Performance Assessment Strategy for Local Government

Credit Number: 4872 IN

Kerala Local Government Service Delivery Project (KLGSDP)

Local Self Government Department

Government of Kerala

Lead Consultants Performance Assessment System

15th

July 2013

Table of Contents

Section 1: Introduction and Background 1 Section 2: Kerala Local Government Service Delivery Project 5 1. Strategic and Development Objectives of KLGSDP 5 2. Project Components 5

2.1 Component 1: Performance Grants 5 2.2 Component 2: Capacity Building 6 2.3 Component 3: Enhancing State Monitoring of the Local Government System 6 2.4 Component 4: Project Management 7

3. Project Implementation Arrangement 8 3.1 Execution Support Agencies 8

4. Monitoring and Evaluation 9

Section 3: Performance Assessment System for Local Self Government 10 1. Strategic Context of Performance Assessment of LSGs 10 2. Purpose and Objectives of Performance Assessment System 11 3. Establishing Performance Assessment System in KLGSDP 12

3.1 Allocation of grant in Phase I 12 3.2 Allocation of grant in Phase II 13 3.3 Minimum Mandatory Conditions for LSGs 13 3.4 Performance Criteria for LSGs 13 3.5 Performance Scores 14

Section 4: Performance Assessment Framework 15 1. Performance Dimensions of LSGs 15 2. Performance Assessment Themes 16

2.1 Planning and Budgeting 16 2.1.1 Performance Themes for Planning and Budgeting 17 2.1.2 Minimum Mandatory Condition for Planning and Budgeting 18 2.1.3 Performance Benchmarks for Planning and Budgeting 20

2.2 Project Execution and Service Delivery 21 2.2.1 Performance Themes for Project Execution and Service Delivery 21 2.2.2 Minimum Mandatory Condition for Project Execution and Service Delivery 31 2.2.3 Performance Benchmarks for Project Execution and Service Delivery 32

2.3 Accounting, Financial Reporting and Audit 35 2.3.1 Performance Themes for Accounting, Financial Reporting and Audit 35 2.3.2 Minimum Mandatory Condition for Accounting, Financial Reporting and Audit 41 2.3.3 Performance Benchmarks for Accounting, Financial Reporting and Audit 42

2.4 Participation, Transparency and Accountability 43 2.4.1 Performance Themes for Participation, Transparency and Accountability 44 2.4.2 Minimum Mandatory Condition for Participation, Transparency and Accountability

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2.4.3 Performance Benchmarks for Participation, Transparency and Accountability 48 3. Design of Performance Assessment System 50

3.1 Minimum Mandatory Conditions 50 3.2 Performance Benchmark 51 3.3 Performance Scores 52 3.4 Performance Assessment Questionnaire 53

Section 5: Workshop on Performance Assessment and Pilot Field Testing 54 1. Workshop on Performance Assessment 54

1.1 Key Suggestion and Discussion 54 2. Pilot testing of Performance Assessment framework 55

2.1 Objective and Coverage 55 2.2 Key Findings from the Pilot Testing 57 2.3 Changes in the Performance Assessment Framework 58

Section 6: Institutional Arrangement for Performance Assessment System 60 1. Role of key Institutions for Performance Assessment System 61

1.1 Project Management Unit, KLGSDP 61 1.2 Performance Audit Department 62 1.3 Supporting Institutions for Implementation of KLGSDP 62 1.4 Project Facilitators of KLGSDP 63 1.5 Local Self Government (LSG) 63 1.6 External Performance Assessment Firms 64 1.7 Performance Assessment Lead Firm 65

2. Government Control and Policy Oversight 66

Section 7: Capacity Development for Performance Assessment System 67 1. Capacity Development Strategy 67 2. Role of key Institutions 67 3. Capacity Development Process 67

3.1 Training Programme on Performance Assessment System 68 3.2 Training Programme on Performance Assessment Database Software 70 3.3 Refresher Training of Performance Assessment Team 71 3.4 Technical back-stopping and handholding support to assessment teams 72 3.5 Other Capacity Development Initiatives 72

Section 8: Planning and Execution of Annual Performance Assessment 73 1. Planning of Annual Performance Assessment 73 2. Assessment teams and their deployment 73 3. Roles and responsibility of assessment teams under PA firms 74

3.1 Expert team of PA firms 74 3.2 Field supervisors of PA firms 75 3.3 Field Assessors of PA firms 75

4. Communication and Information to LSGs on Performance Assessment 75 5. Conducting Performance Assessment 76

5.1 Principles and Approach 76 5.2 Field Assessment 76 5.3 Information Collation, Verification and Documentation 77

6. Monitoring and Quality Assurance Audit 77 7. Data Entry and Analysis 77 8. Report Preparation 78

Section 9: Monitoring and Quality Assurance of Performance Assessment 79 1. Monitoring and Quality Assurance by external PA firms 79

1.1 Scrutiny and Verification of Assessment Questionnaire 79 1.2 Field Verification of Performance Assessment 80 1.3 Technical backstopping and handholding support to assessor 80

2. Monitoring and Quality Assurance by Performance Assessment Lead Firm 80 2.1 Quality Assurance Audit 80 2.2 Policy on Quality Assurance Audit 81 2.3 Quality Assurance Audit Process 82 2.4 Refresher training in significant areas of error 83 2.5 Technical backstopping by lead firm 83

3. Supervision and Monitoring by PMU 83

Section 10: Objection, Appeal and Remedies during Performance Assessment 84 1. Policy for Objection, Appeal and Remedies 84 2. Structure and Constitution of First Appellate Authority 84

2.1 Roles and Responsibility of the Appellate Authority 84 3. Structure and Constitution of Second Appellate Authority 85 4. Process of Objection, Appeal and Remedies 85

4.1 Filing of Objection and Grievance 85 4.2 Verification of Appeal 85 4.3 Decision and Closure of Appeal 85 4.4 Appellate Order 86 4.5 Appeal to Second Appellate Authority 86

Section 11: Performance Assessment Database Software 87 1. Technology for Software 87 2. Software Architecture 87 3. Recording and Displaying Results of Annual Performance Assessment 88 4. Comparative Annual Performances 89 5. Targeting Tools for Planning 89 6. Results and Reports from the database software 89 7. User Guidance Manual 90

Section 12: Way Forward 91 Appendix 1: Reference Documents Annexure 1: Performance Assessment Framework KLGSDP

Performance Assessment Strategy for Local Government Kerala Local Government Service Delivery Project

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Abbreviations and Acronyms

ACR Appropriation Control Register

AFS Annual Financial Statements

APA Annual Performance Assessment

BSUP Basic Services for Urban Poor

CAG Comptroller and Auditor General

CFC Central Finance Commission

CSS Centrally Sponsored Schemes

DAC Decentralization Analysis Cell

DCB Demand, Collection and Balance

DLFA Director of Local Fund Audit

DoF Department of Finance

DPC District Planning Committee

DPR Detailed Project Report

ESMF Environment and Social Management Framework

FMR Financial Monitoring Report

GIFT Gulati Institute of Finance and Taxation

GO Government Order

GPF General Purpose Fund

GPs Gram Panchayat

ICT Information Communication Technology

IDA International Development Association

IEC Information, Education and Communication

IKM Information Kerala Mission

IT Information Technology

IUFR Interim Unaudited Financial Report

JNNRUM Jawaharlal Nehru National Urban Renewal Mission

KILA Kerala Institute of Local Administration

KLGSDP Kerala Local Government Service Delivery Project

KM Act Kerala Municipal Act, 1994

KPR Act Kerala Panchayat Raj Act, 1994

LESA Limited Environment & Social Assessment

LG Local Government

LSG Local Self Government Institution

LSGD Department of Local Self Government, Government of Kerala

M&E Monitoring and Evaluation

MDP Management Development Programme

MIS Management Information System

Performance Assessment Strategy for Local Government Kerala Local Government Service Delivery Project

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MMC Minimum Mandatory Condition

NTR Non tax revenue

OAC Objective Assessment Criteria

OSR Own Source Revenue

OTR Own Tax Revenue

PA Performance Assessment

PAD Project Appraisal Document

PAU Poverty Alleviation Units

PBR People’s Biodiversity Register

PG Performance Grant

PIM Project Implementation Manual

PMU Project Management Unit of KLGSDP

PPC People’s Plan Campaign

QAA Quality Assurance Audit

QCBS Quality and Cost Based Selection

RTI Right to Information

SAC Social Audit Committee

SC Scheduled Castes

SCP Special Component Plan

SFC State Finance Commission

SIRD State Institute of Rural Development

SLNA State Level Nodal Agencies

SOTR State’s Own Tax Revenue

SPAO State Performance Audit Officer

SSS State Sponsored Schemes

ST Scheduled Tribes

ToR Terms of Reference

TSP Tribal Sub Plan

VGDF Vulnerable Groups Development Framework

WCP Women Component Plan

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Section 1: Introduction and Background

Kerala is one of the pioneer and leading state in establishing local government system in India and is often referred to as a model in deepening democratic decentralization of governance. The process of democratic decentralization in the state has been a result of strong political and public consensus built over a long period of time. The state has a long history of Panchayati Raj, however its evolution was not uniform since the areas under the princely rule did not had Panchayats or other forms of rural governance structure until independence. After the formation of Travancore-Cochin State in 1949 the Travancore Cochin Panchayat Act was constituted in 1950, following which the Panchayat Delimitation Committees were formed. Based on their recommendations, 542 Panchayats were formed, though their activities were confined mostly to public works such as roads and buildings.

