Actionable Governance Indicators: Purposes, Concepts and Measurement

1. Actionable Governance Indicators: Purposes, Concepts and Measurement April 22, 2008

2. Outline • What are Actionable Governance Indicators (AGIs)? • Why Should We Care About AGIs? • How Can We Actually Measure AGIs? • AGI Sources • AGI Illustrations • AGI and You: Finding AGI Resources

3. What Are AGIs? • Actionable governance indicators (AGIs) provide evidence on the characteristics and functioning of particular elements and sub-elements of the various dimensions of governance.

4. Governance Dimensions Citizens/Firms • Political Accountability • Political competition, broad-based political parties • Transparency & regulation of party financing • Disclosure of parliamentary votes • Effective Public Sector Management • Ethical leadership: asset declaration, conflict of interest rules • Cross-cutting public management systems: meritocracy, public finance, procurement • Service delivery and regulatory agencies in sectors • Checks & Balances • Independent, effective judiciary • Legislative oversight (PACs, PECs) • Independent oversight institutions (SAI) • Global initiatives: UN, OECD Convention, anti-money laundering • Civil Society & Media • Freedom of press, FOI • Civil society watchdogs • Report cards, client surveys • Private Sector Interface • Streamlined regulation • Public-private dialogue • Extractive Industry Transparency • Corporate governance • Collective business associations Citizens/Firms Citizens/Firms • Decentralization and Local Participation • Decentralization with accountability • Community Driven Development (CDD) • Oversight by parent-teacher associations & user groups • Beneficiary participation in projects Citizens/Firms

5. Governance Systems • Elements and sub-elements of the various governance dimensions identified in the above diagram. • Example from PSM dimension • Cross-cutting public management systems (element) • Public finance management systems • Human resource management systems • Policy management systems

6. Why Should We Care About AGIs? • Design: Guide the design of specific governance systems reforms. • Implementation: Hold such governance systems reform efforts accountable for achieving their objectives. • Learn from Experience: Facilitate systematic empirical research on: • Determinants of governance systems performance • Determinants of governance systems impacts • government outputs • governance quality • policy outcomes

7. AGIs in Indicators Perspective • Conventional range of indicators • Inputs • Outputs • Outcomes • Governance systems unique features • Influence input productivity (on outputs) • Influence output impacts (on outcomes)

8. AGIs in Indicators Perspective (cont.) • AGIs must provide evidence on: • Determinants: Design features of governance systems • Performance: Extent to which governance systems meet their functional objectives • Exogenous factors: Other factors that can condition the impacts of: • Governance systems design features on the extent to which they achieve their functional objectives • Governance systems functional performance on outputs and outcomes of government policies and programs.

9. The Missing Middle: • Direct impacts of institutional reform efforts on how particular governance sub-sub-systems function: including their institutional arrangements, procedures, and practices • Examples include PEFA, Doing Business, Global Integrity, Open Budget Index, Statistical Capacity Index, OECD procurement index Actionable Governance Indicators are the “Missing Middle” Inputs and outputs • Bank operations consistently track project inputs and outputs • A growing number of Bank operations and client countries have begun to track program and policy outputs Outcomes • Broad governance outcomes are measured byFreedom House, ICRG, etc. and by TI, WGI aggregate indexes

10. How Can We Actually Measure AGIs? • What must be measured? • Governance Systems Features (performance-determinants): r-indicators • Governance Systems Performance: Y-indicators • Exogenous factors: s-indicators • Illustrations of AGIs

11. Governance Systems Features: r-indicators • Rules of the game • circumscribing the behavior and actions of agents within a particular governance dimension • defining responsibilities • assigning responsibilities, rights and authority • requiring tracking, monitoring and disclosure of evidence on the exercise of particular responsibilities, rights and authorities • creating checks and balances • Capacity features • types of resources, including their quality dimensions • quantities of each type of resource • production technologies employed and their defining characteristics

12. Governance Systems Performance: Y-indicators • Aspects of organizational behavior and practices, whose variance reflects the extent to which a particular governance system is achieving its various performance objectives

