SEVEN KEY ASSESSMENT AREAS

1. SEVEN KEY ASSESSMENT AREAS .

2. The 5 Main Elements of a Sector Programme • 1. A sector policy and strategy; • 2. The sector budget and its medium term perspective; • 3. A sector coordination framework; • 4. The institutional setting and existing capacities; • 5. A performance monitoring system.

3. 2 Additional Elements • 6. The macroeconomic framework; • 7. Public financial management (PFM) systems

4. 1. The Sector Policy .

5. Relevance and Scope of the Assessment • A coherent and consistently applied sector policy is the heart of any successful sector programme. • Issues to be assessed include • the quality of the policy and • its consistency with government’s own national strategic objectives • and with the Commission’s objectives of development co-operation. • consider how the policy was elaborated, processes etc, • the record of implementation, • and key trends in policy and strategy development.

6. What Needs to be Established • The sector policy and strategy must be consistent with the overall strategic objectives and plans of government. • Both should also be linked to a credible sector budget. • Policy and strategy need to be operational.

7. Good Practice 1 • A good policy document will: • Be prepared by the government (not by donors); • fit clearly into the government’s policy and planning system; • it will be aligned with existing national strategies (eg: PRS); and • endorsed at a high political level.

8. Good Practice 2 • A good policy document will: • Be oriented strongly towards achievement of results; • focus on sector objectives and their impact on poverty reduction; • establish clear sector goals; • provide a basic framework for subsequent monitoring.

9. Good Practice 3 • A good policy document will: • Explicitly address the role of government in the sector; • distinguish regulatory functions from service delivery; • Indicate the complementary roles to be played by communities, non-governmental organisations (NGOs) and the private sector.

10. Good Practice 4 • A good policy document will: • Clearly allocate responsibilities for the programme across government between • a) the sector ministry responsible for implementation, • b) other involved ministries and agencies • focus on implementation capacity constraints, • identify requirements for institutional reform and capacity development.

11. Good Practice 5 • A good policy document will: • Focus on the whole sector’s resource requirements, (including recurrent as well as capital expenditures); • demonstrate the sustainability of proposed public expenditures; • address the effectiveness of existing policies and expenditures.

12. Good Practice 6 • A good policy document will: • Set out clear mechanisms for monitoring, review and updating the policy document, • identify the principal areas where further research and analysis may be required.

13. Implications for EC Support • The scale and scope of EC support to the sector programme; • Identifying areas that EC and donors may wish to contribute through support to policy analysis and performance monitoring;

14. 2. The Sector Budget and its Medium Term Perspective .

15. Relevance and Scope of the Assessment • Focuses on the pattern of public resource allocations and expenditures for the whole sector; • Takes account of all sources of funding; • Examines the processes of resource allocation and use as well as the formal budgets; • Should also address other policy issues and the role of non-government stakeholders and participants; • Draws on existing analytical studies, public expenditure reviews (eg PEFA) etc; • The link between policies and public expenditures is crucial.

16. What Needs to be Established • That the principles of effective public expenditure management are well understood. • To assess whether the country is committed and making progress towards • improving the link between sector policies and budgets, • building sound budgeting procedures, • placing (eventually) the budget in a multi-year perspective, (taking into account its current situation and technical capacity).

17. Examples of Aspects for Review • The pattern of sector expenditures and revenues (including distribution across different ministries and tiers of government); • Historical trends and projections; • Budget discipline, allocative and operational efficiency; • Comprehensiveness of budgets (including aid flows) and integrity of the sector budget process.

18. Implications for EC Support • Important element of the judgment on overall credibility of the sector programme; • Relevant to the design of the support programme, because • it will indicate which policy and analysis issues should be prioritised, • and needs for potential institutional strengthening and capacity development activities and support.

19. 3. Sector and Donor Coordination .