The first Administrative Reforms Committee of the State in 1958, headed by Shri. E.M.S. Namboodiripad recommended establishment of a strong Local Government system to ensure that the gains of freedom and democracy would flow to the disadvantaged, marginalized and exploited sections of the society. Based on his recommendations, the Kerala Panchayat Bill (1958) and the District Council Bill (1959) were placed in the State legislative assembly, but the bills could not be enacted into laws. During that period at the national level the Balwant Rai Mehta Committee was appointed (1957) to study the Community Development and National Extension Service Programme to assess popular participation. The Committee recommended establishment of statutory local bodies with necessary devolvement of power, authority and control of decentralized administrative structure. At the national level, Panchayati Raj was established in 1959 with a three-tier system and most of the States in conformity to it enacted legislations, but unfortunately in many cases without providing sufficient powers or financial control to local governments.

The Kerala Panchayat Act was passed in 1960, incorporating several recommendations of the Balwant Rai Mehta Committee and the first Administrative Reforms Committee of the State and codified the Panchayats laws that were in force in Malabar – Travancore - Cochin regions. Following which the first Panchayat election was held in 1963 and 922 new Panchayats were formed in January 1964. However, Kerala like other states in India could not develop strong local government because of lack of sufficient administrative and financial powers to local government. The rapid growth of department and parastatals during that period for development governance marginalized the local government more akin to local administration arm of the state government. Several attempts were taken to strengthen the local government, but no substantial progress could be made during that period. Kerala Panchayat Union and Zilla Parishad Bill (1964), Kerala Panchayat Raj Bill (1967) and Kerala District Administration Bill (1971) were introduced but could not be passed for one reason or the other.

In 1977, the Government of India appointed the Ashok Mehta Committee to review the status of decentralization which highlighted the absence of real power with the PRIs for effectively contributing to the local development process. In mid eighties, again the demand for strong Panchayati Raj Institutions with real powers for participation in local development was raised in popular and public discourse across India, but nothing much progressed until 1990. The Kerala District Administration Bill was again introduced by the government in 1978 and it became an Act in 1980, however the Government implemented the act only in 1991 and the District Councils were established. However, this attempt to strengthen the local governance through District Council was rather short-lived. Until 1995, Kerala had only a single tier Village Panchayat and lagged behind in the implementation of Panchayati Raj like most others states in India.

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The 73rd and 74th Constitutional Amendment in 1992 created the legal framework for federal democratic set up in India with establishment of Local Governments at different level in rural and urban areas with the specific responsibility for planning and implementing plans for economic development and social justice. According to Article 243G of the 73rd Constitutional Amendment Act and Article 243W of the 74th Constitutional Amendment Act, the States were required to devolve adequate powers and responsibilities to local government in rural and urban areas in order to make them effective institutions of local self government. The responsibility for preparation of plans for economic development and social justice and its implementation in relation to 29 subjects listed in the Eleventh Schedule for Panchayats and for 18 subjects listed in the Twelfth Schedule for Municipalities were also assigned. Each states in conformity with the Constitutional amendment enacted state specific acts and rules for establishing local government.

The Government of Kerala enacted the Kerala Panchayat Raj Act and Kerala Municipal Act in 1994 following the Constitutional Amendment of 1992 following which the first election after amendment was held in September 1995 and the new Local Governments were formed in 991 Gram Panchayats, 152 Block Panchayats, 14 District Panchayats, 53 municipalities, and 5 municipal corporations. The state thereafter made rapid progress in democratic decentralization of governance by significantly transferring financial resources, executive powers, administrative authority and control over functionaries to local government.

1. Progress of Local Self Governance in Kerala

After the 73rd and 74th Constitutional amendment, Kerala carried out several pioneering reforms that lead to rapid progress in democratic decentralization in the state. The government with strong intent of pushing decentralization in the State transferred powers to local governments along with institutions, offices and functionaries in October 1995 and introduced a special budget document for local government in early 1996.

The Government, on 17th August, 1996, launched the People's Planning Campaign spearheaded by the State Planning Board along with the Department of Local Administration, with the full association of political parties, non-government organizations, professionals and elected members. The ‘campaign’ was aimed at making the Ninth Five-Year Plan of the state a ‘people’s plan’. It was launched with an announcement that about 35 percent of the total plan (development) funds of the State would be devolved to the local governments to be spent by them on the basis of the priorities drawn by them.

The campaign intended to ensure people’s participation in local level planning was quite successful and created a strong public demand for decentralization in the State. The institutional, legal and procedural bottlenecks for effective decentralization encountered during the people’s planning process were systematically addressed as the campaign grew momentum in the state. The state has since then rapidly pursued the governance decentralization process through series of policy changes aimed at functional, financial and administrative decentralization.

In 1996, Government of Kerala appointed the Committee on Decentralization of Powers (popularly known as Sen Committee) under the guidance of late Dr. S. B. Sen. The committee recommended principles of decentralization to be followed while institutionalizing the decentralization process in the state by restructuring laws related to local government. The committee based on the principles of Autonomy, Subsidiarity, Role clarity, Complementarity, Uniformity, People’s Participation, Accountability and Transparency; suggested clause by clause amendments of the existing laws, a scheme for redeployment of the staff, a system for improving the auditing of the accounts of local bodies and guidelines for revision of rules. The Kerala Panchayati Raj Act and the Kerala

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Municipality Act, enacted in 1994 were thoroughly restructured in 1999 based on the recommendation of Sen Committee and also incorporated lessons from the early years of decentralization. The legislative amendment incorporated important features such as functional domain of local governments; strong responsibility and powers to Gram / Ward Sabha; greater power and autonomy to local governments; system of standing, steering and functional committee for decision making; introduction of good governance features such as right to information, citizen charter, and performance audit system; and creation of powerful support institutions to reduce governmental control and foster the concept of self government such as The State Election Commission, The Finance Commission, Ombudsman for Local Governments, Appellate Tribunals, Audit Commission, State Development Council, etc.

Immediately following to the amendment of main Acts, the State Government amended various acts (42 Acts) relating to subjects, which are in the functional domain of local government, to ensure that all these legislations are in conformity with the decentralized governance system, both in letter and spirit.

To provide significant impetus to the decentralization process in the state, the transfer of public service delivery institutions and staffs to local government were implemented by the state government. The transfer of district level offices and staff to District Panchayat was implemented in year 2000 followed by redeployment of surplus ministerial staff and engineers to local governments in 2003. In 2008 the formation of common engineering cadre for all Local Self Governments was implemented and a policy decision was taken to set up ministerial and executive cadres for local government. The transfer of institutions to local government was progressively pursued in the state and almost three-fourth of the service delivery institutions has been transferred to local governments. In addition to the typical local services such as water, roads and sanitation etc transferred to local governments, the local governments in Kerala have been given additional functions in respect to primary health and education which have been done in only few other states in India.

The functional decentralization process was accompanied by fiscal decentralization process which not only provided fiscal autonomy to local government, but ensured that sizeable portion of the development fund was transferred to these institutions. The government has constituted four state finance commissions till now and most of the recommendation made by the SFCs has been accepted by the state. Based on the recommendation of the first SFC, several small purpose grants were combined as general purpose grant for local government and the determination and transfer of the share of State tax was made formula based. Based on the recommendation of second SFC in 2004, the sharing of specific State taxes was replaced by sharing of State’s Own Tax Revenue (SOTR), fixing 3.5 percent as General Purpose Grant and 5.5 percent as Maintenance Grant for local government. The third SFC recommended fixing of base year’s grant and 10 percent annual increase for the five year period and structured the transfer as General Purpose Fund, Maintenance Fund and Development Fund for local government. The most recent fourth State Finance Commission recommended that 25-30 percent or more of state plan funds to be devolved to local governments. The Commission also recommended transfer of 3.5 percent of SOTR for general purpose grant and 4.5 percent of SOTR as maintenance grant for the first year which would increase to 5 percent in the second year and then remain fixed at 5.5 percent thereafter. The Commission also recommended allocation of special grants to Gram Panchayats out of development fund based on deprivation index indicating their relative backwardness as compared to other Panchayats. The allocation to LSGs based on the fourth SFC recommendation has increased to Rs.4,160 crore in 2011-12, a one-third increase from the allocation for 2010-11.

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The State Government is in the process of institutionalizing further decentralized governance in the State, by overcoming operational and systemic challenges at the local government level through next generation reforms. Efforts are underway to establish institutionalized systems to improve local planning, budgeting and service delivery by integrating the other tiers of the local government at the block and district level. Establishment of Management Information System for creating and maintaining fiscal data, increased accountability of funds and activities taken up by the LSGs, fund flows and monitoring system, resource mobilization in less developed areas are some of the other steps initiated in this direction. Establishment of management and administrative mechanism in LSGs for improving public service delivery, maintenance and upkeep of productive assets are also important strategies being pursued by the Government.

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Section 2: Kerala Local Government Service Delivery Project

1. Strategic and Development Objectives of KLGSDP

The Kerala Local Government Service Delivery Project (KLGSDP) has been formulated by Government of Kerala to enhance and strengthen the institutional capacity of the local government system to deliver services and undertake basic administrative and governance functions more effectively and in a sustainable manner. The project aims to enhance and strengthen the institutional capacities of local governments in Kerala to deliver services and undertake their basic administrative and governance functions effectively. The project is being implemented with assistance from World Bank and is expected to bring two important impacts viz. additional financing for development expenditures at the local government level and secondly to improve the efficiency of local government expenditures through institutional strengthening and capacity building. The project aims to achieve the following strategic objectives for local governments in the state

i. To establish long term institutionalized systems to improve budgetary, local planning and service delivery by the local governments;

ii. To address the issue of quality of services provided by the LSGs and the need to build up management mechanisms for maintenance and upkeep of the assets established and related facilities; and

iii. To improve the capacities of the local governments including their elected representatives and local functionaries, institutionalization of systems and good practices with modern tools.

