspendingper capita is comparable to, or even higher than, most of the NMS. Service demand is comparatively high, however, with incoming cases per 100,000 inhabitants significantly greater than all other NMS for civil and administrative cases and greater thanmost for criminal cases. Table 1.ComDaringBulgariawith otherNew Member States of the EU Supply Factors Demand Factors Sources: CEPEJ (2006) and SJC (2007) 29 Vide reference number 93-02-56 o fMarch 18,2008 o f the Public Expenditures Directorate o f the MOF. 30The CEPEJ data differs from the SJC data here. CEPEJ records 9 Euros per capita, but a revision based on the official SJC expenditure data has the score at 15 Euros per capita. There is a 60 million Euro difference betweenthe expenditure data inthe CEPEJ report and that inthe SJC reports for 2004. 27 3.6 They do, however, show the explosive growth of incoming civil and administrative cases and the clear implications of this growth for system stress. They point to the need for a deeper analysis o f the causes o f this phenomenon, and potential policy responses to manage this aspect o f demand without in any way constraining access to justice for the poor and vulnerable. These issues are examined later, but it is worthwhile to flag them here. 3.7 On the supply side, resources have actually been flowing rapidly into the I judiciary since 2001. Figure 18 shows a steep increase in both budgeted and actual allocations to the judiciary. The figures indicate a 180 percent growth in financial flows into the judiciary over the 2001-2006 period and budget allocations doubled as a share o f GDP. These fiscal increases reflected supply-side expansion. By 2006 the Flgure 18. Resources Flowlng into Bulgarla'sJudiclary, 2001-2007 number o f judges per 100,000 inhabitants had increased to 25,31 the number o f I 3501 .r0.7 geographic locations per 100,000 300 0.6 250 0.5 0 inhabitants had risen to 2.36, and the 76 .- 200 0.4 3 number o f geographic locations per 8i 150 0.3 "6 100 0.2 100,000 square meters had risen to 0.16. 50 0.1 0 0 The data in Table 1 and Figure 18 do not 2001 2002 2003 2004 2005 2006 2007 seem to indicate a major problem with the Budgeted -Actual *Budgeted, overall level o f financing for the judiciary. % of GDP (RHS) However, they do indicate a persistent trend o f overspending beyond the authorized appropriation. The reasons for this trend are not clear from the data, and could have been due to a variety o f factors both within and outside the control o f the judiciary (the explosively highnumber o f civil and administrative cases being an example o fthe latter). 3.8 The judiciary's overspending raises the issue of the extent to which the legislature appropriated funds HowWell Has The Budaet Allocations 120042007) to the judiciary against judicial % Allocation 120 00 Figure 19.Funds?fDataTrorn Judiciary Captured Requested MOJ and SJC) budget requests. Figure 19 shows the proportion o f the 10000 budget request actually appropriated by the legislature 80 000 for salaries, operations and 60 00' -Operations 8 maint maintenance and capital. Appropriations for the first two 40 00' items have been consistently high 20 000 inrelationto budget requests. But budget requests have exceeded /I 0 000 2004 2005 2006 2007 the authorized appropriations for Year capita1 outlays, however, where historically the judiciary has requested extremely large allocations (BGNI80 million in 2007), and authorized 31The number of judges is calculated using SJC statistics and includes the number of Magistrates in the Courts plus the SCC and the SAC. This number, calculated in2004, roughly equals the number provided in the CEPEJreport and is thus considered a relevant comparator. 28 appropriations are far less (BGN32 million). The highratios of appropriation to request for (a) salaries and (b) operations and maintenanceindicate that these are practically protected items. 3.9 The judicial budget is currently submitted to the legislature in two versions. One comes from the judicial authorities (SJC and MOJ in 2007) and another from the MOF. This situation exists because the MOF i s not allowed to directly engage in negotiations on the judicial budget given the explicit Constitutional guarantee of budgetary independence of the judicial branch of power. The MOF Figure20. ContrastingBudget Requests(2007) budget version i s intended as an (Source: MOJand SJC) alternative for the National Assembly to consider when assessing the ,000 BGN 5ooom validity o f the judiciary's budget 450000 4ooom request. Commentators in the soom 3ooom judiciary have opined that the 25000 separate MOF version undermines 2000m that of the judiciary. Figure20 shows mom iooom this is not the case, at least in 2007 5000C for salaries and operations and 0 maintenance expenditures where the SJC and MOF made very similar proposals (reflecting the protected nature of such expenditures). The two proposals were even similar with regard to capital. The legislature made the final cut on the proposed capital outlay. Whatever the ultimate basis for the National Assembly's decisions, it appears that the justifications put forward for large capital spendinghave so far beenunconvincing. JudicialRevenues:PatternsandDemand J and own revenues Figure 21. Judiciary Own Source RevenuesAre Declining (Source: SJC) between 2001 and .-cn -Centralbudget C 2006. Two third of the 3 1 judiciary's funding a, cn subsidy 3 was from the central C -Own a, ea, budget in 2001, as a opposed to 36 percent from own revenues-a gap of 30 percent 32Amounts exceed 100 percent in some years because of negative transfers to Court Buildings Fund and PenitentiaryBuildings Fund. 29 3.11 Decreased own revenue share could reflect policies promoting access to justice; however such policies also impact the relationship between the demand for and supply of judicial services. Access to justice i s a focus of Bulgaria's judicial policy. It is an important argument why Bulgaria is not overly concerned about the decreasing trendofownrevenues inthe sector-lower own revenuescould reflect lower average court fees which reflect lower absolute fees and more financing for those who cannot pay fees. This may be appropriate in a country with a history o f weak access to courts, if excess costs were the factor limiting access. However, it could constitute a problem when low or decreased costs of bringing cases to court could promote unmanageable levels of case filing and frivolous litigation. Insuch situations access could be thwarted by the inability o f supply to meet demand-due to limitations on staffing, physical facilities, finance and business processes. This could be problematic where management and organization rather thanhighcosts arethetrue access constraints. 3.12 At the initiative of the MOJ, the Council of Ministers has adopteda revision of the judicial fees for civil cases by about 2.5 times. The need to adjust for inflation and increasing property values underpinned this initiative. Fees for execution of judicial decisions, however, were increased in 2006 by six-fold on average, with the judgment- debtor beingresponsible for the payment. 3.13 Evidence suggests a significant gap between case demand and supply. Table 2 shows that the number o f cases entering Bulgaria's judicial systemincreasedby 14 percent during 2002-2006 and the total number of cases from 533,000 to 605,000. Completed cases per annum increased from 383,000 to 480,000 in the same period, showing a 25 percent increase. The higher rate of increase in the share of completed over total cases partlyreflects the improvedSector resources and an improved supplycapacity (inline with the data supporting Figure 18). However, the gap between demand and supply was only closed between 2002 and 2003-where it dropped from about 150,000 to 125,000. A more static gap existed inall other periods. Table 2. Case numbersand average case costs, by financing source I BGNfrom collected court fees per case I 115.01 I 139.81 I 109.56 I 89.34I 109.80I Source: SJC. Numbers do not add up because o f negative subsidies not shown inthe table. 30 Average casa prices and case demand where collected court fees accounted for iiJ 5 0 4 the highest proportion o f total case costs (2003, where collected fees made up 35 ' O: percent of average total case cost). Though the approach may not be O:: classically correct, one could consider iL 015 the proportion of case costs coming H O 1 from collected fees as a case price paid Offl s o upon entry to the judicial system. Figure 53 55 57 58 81 22 shows the typical downward sloping Cnra(lW,000) demand curve calculated when the JudicialExpenditure:PatternsandSupply 3.15 Expenditure patterns indicate opportunities for improvement. Since 2001, as already shown, Bulgaria's increased resources have Figure23. Judiciary: Expenditure Composition (2001-2006) flowed predominantly into 000 BGN Sourm SJC personnel costs. Figure 23 shows how staffing costs have increased between 2001 and 2007. Allocations -Total expenditure to staffing and the rate o f -Staffing @%tions and maint change in staffing - Capital expenditure expenditures have far exceeded allocations and rates of change of other items. I I 2001 2002 2003 2004 2005 2006 Year 3.16 Salaries and other personnel-relatedexpenditureshavebeenprotectedat the expenseof other items:this has crowded out some needed expenditures and in particular undermined capital spending. Table 3 details the extent to which the judiciary has been granted its budget requests. Allocations and actual expenditures on judicial salaries have been high as a proportiono f the budget request. Capital requests have been particularly poorly funded by the legislature. This was partly because of the weakness o f capital requests, but i s only part of the story. The data show that high rates of growth in staff expenditures have crowded out other spendingneeds leavingno room for capital expenditures inparticular. 31 Table 3. How allocations & actual expendituresrelate to budget requests, 2005-2007 2005 Budget 2006 Budget 2007Budget as YOof 2005 Actualas as YOof 2006 Actualas as YOof Request YOof Request Request YOofRequest Request Salaries 84% 98% 88% 98% 87% Operationsand maintenance 60% 68% 72% 68% 89% Capital 37% 52% 15% 27% 19% 3.17 However, the issue i s more complex than it appears. The establishment of the regional administrative courts is a good example of the creation by the executive and legislature of more courts and judicial positions, and then having to finance them. It is not clear whether the judiciary fully supported all new positions being created. But even if it did, the decision to expand the number of positions was clearly acquiesced in by all branches o f the state - perhaps inresponse to perceived EU accession needs. The point is that staffing increases such as this were the result o f conscious state policy agreed to by all branches of the state, not simply due to pressures fiom the judiciary alone. 3.18 Staff numbers have risen over the period in question, contributing to increased personnel expenditures. The increases are more pronounced in some years thaninothers, and patterns vary across thejudiciary. 2007 was a major year for increases, for instance, and the proportional adjustment has been highest inthe SAC, Prosecution and the NIJ. The courts had the highest number o f new positions in the period (over 2000 in three years) whilst the Investigation Services actually saw a drop in numbers in the same period. This report focuses on courts, given that staff numbers here comprise about 60 percent of Sector positions. 12 percent for the sector as a whole. The significant increase in 2007 takes Figure24. Judiciary: Growth of Selected Budgetary Indicators(2001-2006) expenditure growth, with average expenditurexpenditureSalaries numbers salary in Total Capital Staff Average sector A FUNCTIONAL PUBLIC FINANCIALMANAGEMENT SYSTEM 3.20 A basic model of budgeting and financial management shows that Sector budgeting and fmancial management systems have various distinct processes. Figure 32 25 displays how such processes fit into an overall `better practice' system. System effectiveness derives fiom implementing appropriate initiatives in all seven processes (reflected inthe complete boxes) and establishing connections between the various process areas (reflected in the solid arrows, which show how one connection facilitates another, leading to a closed, consistent system o f processes). If individual process areas work effectively but are at odds with each other, the system may not generate effective outcomes. 3.21 Better practice systems are founded on strategic planning processes, ensuring that performance-oriented policy influences financing decisions. This usually begins with a distinct policy review and development step, wherein a sector's medium term direction i s determined. This direction is often reflected at a high level and shows broad certnr nhiPrtivPS-thP kindq nf niitrnmm SlRtPd fnr nrndiirtinn nr dPlivPrv-n9 well RS perspectives on aggregate resource availability, especially as this i s influenced by policies regarding own-revenue collections inthe sector. These objectives are sometimes shown as they relate to recommended programs and sub-programs o f action, which high-level policy-makers identify as the organizing parameters for the sector. These programs or sub- programs focus on the policy-based objectives the sector leadership deems most important. Annex Table 3 shows these for selected countries. Annex Table 3 provides examples of broad policy programs in Europe which could be o f interest to Bulgaria as it proceeds towards better practice systems injudicial budgeting. 3.22 Strategic budgeting follows as the process where a sector translates its broad policy direction into strategic financial plans. These plans are more detailed than the broad policy developed in the first stage and incorporate more operational goals-medium term output targets-as well as the inputs required to achieve these goals-staffing, facilities, financial and other. These plans are drafted for individual budget users (courts and other entities in the Judicial sector, who administer finances directly once received) and relate to the broad plan-with output targets linked to broader outcomes targets and resource needs disciplined bybroader resource ceilings set for the sector. 33 3.23 Strategic planning products lead directly into the formal budget preparation stage, where budget proposals and drafts are prepared. This i s the traditional budgeting step most governments are used to. It involves a central sector entity (like a budget or accounting office) sending instructions to delegated departments and requesting budget proposals. Better practice instructions request information about how the annual request relates to the medium-term plans developed in the strategic budgeting stage, particularly asking for information about the (i) the performance goals for the coming budget year (and how these will be measured) and (ii) how the annual request relates to a medium-term financing plan. These instructions form the basis o f a medium-term budget request which helps the central budget entity compile a budget proposal for the current year that includes performancetargets and indicative budgets for two to three years into the future. 