13. Exogenous Factors: s-indicators • Contextual factors that alter the impacts of governance systems features on either the outputs or outcomes of government policies and programs

14. Illustrations of AGIs • PEFA Indicators • HRM Indicators

15. PEFA Indicators • Capture both features/determinants and performance evidence along six broad dimensions of Public Finance Management systems • Credibility of the budget • Comprehensiveness and transparency • Policy-based budgeting • Predictability and control in budget execution • Accounting, recording and reporting • External scrutiny and audit

16. HRM Indicators: Performance (Y) • Performance HRM indicators capture evidence on four core HRM objectives: • Depoliticized personnel management • Merit-based, performance-encouraging personnel management • Attract and retain qualified staff • Fiscal sustainability of the wage bill

17. AGI Sources

18. Different Dimensions of Good Governance Are Measured Differently (examples of existing AGIs) Citizens/Firms • Political Accountability • Political competition, broad-based political parties • Transparency & regulation of party financing • Disclosure of parliamentary votes PSG public acc. indicators Public official surveys Global Integrity Index Freedom House indicators Afro/Latino/AsiaBarometer

19. Different Dimensions of Good Governance Are Measured Differently (examples) • Civil Society & Media • Freedom of press, FOI • Civil society watchdogs • Report cards, client surveys • Private Sector Interface • Streamlined regulation • Public-private dialogue • Extractive Industry Transparency • Corporate governance • Collective business associations PSG public acc. indicators Human rights database Reporters Without Borders Media sustainability index Citizens/Firms Doing Business sub-indicators BEEPS ICA and accompanying surveys Business Risk Service TI index Global Competitiveness index

20. Different Dimensions of Good Governance Are Measured Differently (examples of existing AGIs) PER and PETS PEFA (e.g. PEFA8) QSDS Score cards • Decentralization and Local Participation • Decentralization with accountability • Community Driven Development (CDD) • Oversight by parent-teacher associations & user groups • Beneficiary participation in projects Citizens/Firms

21. Different Dimensions of Good Governance Are Measured Differently (examples of existing AGIs) LEG.: RoL and human rights ind. PEFA TI perception index Global Integrity indicators Open Budget Initiative • Checks & Balances • Independent, effective judiciary • Legislative oversight (PACs, PECs) • Independent oversight institutions (SAI) • Global initiatives: UN, OECD Convention, anti-money laundering Citizens/Firms

22. Different Dimensions of Good Governance Are Measured Differently (examples of existing AGIs) PSG public acc. indicators PSG country-specific projects Score cards PEFA Global Integrity index OECD procurement indicators • Effective Public Sector Management • Ethical leadership: asset declaration, conflict of interest rules • Cross-cutting public management systems: meritocracy, public finance, procurement • Service delivery and regulatory agencies in sectors

23. AGI Website • http://agi.worldbank.org

24. AGI Illustrations

25. Public Finance Management AGIs

26. PEFA – PFM Performance Measurement Framework • 31 high-level indicators measuring performance of PFM systems (28 Performance Indicators + 3 for Donor Practices) • A performance report supporting the assessment of the indicators and providing an analytical summary • Used in approx 75 countries; with >20 donors involved (WB+EC leading 80-90% of assessments) • Common pool of information on PFM systems performance to promote country reform leadership, with coordinated & aligned donor support = the Strengthened Approach

27. Global access to and use of PEFA assessments • 26 assessment reports made public so far (available on www.pefa.org) • Tracking of changes in PFM performance in HIPCs 2001-2006 (report available on website) • Reports in final stages of preparation: • PEFA global monitoring of roll-out and quality 2007 • Study of the impact of the PEFA Framework on implementation of the Strengthened Approach • Study of what PEFA assessments tell about PFM systems across countries

28. Use of PEFA at country level(Ghana, Bank-led assessment) • Updated PFM action plan 2006-09 directly related to PEFA baseline assessment 2006 • Assessment update 2009 agreed as part of overall PFM monitoring system • All donors mapped on how their assistance is incorporated in this action plan • All budget support donors agree to use the PEFA assessment for their internal fiduciary risk considerations

29. Use of PEFA at country level(Norway, self-assessment) • Presented findings to OECD-DAC in December 2007 • The assessment showed low scores for six areas of PFM system performance • Government reaction: • Weaknesses in procurement and follow-up to external audit findings need to be addressed. • Limited extent of internal audit is mitigated by strong performance in related areas. • Multi-year program/sector budgeting is not a priority at present. • Two indicators scored low but are municipal responsibilities; central government will not get involved.