The development and strategic objectives of the project is expected to have a direct impact on the services received by the rural and urban population and ultimately enhance the quality of life of the people living in these areas. The project will be implemented in all the 978 Gram Panchayats and 60 Municipalities in Kerala and the investments made under project will indirectly benefit the entire population of the state.

2. Project Components

The project has four components

Component 1: Performance Grants to Gram Panchayats and Municipalities

Component 2: Capacity Building for Local Bodies

Component 3: Enhancing State Monitoring of Local Government Systems

Component 4: Project Management

2.1 Component 1: Performance Grants

The main objective of this component is to provide Gram Panchayats and Municipalities with additional discretionary funds for expanding local investment for the creation and maintenance of capital assets in a manner which incentivizes the strengthening of their institutional capacity. This component will phase in an annual, performance-based grant for all 978 GPs and 60 Municipalities in Kerala. The performance grant (PG) will be spent on the creation, maintenance and operation of

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capital assets used in service delivery. The overall goal is to improve GP and municipal performance in local governance and public service delivery.

Performance grant will be introduced in two phases in order to provide a realistic and feasible mechanism for incrementally strengthening the institutional capacities of the Gram Panchayats and Municipalities. In the 1st phase, administrative and institutional systems necessary for the introduction of a full performance grant will be established. During the phase all Gram Panchayats and Municipalities will receive grant funding, subject to basic fiduciary requirements.

In the 2nd phase the performance dimension of the grant will based on an annual performance assessment. This Performance Grant system is anticipated to become an integral part of the Kerala Local Self Government fiscal framework beyond the duration of the project with performance based grant allocation to local government by Government of Kerala. The total performance grant for both the phases will be equivalent of $238.6 million over four years from IDA through the state government.

2.2 Component 2: Capacity Building

This component will provide capacity building inputs to strengthen and supplement the existing systems and human resources of local governments to enhance their institutional performance. The focus will be on four core areas:

• Development and improvement of administrative systems used by LSGs;

• Formal training to strengthen the human resource capacities of LSGs using these systems;

• Mentoring directed at human resource capacity improvement and supplementation; and

• Strengthening of the overall institutional capacities of the key organizations responsible for delivering local government training in Kerala.

In the longer term, the component will support the formulation of a State-wide capacity building strategy for local governments.

2.3 Component 3: Enhancing State Monitoring of the Local Government System

This component will provide support to strengthen the system of performance monitoring of Gram Panchayats and municipalities in Kerala. The component comprise of the following sub-components.

2.3.1 Establishment of a database of GP and municipal information

A Database of GP and municipal information will be established which will store basic information regarding GP and municipal profiles: population, vital statistics, livelihoods, employment, education, water and sanitation, budget expenditures and physical assets. The database would be updated annually and would be available in the public domain.

2.3.2 LSG Service Delivery Survey

Project Evaluations and LSG Service Delivery Survey to gauge trends on LSG service delivery performance and citizen satisfaction throughout the state would be conducted. This would help to examine the State wide delivery trends in sectors where Gram Panchayats and Municipalities have

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some responsibility, explore citizen satisfaction and usage of basic services as well as awareness of Gram Panchayat planning and budget processes.

2.3.3 Project Evaluations

The project has planned for two evaluation studies. One to evaluate the quality of the capacity building efforts (Component 2) and service delivery technical evaluation for the Performance Grant investments (Component 1). The latter will include an assessment of improved access to services as a result of the block grant investments; coverage/distribution of service provision; technical quality, operations and maintenance arrangements, cost effectiveness and safeguards issues.

2.3.4 Establishment of Decentralization Analysis Cell (DAC)

A Decentralization Analysis Cell (DAC) would be established at the Gulati Institute of Finance and Taxation (GIFT). The Decentralization Analysis Cell would collect, store, compile and report GP / Municipality level information and service delivery data; as well as carry out a policy advisory function providing independent analysis on the performance of the State‘s intergovernmental fiscal system and service delivery system to provide ongoing policy advice to Government of Kerala and the State Finance Commission on local and intergovernmental fiscal and institutional issues. The key clients of the DAC‘s outputs will include the Department of Local Self Government (LSGD), Department of Finance (DoF), State Finance Commission (SFC), LSGs, and citizens.

2.4 Component 4: Project Management

A Project Management Unit (PMU) has been set up within the LSGD for overall coordination, implementation, monitoring and evaluation of the project. The main activities envisaged under this component are summarized below.

2.4.1 Support for Project Management

The project will provide financing towards office and administrative expenses for the PMU and also provide resources for technical assistance, training of the project team, goods and equipment to augment the LSGD’s capacity in the areas of monitoring and evaluation, contract management, and communication and funding for the annual Performance Assessment and Quality Assessment.

2.4.2 Project Reporting

The project would provide resources to support the project M&E, including monitoring of the project outcome indicators; preparation of annual project report, audited financial reports and semi-annual progress reports, Interim Unaudited Financial Reports, consulting services for preparation and review of documents for the Mid Term Review and project completion reports and workshops for final evaluation of the project. Preparation of a follow-on support prior to closure of the project is also envisaged under the project.

2.4.3 Project Information, Education and Communications

The project information, education and communication activities would include: (i) broad communications about the project including its objectives and expected outcomes, roles and responsibilities of the Gram Panchayats and Municipalities, and (ii) focused IEC to the targeted GPs and Municipalities on eligibility, allocation, rules and procedures of the Performance Grants.

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3. Project Implementation Arrangement

Local Self Government Department (LSGD) has the primary responsibility for project implementation and ensuring that the project development objectives are met. The department is being supported by the PMU established for the project.

The Project Management Unit (PMU) established under the LSGD has the overall responsibility for day to day project management, coordination and monitoring of the project performance in line with the project implementation schedule. It also facilitates day to day decisions for implementation of various components of the project and ensures that the project resources are budgeted for and disbursed, and project accounts are audited. Specifically the PMU is responsible for the following:

• Ensuring timely implementation according to the Project Implementation Manual (PIM);

• Preparing for annual work programs, budgets, annual procurement plans and providing quality control;

• Preparing withdrawal applications for disbursements and for submission to IDA;

• Maintaining consolidated project accounts and arranging for project audits to be done on time and as per specifications;

• Preparing quarterly Financial Monitoring Reports (FMRs), information on financial execution, activity progress as well as procurement progress on all components of the project;

• Supporting coordinating and interacting with Local Fund Audit for Gram Panchayats and Municipalities and with KILA, SIRD and GIFT, the three executive support agencies involved in the project; and

• Ensuring proper implementation of the ESMF and VGDF within the planning process by the GPs and Municipalities.

The PMU under the leadership of Project Director is supported by Deputy Project Director; Financial Manager; Finance Assistant; Procurement Specialist; Environmental and Social Safeguards Specialist; Grant Management Specialist; Capacity Building Specialist; Monitoring and Evaluation Specialist; Communications Specialist; IT Specialist; and other Support Staff.

3.1 Execution Support Agencies

The execution support agencies will implement specific project components and sub components under the overall direction of LSGD.

• The KILA and SIRD will be responsible for executing the capacity building training programs for GPs and Municipalities under Component 2;

• GIFT will be responsible for establishment, governance and functioning of DAC and undertake activities under the overall oversight of the PMU / LSGD;

• Information Kerala Mission (IKM) under the LSGD will support the process of updating legacy data of GPs and Municipalities relating to inventory of assets, infrastructure, taxation, and other revenue related information in the financial management e-system at the LSG level.

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4. Monitoring and Evaluation

Monitoring and evaluation is a critical aspect incorporated in the overall project design. Components 2 and 3 in the project relates to support establishment and improvement of the government’s internal performance monitoring systems and financial and progress reporting. Annual performance assessments would provide LSGD with data to measure the progress of all participating LSGs. Further, the project would also provides technical assistance to review the LSGD’s information systems, rationalize the various reporting streams, and develop the necessary management information systems to ensure sustainability of the interventions introduced in the project.

The project also supports greater accountability and transparency to citizens through social audits, a strong information dissemination strategy to citizens, and support to the government’s grievance redress mechanism. To enhance transparency, accountability and results measurement, two additional reporting will be introduced:

• For upward accountability, a system of semi-annual administrative reporting to the State Government on physical progress and asset creation funded from the performance grant would be introduced. This will be expand to include other expenditures over the life of the project

• For downwards accountability, a local annual budget report and a local plan execution and project report will be disseminated to the public.

For standard reporting to the World Bank, the PMU will prepare the required semi-annual narrative progress reports and quarterly Interim Unaudited Financial Reports (IUFRs). A midterm review would be conducted within 30 months of project implementation to evaluate progress of the project.

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Section 3: Performance Assessment System for Local Self Government

1. Strategic Context of Performance Assessment of LSGs

The process of decentralized governance in Kerala has progressed rapidly since the launch of People’s Plan Campaign (PPC) for the ninth five year plan in 1996 and the state thereafter has devolved greater functions, funds and functionaries to local self-government institutions than any other state in India. The nurturing and strengthening of local self-government institutions by devolving more responsibilities and resources to them has been a result of several radical initiatives and policies of the government since then. The decision to devolve more than a third of the state plan funds to local government as against less than 3 percent during the Eighth plan was rapidly followed by legislative amendments to provide autonomy and power in functions, finance and functionaries to local government. The mapping of functions based on principle of subsidiarity across different tiers of Government was a radical step towards providing functional autonomy to local government in the State.