3.24 The proposal includes both operational and capital expenditures and shows how the expenditure needs relate to policy directions, often through a programmatic structure. The programmatic structure simply organizes resource allocations according to specific objectives (where a program or sub-program i s generally defined as a set o f processes required to meet a specific objective). Allocations to each program can still be broken down to show organizational recipients and economic items, as in the example at Annex Table 4, which depicts in simplified form how a court could compile a budget in two sub-program areas it would share with all other courts. This request may then be negotiated with officials in ministries like Finance and Economy and sometimes with Cabinet and, ultimately, it i s defended in front o f the Judiciary. The defense is usually led bythe political and administrative leadership o fthe sector, who must show how the overall request is strategically influenced and disciplined by the sector's broad policy direction. 3.25 Implementing policy-based budgets requires strong and connected budget execution mechanisms. Resource management processes are vital because they regulate the access sector entities have to resources allocated inbudgets. Having formal budgetary authority to access cash, capital, goods or personnel does not always mean that access i s realized. Sectors must have effective systems whereby budget entities request and receive the resources they have been allocated, and simultaneously have the capacity to use them. These processes must be strategic (allocating resources to the kinds o f inputs and outputs focused on in strategic budgeting documents-like the programs and sub-programs shown in Annex Table 5), efficient (allowing timely access to the resources) and effective (imbued with the capacity to use resources once accessed) and ensure high levels o f accountability (ensuring that budget users access only those resources they have been allocated and use them appropriately). Better practice processes often use information technology solutions to ensure resource flows work, but even these systems fail when entities lack the personnel capacity to effectively manage these processes. 3.26 Internal controls, internal audit and monitoring mechanisms are vital for efficiency and accountability. These mechanisms generate the information managers within sector entities need to manage and ensure efficient and effective implementation o f the budget program. Internal controls involve the set o f procedural rules and structures that control how entity's work. They set the base requirements for managing cash, capital, goods or personnel. Management can rely on these controls to,ensure basic process efficiency and accountability and often use the controls to minimize risk o fprocess failure. 34 Internal audit mechanisms involve ongoing assessments to ensure that that controls exist and are adhered to and to provide ongoing analysis o f organizational issues that threaten achievement o f the organization's goals. Internal auditors thus provide an ongoing report to managers on organizational progress in its implementation o f budgetary programs- from a process perspective (is the integrity of internal controls being maintained?), a financial perspective (are resources being allocated to appropriate areas at appropriate times?), a broader resource perspective (are the resources needed for service delivery being appropriately provided and maintained?), and a performance perspective (is the organizational appropriately focused on reaching its targets, and i s performance being consistently and reliably assessed?). The internal audit function is vitally connected to overall monitoring, whereby management regularly gathers information about the organizational progress-regarding adherence to process, financials, broader resource strength andperformance. These processes are vital for managers at the operational level to keep watch on progress inmeeting targets like those set in Annex Table 4, and for higher level policy-makers and managers to monitor overall progress in addressing program objectives (as set out inAnnex Table 3, for example, at the sector level). 3.27 Accounting and reporting processes are also vital. These processes ensure that budget users are recording their activities and reporting on them, keeping records of resource access and use. These accounts and reports should reflect the way in which resources are actually allocated in the budget and through the resource management systems (especially cash and procurement systems). In better practice governments accounts and reports show how finances fund inputs and contribute to the provision of outputs (often shown inprogram-based accounts, with economic item break-downs in each program, reflecting the classification one would associate with Annex Table 5's budget allocation). Poor accounting and reporting undermines incentives for effective budget implementation and constrains transparency and accountability. Accounting processes contribute to internal control regimes (providing rules about how and when to account for transactions, for example). Better practice accounting and reporting systems requirebudget users to reflect on financial transactions as well as progress in meeting goals. Reports in better practice governments provide regular information (quarterly, bi-annually and annually) on both issues. 3.28 External audit (and other accountability) processes provide a link between strategy development/budget preparation processes and budget execution and reporting. These processes ensure accountability for implementing the budget program, examining process conformance, financial probity and performance (in better practice settings). The external audit i s usually conducted by an external agent, most commonly the supreme audit entity which i s accountable directly to the legislature. The audit report i s usually provided to sector budget users within six months after a budget year i s concluded and will note areas o f concern. Sector users should berequired to respond formally to these concerns and should use the information provided in the reports as an input into fbture strategic planning and budgeting initiatives, and to inform initiatives to strengthen the system as a whole. 35 PUBLIC FINANCIAL MANAGEMENT PROCESSESINTHEJUDICIARY 3.29 There are many entities engaged in Bulgaria's judicial sector's various public financial management (PFM) processes. Role players tend to be concentrated among central entities inthe executive (the Council o f Ministers, the MOF and the MOJ), central entities in the Judiciary (the Supreme Judicial Council and its constituent members in the courts, prosecution service, investigations offices and the NIJ) and the Legislature (including National Assembly committees on legislation and budgeting and accounts). 3.30 Some process areas are not well represented or addressed, however, particularly the foundational strategic planning steps. This is not to say that there i s no strategic planning in the judicial sector. Policy-makers in the sector have produced, for example, the Joint Program o f Action on Drugs and Crime (with the United Nations, produced in 2006) and others related to EU initiatives and commitments. These products have not been developed with an eye to influencing actual budgetary allocations, however, and thus have limited value in such context. There is no process in place for annually reviewing sector performance and settindadjusting sector goals in a manner that could effectively improve the strategic orientation o f budgets. The lack o f a suitable process manifests in a lack o f high-level planning product or direction and a lack o f clear sector objectives, which could informprogrammatic ideas for the budget. 3.31 The lack of a strategic budgeting element weakens the judiciary's ability to advocate for resources. Recent efforts to show policy bases for the judiciary budget are not yet evidence of a new strategic stage. The SJC has recently realized that a more programmatic approach i s required if it is to keep up with the executive (where program budget documents are now routine) and strengthen its ability to advocate for resources. As part o f its budget preparationprocess in2008 the SJC produced a document titled "Report on the priorities and distribution o f budget resources for the Bulgarian judicial system in the period 2008 - 2010." The report identified policy areas funded through the budget: (i) Ensuringoptimum positions to cover the complete work inthejudiciary bodies as required bythe JSA and to develop access to information mechanisms for the purpose o fincreasing public trust injudiciary; (ii) Strengthening the professional qualifications o f the judiciary bodies; and (iii)Activities o f the specialized judicial institutions in relation to the legislative amendments and the drafting o f new ones. These policy areas did not develop from any strategic process and do not reflect service delivery objectives o f the sector. Rather, they are a continued reflection of inputs needed in the sector-personnel, training and provisions for administrative courts and special prosecutions entities. A reader o f the document i s still left asking what the resources will fund-beyond new positions and new entities. Bulgaria needs a process for answering this question in the sector, as well as a final answer, if it i s to truly introduce a strategic policy-making stage into its budgeting and financial management system. 3.32 Existingjudicial cash management processes raise concern. These processes are largely decentralized, although the SJC does exercise some central control. The operational budget o f each court is largely executed at the court level, for example, although the SJC controls the time o f distribution. (Money i s distributed by months and execution may not exceed the monthly temporary limits, a common cash management control). Consistent information i s not available on, for example, how cash i s distributed across first and 36 second level spending units and how own revenues (like court fees) are collected and transferred to the SJC (which is a requirement). National Audit Office reports suggest that such processes are not standardized for budget users and that system variation does raise concerns about inefficient resource use and potential or actual control/accountability breakdowns. 3.33 Similar concerns have been raised regarding procurement practices. Reports of weaknesses inprocurement processes are a reason why the MOJ maintains its voice on capital expenditure decisions at relatively low levels (with a low threshold). HUMAN RESOURCE MANAGEMENT 3.34 Personnel management policies and processes also seem quite ad hoc, though there is a perception of central control. Personnel expenditures have been consistently high and increasing, with actual expenditures on salaries having risen from BGN119 million to BGN131 million to BGN 159 millionbetween 2004 and 2006. An increase o f this magnitude requires careful management. On the one hand there is an appearance of strong central control over this item, manifest in the 2005 order from the SJC that give it authority over new appointment and salary decisions. There are also financial reports that show minimumnational salary levels, suggesting strong management of this variable. The perception o f a strong central control on numbers and compensation is maintained in the data in Table 4, which shows a fairly standard, accountability-enhancing approach to identifyingremuneration levels for judicial staff. Table 4. Calculating Judge and Junior Judge Salaries, UsingNationalNumbers Judge at a district court (2007) Junior Judge at a district court (2007) Experience: 15 years Experience:5 years SALARY AND ALLOWANCES SALARY AND ALLOWANCES Base salary: BGN1,470 Base salary: BGN732 + 30% allowance for class (BGN441) + 10%allowance for class (BGN73.20) +Additional allowance (BGN82.22) +Additional allowance (BGN65.68) + Surcharge on additional allowances (BGN19.73) Amount subject to taxes: BGN1,993.22 Amount subject to taxes: BGN805.20 TOTAL salary andallowances: BGN2,012.95 TOTAL salary and allowances: BGN870.88 DEDUCTIONS DEDUCTIONS Social contributions paid byjudge: Social contributions paid byjudge: Tax on the Common Income BGN421.37 Tax on the CommonIncome BGN140.25 TOTAL deductions: BGN421.37 TOTALdeductions: BGN140.25 SocialContributionsPaidby the Court: Social Contributions Paidby the Court: Pensions Fund(18 % o fBGNl,400) = BGN252 Pensions Fund(18 % o f BGN805.20) = BGN145 Maternity and common health (3.5% o fBGN1,400) Maternity and common health (3.5% o f =BGN49 BGN805.20) =BGN28.20 Work accidents (0.7% o fBGN1,400) = BGN9.80 Work accidents (0.7% o f BGN805.20) = BGN5.60 Universal Pension Fund(5% o f BGNl,400) = Universal Pension Fund(5% o f BGN805.20) = BGN70 BGN40.26 Health Insurance (6% o f BGNl,400) = BGN84 HealthInsurance (6% o f BGN805.20) = BGN48.30 Unemployment Insurance (3% o f BGN1,400) = Unemployment Insurance (3% o f BGN805.20) = BGN42 BGN24.10 NET SALARY (to be receivedby thejudge) : NET SALARY (to be receivedby the judge) : BGN1591.58 BGN730.63 Source: World Bank staff analysis from SJC data 37 3.35 Personnel management conditions are highly decentralized. Data on salary structures and new positions by court indicate that the central rules are not that bindingand decentralized decisions seem to determine personnel issues. Annex Tables 7 and 8 show how core components of the salary structure differ quite significantly across courts-in the sample these are all regional courts (the same type) and inthe same district (Sofia). There i s no rationale for the high variation in these parameters, which vary even more when looking at other court types (looking at the Sofia regional, city and district courts, for instance). New positions allocation also appears ad-hoc. The national average of finished cases per open magistrate position for regional courts in cities with district courts33was 263 in 2005. 2006 staff numbers increased in 22 of 38 of courts with higher workloads (65percent of the total new positions). But numbers increased in 20 of the 48 courts with lower averages as well (35 percent of the total new positions). Bre~nik~~ increasedby three positions including one new magistrate (increasing from 13 to 16 in total) even though workload per magistrate was only 133.5. Kavarna increased total numbers by three (from 17 to 20, with two new magistrates) but its workload pr magistrate was way below average at 153.5. These appointments not only defy central rules, but also lack management rationale: Kavarna had two unoccupied positions when new ones were allocated in the 2006 budget. It still had two unoccupied positions at the end of 2006, for example, suggesting a need for better hiringprocedures, not new appointments. 