20. Relevance and Scope of the Assessment • Government leadership and systematic coordination of donors and stakeholders are one of the main characteristics of a sector approach. • The sector approach is a process through which the sector programme will be continually refined and improved. • Its successful operation depends on trust, flexibility, and excellent collaboration, especially in the review of performance. • Therefore the effectiveness of coordination mechanisms is crucial.

21. What Should be Established • Overall sector coordination (including linkages to central government and relevant decentralised agencies, at both political and technical levels); • Extent of stakeholder consultation and involvement; • Arrangements for donor involvement; • A proper understanding of incentives to coordinate; • Good articulation between the programme documents and the rules and the calendar of events that govern the management framework for the sector approach. • Sector processes must be synchronised with wider national ones, including the governments' overall planning and budgeting calendar.

22. Implications for EC Support • In its early stages, there may be an assessment whether the approach is sufficiently developed to justify an SPSP, or how EC can help to further the process. • Later, assess how well sector management is working and, always, how it can be strengthened. • The EC may be able to help in providing technical support to the coordination bodies – but collaborate with other donors and guard against arrangements that undermine rather than reinforce mainstream government systems. • This assessment will cross-link with the institutional and capacity assessment, and the assessments of performance monitoring and sector policy process.

23. 4. The Institutional Setting and Capacity Issues .

24. Relevance and Scope of the Assessment 1 • These factors will determine the pace of implementation and effectiveness of the sector programme. • Dialogue with stakeholders about institutional setting and present capacity is an essential part of an SPSP. It must be • based on a joint assessment of the situation • ongoing throughout implementation. • The sector approach believes that an important way to strengthen national systems is to use them. • But this needs to be complemented by an appreciation of capacity issues and a pro-active approach towards capacity development.

25. Relevance and Scope of the Assessment 2 • Assessment depends on the status and characteristics of the sector programme itself. • Initially, it might assess whether the sector programme can realistically be implemented under national leadership and by using existing capacity. • Later, if the programme already has a capacity development component, it will examine the soundness and quality of the component. • In either case, if the EC intends to offer specific support to capacity development, the assessment will provide important inputs to the dialogue and design of the SPSP.  • It is vital to involve partner country and organisations in the assessment. • If an assessment recommends EC or donor-contracted TA, TORs should be drafted by government and endorsed by donors.

26. What Should be Established • Three key issues are particularly important : • the present outputs (products and services) from the sector; • the institutional setting and context; • and the capacity of the key sector organisations. • It is necessary to look beyond what is directly observable and understand the informal aspects - power and loyalty issues that foster or constrain capacity.

27. Implications for EC Support • The Paris Agenda calls for a harmonised approach to capacity development. • The EC has fully endorsed the Paris Agenda, and will therefore undertake all CD activities jointly with other development partners, supporting government leadership in all processes. • Experience shows that in CD the partner government's leadership is key and donors can only play a supportive role. • Donor driven activities may fail to create an open and trustful dialogue and hinder ownership national stakeholders. • Without such ownership, even the most technically proficient and excellent capacity assessment is unlikely to be used as foundation for subsequent capacity development.

28. 5. Performance Monitoring Systems .

29. Relevance and Scope of the Assessment • The trend towards stronger results-orientation is reflected in the Paris declaration. • It is not simply a matter of aid effectiveness but of applying modern management principles to the use of resources. • Most countries already have excellent performance monitoring systems in place.

30. What Should be Established • The strengths and weaknesses of performance assessment systems (PAFs) already in place; • Sector PAFs should be coherent with overall monitoring and review of the national plan/PRSP etc; • Examine the political ownership as well as the technical quality of PAFs. • The assessment will help to identify ways in which all partners should seek to support and strengthen PAFs. • Strike a balance between what is ideal and what is practical. • Targets must be agreed by all major stakeholders, implementing managers and evaluators who may have to measure the results. • The assessment should help to identify possible indicators to which EC sector support must be linked. • Ensure that indicators eventually selected properly reflect sector objectives.