The successive State Finance Commissions in Kerala has strengthened the fiscal decentralization process and have recommended increasing transfer of state own tax revenue to local self government institutions. The most recent fourth State finance commission recommended transfer of 25-30 percent or more of state plan funds for local governments besides 3.5 percent of State’s Own Tax Revenue (SOTR) for general purpose grant and 4.5 percent of SOTR as maintenance grant for the first year which would increase to 5 percent in the second year and then remain fixed at 5.5 percent thereafter. The commission also recommended allocation of special grants to Gram Panchayats out of development fund based on deprivation index indicating their relative backwardness as compared to other Panchayats. The allocation to LSGs based on the fourth SFC recommendation has increased to Rs.4,160 crore in 2011-12, a significant one-third increase from the allocation for 2010-11.

Local self-government institutions in Kerala have also been given responsibilities for far greater number of services or functions including specific functions related to health and education than other states in the country. For creating an accountable and efficient administrative set-up for LSGs the full time staffs under local government is the highest in the country. Besides full time staff, additional contractual staffs under local government have also been appointed to strengthen the administrative unit.

The Government of Kerala is committed to further expand the decentralization process in the state by enhancing expenditure autonomy as well as the institutional capacity of local government to effectively respond to local service demand and investments from greater discretionary funds flowing to them. The government is also committed to strengthen systems necessary for supporting, strengthening and state oversight of local self-government institutions in the state. The World Bank assisted Kerala Local Government Service Delivery Project is designed with these strategic objectives and aims to enhance and strengthen the institutional capacity of the local government system in Kerala to deliver services and undertake administrative and governance functions more effectively and in a sustainable manner.

An important project component of the KLGSDP is to provide them with additional discretionary funds in the form of performance grants with an intended objective of enhancing expenditure autonomy of local government to respond to the demands for local investments and services. The performance based grants in the project would also incentivize the local government to improve performance in administrative and governance function and build institutional capacities in critical areas related to service delivery; public financial and expenditure management; revenue generation;

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socially and environmentally sensitive project planning and implementation processes; transparency and accountability in procurement and project execution; use of improved ICT based technologies for planning, accounting and reporting; inclusion and services for vulnerable, women and children; participatory decision making process; etc. The performance based grant to LSGs would be based on annual performance assessment in these key performance areas.

The performance grant for LSGs from KLGSDP would provide additional funds for the acquisition of capital assets; capital works; and maintenance and operation of these assets for improving local services. Although the grant to be provided is estimated to be less than 10 percent of the annual total receipt of a Gram Panchayat / Municipality, it will increase the discretionary funding available for capital expenditures significantly by approximately 50 percent in case of GPs and 80 percent in case of Municipalities on an average.

The performance assessment system for the LSGs would be an important mechanism to measure and monitor performance of LSGs and award well performing local government with additional discretionary fund as performance grant during the third and fourth year of the project. The success of the performance assessment system for LSGs would assist the LSGD to monitor and track performance of local governments which would be useful in designing strategies, capacity building programme and institutional support for strengthening local governments. The lessons and learning from performance based grant transfer to LSGs in KLGSDP would create opportunity for exploring performance based grant transfer from state plan fund in future.

2. Purpose and Objectives of Performance Assessment System

The prime objective of a performance assessment system is to measure and monitor the performance of local government in important performance dimensions in areas of governance and service delivery. The performance assessment system would be an important mechanism for strengthening the state’s oversight of local government systems and would complement the concurrent performance audit of LSGs undertaken by the State Performance Audit Office.

The performance assessment system for LSGs has the following objectives:

i) The performance assessment system would be used annually to measure performance of local government to decide annual performance grant allocation under KLGSDP. The annual performance assessment using the performance assessment system would be undertaken by independent agencies / institutions to be appointed by the project.

ii) The performance assessment system would assist KLGSDP to identify specific areas of weakness in governance and service delivery functions in LSGs, for designing targeted capacity development programme and providing need based institutional support.

iii) The performance assessment system would sensitize the LSGs by articulating good practices and performance in governance and service delivery and encourage them to improve their institutional performance. The performance grant fund provided by the project would catalyze LSGs for achieving good governance and encourage them to bring systemic changes in their functioning, administration and processes.

iv) The performance based grants to deserving LSGs would capacitate them with additional discretionary funds to make further investment in local infrastructure and service delivery improvement schemes. The additional resources provided would assist LSGs to bridge the investment gap in critical productive infrastructure and service delivery.

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v) The performance assessment system would ensure that performance of local government are objectively assessed and disclosed in public domain which would create a greater demand on LSGs for improving performance.

vi) The use of performance assessment system for LSGs in KLGSDP would generate useful lessons for future regarding policies related to performance based transfer and allocation of funds for local government in the state.

3. Establishing Performance Assessment System in KLGSDP

The first project component of KLGSDP is to establish a system of annual performance based grant for all 978 GPs and 60 Municipalities in Kerala. The establishment of performance based grant would be undertaken in two phases. During the first two years of Phase 1, the administrative and institutional system necessary for the establishment of full performance based grant will be created. The grant funding to LSGs during the Phase 1 would be based on some basic fiduciary and procedural requirements. During this period the project would undertake systematic capacity development of LSGs for improving institutional performance considered to be currently weak so that LSGs have opportunity to access performance based grants during the Phase 2 period. During phase 2 or from year three onwards, the local self governments will only receive grant funds on the basis of demonstrated institutional performance as measured through an annual performance assessment and procedural requirements. In order to access the grant in any year all participating local bodies will be required to have passed a resolution with respect to participation in the performance grant programme at its commencement. The performance grant in KLGSDP would approximately amount to the `equivalent of $238.6 million (Rs. 1097.56 crore) over four years from IDA and Government of Kerala. The allocation of funds to LSGs will be based on the prevailing State Finance Commission (SFC) recommended approach for grant allocation. The full allocation of performance grant for any year will be divided, according to the allocation formula, amongst those Gram Panchayats and Municipalities qualifying for the grant. The performance grant will be fully additional to the annual SFC allocation for which the institutions are otherwise eligible and the grant will not lapse at the end of the corresponding financial year and can be carried over and used in subsequent years up to the close of the project period. The unspent balance at the end of 2014-15 shall be refunded.

3.1 Allocation of grant in Phase I

The project grant in the first two years was on the basis of LSGs meeting the basic fiduciary access criteria set by the KLGSDP.

Phase 1 - Basic Fiduciary Access Criteria

Grant in Year 1 (2011/12) Grant in Year 2 (2012/13)

“Clean” external audit (not adverse or disclaimed) for 2008/09 External audit for 2008/09 does not include observations pertaining to significant financial management weaknesses.

− “Clean” external audit (not adverse or disclaimed) for 2009/10 and 2010/11

− External audit for 2009/10 and 2010/11 do not include observations pertaining to significant financial management weaknesses.

− Annual Plan for 2010/2011approved by both the council and DPC and a copy availed to LSGD by end of April.

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The Project Management Unit of KLGSDP have undertaken assessment and verified whether LSGs have met the Grant Access criteria set for phase 1 period and the Government based on the recommendation of the PMU for grant allocation have released the grants to the eligible local bodies in the first two years.

3.2 Allocation of grant in Phase II

The allocation of grant to LSGs in Phase II from third year onwards would be performance based grants for which annual performance assessment of LSGs would be conducted on key institutional performance criteria.

In order to access the grant all participating local bodies will be required to a) meet a set of mandatory minimum conditions in full; and b) achieve a certain score against a set of performance criteria. An Annual Performance Assessment will be carried out between September and December each year during which performance against mandatory minimum conditions and performance criteria will be measured. This will be conducted by one or more independent organizations contracted by the PMU and the results of each assessment will be independently validated on a sample basis.

3.3 Minimum Mandatory Conditions for LSGs

Local government institutions would have to qualify certain minimum mandatory conditions (MMCs) to be considered for performance grant provided they additionally achieve a certain level of score in annual performance assessment. The minimum mandatory conditions for the LSGs are elaborated in Project Implementation Manual (PIM) which have been jointly fixed by the KLGSDP and the World Bank and has been approved by the Government. The MMCs relate to primary institutional performance in four key performance areas: (i) Planning and Budgeting; (ii) Project Execution and Service Delivery; (iii) Accounting, Financial Reporting and Audit; and (iv) Participation, Transparency and Accountability.

LSGs are expected to attain the most primary and basic institutional performance in the above four areas first, before they are considered for performance grant provided they qualify the minimum performance score set for annual performance assessment in each year. LSGs failing to meet one or more of the MMCs even if they qualify the minimum performance score would not be eligible for performance grant.

3.4 Performance Criteria for LSGs

KLGSDP has identified four areas to measure institutional performance of LSGs during annual performance assessment: (i) Planning and Budgeting; (ii) Project Execution and Service Delivery; (iii) Accounting, Financial Reporting and Audit; and (iv) Participation, Transparency and Accountability. The four performance areas for LSGs have been selected to cover all key dimensions of institutional functioning that affects governance and service delivery.