3.36 These expenditures could be taken as reflecting the judiciary's intention to expand human resource capacity, which appears to be a purposeful and well- conceived strategy. Personnel are an input into the judicial production function. Expanding personnel capacity i s a valid strategy to expand capacity to provide judicial services. Expansion could indeed require both increased position numbers and higher salaries (to attract good applicants to the new positions). The focus on human resource capacity building i s also evident in investments made in the NIJ (which has seen significantly enhanced personnel capacity funded via the budget and has also received support to build new facilities). The NIJ has a core role o f training new personnel, which the SJC argues are required to fill positions created to reflect burgeoning caseloads. Decisions to create new openings are intendedto be drivenby caseload data, as per a 2005 decision that states: "The criterionfor deciding to approve new positions incourts shall be the ratio ofthe averageworkloadperposition calculated on the basis ofnumberof finished cases. When the average workload of the specific court is higher than the average for the country (for the same type o f courts) new positions shall be approved until the average o f the country is rea~hed."~ This appears to be a rational and accountableway of deciding on new appointments. All one would need to do is benchmark an individual court's caseload against the national average (by court type, as calculated in Table 5) to see if the court qualified for a new position.36 33 The average of finished cases per total positions was 50. The correlation between this measure and the average of finished cases per magistrates was 0.86. 34 Inthe Pernikjudicial district. 35 Minutes No. 2, Meeting o f the Temporary Judiciary Vacancies Commission, 31 May 2005. 36 There are obviously many improvements that could be made to this approach-including weighting the caseload data and evenintroducing explicit norms relating excess caseload to actual new appointments. 38 caseslopen I I I 1 1 I magistrate 77.3 70.6 191.7 363.7 263.0 329.4 Dositions Finished casesltotal occupied 38.3 19.6 65.4 91.7 53.6 89.2 positions Finished casesloccupied magistrate 83.4 77.1 197.5 384.0 285.7 348.2 positions 3.37 But evidence suggests unexplained variation in appointment decisions. New position creation in regional courts not located in cities was analyzed vis-&vis district courts between 2005 and 2006.37 The national average o f finished cases per open magistrate position for these courts was 263 in 2005. Staff numbers increased in 22 of 38 courts with higher workloads than the national average (accounting for 65 percent o f the total new positions). But numbers increased in 20 of the 48 courts with lower averages as well (35 percent o f the total new positions). The correlation betweennew positions created and caseload across the entire population of these courts was only 0.35. The statistic increases to only 0.41 when one considers caseloads in 2006. This indicates that caseload was not the only factor driving new position creation-and probably not the most important factor either. The question was whether increasedcase numbers themselveswere drivingnew position creation-under the rationale that policymakers observing an upward trendindemandwould respond by creating new positions. The answer was no. 3.38 Annex Table 9 shows new positions in 2006 alongside finished case numbers for 2002 through 2005. New positions were created in six of the eleven courts where 2005 case numbers could suggest systematic increases (but not inthe other five). New positions were also created in eight o f nine courts where 2005 case numbers do not suggest systematic increasesover time. 3.39 The data might suggest that new position rewards follow weak management. The correlation betweennew positions allocated in2006 and unoccupied positions in2005 i s 0.87. This indicates that courts with open positions that have been routinely unfilled 37 There are 87 such courts. The average of finished cases per total position was 50. The correlation between this measure and the average of finished cases per magistrates was 0.86. 39 benefitthe most from the creation ofnew positions. The correlation betweennew positions in 2006 and the number of open positions in the same year is higher, at 0.91, indicating that the new position allocations exacerbatethe hiringweaknesses o f these courts. Ihtiman Regional Court had three unoccupied positions when new ones were allocated in2005 and still had four unoccupied positions at the end of 2006, for example. Put simply, the observation i s that budgetary resources are being systematically allocated to human resourcemanagement systems that cannot absorb them-for whatever reason. 3.40 The data also suggest that new positions are having only a limited impact on results. One would hope to see that new positions yield increases in key sector outcomes-notably case completion ratios. This is not apparent, however, as the correlation between the two series i s only 0.13. In a court like Ihtiman new positions did not help curb an actual decline in case completion between 2005 and 2006. This is another indicator that new positions follow less than optimal management. Expanding position numberswith static facility space, limitedability to housenew staff, limited equipment for new staff to use, and so forth, will not yield improved performance. It is concerning that Bulgariawill struggleto adopt a more strategic resourcemanagement framework with such patterns inplace. Strategic performance-oriented organizations are built first and foremost on personnel management systems that incentivize performance. 3-41 Salary patterns also reveal less than purposeful variation. Budgetary documents provide details o f average salaries across the sector as if these imply standard rates. Variation across the sector i s extreme, however. Annex Table 8 provides details o f variation in key remuneration parameters within one judicial district (Sofia). Within the same court types, variation i s significant for the pre-determined individual monthly basic salary, the additional remuneration for rank and the additional remuneration for class. Annex Table 7 shows that this variation also exists within a city. The parameters and changes in the parameters are dramatically different between the City, Regional and District Courts in Sofia. The reasons for these variations are unclear, and it i s difficult to establish if data weaknesses partially explain them. The variations as seen suggest an unsystematic approach to salary policy that most likely undermines efficient allocations andjudicial performance. 3.42 Personnel expenditures are budgeted to continue increasing- this is a matter of concern. Projected increases in personnel expenditures between 2008 and 2010 are shown in Table 6. Given this, the SJC has requested significant increases in expenditures for salaries (a 25 percent increase in 2008 alone), in average salary levels, and in staff numbers (a 12 percent increase in 2008, following the 20 percent increase in 2007). In advocating for such request, the SJC states: "The planned number o fpositions (employees) reflects the minimum requirements resultingfrom the Government's mid-termpriorities o f requested: the Strate !?rand Program for Judicial Reform." It lists a breakdown of new positions 2008: 15257 payroll positions (incl. 5055 magistrates and 9745 clerks); increase compared to 2007: 1600 payrollpositions (incl. 354 magistrates and 1241 clerks); 38Note the numbers inthe table differ from those inthe original SJC request, cited here. 40 0 2009: 15466 payroll positions (incl. 5104 magistrates and 9904 clerks); increase compared to 2008: 209 payroll positions (incl. 49 magistrates and 159 clerks); 0 2010: 15651 payroll positions (incl. 5141 magistrates and 10052 clerks); increase compared to 2009: 185 payroll positions (incl. 37 magistrates and 148 clerks). Table 6. Projected increases inpersonnel expenditures, 2008-2010 (BGN) 2007Budget Suggestedby the Judiciary's Prognosis for Indicators received from the Government 2008-2010 (BGN) (BGN) 2008 2009 2010 1. Salarv ExDenditures 186.428.951 228.107.450 I 237.369.106 I 247.101.876 2. Other staffpayments andremunerations 23,713,875 33,434,848 34,812,873 37,298,975 3. Social Security Payments 57,092,174 75,826,282 79,452,172 81,519,594 TOTAL SALARIESAND SECURITIES 267.235.000 337.368.580 351.634.151 365.920.445 Average gross monthly salary 1,138 1,246 1,283 1,325 Average year payroll positions number 13,657 15,251 15,417 15,546 3.43 The close connection between personnel numbers and judicial infrastructure (facilities and information technology) requires more intensive review and could provide important pointers to raise judicial efficiency, productivity and performance. There is almost universal recognition that the general condition o f court facilities in Bulgaria inhibits the operation o f the courts and has a seriously negative impact on the efficiency o f court operations. The problem most frequently cited i s the lack o f space for court operations, resulting in overcrowded, inefficient, and, in some instances, unsafe working conditions for staff and the public. Herein lies the connection betweenpersonnel numbers andficilities. In the Sofia Regional Court, for example, the lack o f space has delayed the hiring o f staff; and an inadequate number o f courtrooms has meant that judges must routinely extend the deadline for initiating trials for criminal defendants by 30 days beyond the 60-day legal requirement. The PORB has been unable to integrate transferred Investigators into the Prosecutor Offices in many locations because o f lack o f space, and has postponed hiring prosecutors for the new Administrative Courts because there are no facilities for them. The MOJ points out that (a) the Sofia Administrative court has already been allocated a buildingby decision o f the Council o f Ministers and i s moving there and (b) most administrative courts in Bulgaria have by now been allocated accommodation in existing buildings or buildingsunder construction (numerous buildings have been provided by government or municipality councils; for a minority the allocationis yet to bemade). 3.44 A review of judiciary personnel policies, benefits and management practices could also yield important information to improve efficiency and reduce fiscal impact. This report was unable to make any assessment o f the complete set of judicial personnel benefits, especially non-monetary benefits such as different categories o f leave benefits. This i s because o f the opacity o f and lack o f readily available information on such personnel benefits. Examining such benefits, and benchmarking them with respect to appropriate comparator judiciaries from EU member states, could be desirable both from the narrow perspective o f estimating the fiscal impact o f such benefits and from the larger perspectives of transparency and accountability. 41 JUDICIAL FACILITIES 3.45 With the above two examples in mind, the judiciary could gain a fresh understanding of its facilities needs through a review of why new positions are not being filled and why new staff numbers are not translating into improved case completion ratios. Annex Table 9 provides a very basic perspective on the situation inthe twenty courts listed in Annex Table 6, for example. Annex Table 9 compares rough measures o f the size o f court house facilities39with the 2005 case completion ratio. The average square meters per staff member i s 29 in the sample. The average case completion rate for courts with lower-than-average space per person is 71 percent. It is 84 percent for courts with higher than average levels o f space per staff member. This suggests that facilities are a constraint on staff ability to perform. Facility constraints limit courts' abilities to absorb new positions. A more rigorous analysis could help confirm if this i s indeed the case, and ifso could guide personnel and capital budgeting decisions. 3.46 Insufficient space i s a major concern that future budgets need to address. The lack o f facilities greatly delayed establishing the 28 Administrative Courts that began functioning in 2007. Inmost locations throughout Bulgaria the Administrative Courts are sharing space with other courts in already overcrowded courthouses, greatly reducing the ability o f the Administrative Courts to hear cases. In Sofia, for example, two o f the Administrative Courts share space inthe Palace o f Justice with other court units, and have limited access to office space and courtrooms. The Sofia City Administrative Court with 37 judges and 42 clerks has access to only 1hearing room and has 2 offices for the judges and 20 square meters o f space for all clerks in an archive room used also by the Sofia City and Sofia Regional courts archives. The Sofia Regional Administrative Court with 8 judges and 6 clerks (30 unoccupied positions) has only 2 offices and 1working place for a court clerk and access to 2 hearing rooms on Friday afternoons only. Office space i s so short that most judges work at home and clerks have no chairs or equipment. There does not yet appear to be a comprehensive plan for permanently housing all the Administrative Courts, and no total cost estimates yet developed to provide facilities for them. It appears that the major reason no comprehensive plan to house the Administrative Courts has been developed i s that the courts anticipated that local municipalities would make buildings available for refurbishment. This has beenvery slow to occur. 3.47 Inaddition to the lack of space, there are other facility constraintssuch as: 0 Lack o fpublic spaces such as areas to submit and to view court documents; 0 Lack o f appropriate space for archives (active and inactive); 0 Lack o f electrical capacity to support current operations and to accommodate technology; aged, deteriorated, unsafe wiring and electrical panels; 0 Structural deficiencies (e.g. roof leaks, poorly fitted windows, deteriorating faqades and interiors); 0 Inadequate accessibility for handicapped; Inadequately separated circulation for public, prisoners, witnesses andjudges; and 39 Obtained from building passport data, but variously including investigations and prosecutors' facilities and court facilities. This is the most robust data that currently exists on court facilities. 42 0 Lack of secure holding space for prisoners in the courthouse waiting to go to courtrooms, resulting inthe danger of fights amongprisoners and escapes). 