30. Decentralization AGIs

31. Decentralization AGIs (examples) • Local Fiscal Monitoring • Indonesia’s Fiscal Information System (SIKD), Village Finance Statistics • South Africa’s Periodic Intergovernmental Fiscal Review • Intermediate PFM Benchmarking • Public Expenditure Tracking Surveys (PETS) (e.g., Uganda) • Sub-National Public Expenditure and Financial Accountability (PEFA) • Performance Indicators (e.g., Bosnia, Indonesia) • Brazil’s “Random” Public Audits for Municipalities Assigned by Lottery • SN Credit Ratings • Other Process Indicators • Public Integrity Indicators (e.g., Colombia, Turkey) • World Bank Institute (WBI) Surveys – corruption diagnostics • India’s Bangalore Citizen Score Cards – implemented in all Indian states • Indonesia’s Evolving Local Governance “Platform” Monitoring • Governance & Decentralization Surveys (2002, 2004, 2006) • National Household Survey (SUSENAS) significant at district level • Colombia ¿Como Vamos? (How Are We Doing?) • Turkey Municipal Performance Measurement Project (BEPER) • Australia’s Productivity Commission • On-Going Surveys in China… Bottom line: While “decentralized” PFM AGIs are widely used and relatively well defined, the work on decentralization AGIs outside of PFM is lagging and needs a boost.

32. HRM AGIs

34. Albania: Depoliticization Table 1: Average Quarterly Turnover Rates [1] Data exist for 2000:Q2 through 2003:Q4 for civil servants; 2000:Q3 through 2003:Q1 for political appointees and other public employees. The civil servants data encompasses two changes in political leadership, while the other data encompasses only one change in political leadership. Changes in political leadership occurred in September 2001 (new Parliament, new Cabinet, no change in Prime Minister) and August 2002 (new Prime Minister, new Cabinet).

36. Albania: Meritocratic CS Management

37. [1] Ratio of average total remuneration for staff in the highest rank to average total remuneration for staff in an entry level position.

39. Albania: Attracting Qualified Civil Servants

41. Albania: Fiscally sustainable wage bill

42. HRM Indicators: Features/Determinants (r) • HRM diagnostic tool captures evidence on HRM system features/determinants along six broad dimensions: • Legal and ethical framework • Institutional framework • Employment and pay policy management • Human resource management policies and practices • Training and career development • Management practices and culture

43. Corruption AGIs Business Enterprise Environment Surveys (BEEPS)

44. Survey-based Indicators for Monitoring Regional TrendsBribe Frequency, 2002-2005 Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?

45. Tax and Customs Administration

46. Monitoring the Impact of Tax ReformSlovakia Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?

47. Monitoring the Impact of Customs Reform -- Romania Source: Trade and Transport Facilitation in Southeast Europe.

48. Time it takes South African Revenue Service (SARS) to issue a tax registration number (weeks) • None of the provinces has SARS issuing registration number according to the service charter time limits • If done consecutively, it takes a total of 18.3 weeks to get three registrations from SARS in Kwazulu Natal and half of this time in Northern Cape

49. Time taken by SARS to process tax returns (weeks) VAT Income tax • Only two provinces – N. Cape and Limpopo - have IT return processing time above SARS charter specified limit, • All provinces have VAT return processing time below SARS charter limit

50. Income Tax VAT Time it takes to receive a tax refund on a client’s bank account (weeks) • W. Cape is the only province where receiving VAT refund takes less time than specified in the SARS charter, in North West it takes 3 times longer • IT refund takes between 1.5 to 2.5 times longer than stated in the SARS charter