Each performance area comprise of several themes that cover different dimensions of functionality in LSGs. The performance of LSGs in each area would be measured through performance criteria set for different themes and sub-themes. The performance parameters / criteria selected for the performance assessment system factors all key institutional functioning that are relevant and considered to be important for effective governance and service delivery. Enactment of recent legislation such as Kerala Right to Service Act 2012 and new guidelines and directives by the Government such as Procurement Guideline, Public Works Rules, development planning process,

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Environment and Social Management Framework for KLGSDP financed sub-projects, performance in revenue generation, status of implementation of software developed by IKM, etc. have been considered as emerging performance areas for LSGs and has been included as performance criteria. The performance benchmarks selected for LSGs are based on institutional performance considered important presently and also those which are likely to be focussed in coming years. Recent legislations, directives and government orders clearly indicate the priority areas of performance of LSGs in near future and all such areas has been given due weightage in the performance assessment system.

The distribution of performance score across performance criteria has been decided based on the relative importance of each performance dimension. Priority of the government and KLGSDP in strengthening institutional performance of LSGs has been the key rationale in allocation of performance scores. The total attainable performance score has been set at 100 and the LSGs would be expected to achieve a certain minimum score out of 100 in each year. The cut-off level of performance score that LSGs must qualify for performance grant would progressively increase every year. This would encourage the LSGs to make substantive efforts to improve institutional performance for receiving performance grants in subsequent years.

3.5 Performance Scores

As mentioned earlier that depending on the cut-off level of performance score set annually, the LSGs would be shortlisted for performance grant fund provided they pass all the MMCs and have attained the minimum score. The year wise qualifying performance scores as fixed by the KLGSDP is given below.

Minimum scores required for each year

Year 2012/13 2013/14 2014/15 2015/16

Minimum score 50 60 70 80

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Section 4: Performance Assessment Framework

The allocation of performance based grant to LSGs under KLGSDP would be based on annual performance assessment of LSGs using the Performance Assessment System elaborated in this section. The performance assessment framework presents the design and elaborates the performance areas, themes and sub-themes; the performance criteria; the performance score and its calculation; the means of verification and the assessment methodology that would be used for annual performance assessment of LSGs.

The following parameters have been factored in the proposed framework

• The performance assessment framework is based on the project strategy and implementation plan, which identifies main areas for institutional strengthening of LSGs and also the key performance parameters for the performance assessment system

• The legal and administrative context of LSGs in Kerala and prevailing legislations, rules, guidelines, and government orders applicable to LSGs have been considered in the design of the framework

• The priorities of the government and the project in strengthening LSGs for promoting effective governance and service delivery has been used in identification of themes, sub-themes and performance criteria for LSGs

• The means of measurement and verification methodology is based on the existing systems of planning and reporting followed by the LSGs in the state

• The proposed process for performance assessment is highly participatory where LSGs would have fair and equal opportunity to engage and agree with the process and its findings

1. Performance Dimensions of LSGs

The Constitutional amendment and the related state legislations mandates the local governments with the primary task for preparing and implementing plans for economic development and social justice. The assignment of functions to local government from various subjects listed in XIth and XIIth schedule of the Constitution devolves the responsibility of planning for assigned functions to these institutions. The decentralized planning process in Kerala has evolved in phases since launch of People’s Plan Campaign in 1996. The identification of people’s need and development priorities through Gram Sabha, preparation of development report by representatives, formulation of plan by different working groups, development seminar at the Panchayat level, etc. are some of the important elements of the decentralized planning process followed. The Planning and Budgeting therefore is an important area of performance for local governments and the extent to which the development planning process is adopted is an important performance dimension.

The primary function of local government institutions is governance; particularly with respect to ensuring that provisions for basic services and infrastructure are made for the citizens. The devolution of functions, funds and functionaries to local government institutions and the functional, financial and administrative autonomy provided through legislations intends that local government should make necessary investments in infrastructure and service delivery. The grants to local government from state (both, plan and non-plan) and union (centrally sponsored schemes and central finance commission) are primarily aimed at encouraging these investments. Therefore the

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performance of local government in Project Execution and Service Delivery is another important dimension that has been considered.

The local government as custodian of public funds has several public financial management responsibilities. The financial management systems of LSGs are governed by various provisions of Kerala Panchayat Raj Act (KPR Act), Kerala Municipal Act (KM Act), Kerala Panchayat Accounts Rules, Kerala Municipal Accounts Manual, Kerala Financial Code, guidelines, standing orders and instructions of Government. Notably, LSGs must ensure proper maintenance of accounts, prepare and submit financial reports to government and subject its financial systems to audit by Local Fund Audit Department. The performance of LSGs in accounting, financial reporting and audit reflects that the public funds placed with local government have been spent fairly, prudently and efficiently.

The most persuasive Raison d'être for local government is that they are responsive, transparent, participatory and accountable to the people, particularly those from the deprived and vulnerable sections. The process of democratic decentralization in Kerala has been based on this fundamental premise and has focused on empowering people through people’s participation in the governance process. Efforts such as committees of beneficiaries, right to information, citizen’s charter, social audit, performance audit and the most recent Right to Service Act has been to ensure that local government are transparent and accountable to citizens. The Tribal Sub Plan (TSP), Women Component Plan (WCP) and Special Component Plan (SCP) under development fund transferred to local government are earmarked to provide special attention to vulnerable sections. The performance of local government in ensuring participation, transparency and accountability is clearly one of the most important performance dimensions.

The progress of decentralized governance in the state has focused on these four most important functional dimensions of local government and therefore they have been included in the performance assessment system for LSGs. The performance assessment of LSGs would be undertaken in the following four broad areas:

i. Planning and Budgeting

ii. Project Execution and Service Delivery

iii. Accounting, Financial Reporting and Audit

iv. Participation, Transparency and Accountability

2. Performance Assessment Themes

In each of the four performance areas there are several important performance assessment themes that are relevant for the LSGs. These performance themes relates to administrative and governance functioning of LSGs within the prevailing legislative and established guidelines of the government. Among several possibilities, the most important performance themes relating to function, systems and processes of local government that are aimed to be strengthened in KLGSDP and those reflecting current priorities of the government have been included in the performance assessment system.

2.1 Planning and Budgeting

Planning and budgeting for implementing development programme are the core functions of local government. One of the principal objectives of the democratic decentralization process in the state so far has been to ensure that the development planning process is bottoms-up and is based on

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people’s own plan in order to ensure that it is inclusive, participatory and is based on local requirements and demand.

The development planning process of the local government is the most important theme considered under planning and budgeting area. In this regard, the preparation of plans and budget by LSGs are primary responsibilities and obligation and therefore they have been set as Minimum Mandatory Conditions for LSGs in planning and budgeting area.

2.1.1 Performance Themes for Planning and Budgeting

2.1.1.1 Development Planning Process

Proper plan development process is an important performance theme for local government since the quality of the process has a significant bearing on the development outcomes for the people. To ensure that local government follow a robust planning process the State Government has issued guidelines1 for the 12th Plan Period (2012-17) and the compliance to it has been included as a performance criteria.

The compliance with the recommended development planning process for the LSGs has several requirements which are intended to ensure that the development plans are prepared through a bottoms-up participatory process in order to provide sufficient opportunity to people and people’s representatives to effectively participate and contribute to the process. These dimensions are important quality parameters for the development process adopted by LSGs and have been included as Objective Assessment Criteria (OAC) in order to assess the performance of LSGs.

a. Development Report and Five Year Perspective Plan

The process of decentralized planning starts with the needs identification in the Gram / Ward Sabhas that ensures that people, elected representatives and local government officials deliberate on local development perspectives and to determine local needs and priorities. Based on these priorities and analysis of related data / information a detailed development report for each LSG is prepared. The preparation of development reports by LSGs is an important performance yardstick since local problems and needs are reflected in development plans prepared subsequently.

The LSGs are expected to prepare Five Year Perspective Plans to commensurate with plan period duration which can provide longer term perspective to development goals. The local governments in the state have been making efforts to prepare five year plans from the Eleventh plan period and in the Twelfth plan period it has been made mandatory. The development reports are now being drawn keeping in view both annual and five year plans.

The preparation of development reports and the Five Year Perspective Plan by LSGs for the current plan period have been included as one of the first compliances to Government guidelines applicable for Twelfth plan period. The guidelines also recommend specific forms to be used by LSGs for preparation of perspective plans.

b. Working Groups for Developing Planning

The sector or subject wise task force for formulation of the local plans based on the development issues and solutions suggested in Gram / Ward Sabha and Development Seminar is an important participatory mechanism introduced in People’s Plan Campaign in the state. The task force now renamed as Working Group has responsibility for preparing shelves of projects on concerned subject with full details covering detailed analysis, outcomes, beneficiaries, activities, work plan, 1 Government Order - GO (Ms) No. 168/12/LSGD dated 15-6-2012 and GO (Ms) No. 225/12/LSGD dated 18-8-2012

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budget and impacts. Formation of different subject wise (sector) working groups according to the necessity and preparation of status report and project proposals have been recommended by the Government for preparation of the plan for the current plan period. The formation of Working Groups and their role in planning process has been considered as one of the assessment criteria to measure compliance to the recommended development process by Government.

c. Review of Plan Proposals in Gram / Ward Sabhas

Gram or Ward Sabhas have an important role in seeking public opinion and vetting plan proposals being suggested by the different Working Groups. The guidelines for preparation of plan for the 12th plan period stipulates that status report and draft project proposals prepared by different working groups would be discussed and the Gram / Ward Sabha would take decisions regarding preparation of final draft proposals by the Working groups for submission to LSG council / committees for further discussion in Standing Committee as well as in Development Seminar. Organizing Gram / Ward Sabhas for review and discussion on project proposals prepared by working groups and making recommendations is an important contribution to the participatory planning process and therefore has been included as one of the assessment criteria for LSGs.

d. Recommendations on Plan Proposal by Standing Committees

The prescribed standing committees have important functions in making final recommendation on project proposals for inclusion in plan prepared by LSG. The stipulated standing committees2 for Gram Panchayats (four) and Municipalities (six) have the responsibility in directing working groups functioning under them and approving plan proposals before making final recommendation to LSG committee / council under recommendation of Standing Committee of Finance. The role of standing committee in approving and recommending project proposals for plan has been set as one of the assessment criteria for LSGs in order to assess compliance to the recommended development planning process.

e. Organizing Development Seminar

Development Seminar is one of the unique features of the decentralized development planning process followed in the State. The present guideline for plan preparation also gives special emphasis on organizing development seminar to discuss the development report and project proposals and make suggestions and changes before submitting to LSG governing body for approval. Organizing the development seminar for recommending the final development report and plan proposals to LSG has been included as one of the performance indicator for the planning process.