3.48 Past capital budget requests have failed to motivate allocation of necessary resources. Annex Table 10 indicates that Bulgaria invested BGN121 million injudiciary facilities (including furnishings and IT equipment) between 2001 and 2006. This comprises 1.2 percent of the total capital investments of the government during that period. The level o f expenditure, however, i s far below the amounts actually requested (about 28 percent of the judiciary's requests were approved for the years with complete information, 2004-06), although actual capital spending has consistently exceeded budgeted amounts. Earlier sections have already demonstrated that the failure of capital requests i s understandable because of their unrealistic size, their lack of convincing detail and lack of evidence o f prioritization. INFORMATION TECHNOLOGY/INFORMATION SYSTEMS4' 3.49 Bulgaria's judicial leadership recognizes that information technology (IT) and Information Systems (IS) can and should play a major role in facilitating judicial functioning. Substantial efforts, with support from development partners in some cases, have been - and are still being - undertaken to develop workable judicial IT systems. Significant attempts to introduce case management systems and judicial databases date from the 1990s. The M O J points out that state enterprise `Information Servicing' created and introduced a business-registration case management system in all 28 district courts in Bulgaria. It still continues to maintain that data base for Bulgarian business entities. In 1996 the same company created and introduced judicial case management system called SAS which at present is used in 58 courts including all 28 district courts. In 1996 the company `Parallel - Kodinov' created and introduced a case management system (EMSG) inthe SCC which is used even today. The EMSG system has beeninuse in6 other courts inBulgaria. Both the SAS and EMSG systems were established on a self-financing basis and are usedby the courts on a subscription basis-a minimal monthly subscription to cover technical support and development costs. The M O J is of the view that both these information systems "function without problems; they have high-quality maintenance executed on regular bases; and they answer the needs o f more than 1/3 of the courts in Bulgaria. Users of both systems evaluate them highly in terms of convenience, functionality, adjustability and ~ t a b i l i t y . " ~ ~ 3.50 In 2000, USAID began its Judicial Development Program (JDP) - subsequently succeeded by the Judicial Strengthening Initiative (JSI) - which supported the development and implementation o f a decentralized case management system. The M O J states that the case management system developed with U S A I D support by the firm `Latona' has been introduced in 29 courts and in 12 courts has been abandoned due to low satisfaction 40This section only covers selected core judicial IT systems. Consequently, this Report does not include an assessment o f other IT-related MOJ systems such as the registers with the M O J (e.g. Commercial Register, Property Register, Central Register of Special Deposits, Central Register of the Legal Persons Non- commercial Purpose, and the Mediators Register). Should an opportunity arise to make such an expanded assessmentand support hrther modernization, the World Bank would be pleased to do so. 41MOJ comments on the draft Report. 43 reported by users. It continues to be regularly used in 16 courts and occasionally in one court (Gabrovo RC). Eight of the courts which use this system assess it very positively. These are the courts which have succeeded in attracting highly-qualified system administrators who maintain the system and, importantly, update it to reflect amendments inlegislation andchangesinthe internal organization ofthe courts. 3.51 EU PHARE support for judicial IT modernization alone amounts to more than 34 million Euros42.The PHARE program has financed the acquisition of hardware and the development of centralized case management systems for courts and prosecution offices. The MOJ i s implementing the project in the courts, while the PORB does so for prosecutionoffices. 3.52 The MOJ is responsible for managing the IT infrastructure of the Bulgarian judiciary but its capacity to do so effectively i s severely constrained. MOJ Ordinance 8 o f June 2007 effectively gave the MOJ the primary role in managing the information infrastructure for the Judiciary. It also establishedthe rules for MOJ-SJC coordination. The current arrangement i s that the MOJ will provide and maintain the judiciary's IT infrastructure (computer equipment, networks, software, systems, applications, and support services). According to the new JSA the MOJ i s also responsible for the creation, maintenance, implementation and development o f the central nuclear o f the Unified Information System for Combating Crime (UISCC), as well as its communication connections with the IT systems of the judicial bodies. These arrangements assume strong MOJ institutional capacity to maintain consistency, develop standards and provide technical support. In reality the MOJ i s facing great difficulty fulfilling this role with its available human and financial resources (e.g. the MOJ has only 8 staff to provide IT servicesto the entirejudiciary). 3.53 An IT Strategy for the judiciary was developed in 2003 and updated in 2006. As in many other countries, the MOJ in Bulgaria plays a key role in the planning and implementation of judicial-wide IT systems. The Strategy proposed the establishment o f the Information Services and Technology Directorate (ISTD) to provide technical support acrossjudicial agencies. The original intention was to consolidate the IT capacity under the ISTD, which could function as an IT Agency for the Judiciary. The current arrangement, however, i s that an IT Department in the MOJ functions in collaboration with the IT Department of the RegistryAgency (RA), an entity under the MOJ, in developing plans and providing technical support. The 2003 IT Strategy also defined a 5-year roadmap for implementingjudicial information systems, in the form of a judicial IT investment plan specifying the sequencing of the deployment o f priority systems (Annex Table 2). However, the 2006 Strategy update stopped short o f specifying a medium-terminvestment 42 Comprising funding under the project B G 0203.01 ("Implementation of the Strategy for reform o f the Bulgarianjudicial system": 10 million Euro) as well as supplementary funds for other projects such as BG 2003/004-937.08.02 (3.8 million Euro); B G 2004/006-070.03.01 (4.05 million Euro); B G 2004/016- 711.08.01 (3.30 Euro); BG 2004/017-353.07.01 (5.85 million Euro) and B G 2006/018-343.07.01 (6.90 million Euro). The judicial system i s a beneficiary also o f the "Administrative Capacity" Operational Program, and is entitled to apply for administrative capacity strengthening and IT development. (Source: MOFvide reference no. 93-02-56 ofMarch 14,2008). 44 plan, and shifted its focus from committing to operational timelines (action plan) to defining higher-level requirements e.g. overall capacity gap and strategies on architectures. 3.54 However, difficulties arose from the outset in strategy implementation. It appears that the strategy was discussed and approved at a high level but little, if any, investment was made to disseminate it and inculcate its recommendations at the working levels o f the judicial system. Furthermore, the resources allocated for implementation seem to have been too stretched. Key application systems included in short term priorities such as a unified court case management system are not yet fully operational. And manyjudicial actors do not seem to be fully aware o f the IT strategy for the judiciary. 3.55 The result is a collection of disparate systems with limited contribution to streamlining business processes and information-sharing (Box 8). Overall therefore, there seems to be a lack o f coherence on the IT front. A Report `On the State of IT Systems for the Needs o f the MOJ and the Judiciary' commissioned by the MOJ and prepared by a three-expert team refers to nine different applications inuse, none o f which seems to be highly appreciated by the users.43These applications use disparate technical platforms and cannot exchange court case information or documents. Industry views suggest that there is no operational strategy to harmonize hardware, system software, application sofhvare, security management and other technical infrastructure. The fragmented efforts inthe absence o f a strategic policy for development and implementation o f IT applications for the judiciary have led to large expenditures for creation o f systems, whose installation, use and maintenance present significant problems. 3.56 Taken as a whole, existing IT applications do not yet constitute a functional IT system for the judiciary, jeopardizing enforcement of new legislation and delaying potential efficiency and governance gains. The MOJ and SJC leadership clearly recognize this challenge. According to the MOJ, the case management system developed by Siemens through PHARE support44should have been completed by 2006 according to the contract and introduced in all 156 courts in Bulgaria. Persistent and significant obstacles reportedly continue to plague the creation o f a stable functioning version o f the system, in its ability to incorporate changes in legislation and the internal organization o f the judiciary. The system has been introduced in 4 courts. However, since March 1, 2008 the Sofia RC has reportedly refused to implement it due to its unsatisfactory functioning and instability. According to the MOJ, an international audit o f the Siemens system commissionedby the Sofia R C and executed by the `Stemo' Company "has established the instable functioning o f the `Siemens' IT system and its incapability to be exploited together with the `Index' IT system for previous conviction records"45. A key idea behind this PHARE project was to implement a set o f complementary IT applications across the judiciary. 43The EU-PHAREhas been the most significant international source o f financing. Of particular interest is its ambitious and complex program "Implementation o f the Strategy for Reform of the Judiciary in Bulgaria through the Introduction o f InformationTechnologies." 44Lot 1o fPHARE Project 2002 - Implementation o f the Judicial Reform Strategy via introduction o f IT. 45MOJ comments on the draft Report. 45 3.57 Policymakers are now aware of the urgent need for stronger linkages between IT investments and performance improvements through a better-defined, well- sequenced and realistically costedjudicial IT strategy and implementation plan. Upon assumption o f office inmid-2007 the Minister of Justice commissioned, inAugust 2007, a group of external experts to prepare an independent report on the condition of IT in the judiciary. The group completed its report in October 2007 and presented it to the SJC on December 14, 2007. It concluded that the IT systems developed with external support (PHARE, USAID)hadnot answeredthejudiciary's expectations, andthat the backbone of the IT systems in the judiciary comprised those IT systems developed through self- financing methods and used and supported through subscription by the courts (i.e. as a service and not through one-time acquisition of software programs which according to the group created maintenance problems). The group also presented aggregate data on implementation of ITsystems inthejudiciary and users' evaluation for each(Table 7)47. 46Questions have been raised about the MOJ's ability to enforce the key application systems. The "Bulgarian Judiciary IT Strategy 2003-2007" section 3.4.1.1 indicates that "The regulations on the UISCC are insufficient for ensuring the implementation o f the requirements.,, ... Inpractice the Act is being violated with no consequences." 47The Adviser to the MOJ shared with the World Bank on May 22, 2008 a summary o f the "Report on the State of the Information Systems for the Needs o f the Ministryof Justice and the Judicial Authorities", from 46 Table 7. User Ratings of Judicial Information Systems (2007) Source: Report of MOJExternal Expert Group (October 2007) 3.58 Inthe report the external experts propose that the development of IT systems for the Judiciary be executed provided (a) courts are empowered to choose the IT system they would prefer to use and (b) at the same time the providers o f such systems are obliged to maintain a common standard for data exchange. According to the experts, this approach has proved its functi~nality~~.Another recommendation of the experts i s that the contracts for implementation o f the IT systems be negotiated as a service included in the on-going maintenance and update, and not as a one-time acquisition o f rights to use the software. 3.59 IT leadership and strategic planning are possibly the most critical dimensions of the IT institutional infrastructure. Ingeneral, the MOJ andjudiciary have developed IT solutions in a more or less isolated manner. This has created a substantial burden in maintaining existing court application systems49. The revised JSA aims to strengthen cooperation between the SJC and the executive under a more strategic approach. Not only does the JSA refer to IT as a field o f joint responsibility (Art. 370.1.4), but attempts to divide relevant responsibilities between the SJC and the MOJ. However, due to insufficient clarity in the JSA provisions, the result is overlapping rather than divided or joint responsibility: both the SJC and the MOJ have powers to approve IT systems (Art.30.16 and Art. 385.1), while bothjudicial bodies and the MOJ have competence to maintain the which Table 7 is taken. The robustness o f the sampling framework and methodology for data collection in respect o f the user ratings, or the criteria against which the different IT systems in use have been assessed, are not clear upon a reading o f the MOJ report. This report therefore does not offer any comments or suggestions since more detailed discussions will be needed with the external experts (who preparedthe MOJ report) and end-users, as well as examination o f quantitative data on technical and user specifications, performance parameters and actual performance. 48E.g. in Bulgaria the numerous accounting systems present on the market maintain a common standard for data exchange with the National Revenue Agency, the National Social Security Institute and the Customs Agency. Likewise, different information systems for management o f pharmaceutical activities exchange data with the National Health Insurance Fund. 49Financial Risks, Management Summary section o f the "Bulgarian Judiciary IT Strategy 2003-2007". 47 communication connections of the UISCC. The deficit in strategic leadership i s also evident in IT budget preparation and approval processes. Assigning responsibility for IT strategic planning andmanagement to the IT Directorate o f the MOJ seems to bejustified, necessary and timely. However, the Directorate received the mandate but not commensurate resources. Lastly, it continues to be a significant challenge to attract, train, andretainhighly-skilledITprofessionals to support a significantly automatedjudiciary. 3.60 The MOJplays a key role inpreparing the judicial IT capital budget requests, but is severely constrained by staffing constraints. Until2006, the SJC was responsible for consolidating and submitting budget requests for the entire judiciary. The new procedure transferred the responsibility o f preparation of the capital budget request to the MOJ. The requests from judicial agencies are now forwarded to the IT Director of the MOJ,whose office consolidates all requests and presents the consolidated budget request to the SJC for their comments. The IT Director of the MOJ is responsible for reviewing the proposals and ensuring they are appropriate. Given the staffing constraints in the IT Directorate, such requests tend to be passedto the SJC and forwarded to the Parliament for decision with little or no quality control. 