31. Implications for EC Support • Performance indicators must link EC support to results. • Encourage a comprehensive overall system for performance monitoring, involving managerial feedback and policy reviews. • Targets should be based on national plans • National monitoring systems should be used as much as possible. • There may be possibilities for EC support or other donors to strengthen national capacity for monitoring and analysis. • There are direct cross-links to sector budgets as well as to coordination systems, since policy documents, annual sector reviews etc should all draw on and feed into common performance systems.

32. 6. The Macroeconomic Framework .

33. Relevance and Scope of the Assessment • A primary concern is to assess the stability of the macroeconomic situation, and the outlook for public finances and private investment. • In turn, this will provide the basis to assess the realism and appropriateness of public expenditure plans at the sector level. • Whenever available, a sector assessment will draw on (and perhaps update) an existing macro assessment, especially from donors, IFIs or the IMF

34. What Should be Established • If SBS is to be used, a stability-oriented macroeconomic policy must be in place or under implementation. • The assessment relies on the following elements: • A summary of the main past and expected trends in macroeconomic variables • The existence of a stability oriented reform programme where appropriate. • The relationship between the partner country and the IMF. • A review of any macroeconomic topics that might be of special relevance to the sector (e.g. macroeconomic aspects of "scaling up" to meet the MDGs).

35. Implications for EC Support • The macroeconomic assessment is fundamental to the provision of SBS. • It is relevant to other key assessments: • it will indicate the quality of public finance management; • it will provide a context for assessing the sustainability of sector expenditure plans, and some of the risks the sector faces.

36. 7. Public Finance Management (PFM)

37. Relevance and Scope of the Assessment 1 • PFM is concerned with the planning, spending, reporting and auditing of public money • Therefore it needs • a comprehensive, accurate and transparently prepared and executed budget. • Tto assess the extent to which plans are implemented and expected results achieved. • As a result the country’s public financial management system determines the efficiency and effectiveness with which budget resources contribute to achieving the objectives of the sector policy.

38. Relevance and Scope of the Assessment 2 • The standardised Public Expenditure and Financial Accountability (PEFA) framework is the basis for PFM analysis and reform strategies. • PEFA is used by the EC in collaboration with other donors. • Full details available at <www.pefa.org>

39. Public Expenditure and Financial Accountability (PEFA) Framework • Performance measurement framework consisting of the analysis of 28 indicators covering six essential dimensions of PFM systems: • credibility of the budget, • comprehensiveness and transparency of the budget, • policy-based budgeting, • predictability and control in budget execution, • accounting, recording and reporting, and • external scrutiny and audit. • It also includes three indicators on donor practices.

40. What Should be Established • A credible and relevant programme to improve PFM must be in place or under implementation. • An overall assessment of the quality of PFM systems, based on PEFA. • An assessment of the PFM reform process, focusing on: • the relevance and degree of implementation of the reform strategy (and related action plan); • the relevance and degree of coordination and implementation of the PFM capacity development programmes financed by donors; and • evidence of the national authorities’ political will, commitment and endeavours to improve PFM performance. • Any sector-specific PFM issues that could be usefully supported by the EC.

41. Implications for EC Support 1 • Use of budget support requires an assessment of the sector’s eligibility based on the • quality of the PFM system, and • the credibility of the PFM reform process. • If it is not possible to carry out an assessment on this basis, the partner country would not be eligible to receive budget support to finance the SPSP. • Apart from the special cases of sector specific PFM systems, any sector PFM assessment should not be used to establish eligibility for the use of budget support, but rather be used to • identify weaknesses, • inform support to be provided and where appropriate • used to help establish disbursement conditions associated with the programme.

42. Implications for EC Support 2 • The PFM assessment has obvious cross-links to • the macro assessment, • the assessment of the sector expenditure framework, and • the institutional and capacity assessment. • Many of the issues concerning PFM need to be addressed at central government level. • Sector experiences and concerns can usefully feed into broader strategy and create demand for wider reforms. • There are also implications for sector coordination arrangements with wider coordination processes.