2.1.2 Minimum Mandatory Condition for Planning and Budgeting

Preparation of annual plan and budget are primary functions of the local government and the minimum mandatory conditions relates to timely and accurate preparation of annual plan and budget and its submission to Government.

Annual Budget

Section 214 of Kerala Panchayat Raj Act, 1994 and Section 293 of Kerala Municipality Act, 1994 prescribes the preparation of budget and its approval for each financial year for local government. The budget prepared by the respective standing committee before 15th January every year is

2 Finance, Welfare, Education and Health and Development Standing Committee in Gram Panchayats while Finance, Welfare, Education, Arts & Sports, Public Works, Health and Development Standing Committee in Municipalities are stipulated.

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submitted to the Standing Committee for Finance which then prepares a budget for the ensuing year and present it before the Committee / Council before the first week of March for approval. The LSG committee / council before the end of March approves the budget for the ensuing financial year and submits a copy of the approved budget to the LSGD through Deputy Director of Panchayats or Regional Joint Director (Urban Affairs). The annual budget for the ensuing financial year needs to be prepared in prescribed format by the local government.

The prescribed format for preparation of annual budget by the Gram Panchayat comprises of

Form 1: Function Group-wise Abstract of the Budget

Form 2: Budget Summary for the Year

Form 3: Detailed Budget

New Forms (1 to 3) for preparation of budget for 2013-14 by Panchayats was introduced by IKM and this was accepted by the department and the Deputy Directors of Panchayats endorsed it to the Panchayats3. The new format is in the implementation stage.

The Kerala Municipalities (Preparation of Estimates of Receipts and Expenditure) Rules, 1962 prescribes that the annual budget is prepared in Form A(i), A(ii), A(iii), B, C, D and E by Municipalities.

The Comptroller and Auditor General of India (CAG) have prepared the National Municipal Accounts Manual for use by all Municipalities in India, which have been adopted by the State Government. The Manual prescribes a new set of forms for Municipalities for preparing budget, which is under implementation.

Form Bud- 1. Budget estimation sheet

Form Bud- 2. Budget estimate Consolidation format

Form Bud- 3. Summary of budget

Form Bud- 4. Major account head wise budget

Form Bud- 5. Summary of function wise budget

Form Bud- 6. Summary of field wise budget

Form Bud- 7. Summary of function wise budget

The use of correct form for preparation of annual budget before beginning of the financial year and its submission to Government within succeeding month is one of the minimum mandatory conditions of performance for LSGs in planning and budgeting area.

Annual Plan

The main duty of local government is to prepare plan for implementation of schemes for economic development and social justice in matters as assigned to them from those listed in the Eleventh and Twelfth schedule of the Constitution. The annual plan of the local government needs to be prepared in prescribed format and approved by the Committee / Council before it is submitted to District Planning Committee (DPC) for their scrutiny and approval.

3 In order to have uniformity and to suit with system of accounts in Saankhya, IKM developed a new format for budget of Panchayats and published it in www.lsg.kerala.gov.in/news/archiveDetails.php?id=209 on 7-3-2013. The broad guidelines and procedures to be followed and the forms to be used are given therein.

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The State Government has issued guidelines4 for preparation of annual plans for the Twelfth plan period and it is mandatory that all plans are prepared in Sulekha software (developed by IKM) and all relevant forms (Annexure 1 to 6) is used for uploading plan data. The prescribed forms to be used for plan preparation are

Annexure 1: Relates to projects in which beneficiary selection is required

Annexure 2: Relate to general construction work and procurement for general purpose

Annexure 3: Relate to projects relating to public services

Annexure 4: Relate to spill over projects

Annexure 5: Form for verification and approval of plan by higher authorities

Annexure 6: Form to be submitted for approval of Environmental and Social Management Framework (ESMF) for KLGSDP grant funded projects

Considering that the timely preparation of annual plan in prescribed formats and its submission is an important obligation for local government, the same has been set as one of the minimum mandatory condition of performance for LSGs. Section 175 of Kerala Panchayat Raj Act and Section 51 of Kerala Municipality Act obligates LSGs to submit their development plans for approval to DPC within prescribed time and hence it would also be considered as a necessary compliance for LSGs under this condition. The LSGs are also required to submit a copy of the approved annual plan to the LSGD through Deputy Director of Panchayats or Regional Joint Director (Urban Affairs) before 25th of March as per Government directives. Now the Deputy Director of Panchayats or the Regional Joint Director of Municipalities has the option for viewing the approved plans through Sulekha software. For the performance assessment the annual plan for financial year preceding the assessment would be considered.

Minimum Mandatory Conditions: Planning and Budgeting

1. Budget for the current financial year prepared and approved by the Committee / Council of LSG and copy availed to LSGD by the end of April of the succeeding financial year

2. Annual Plan for the financial year preceding the assessment approved by both the Committee / Council of LSG and DPC

2.1.3 Performance Benchmarks for Planning and Budgeting

As elaborated earlier, in planning and budgeting area, “Compliance to Development Planning Process” has been selected as a performance theme for the performance assessment system. The strategic context of the objective assessment criteria related to the theme have also been explained in the previous section. The performance benchmark for Planning and Budgeting is summarized below.

4 GO/MS No. 233/2012 LSGD dated 7-9-2012 issued by State Government with respect to preparation of plan for 12th plan period

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Compliance with Development planning process Objective Assessment Criteria

1. Working groups are formed and they are involved in the planning process

2. Gram / Ward Sabhas / Oorukootam (Tribal hamlets) have discussed the plan proposals and made recommendations

3. Standing Committees have recommended projects to LSG Committee / Council for approval

4. Development Seminar as prescribed was conducted for discussion of Plan Proposals for Perspective Plan

5. Development Report along with the Five Year Perspective Plan for the current plan period prepared by LSG in prescribed format and approved by the LSG Committee / Council

2.2 Project Execution and Service Delivery

Improving service delivery is perhaps the strongest rationale for decentralizing governance and much of the discourse surrounding decentralization has focused on the responsibility and accountability of local government in bringing service delivery closer to people. The local governments have Constitutional mandate to “govern” including governance of service delivery institutions transferred to them. The effectiveness of the governance in creating and enhancing provisions of basic services for people that can accelerate local development, social justice and protection, and economic growth is an important performance parameter.

Effective governance for improving service delivery requires that schemes and projects for local infrastructure and service delivery are implemented properly and in time; development funds and grants are utilized prudently; own revenues are raised / mobilized for meeting expenditure; projects are executed in socially and environmentally sensitive manner; and information technology and e-governance systems are effectively used for governance and management.

2.2.1 Performance Themes for Project Execution and Service Delivery

The performance of local government in Project Execution and Service Delivery has several themes, which are elaborated below.

2.2.1.1 Expenditure Performance

The local governments have primarily three sources of finances; i) Own Source Revenue comprising of both Own Tax Revenue and Non Tax Revenue, ii) State Transfer comprising of General Purpose Grants / Funds, Development Funds and Maintenance Grant for both road and non-road assets, and iii) Central Transfer for implementation of centrally sponsored schemes.

The state government fund includes State Finance Commission grants and allocation for state sponsored schemes, besides state share of centrally sponsored schemes. The grants from the state government are routed through Public Account where as funds for State Sponsored Schemes (SSS) and state share of Centrally Sponsored Schemes (CSSs) are routed through State Level Nodal Agencies (SLNAs)5 and Poverty Alleviation Units (PAUs).

The Central Government fund comprises of Central Finance Commission Grants and funds for centrally sponsored schemes (10 schemes in 2010-11). The receipt of funds for Jawaharlal Nehru 5 Kudumbashree, Kerala Sustainable Urban Development Project (KSUDP) and Suchitwa Mission are the important State level nodal agencies for implementation of sponsored schemes in the State.

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National Urban Renewal Mission (JNNRUM) and Basic Services for Urban Poor (BSUP) is released through State budget and for other schemes through SLNAs and PAU.

The Own Tax Revenue of local government comprises of five major taxes - Property tax, Profession tax, Entertainment tax, Advertisement tax and Service Tax. The Non Tax Revenue of Local Government comprise of fees (market, license, registration, etc.), permits, levies, rent, user charges and other non tax revenue levied on over 30 different items by LSGs.

The State Transfer to LSGs comprises of General Purpose Fund, Development Funds and Maintenance Grant from state own tax revenue (SOTR). The General Purpose Fund (GPF) is the share of state own tax revenue6 transferred to LSGs for meeting their establishment costs and obligatory expenses (core service expenses). The Development fund7 to LSGs comprises of flow from State non-plan revenue, World Bank fund, allocation by central finance commission grant (both, general basic grant and general performance grant) meant for development purposes. The Maintenance Grant8 is divided in the ratio of 2:1 for road and non road assets respectively to meet the maintenance requirement of assets of LSGs (for the current 12th plan period).