3.61 From 2004 onwards, judicial IT capital expenditure has fluctuated between BGN1.1million and BGN1.7 million, and its composition has changed. More than 90 percent o f the expenditure was for purchasing computer, printers and other hardware. The remaining amount was for acquisition of software. The percentageof IT investment intotal capital expenditure decreased from 9.9 percent in 2004 to 3.0 percent in 2006. Expenditure by courts5' accountedfor about 60 percent of IT expenditure in2004. In2006, it decreased to 52 percent. Spending by the newly created Administrative Courts is expected to start from 2008. The Prosecutors' Offices, which were spending substantially less on IT until 2005, increased their spending in 2006" and have requested a further substantial expansion inspending in coming years to address the needs associatedwith the deployment o ftheir new casemanagement system. 3.62 The percentage of IT investment within the capital expenditure of judicial agencies also fluctuated substantially between 2004 and 2006, between 3.6 and 7.1 percent for courts and 2.8 and 23.3 percent for prosecutors' offices. The IT capital request for courts envisages an increase from 4.3 percent in 2007 to 13.0 percent in 2009. The PORE3 requested a more ambitious investment plan, which assumed that PORE3 IT expenditure would reach 30 percent of the PORB total capital expenditure. This begs the question of whether, to the extent that such expenditures are incurred or administered by the PORB andNIJ, these agencies have increased (or plan to increase) their respective in- house IT capacities commensurate with the increased need for contract administration and oversight on the one handand technical support on the other. 50 Courts include Supreme Court o f Cassation, Supreme Administrative Court, Appellate courts, Sofia City Court, District courts, and military courts. 51 IT capital expenditure of the Prosecutor's offices reached more than BGN250,OOO in 2006 from BGN 33,000 in2005. Most of the increase is for purchasing hardware. 48 Figure26. ITExpenditures:2004 and2006 Judicial IT Expenditure2004 Judicial TT Expenditure2006 I NU NU lnvestiaation 13% Services I 1 Prosecutor's ORice Gffice I 1% Source: MOJ 3.63 The consolidated request shows a general rise in the proportion of IT investment in total capital expenditure over the next three years. This suggests that the growing need for IT investment i s recognized by the judicial leadership. While this implies additional pressure on already stretched IT technical and humanresource capacity, data i s not available to ascertain whether a commensurate increase has been requested for the IT operation and maintenance budget. Adequate funding and a robust plan for IT operation and support are o f critical importance to effectively absorb the expected growth inITinvestment. 3.64 The next chapter outlines concrete steps that could be taken by the judicial leadership - and a beginning has already been made in some areas - to strengthen allocation andmanagement, targetingperformance and accountability improvements. 49 4. ACCELERATINGAND SUSTAININGCHANGE IMPROVINGTHE JUDICIARY'S PUBLICFINANCIALMANAGEMENT PROCESS 4.1 This systems ap could be filled by introducing a clear strategic planning process in the sector5P-for high-level policymakers especially. This process will focus on generating a set o f clear sector policy objectives (like those shown in Table 1) by January of each year, preceding formal budget preparation for the coming year. These objectives should be set for the entire sector and could be used as the basis o f a programmatic structure in the sector's budget. The broad objectives should be related to specific performance criteria (as shown in Table 2, but for the entire sector) and targets should be set for the sector (with data showing prior year performance). The target setting process should be informed by a realistic assessment of expected resource ceilings in the future budget. These could initially be identified through the nominal upwards adjustment of the prior year's budget allocation (with a nominal adjustment one or two percent less thanexpectedinflation, for instance). 4.2 This product should be followed by a more operational process in which all budget entities in the sector (including courts) submit a strategic multi-year plan that shows their past performance against set criteria and identifies specific targets for performance improvement in the coming three years. At this stage all entities should also be required to show indicative funding needs to meet these criteria over the period, held under the adjusted ceiling. All entities should be allowed to add extra requests in an additional section, with the proviso that strong argument be made for these requests- showing how each request will impact on the entity's performance. The entire request should be short and focused on establishing a link between objectives and financial planning. Annex Table 5 provides an example of a simple worksheet that could be used (and actual ideas o f programs and performance indicators are provided inthis report and the Technical Annex on Budgeting). The requests are not formal budget proposals, and thus should be submitted before budget preparation instructions are even issued (probably in March). Interestingly enough, this is about the same time-table that holds for budget entities in Bulgaria's executivebut these entities have to provide much more detailed program budget documents inthis period. 4.3 The new strategic planning processes will require intensive collaboration between the key role players in the sector. The high-level product (a broad sector strategy) will require genuine participation of all parties inthe Supreme Judicial Council, as well as their support staff (including the SJC and M O J administrative units). The more operational products will require collaboration between the SJC and MOF administrative units as well, and the engagement of all second-level (and below) budget users in the judiciary. The former group will have be responsible for developing the high-level product 52 The MOF confirms that under the Transitory Financial Instrument, a project has been approved ("Strengthening o f the Judicial System Public Management"), with the SJC as the beneficiary. This project seeks to develop recommendations for strengthening the management o f the judiciary, including the preparation o fprogrammatic budgets (MOF reference no. 93-02-56 ofMarch 14, 2008). 50 and translating objectives and programs into a strategic planning guideline and the latter group will need to fill this guideline in and make submission in March-earlier than they have ever produced a budgeting product before. Achieving collaborative structures and harnessing the support and engagement o f all parties will require significant political leadership and may be the biggest challenge for the initiative. 4.4 Collaboration is also required for basic budget preparation, whether new strategic elements are introduced or not. The judicial budget preparation process has a strong bottom-up structure, whereby second level budget entities (courts, investigation offices, etc.) submit requests that are simply compiled into a sector proposal by central en ti tie^.'^The SJC Budget and Finance Department (BFD) issued guidelines for the complete budget request and aggregated these into an entire budget proposal until 2007, when this role was split for operational and capital budgets. The SJC Department retained its role in regard to the operational budget but the MOJ was given responsibility for the capital budget. Internationally, separating operational and capital budgeting processes i s not considered good practice as it leads to budget fragmentation and reduces the efficacy o f holistic resource allocation. 4.5 It would be desirable for the SJC and MOJto formalize a collaborative model through which they could jointly prepare the budget. Given that responsibility for developing proposals and aggregating these has been separated, the onus i s on the BFD and M O J to establish collaborative mechanisms to overcome process separation. The highlevel o f formality in the budget process yields it appropriate that any collaborative model be formalized through an administrative agreement-specifying responsibilities, important dates, capacity-sharing arrangements, meeting timetables and such. A strong collaborative budget preparation process founded on common timetables and guidelines and buildingon strategic products (as suggested above) decreases the influence o f changes inorganizational responsibilities. 4.6 There i s ample opportunity for a collaborative agreement to improve the system as it currently exists, starting with basic documents and processes. Guidelines issued to date-especially the split operational and capital guidelines-have not incorporated a strategic focus, for example. The guidelines for operational requests ask second level budget entities simply to show their request by economic item. Accompanying annexes request explanations and caseload statistics (the latter i s used to show own revenues). Explanatory text focuses on input needs, providing detail o f staff members needed for example. There i s no request for performance information at all, and even the case data i s not directly referenced in any strategic manner. (In some cases courts will use the caseload data to explain requests for new personnel, as per a 2005 order that allows new appointments for courts with above average caseloads). The process for gathering information in the capital budgeting process is similarly un-strategic, with second level 53 The budget proposal made by the SJC i s based on the proposals filed by each of the Courts and secondary bodies which are then incorporated to a sole budget together with the first-level cost centres: Supreme Administrative Court, Constitutional Court, Supreme Cassation Court, State Attorney's Office, National Department o fInvestigationandNationalInstitute of Justice. 51 budget users asked to submit requests and provide basic information about what the spending will cover. 4.7 A more strategic set of budget preparation guidelines-jointly issued by the SJC and MOJ-is urgently required and could act as a crucial coordination mechanism. If budget guidelines are structured along the lines of the initial strategic planning guidelines (Table 3) but obviously with more detail-on the economic items, for example-the entire budget preparation process would become more strategic and disciplined. Operational and capital elements could be combined in the request and separated for analysis once requests are received at SJC and MOJ. However, the common guidelines and common focus on programs and objectives would allow the SJC and M O J a common language for discussing requests and developing a final proposal. 4.8 Improved guidelines will also allow more constructive budget negotiations. Budget proposals produced over the past five years betray a lack of structured negotiation, which appears to have significantly harmed the ability to raise certain kinds of resources. The low quality o f budget requests is evidenced in regard to capital, however, where it seems that there is nothing to automatically discipline requests to a level more realistic (why are requests so high, year-after-year, when they are never honored?) and more strategic (requests are easier to turn down when they give limited reason for funding). More strategic guidelines would introduce realistic limits for requests and thus eliminate the excessively inflated unrealistic requests o f the past (that suggest weak prioritization) and would also ensure that all requests show how new capital will contribute to sector performance. 4.9 Making budget preparation more strategic will improve budget quality- ultimately enhancing the sector's ability to advocate for resources. The judicial budget i s currently submitted to the legislature in two versions. One comes from the judicial authorities (SJC and M O J in 2007) and another from the MOF. This situation exists because the MOF is not allowed to directly engage in negotiations over the judicial budget (given independence of the judiciary from the executive). The MOF budget version i s intended as an alternative for the legislature to consider when assessing the validity o f the sector budget. Commentators in the judiciary have opined that the MOF version undermines its own. Figure 20 shows that this is not the case, at least in 2007 for salaries and operations and maintenance expenditures, where the SJC and MOF made very similar proposals (reflecting the protected nature of these expenditures). The two proposals were even similar with regards to capital. The legislature made the final cut in regard to capital. This i s at least partly because o f the low quality of the request. A more strategic budget request, realistic in amount and showing how allocations contribute to performance, is much harder for legislatures to turn down. 4.10 Capacity to budget for capital spending needs improvement. The low quality of capital budget requests suggests weak capacity in this area. There has definitely been a breakdown in capacity since the hand-over o f capital budgeting from the SJC to the MOJ, with the latter struggling to staff the new function. Capacity was not significantly higher prior to this either with limitations on the personnel and information side. Regardless of who has been responsible for the function, there has also been no systematic way o f 52 compiling data, prioritizing and developing a strong submission. Improved budgets will only flow from stronger abilities to develop such. 4.11 Capital management capacity also requires attention. In many respects the judiciary can consider itself fortunate that capital allocations have been lower than requests. Actual spending has in many years amounted to a fraction o f initial requests. The MOJ points out that in2007 it spent almost BGN67 million as against the previous maximumo f BGN35 million. Given the importance of considering ability to spend when compiling a budget, a pertinent question could be why the sector continued requesting far more in each year (from BGN63 million in 2004 to BGN182 million in 2007). Its institutional and implementation structures and capacity do not seem to be strong for such allocation levels. 4.12 Strengthening capital management capacities i s an urgent need. The recent shift in capital management to the MOJ resulted in a loss of all existing, albeit limited, SJC capital management capacity, with staff reallocated and significant failure inthe transfer o f crucial data. This situation was very problematic and, it could be argued, reflected a short- term and ad hoc approach to capital management inthe sector. It would be desirable for the authorities to focus on developing a sector capacity that i s not dependent on formal associations. This capacity should reflect the fact that capital management (and indeed budget execution) i s actually quite decentralized. A great number o f approved expenses, either current or capital, are incurred directly by the first-level entities like the PORB or even below, at the courts. Major investments regarding construction or refurbishment for judicial buildings were previously carried out by the SJC when their cost exceeded a minimumparameter. Current law requires the MOJto playthis role54.Inorder to minimize the constant capacity holes resulting from these shifts, the sector should consider how best to create capacity across its core entities-that i s easily transported and in fact allows best engagements o f the first and second level entities, the SJC BFD and the MOJ. This includes having the capacity to do long-term capital planning, develop realistic and targeted budgets, assess the validity o f capital spending requests, contracting documents pertaining to capital projects, actually manage project procurement and execution, provide project oversight, obtain and maintain a facilities and project database, produce reports on facilities quality andproject progress, etc. 4.13 It may be difficult for the MOJ to perform all the required functions on its own-thus a combined partnership-cum-capacity-building approach could more efficiently split responsibilities across all relevant players. Experts in the SJC are probably better located to collect and organize facilities data, for example, given the fact that they routinely receive other spending reports. First-level spending units and the courts are being given greater responsibility in deciding on smaller expenditures through decentralized approval authority. This would decrease the MOJ's current burden o f having to vet all requests above BGN300 and increase end users' flexibility with regard to largely operational decisions regarding purchasing o f individual computer hardware objects, software and small furniture purchases. In splitting responsibilities the onus would be on the entity legally responsible for the spending (currently the MOJ) to coordinate a working group. Such working groups are common in many governments and private organizations, 54 Arecent challenge to the laws suggests that functions may shift again inthe future. 53 especially for issues such as capital management, because o f the many interests involved. The MOJ stresses that chief managers o f judicial entities are already authorized by the Minister o f Justice to organize and execute limited public procurement (provided for inthe regulation on small public procurements). 4.14 There is significant scope to improve procurement transparency and efficiency in the system. One approach could involve centralising more contracts for common operating and capital expenses such as maintenance, security or roof and sidewalk repairs. Larger contracts, spread over a period o f years after transparent negotiation at either national or regional or district level, would allow for a more efficient pricing structure and would reduce the contracts management burden (through fewer contracts and contract procedures). 4.15 A central review of staffing and remuneration variations, and development of a clear sector personnel management regime, is suggested. The sector has invested a lot in its staff in the past few years. It is important that the sector know where its personnel management regime i s functioning and where it i s not. If the sector decides to move towards a more strategic approach to budgeting and financial management it i s further important that authorities create a personnel management system that stimulates efficiency andperformance. A first step inthis directionrequires developing a better understandingo f why remuneration and staffing numbers vary so dramatically, how staff are managed, and what efficiency variations exist across first and second level spending units. Meanwhile, it would be desirable to reconsider increasing staffing and salary levels, and slow down personnel expenditure increases. Given that salaries have crowded other expenditures out in the past, a continued increase inpersonnel expenditures i s not advised. The evidence o f ad- hoc staffing decisions raises further questions as to the efficacy o f the continued new staffing and salary requests. 4.16 The existing situation calls for a review of personnel expenditure patterns across Bulgaria's judiciary to inform a targeted approach to personnel spending in the judiciary and assist the judiciary in properly identifying its capital needs. This review could be based on a benchmarking exercise that can relate caseload to allocated positions, actually filled positions, positions per square meter in housing facility, and to case completion ratios. This exercise can allow identification o f those bodies and courts that are truly in need o f more staff or higher salaries, and those where staff numbers and salary levels are not the major constraint. The exercise can also reveal which courts are struggling to fill positions and which courts appear to have a humanresource management strategy that encourages performance. 4.17 Such a review could help inform a targeted approach to personnel spending in the judiciary, which is urgently needed. This report does not suggest that all courts have sufficient staff or that all salary levels are appropriate; in fact, many courts with weak staffing structures and salary levels are not getting the support they need because o f the apparently ad-hoc approach to deciding on personnel expenditures. 4.18 Accounting, accountability and management functions also require strengthening. Each spending unit, including courts, currently has its own separate 54 accounting system. Accounting entries are made by each budgetary unit pursuant to an approved coding system and the monthly and cumulative results for each financial year are submitted to the SJC. At the SJC they are consolidated and verified during preparation of monthlyaccounting summaries which are sent quarterly to the MOF. The SJC thus lacks a discreet accounting system whereby each court makes its own specific accounting entries allowing for real-time monitoringinformation on a centralised and cumulative basis. This raises questions about the validity of data presented, the ability of the SJC to properly monitor and oversee judicial expenditures, and the efficacy of spending controls These are undermined by the lack of consistently applied commitment controls, for instance, as well as the large variation in accounting capacity in individual spending units-reports suggest that many courts do not have qualified accountants on staff. Furthermore, the sector has lacked real internal audit to date. Its internal control system (located in the MOJ) has taken the shape of an investigations unit responding to claims of process violations rather than providingongoingassessment of systems integrity. 4.19 Recent steps to strengthen these functions are welcome and strongly endorsed. These steps include an SJC-initiated tender to develop an IT-based accounting system. Progress in the tender is limited, however. There are other tenders by delegated entities in the judicial sector (including the Prosecution) which could further fragment the systems. It is vital that accounting officers across the sector communicate about the systems they are introducing, and work to ensure these are established in an efficient and effective manner and in a way that allows inter-system engagement. These arrangements could be institutionalized in due course. Steps to establish a modern internal audit capacity in the SJC are also highly commendable. It would be appropriate for the SJC to take note o f the success inthis regard inthe executive, and reach out to the internal audit entity inthe MOF for assistance. A strong internal audit and monitoring function will be invaluable if the sector i s to embrace the vision of more strategic, performance oriented budgeting and financial management. 4.20 Positive actions in response to this report's recommendations on budget and financial process improvement would contribute to improved financial performance inthe sector. A review ofpastperformance, and indeed ofthe most recentbudget, reveals weaknesses that one can trace back to the current process deficiencies. This review also reveals policy weaknesses on the demand and supply sides. ESTIMATINGFACILITYFINANCINGREQUIREMENTS 4.21 It is likely that Bulgaria's judiciary actually needed more facilities expenditure over the past decade: a catch-up may therefore be needed in future budgets. Anecdotal evidence already mentioned indicates that many key courts are not properly housed. Absent a professionally conducted baseline survey it i s very difficult to estimate with any accuracy the total funding required to provide Bulgaria's judicial system with adequate, functional facilities that reflect better international practice. Without such an estimate, however, it i s also difficult for the government to evaluate the level o f funding needed over time to accomplish such a goal. 55 4.22 Informed estimates can be used to approximate facilities financing requirements. In 2006 the SJC staff estimated that o f 145 non special court facilities, 43 were usable without modifications. The remainder required modernization, extensions and additions or replacement with new facilities. They had not, however, calculated how much additional space would have to be provided. This report uses industry averages from Bulgariato estimate the average cost of modernizing 44 locations (81,911 m2),refurbishing 36 locations (45,384 m2),adding 25 or 50 percent o f space to 36 locations (11346 m2and 22,692 m2respectively), and replacing 22 locations (5673 m2at 25 percent additional space and 13014 m2at 50 percent additional space)." Annex Table 13 summarizes the resulting figures. 4.23 Based on these estimates the total cost for refurbishment and new constructiodadditions for the judicial space would be BGN109.9 million (to refurbish the existingspace designated as needingmodernization and construct 26,000 m2of new space). Adding 25 percent additional space to the 36 locations needing extensions/additions andto the 22 locations that must bereplaced could cost an estimated BGN124.2 million. To add 50 percent additional space to those 36 locations could cost an estimated BGN138.5 million. To this number mustbe addedthe requirements for the PORB, for which the office i s requesting some BGN58.5 million for 2008-10; however, the technical staff estimated that PORB might actually need as much as 34,200 m2more space than the roughly 53,577 m2now occupied. Completely refurbishing53,577 m2would cost an estimatedBGN37.504 million, and creating 34,200 m2of new space would be an additional BGN27.36 million. To this rough range of costs-BGN147.4million to BGN203.36 million-must be added furniture and computer equipment. This excludes the cost of new facilities for the new administrative courts, for which some estimates runto about BGN25 million. 4.24 Another approach could be to calculate the costs o f replacing all the space with new construction, adding 25 percent more space, and adding 50 percent more space. Although this solution is not likely to happen, it gives some estimate of the higher end of the range. Replacingthe existingjudicial space would cost an estimated BGN183.9 million; adding 25 percent more space would cost an estimated BGN229.8 million; and adding 50 percent more space would cost an estimated BGN275.8 million; reconstructing all the current and requiredPORB space would add another BGN70.2 million. Again, to this rough range of costs-BGN147.4 to refurbishexisting space to BGN346 million to reconstruct all current space plus add 50 percent more for courts and 34,200 m2for PORB--must be added furniture and computer equipment. 4.25 The last piece o f the puzzle is the likely cost o f providing adequate space for the Administrative Courts, for which no estimates have apparently yet been developed. However, the budgetprojections for 2007-09 developed by the SJC provide some clues. It estimates capital costs for the Administrative Courts o f BGN25.2 million for the three years. Although we cannot be certain, it is likely that this amount i s only for the interim accommodations o fthe Administrative Courts, not the longer term solution. "UsingBGN700/m2formodernization/refurbishment, andBGN800/m2forconstructingnewspace. 56 4.26 The medium-term program of the judiciary submitted to the National Assembly included about BGN34 millionfor improving courts' infrastructureduring 2008-2010. In contrast, the requests received by the MOJ from the courts and PORB for the 2008-10 budget cycle initially amounted to BGN334 million at the high end of the - range o f total necessary costs estimated in this report. The high requests followed past patterns and were difficult to defend. Following prior year practices, the MOJ in 2007 asked court Presidents and the PORB to submit requirementsfor capital investmentsto be funded between 2008 and 2010. The responses received ranged in specificity and usefulness from the very thorough submission of the PORB, to one page letters from individual courts: the capital request for 2008-10 came to over 3 times the total appropriated inthe prior 7 years. The request for 2008 alone amounted to five times more than was appropriated in 2007. This underlines the major variation between past experience and current request. 4.27 The first step to improvingthis request is greater realismabout how much can be spent within the confines of the overall budget framework. The MOF informally suggested a cap of BGN40 million for the judiciary's capital outlay for 2008. This is more than the judiciary has been able to disburse in any single year since 2001. It would show a realistic approach if the judiciary could estimate a base request within this limit in future years. This could be the first tier of a more compete budgetrequest, which couldbe broken into manageabletiers. 4.28 The second step requires real (and therefore difficult) prioritization.This was difficult in 2007 given information constraints and is likely to be so in 2008 as well, but a tiered approach could allow for some strategic orientation: 4.29 Thefirst tier,for expenditures within the MOF cap of BGN40 million, could include requests that represent the most critical safety, health, and structural problems-and are not huge projects. The approach would accommodate a number of interventions that could even be grouped according to the kind o f work d o n e r o o f repairs, structural repairs, and so forth. Grouping work inthis way could also allow for efficiency-enhancing management processes (like district-wide roofing contracts to cover four courts). 4.30 The second tier could focus on a critical project that by itself consumes a full BGN40 million, such as the critically needed refurbishment of the Regional Court in Sofia, which represents 6.8 percent o f all the judges and 12 percent o f the finished ca~eload.~~ This project would have a far greater impact on the efficient operation of the judicial system than any other project, and the Parliament might be willing to fund it over and above the MOF cap. 4.31 The third tier could identi& the level of funding needed in 2008 to house the Administrative Courts. These expenditures could be included in the first, critical, tier, but would probably not consume much in the first budget year. As with the Sofia Regional Court, the legislature mightbepersuadedto exceedthe cap for such critically neededwork. 56According to 2006 data. 57 4.32 A final, fourth, tier could incorporate all the remaining requests in some logical way-by percentage o f the caseload inthe court, for example. 