LSGs are responsible for preparing annual plan and budget for executing projects for development and service delivery from Development funds released by the State Government. Project execution and expenditure performance are the most critical performance parameters for LSGs considering that substantial share of the state plan outlay is being transferred to local government. The report on supplementary audit undertaken by CAG for the year ending 2011 makes the following observations; indicating the need for improving project execution and expenditure performance among LSGs in the state.

Section 2.1.2: The LSGs (all tiers) in the state formulate 199,378 projects with a total estimated outlay of Rs. 10,500.9 crore in 2010-11 out of which the LSGs have taken up 147,222 projects and has spent Rs. 3521.88 crore and have completed 60,495 projects (33.5 percent) only.

The details of project taken up and expenditure incurred for 2010-11 shows that Gram Panchayats formulated 157,242 projects of which 119,049 projects (75.7 percent) were taken up and out of the total outlay of Rs. 6,589.84 Crore only 32.39 percent (Rs. 2,134.71 Crore) was spent. Similarly, in Municipalities 11,883 projects were formulated of which 8,937 projects (75.2 percent) were taken up and out of total outlay of Rs. 709.65 Crore only 31.08 percent (Rs. 220.55 Crore) was spent in 2010-11.

Considering the importance of project execution and expenditure performance the State Government and World Bank has agreed to set expenditure performance as one of the Minimum Mandatory Conditions for LSGs to be eligible for performance grant fund. Initially the expenditure performance of 80 percent of KLGSDP grant fund was set as a minimum mandatory condition. However, considering the importance of expenditure performance for all development funds, the MMC was revised for total development fund comprising of KLGSDP grant fund, General Capital fund, Special Component Plan and Central Finance Commission Grant received by LSGs. The expenditure performance of LSG has also been set as one of the important performance criteria to identify better performing LSGs.

6 The General Purpose Fund recommended by the fourth State Finance Commission is 3.5 percent of the SOTR using the tax collection figures of two years back allocated among different tiers of local government. 7 The Development Fund recommended by the fourth SFC is 25 percent of the plan size for 2011-12 and would progressively increase to 30 percent in 2015-16. 8 The fourth SFC recommended maintenance grant is 4.5 percent of the SOTR in 2011-12, which would progressively increase to 5.5 percent in 2013-14 and remain at that level till 2015-16.

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2.2.1.2 Project Execution

Expenditure performance is directly related to performance in execution of projects planned by LSGs. Considering the importance of timely execution of projects planned from development fund, particularly the Capital works / infrastructure; one of the minimum mandatory conditions has been set accordingly. For minimum mandatory conditions the capital works and acquisitions funded from KLGSDP grant fund only is being considered for the time being, which can be extended to cover all fund categories within Development fund as well as use of Maintenance fund in subsequent years. Considering that fund release from KLGSDP has been in the later months of the financial year, the indicator has been relaxed to measure off-take of projects instead of completion for the time being. Once the fund flow is streamlined and is disbursed to LSGs in the beginning of a financial year, the LSGs would have sufficient time to complete all planned capital works and then completion of projects would be measured for the MMC.

Though the MMC only considers performance in execution of projects from KLGSDP grant fund, the performance criteria includes performance in capital works and acquisition from all components of the development fund. The criteria would measure the extent to which LSGs were able to complete projects earmarked in a financial year as per the approved annual plan.

One of the indicators of timely project execution is that all planned capital projects from development fund are implemented during the year itself and there is no spillover of projects. However, this might not be always feasible considering the timeframe in which the funds are released to LSGs and therefore spillover of few projects to next year cannot be avoided at present. But, it is expected that there would not be any spillover of projects beyond next year if the LSGs execute all the planned projects in a timely manner. Considering the importance of this issue one of the performance criteria for LSG has been set to assess whether there are projects with extraordinary delay or if there are spillover of projects beyond the immediate next year.

2.2.1.3 Permissible Projects from KLGSDP grant fund

Two normative guidelines are applicable for capital works / projects to be financed through KLGSDP grant fund. The Environment and Social Management Framework (ESMF) of the projects clearly stipulates the negative list of projects that cannot be financed from KLGSDP grant fund. The same has been dealt later as part of the ESMF theme.

The state government in order to ensure that KLGSDP grant fund is used as gap fund for investment in creation and maintenance of capital assets have issued guidelines for the LSGs. According to government order9 the grant fund shall be utilized only for capital assets and provides a list of projects not permissible from KLGSDP grant fund. However, it came to the notice of the Government that certain LSGs have used the fund for works included in negative list issued earlier through government order. The Government subsequently issued another order10 providing detailed list of projects (containing 55 items) that cannot be permitted through KLGSDP grant fund.

The compliance to government order regarding the permissible projects from KLGSDP grant fund has been set as one of the performance criteria for LSGs to ensure that investments from the project are made in the appropriate sectors where funding requirement is higher.

9 GO (ord) No. 1731/2011/LSGD dated 20-07-2011 on use of KLGSDP grant fund. Annexure to GO gives a list of projects not permissible from the grant fund. 10 GO (ord) No. 2668/11/LSGD dated 15-11-2011 giving a detailed negative list of projects not permissible from grant fund.

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2.2.1.4 Environmental and Social Safeguards during Project Execution

Compliance with the environmental and social safeguard during the implementation of the project is an important performance parameter for local government and reflects commitment of LSGs to social and environmental concerns and adoption of socially and environmentally responsible project execution. The role of local government for ensuring development of deprived and vulnerable groups and women is also reflected in the Transparency and Accountability performance area.

The Environment and Social Management Framework prepared for KLGSDP is an important process oriented mechanism to encourage environmentally and socially sensitive project planning and execution by LSGs. For the time being the framework is applicable to projects executed from KLGSDP grant fund, but in subsequent assessment the framework or any other framework as prescribed by Government and as applicable to different grants made available to LSGs can be considered.

The application of ESMF for projects from KLGSDP grant fund has three stages: ESMF Planning, ESMF compliance or implementation of mitigation measures and ESMF monitoring. LSGs are responsible for ESMF planning and implementation during project execution, while the PMU is responsible for its monitoring.

Considering the high importance of ESMF in Bank assisted projects, several performance parameters have been selected for the assessment. Equally there is a growing concern in Government regarding integration of environmental concern in planning process of local government and investment for promoting them. Successive five year plan has also stressed on inclusive development and growth along with environmental concerns and sustainability.

The fourth SFC recommended establishment of Biodiversity Management Committees in Gram Panchayats and preparation of People’s Biodiversity Registers (PBRs) in all Panchayats from Development Fund to confirm with the provisions of Section 42 of the Biological Diversity Act 2002 (Section 11.1.25), which has been accepted by the Government. It also explored the feasibility of special grants rain for financing projects related to water harvesting as well as capacity building for Urban Local Governments in solid waste management, but recognized that alternate sources of financing these projects are available and hence no recommendation was made (Section 2.27). The fourth State Finance Commission also made the following observation on trees outside forest and biodiversity (Section 2.8)

Promotion of Tree Growth in Non Forest Areas Act, 2005, of the State also confers on the Panchayats the responsibility of planting trees in non forest areas, conducting census of trees, raising of nurseries for production of seedlings etc. All these indicate that the Panchayat Raj Institutions have to play a proactive role in the fields of afforestation and biodiversity conservation in non-forest areas. All Panchayats, therefore, need to be assisted as per the statutory position and as also to promote the rich biodiversity of the State which is facing increasing threats.

The Environmental and Social Management Framework for execution of project is likely to gain considerable importance for Government in the years to come with growing concerns for environment, biodiversity and natural resources. In future ESMF mechanisms which are currently applicable to only KLGSDP funded projects might be extended to cover all projects from the Development fund.

The compliance to ESMF during project planning requires screening of projects as per regulatory list prescribed in the framework, regulatory clearance if necessary, conducting Limited Environment & Social Assessment (LESA) for sensitive projects and identification of mitigation

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measures to be adopted. The ESMF screening formats to be attached with Detailed Project Report (DPR) should mandatorily contain all these details for project sanction. The compliance to ESMF screening and planning process through use of appropriate ESMF forms has been set as one of the minimum mandatory conditions to ensure that all KLGSDP grant funded projects are ESMF compliant.

The implementation of ESMF safeguards during project execution is one of the performance criteria to measure whether LSGs have actually implemented all planned mitigation measures to ensure that no adverse environmental impact arise as a result of the projects. The performance would be measured through ESMF compliance verification process.

ESMF guidelines for projects under KLGSDP have been recently introduced for the LSGs and hence the project has undertaken systematic training to build capacity of LSGs to apply them during project execution. Since, availability of trained personnel at LSGs is crucial for successful application of ESMF in project execution, the same has been set as one of the performance criteria. It is anticipated that at least one of the elected members of LSG and one of the official with LSG responsible for ESMF are trained and available for ESMF compliance.

The ESMF for KLGSDP prohibits activities involving involuntary land acquisition and is specified in the regulatory list for the project. It is one of the critical social safeguard recommended in ESMF to ensure that land acquisition if necessary is voluntary and follow the prescribed process recommended by the Government. In such cases it is mandatory for LSGs to obtain singed undertaking by the donor stating that the donation is voluntary and the donor is freely relinquishing all his rights. The land donation must be reported in Gram Sabha and the legal transfer of title to the land must be obtained. This should be done only after payment of compensation to the affected persons in deserving cases. In order to discourage involuntary land acquisition for activities / projects funded through KLGSDP this has been set as one of the performance criteria.