4.33 The third step would require improved advocacy of the request. The improvement o f strategic orientation in judicial budgets i s a theme of this chapter. Improving the prioritization of the budget request is one way of doing this. It is also important to show how the prioritized spending will affect sector performance. This involves showing the legislature and the public exactly what it is buying with its capital expenditures, and giving some assurance that the money will be spent and will be spent well. The capital budget request produced in June 2007 showed only inputs as products (Table 8): the number of buildings purchased, buildings refurbished, and furniture and equipment purchased. 4.34 These are not the kinds of things that legislatures consider when making budget appropriations. As was asked with regard to salary expenditures, "what will the capital expenditures buyinterms of sector production-improved ability to accommodate hearings and improve case clearance, for example? Table 8. What Will the Capital Expenditures Buy? IProgram Goals: Improving the Working Conditions of Judicial Bodies buildkg(purchaseor construction) 2. Building Number 26 111 64 54 reconstruction, reorganizationand overhaul 3. Acquisitionof Number 29 127 122 113 furnitureandequipment 4.36 More forceful arguments could be put forward for capital requests, even inthe short-run. Arguments should focus the budget request on policy goals, indicating that results matter and capital financing is needed to improve results. Requests should be framed interms ofbroad sector objectives that are usually used to organize programmatic budgets in other settings (as is apparent in Table 1) -improved access, efficiency, transparency and credibility. Beyond the 2008 budget these could be the starting candidates for sector objectives and the basis o f programs for capital and for operational expenditures. In the 2008 budget submission they could be used as the basis of arguing for improved capital funding. 4.37 The basic approach involves showing how capital requests provide inputs that one can reasonably assume will improve performance and help the sector meet its objectives. Figure 27 shows how this could be done. For each tiered budget request, the MOJ and SJC could show how financing will yield key inputs (like those shown in Table 16). An argument could be made as to how these will improve the capacity for strategic management in the sector and subsequently key performance metrics. For example, an argument could be made that roof repairs in the regional courts in the Sofia district would ensure the functionality o f court buildings servicing about 10percent of the country's cases. The functionality of these court buildings i s vital to having enough court space in the 58 district (a performance measure in the Figure) and facilitating an improved number of case hearings-a keyjudicial access indicator. Figure27. A simple approachto thinkingabout improvedadvocacy Strategic PerfOrmance Programobjectives and Budget Management Metrics (Partial) For Judicial sector Other Measures(partial) inputs court No.functionalcourt space/l,OOO buildings people No. court rooms/1,000 people accessible % courts + % courts appropriate Incl. signage - handicamed E Judges . . 0 Clerks % courts handicap Cases entering Specialis& facilities courts Equipment Judgesl1,OOOoeoole Bytype % unfilledjudge (compared with --., Improveefficiency positions past and with Clerkdl,000 people European average) %unfilledclerks Hearingslcases + Legalaid lawyer entering transparency availability Legalaid lawyer and credibility Caseload/judges access Caseloadlclerks %finished cases Judgeskourt room %finished 3 Computers/judge months IT systemefficiency %cases still (internaland pending year external) end (negative) Information system Judicial efficiency information (internal and access external) Salaries, budget Specialization ability (for Case decisions Complex cases) Business perceptions of credibility Unqualifiedaudit reports made public 4.38 This method would require that budgeting authorities actually use the management and performance metrics at their disposal-something not done in the past. Much of the information required to develop strategic performance-based budgets actually already exists inBulgaria. It is not beingused at present but could be used to much effect. The experience of countries such as the Netherlands, and the lessons fiom such experience, could be relevant for Bulgaria (Box 9). 4.39 The strategic value of an intervention in the Sofia Regional Court would resonate with any legislature, given the proportion of national cases it houses. Figure 28 provides an example of this (which could be the basis of a second tier capital request). 59 As mentioned inBox 4 and from the analysis inFigure 28, it canbe argued that the court's key constraints relate to space. It could be fair to argue that investment innew premises (or refurbishment) would lead to more space, allow for more employment, greater numbers o f hearings, a higher case completion rate andultimately greater judicial efficiency. 4.40 Beyond 2008 it would be desirable to formalize this strategic approach into a more programmatic budgeting method. The basic o f this has already been discussed but essentially requires that a planning period be introduced prior to the formal budget preparation period. During this period the sector authorities will identify formal program objectives officially, performance metrics associated with such, and a planning method that allows for effective analysis o fneeds inthe programmatic areas. 4.41 There is an urgent need for improved capital planning - and a number of components the Judiciary will need to put in place to develop a multi-year capital investment plan. These include functional assessments, space design guides, long range facilities plans and multi-year capital plans. The planningprocess will provide the formal method for prioritizing and allocating fundingprovided by the government each year. 4.42 Obviously, a comprehensive plancannot be developed quickly. However, a realistic timeframe to do so must be developed. It should be possible to develop a capital investment plan in time for the next budget cycle if actions begin now. Further, a phased approach to the effort can be helpful even in the current cycle. Two actions are critical even for the preparation o f the budget for 2009-11: (a) setting priorities based on programmatic goals for the judiciary and (b) beginning the baseline survey o f facilities well before the information is needed for the next budget cycle, focusing first on proposed projects most likely to fit the programmatic goals, and then moving to all other locations. 60 Figure 28. Advocating for fhding for Sofia's Regional Court Budget and Strategic Other inputs Management Performance Program Objectives Measures(partial) Metrics (Partial) For Judicial Sector Accounted for 13%of all cases in 2006 (13% in 2004) No. hearings as YOof + nationalaverage has In2006 Sofia Regional Caseload perjudge in Sofia decreased(15% to Courtsonly received Regional= 611(national 12%since 2003) 1%of courts median = 432) capital allocation Caseload per clerk = 200 -b Mediancase (nationalmedian = 92) completion ratio = 85% in Bulgaria + Twice the % of unfilledjudge and clerk positions (compared Sofia Regional Court to national average) = 71% Buildingspace highly %casesstill pending constrained (only 6222 m2for year end in Sofia 612 positions-IO maper Regional= 20% of person, less than half the total in Bulgaria in averageof the 20 regional 2006 (increasing courts shown in Table 14) annually) % cases completed in 3 months in Sofia Regional= 40% (national average 55%) So: Obviously they are inefficient when comparedwith others. INFORMATION TECHNOLOGY 4.43 Progress on standardization of business processes and technical infrastructure would strengthen provision of judicial services and judicial governance. The MOJ's IT Department will have to decide on several standardization issues. Given the highly decentralized nature o f the judiciary and the judicial independence, it would be desirable for standards to be kept to the minimum necessary to achieve the goal o f providing users with transparent and reliable access to judicial services. Further standardization would be helpful inthe following areas: Business Processes: The use o f uniform processes and procedures throughout Bulgaria would be important for consistency inthe administration o fjustice across the country. It would also contribute to establishing a common infrastructure on which integrated strategies to achieve efficiency gains can be built. It appears, however, that courts have been free to adopt different business processes so far as they are rooted inthe law. That being said, there now seem to be more uniform business processes inthe PORl3; Key Application Systems; The implementation o f the four key application systems currently under development i s a positive development. Effective deployment of the Siemens Case Management system, inparticular, could help establish a uniformjudicial IT system inthe country; 61 c) Data Management: Further standardization o f data management is o f fundamental importance for the Bulgarianjudiciary to address issues such as high data sensitivity. Training would also have to be provided to users to ensure data protection; d) Technical Infrastructure; The SJC recognizedthe need to create a uniform automation environment, due to the implementation o f numerous unconnected projects, many financed by development partners. Some o f these seem to suffer from lack o f standards and non-interoperable architectures7.Anticipating the future growth anddevelopment o f the IT system, the existing communication networks will also require investment in higher data bandwidth. This may not be a serious constraint, however, due to ongoing private sector efforts to increase Bulgaria's data highway ~apacity.'~ 4.44 It would be desirable to take urgent steps to strengthen the institutional capacity of the IT Department of the MOJ. This will help formulate an IT investment plan, design architecture, enforce standards, and provide technical support to the judiciary; training for relevant staff; and a strategy for providing support services incorporating measures to contract-out non-core functions to improve the quality o f support services. 4.45 It would also be helpfulfor the MOJto identify specific functions that could be outsourced. Even with outsourcing, the MOJ/judiciary would still need to maintain a core skill set on business analysis, system design, project management, contract management and vendor management. The MOJ and judiciary would benefit from a judiciary-wide policy to assist court managers inmanaging this special skill set. Inparticular, it would be desirable to develop a human resource policy considerate o f the existing market constraints for informatics professionals and appropriate incentives to guarantee a stable and high- skilled set o f informatics personnel for the judiciary's IT needs. 4.46 Launching a consultation process to update the IT Strategy for the judiciary would significantly contribute to consensus-based system improvement. While the processes for defining standards would provide the framework at the operational level, the strategy would indicate higher-level goals such as sector-wide objectives, performance monitoringmeasures, a medium-term investment plan, and sequencing. 4.47 In the immediate term, it would be helpful for the MOJ to focus financial, technical and managerial resources to complete the four key application systems still under development. These projects were expected to be completed much earlier based on the roadmap provided inthe 2003 IT strategy. 4.48 It would be helpful to develop a list of amendments to the legal and regulatory framework for management of justice sector resources and assets - and a partnership between the MOJ, SJC and MOF would be most effective for this purpose. Full support from the MOF i s envisaged, especially as the M O F is o f the view that this report's "recommendations. ..presuppose also amendments to the valid legislationyys9. '*"Bulgarian 57 Judiciary IT Strategy 2003-2007" section 2 -Executive Summary." The strategic direction of the state's network development is not clear at the moment. 59Vide reference number 93-02-56 ofMarch 18,2008 ofthe MOFPublic ExpendituresDirectorate. 62 MANAGING DEMAND BUTSTRENGTHENING ACCESS 4.49 Bulgarianow needs to consider demand-side policy intervention to improve the efficiency of its judiciary. Focusing only on the expenditure side may not be sufficient. Demand-side interventions could take two complementary and mutually reinforcing forms outlined below. 4.50 It would be desirable for the SJC to commission a demand management exercise based on a review of the structure and level of judicial fees and other sources of judiciary own revenues6'. The objective would be to formulate a policy that could permit adjustment o f the levels o f fees and other charges to manage the explosive rise inthe filing and inflow of civil and administrative cases, by using higher fees to restrict or reduce the inflow o f high-volume small-value cases clogging judicial dockets. Demand could be reduced by increasing the proportionate contribution o f court fees to total case costs. Such an analysis could also establish whether it would be desirable to legislate certain categories o f cases (e.g. those that have seenmajor increases inpast years-tax challenges, traffic fine challenges, and actions firms bring against debtors, for instance) out o f the judicial system and into administrative or quasi-judicial fora. The argument originates from the observation that Bulgaria has a higher per capita case demand than other N M S --especially inregard to civil and administrative cases. The argument is strengthened by the evidence (in Table 2 andFigure 22) indicating a relationship betweencollected court fees andcaseload. 4.51 Inparallel, the executive will needto ensure that access to justice, especially for the poor and vulnerable, i s strengthened, includingthrough state-funded legal aid for eligible categories of beneficiaries. The MOJ has initiated an initiative on this, including provision o f legal aid in criminal cases and some categories o f civil cases. This is a welcome initiative. It would be desirable to scale this up as rapidly as possible, especially in rural and remote areas of Bulgaria. The MOJ i s o f the view that active steps are necessary in close coordination with stakeholders such as NGOs, the Supreme Lawyers' Council and the National Bureau o f Legal Aid. Development partners, including the World Bank, are likely to be ready and willing to support such MOJ efforts through grant-based financing and technical support. MONITORING PROGRESS 4.52 Based on the foregoing analysis and examples, it would be desirable to establish a set of indicators to track progress on judicial performance and efficiency. A mix o f indicators is suggested, comprisin (a) indicators internal to each o f the three elements o f the judiciary6' and those external to them, and (b) indicators for the system as di 6o There i s a school o f thought that the judiciary ought to be self-financing and should seek to recover as much o f its costs as possible through fees and other charges. This report does not suggest this at all. I t believes that judicial expenditures and budgets should generally be subject to the same tests and processesapplicable to the other branches o f the state. This recommendation suggests using judiciary own revenue solely as a demand management tool and not as an instrument to raise revenue, although increased revenues could indeed be a consequenceo f such an exercise. 61 E.g. process-based indicators (average case disposition rates, timeliness o f disposition); efficiency o f resource use-basedindicators (average cost per case disposeddecided); etc 63 a whole and also those focusing on individual courts. Other indicators that track system conditions (such as the ones that track supply factors in Table 1) would also form part of the indicator set. All o f these are supply-side indicators as they focus on the supply of judicial services. 4.53 It would be desirable to complement the supply-side indicators with a set of demand-based indicators, such as those in Table 1 at system and individual court levels. This set could also include additional survey-based indicators on the efficacy of legal aid and user-provided feedback on issues such as access to, quality of and satisfaction with judicial services. (Courts in some countries survey users when they enter and when they leave the courtroom - andpublishthe feedback.) 4.54 Together such an indicator set could constitute a performance framework for the judiciary to track the impact of reform and modernization actions. Updated and published annually, it could be a powerful tool for the judiciary to strengthenits advocacy for resources and demonstrateits commitment to performance and accountability. 4.55 When combined with the medium strategic planning and budgetingperspective and process outlined in the previous sections, this could be an excellent starting point for developing a medium term performance and results-based strategic approach to judicial modernization. Box 10 shows an early application of such an approach by the PORE3 in its modernization effort. 62E.g. survey-based indicators such as those used in BEEPS pertaining to efficiency (speed), integrity (honesty/conuption; fairness and impartiality), cost (affordability) etc. 64 CONCLUDINGOBSERVATIONS 4.56 The key challenge now confronting Bulgaria's judicial leadership i s to buildon the reforms by developing, financing and implementing a judiciary-wide modernization program to sustain the transformation and demonstrate impact through monitorable indicators of p e r f ~ r m a n c e ~The MOF has indicated its "general ~ . agreement with the fundamental findings o f the report: the necessity to introduce a strategic approach for the preparationo f the budgets o f the judiciary branch o f governance, including the multiannual planning o f capital investment, the strengthening o f the capacity o f the Ministry o f Justice and o f the Supreme Judicial Council, the improvement o f the institutional coordination within the framework o f the budgeting procedures, the need to introduce a more transparent system for the management o f financial and human resources and the full utilization o f the information systems' potential". The MOF is also ready "to provide full support for the judicial system in the refinement o f the public funds management process, including the introduction o f good practices, such as program- oriented b ~ d g e t i n g " ~Goodwill for the judiciary clearly exists: the time to seize such offers ~ . is now. 4.57 This report points to modest improvements in judicial performance, which could spur greater performance gains through a sustained reform and modernization program. However, differing perceptions o f the three branches o f power regarding the appropriate balance betweenjudicial independence and accountability for the use o f public funds appear to have compromised the effectiveness o f some reform efforts. And different institutional actors seem to have occasionally become more entrenched in their positions. Nevertheless, there is a real opportunity for progress: the true test, according to the MOF, will be whether, "after the consideration and the adoption on behalf o f the Government of the Republic o f Bulgaria o f the recommendations made by the World Bank, measures and actions for their implementationby the respective competent bodies will be ~ndertaken"~~. 4.58 This report provides information and analysis to now facilitate a consensus- building dialogue among the three branches of power on the resources the judiciary could realistically expect to receive, and the results it can be expected to achieve. In this dialogue, an exclusive focus on judicial independence could risk diverting attention from concrete measures to ensure that the judiciary i s adequately resourced with mechanisms in place to ensure efficient resource use and improved performance. Indeed, judicial independence i s a fundamental principle guaranteed by the Constitution, and unconditionally respected with regard to the judiciary's adjudicative functions. However, increased accountability for resource use and for achievement o f performance goals could have important long-term benefits for the judiciary, not only in terms o f increased budgetary resources but more importantly through greater public trust and confidence. 63 The MOF supports "the opinion articulated in the report to the effect that the judicial system needs to persevere with the successful reforms carried out until now by developing, financing and implementing a program for the modernization o f the entire judicial system, which will guarantee the sustainability o f the transformations, and it must show tangible results by means o f measurable indicators for the assessment o f its efficiency" - vide MOF Public Expenditure Directorate reference number 93-02-56 o f March 18,2008. 64Vide reference no. 93-02-56 o fMarch 14,2008 o fthe MOF. Vide reference no. 93-02-56 o fMarch 14,2008 o f the MOF. 65 Annex Tables 66 hl 9 3 2 3 N v, o! m 3 vl 3 N 00 \o hl m v, m 2m z3 v, hl 3 d m \o m 00 hl "" 3 d 0 x 0 3 v, 00 dn hl v, I m 00 hl I d 00 hl 2 0 mm 3 Annex Table 3 Examples of Broad Policy Programs inEurope UnitedKingdom Slovakia Program 1: Program1:To ensurethe effective Program 1:Remunerationof the Judiciary Administration delivery ofjustice andJudicial Support Staff. (To provide o f Justice administrative and managerial services that support the independence of the judiciary, its efficient operation, and its capacity for high-qualityjudicial decisions) Program2: Program2: To ensure a fair and Program2: Operationo f the Courts. (To Prison effective system of civil and support a fair and efficientjudicial Administration administrative law process through efficient management and administration of the courts, and To support continuous improvement of the judicial systemby ensuring courts have modem and efficient facilities, equipment and informationtechnologies.) Program 3: Program 3: To reduce social Program3: Administration and Collection Judicial exclusion, protect the vulnerable and o f Judicial Revenues. (to ensure full, fair Protection of children, including maintaining and efficient collection of all fines, Youth contact between children and a non- penalties and other payments imposed by resident partner after a family the courts.) breakdown, where appropriate Program4: Program4: To modernize the Program4: Judicial Educationand Access to Law constitution and ensureproper Training. (To ensurethat the human and Justice access to informationby citizens resources capacity of the sector i s (Legal Aid) adequate for supportingthe effective operation and future development of the judicial system.) Program5: Program 5: To increaseconsumer Program5: Judicial Reform Projects. (To Managing choice inlegal services by undertake specific, well planned and Justice Policies improving informationand by time-bound reform projects aimed at and Related promoting competition improving the fairness and efficiency of Institutions thejudicial system of the Slovak Republic.) Program 6: To deliverjustice in partnership with the independent iudiciarv Source: Webber, 2006. 70 Annex Table4 ExampleOf BudgetProgramsFor An IndividualCourt(Simplified) Budget wowam I Administration of Justice Access to Law andJustice Sub-program objective IIDeliverjudicial decisions in Provide legal aidto those timely fashion needing it, intimely and cost efficient manner Performance indicators and 0Case completionratio 0 Timeto addressrequest for targets (improve by 10%on legal aid (decrease average prior year's 70% rate) time from 3 weeks to 2 Number o f hearings held weeks) (increase by 15%, from 0 Percentageof positive legal 1000 to 1150) aid decisions funded within 0Percentagecases 3 months of decision completedunder 3 (increase from 40% to 60%) months (improve from 0 Cost o f making legal aid 50% to 60%) decision (decrease from BGN 100per caseto BGN 80 per case) BGN20,000 ~~~ Own revenue expected None Program allocation BGN 180,000 BGN50,000 Breakdown by economic item: Personnel BGN 140,000 BGN35,000 Operations and Maintenance BGN40,000 BGN 10,000 Catital BGN20.000 BGN5.000 Budget increasefrom prior year? 5 1%) l 8 Staflng increasefrom prior 2 0 year? (%) 71 Annex Table 5 Example of a Budget Entity's Strategic Request (depicting only one year) Indicative budget ceiling (prioryear 's budget Informedby sector strategy allocation + nominal upwards adjustment) Programor sub- Programor sub- Programor sub- Iprogram 1(identified 2 (identified (identified insector strategy) I program strategy) insector I program 3strategy) insector Proposed allocations (calculated within nominal ceiling) Targets, identified for eachperformance indicator, with informationof past three years' results Ownrevenue expected Programallocation Breakdownby economic item: I I I Personnel Operations and Maintenance Capital Budget increasefrom prior year? (%) Staffing increase from I I I Additional reauest I I I Breakdownby economic item: Personnel Operations and Maintenance Capital Staff implications? Rationale(explain how the additional expenditure will impact onprogram objectives). Source: WorldBank 72 Annex Table 6 RelatingNew Positions to Numbers of FinishedCases New Finished Finished Finished Finishednumberssystematically Were 2005 case court podtions cases cases cases cases in2006 2002 2003 2004 200s above prior year numbers? RazlogRC 3 1,462 1,832 1,977 2,452 Yes Petrich RC 4 1,868 2,002 2,574 4,460 Yes 73 Annex Table 7 Remuneration Parameter Variations Among Sofia's Courts Sofia City Sofia Regional Sofia District 2004 184,976 237,686 38,219 I2005 I 218,285 I 266,315 I 40,121 Change 18% 12% 5% II2004 14,650 17,526 2,325 2005 II 35,300 II 37,463 II 3,500 Change 141% 114% 51% II2004 70,048 92,640 14,123 2005 91,845 116,029 15,769 Change II 31% II 25% II 12% I I I I Source: 2004 and 2005 Expenditure Reports provided by the SJC. 74 Annex Table 8 Remuneration Parameters Across Regional Courts inthe Sofia Judicial District Ihtiman Pridop Svoge SlivnitzaPelin Botevgrad Etropole Samokov Kostinbrod RC RC RC RC RC RC RC RC RC 2004 8599 7704 7134 9099 8294 9814 6269 8534 7754 2005 8807 8064 8137 9549 9119 10315 6932 10441 8117 Change 2% 5yo 14% 5% 10% 5% 11% 22% 5% 2004 850 700 735 985 675 700 600 600 800 2005 950 800 965 2000 800 1525 775 1000 1475 Change 12% 14% 31% 103% 19% 118% 29% 67% 84% 2004 3718 2977 2511 2826 2962 4164 3275 3454 3131 2005 4060 3319 3082 3534 3581 5018 3758 3367 3768.7 Change 9% 11% 23% 25% 21% 21% 15% -3yo 20% 75 Annex Table 9 Relating Case Completion Ratios to Facility Size for Selected Courts Court Completion ratio 2005 Square meters infacility Square meterdperson BreznikRC I 89% 917 I 57.3 1 Kavarna RC 50% 347 17.35 I Tervel RC 76% 300 23.08 ElhovoRC 82% 776 35.27 General Toshevo RC 70% 44.76 Slivnitza RC 79% 1,120 53.33 S v o g e ~ ~I 59% 220 13.75 O m u r t a g ~ ~ I 85% 568 27.05 LomRC 84% I 2.540 II 61.95 BalchikRC II 68% 1,170 I 39 Cherven Bryag RC 74% 480 22.86 TutrakanRC 86% 650 29.55 Tzarevo RC I 68% 384 I 29.54 Karlovo RC 73% 622 20.73 DupnitzaRC 73% 2,800 54.90 Aitos RC 79% 365 20.28 Sandanski RC 77% 1,030 46.82 Botevgrad RC 65% 360 17.14 Razlog RC 76% 915 36.6 Petrich RC 1 81% 489 I 15.28 Source: SJC 76 2 2 r- 2 3 3 2 od b 3 2 c! x 2 IA? 3 3 3 6 z 3 3 m -- -- 6 z 3 m 2 2 hl 3 3 0 0 N 0 IA 0 % 2 "! 3 3 3 3 r( o! 2 hl 0, m 3 - W 0 0 N Annex Table 11 Bulgaria: Condition of Judicial Facilities (end-2007) Number Current Space (square meters) Usable and require no modifications 76503 Usable but require modernization 44 81911 Requireextensiodaddition 36 45384 Requirenew construction I1I 22 1II 26027 78 Annex Table 12 Requestsfor CapitalResources2008-2010 Item 2008 2009 2010 Totalfor the judicial system(BGN) 179,239,173 120,979,065 35,793,585 51-00Mainrefurbishmentoflongtermtangible assets (Buildings)(BGN) 63,35 ,975 13,583,150 7,678,340 I I 52-00 Acquisitionof longterm tangible assets (LTTA) 14,906,378 106,662,365 27,385,045 (BGN) II I ~ 53-00 Acquisitionof longtermintangible assets(LTIA) 960,820 713,550 730,200 (BGN) I 20,000 I I I I 54-00 Acquisitionof land(BGN) 20,000 iource: MOJ 79 Annex Table 13 Bulgaria's Judiciary: Approximate Costs of Improving PhysicalFacilities ProposedAction Area in Square Meters Cost inBGN I Refurbishandconstruct 45,384 + 22,692 49,922,400 Replace all PORI3 53,577 42,861,600 Replace all PORI3 + 34,200mL 87,777 70,221,600 80 Annex Table 14 Bulgaria: Judiciary Computerization Plan- Priorities -IT Strategy 2003 Unifiedinformation systemto combat Property register crime 0 Court Case Management systems Prosecutorscase management system 0 Technical infrastructure 0 Bankruptcy proceedings (independent procurements, mainly for office use subproject of court case management) and supporting administrative functions 0 Unified Court Case Management 0 Datawarehouse / management system informationsystem Conviction status 0 Unified commercial registers & certificate system central pledgeregister 0 Legal informationsystem 0 Document management/ workflow Prosecutors case management system Security policy 0 Prisons andArrests information Investigation Services case management systeme-Justice (Phase managementsystem 1) 0 Document management & workflow Enforcement of Judgment System system (Phase 11) 0 Financial management (payroll, etc.) 0 Data warehouse / management 0 Technical infrastructure procurements information system(new systems Humanresourcemanagement 0 Technicalinfrastructure procurements Accounting system compatible to the Other to be examined Acquis e-Justice(continuation) n e : Bulgaria Judiciary IT Strategy (2003-2007) 81 Annex Table 15 Bulgaria:JudicialIT Expenditures(2004-06) andBudgetRequests(2007-09) [BGN0001 Expenditure 1004 Hardware 597 39 76 n.a. 16 Software 48 22 21 ma. 3 Subtotal 645 58 97 n.a 19 2005 Hardware 1,108 27 18 n.a. 12 Software 21 18 7 n.a. 21 Subtotal 1,129 45 25 n.a. 33 2006 Hardware 281 193 29 n.a. 206 Software 11 24 9 n.a. 44 Subtotal 292 217 38 n.a 250 Request 2007 Hardware 3,640 150 200 1,590 Software 512 20 160 364 Subtotal 4,151 I70 360 1,954 2008 Hardware 1,783 150 300 1,400 1,033 Software 324 20 260 213 Subtotal 2,106 I70 560 1,400 1,246 2009 Hardware 1,901 150 500 1,400 1,190 Software 335 200 410 232 Subtotal 2,235 350 910 1,400 1,422 Source: SJC 82 22°E 23°E 24°E 25°E 26°E 27°E 28°E This map was produced by the Map Design Unit of The To 0 20 40 60 80 Kilometers World Bank. 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