2.2.1.5 Procurement of Goods, Works and Services

The LSGs in the state are receiving substantial share of the State’s fund for implementation of projects and schemes, which involves procurement of Goods, Works and Services. Since the procurement of Goods, Works and Services are entirely carried out by LSGs for funds transferred to them; they are responsible for adopting robust procurement system which is economic, efficient, transparent, prudent and fair. The LSGs as a custodian of public funds have obligation to follow procurement system and management which are consistent with good fiduciary practices and to be accountable to Government and citizens for all procurement decisions.

The procurement by LSGs is governed by applicable rules of the Government. The Kerala Stores Purchase Rules applicable to LSGs earlier for procurements of goods have been replaced by new Procurement Guidelines11 issued by Government in 2010 for procurement of goods and services. For execution of public works by LSGs, The Kerala Panchayat Raj (Execution of Public Works) Rules, 1997 and The Kerala Municipality (Execution of Public Works and Purchase of Materials) Rules, 1997 and Consolidated Works Rules for LSGs issued vide Govt. Order no. 2565/DA1/2011/LSGD dated 12-01-2011 is applicable presently. These rules provide the legal framework for all procurements to be undertaken by LSGs in the State including those from KLGSDP grant fund.

11 The Government Order GO (P) No. 259/2010/LSGD dated 8-11-2010 provides detailed guidelines for procurement of goods and services in Local Self Governments in Kerala

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Apart from the above applicable rules the procurement by LSGs from KLGSDP grant fund would also be subjected to certain Special Conditions mentioned below as provided in Section 7.1.1 of Project Implementation Manual.

1. The use of DGS&D Rate Contracts or Rate Contracts established by Kerala Medical Services Corporation will be subject to a maximum per contract value of $50,000. For procurement up to the value of $50,000 per contract, Rate Contracts established by autonomous and commercially operating state corporations and agencies which are not under the LSGD, if available, can be considered as one of the 3 quotations/tenders. It is essential to invite quotations/tenders in all such cases, if funding from Bank supported project is used.

2. Direct Contracting using Block Grants will be carried out only when the conditions of (i) extension of an existing contract; (ii) standardization of the item being purchased; (iii) proprietary and obtainable only from one source and in (iv) in exceptional cases, such as in response to natural disasters.

3. Kerala Works contracts Rules allows for 2 stage pre-qualification and tendering above Rs 10 million (approximately $210,000). Use of funds for works contracts shall not follow 2 envelope/stage procurement processes.

4. Negotiations will not be carried out with any bidders including the lowest bidder. In the event the bid prices are considerably above the estimated budget and a fresh bidding is not expected to result in better offers and the need for negotiations arise, these shall follow the guidelines set by the Central Vigilance Commission, Govt. of India.

Quality of procurement process followed by LSGs is an important performance parameter since LSGs are accountable for funds used for procuring goods, works and services intended for improving infrastructure and services. There are four important dimensions that are important regarding procurement process followed by LSGs.

Compliance with Recommended Procurement Process

The main focus of the new procurement guidelines for LSGs is to ensure that all procurements are competitively, economically, efficiently, fairly and transparently undertaken so that public money is prudently and wisely spent. Consequently, LSGs need to follow the procurement guidelines issued by Government, which is an important performance dimension.

The LSGs must comply with the following aspects of procurement as prescribed in the guidelines

• All procurement must be through Competitive Methods prescribed for different threshold values set by Government, except for those through Community / Beneficiary based direct implementation.

• Procurement opportunities must be widely circulated through notice board or newspaper advertisement for greater participation and competition among bidders / suppliers

• Quotations, Tender Document and Request of Proposal as applicable must give full description of specification or scope of work and all associated procurement conditions to ensure that there are no omissions that can affect the satisfactory and timely delivery of procurement

• Quotations, Tender Document and Request for Proposals must not indicate brand name or tweak specifications or references that can potentially favor a select set of bidders / suppliers and discourage others from participating in procurement process

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• Public opening of quotation or tender to be followed as per prescribed guidelines for transparent procurement process

• Rejection of quotation / tender is permissible only with adequate reasons as specified in procurement guideline to ensure that suppliers / bidders are not eliminated on frivolous grounds

• Price negotiation with any bidder / supplier is not allowed, except for tenders where lowest evaluated tender or preferred bidder exceeds pre-tender cost estimates, but in such cases the prescribed procedure for price negotiation laid down in the procurement guidelines has to be followed

The performance of LSGs in complying with procurement guidelines would be applicable to procurements made from both KLGSDP grant fund and other Development fund provided to LSGs. However, the performance of LSGs in adopting procurement guidelines for KLGSDP grant fund would have comparatively more weightage than other development fund as per the principles elaborated earlier. The procurement review for performance assessment would be undertaken for all types of procurement, goods, works and services on a sample basis, since it would be difficult to review all procurements undertaken during a year.

Documentation of Procurement Process

The procurement guidelines for LSGs issued by the Government for procurement of goods and services and the Execution of Public Works Rule applicable for public works by LSGs prescribes maintenance of proper records for each procurement undertaken. The detailed record of procurements to be maintained by LSGs ensures that the process followed is well documented and qualifies all legal and public scrutiny. Consequently this has been set as another performance indicator for LSGs.

The LSGs are expected to maintain at least the following details related to procurement for this performance parameter

• Proceeding / Minutes of Quotation / tender opening signed by participants and bidders / suppliers

• Comparative statement of bidders used for evaluation of tender

• Minutes of procurement committee meeting for selection of bidder / supplier

• Supply / Work order/agreement to successful bidder / supplier

Procurement Complaint Redressal

The procurement guidelines for the LSGs prescribe that a register of complaint redressal related to procurement shall be maintained by LSGs with full details of complaints. It is mandated that the complaint register would be regularly updated and actions taken by LSGs against each complaint would be recorded. The complaint register is also subjected to concurrent audit by auditors appointed by the Government. Maintaining the prescribed procurement complaint register and resolving all complaints received by the LSGs is another performance parameter included in the performance assessment system.

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Social Audit Committee for Procurement Monitoring

The role of Social Audit Committee in procurement monitoring has been envisaged as an important mechanism for transparent and prudent use of public resources in the revised guideline for procurement in LSGs. Social Audit Committee would undertake monitoring in all critical stages of the procurement cycle to ensure transparency in procurement and to improve efficiency, productivity and quality in the delivery of goods and services. The constitution of Social Audit Committee as per prescribed guidelines and procurement monitoring has also been added as an important performance indicator under procurement performance of LSGs.

2.2.1.6 Service Delivery Infrastructural Facilities

Local self governments have the obligation and duty to develop infrastructural facilities required for basic service delivery. Basic services include drinking water facilities, toilets, street lights, markets, anganwadis, basic infrastructure in scheduled caste and scheduled tribe colonies, waste disposal system, etc. Creating basic and essential service delivery infrastructure is one of the key performance areas of LSGs and accordingly the same has been included in the performance assessment system. However at present the availability of service delivery infrastructure varies widely across institutions and there are no well established normative guidelines at the national and state level for all basic infrastructures that should be made available to public. In fact what constitutes the basic infrastructure itself has several opinions and there is no single yardstick or definition regarding basic infrastructure in rural and urban area. There are some guidelines for establishment of anganwadis, or amount of safe drinking water per capita per day that should be made available, but by and large for all other infrastructure such normative guidelines are yet to be established. For instance the population norms for public toilets for cities varies from 25 people per toilet to 100 people per toilet (based on different norms followed by municipalities) while none exist for rural areas. Considering that there are no well established adequacy norms for most of the basic infrastructure to be made available for public, the same for the time being cannot be used to measure the performance of local governments. For the present, the performance assessment would assess the availability of ten basic service delivery infrastructure and not their adequacy, which in subsequent assessments can be revisited to include adequacy based measures once the adequacy norms are established in policies.

2.2.1.7 Revenue Generation by LSGs

Generation of own source revenue is perhaps the most important performance area for LSGs considering that local public goods and services to the extent possible needs to be financed by own revenues of LSGs. Revenue mobilization can significantly expand the financial capacities of LSGs for financing such investments.

The fourth State Finance Commission examined the finances of local governments in details and identified several important trends before making specific recommendation. It found that Own Source Revenue of Municipalities was 32.5 percent of the total receipts in 2008-09 (on the basis of 35 municipalities). Revenue from taxes was 61.9 percent of the OSR, while remaining were non tax revenue (NTR). The property tax, profession tax and entertainment tax together accounted for 96.7 percent of the total tax revenue of Municipalities. Property tax has the largest share (54 percent) followed by profession tax (31 percent) for Municipalities in 2008-09. The OSR of sample Municipalities increased at the rate of 10.4 percent per annum, however two-third of the Municipalities had per capita OSR below the state average. The per capita OTR of Municipalities increased at the compound rate of 9.2 percent per annum with profession tax at a much higher rate

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of 17.1 percent during the period 2004-09. The rate of growth of property tax was 9.9 percent during the same period, but varied widely among municipalities. The share of entertainment tax in total tax declined during the period and showed negative growth. The commission also examined the financial autonomy of urban local bodies on the basis of share of OSR to total expenditure. Considering a reasonable OSR ratio to expenditure (direction and administration, and on core functions) of 50 percent, it found that OSR as a percentage of total expenditure was 37 percent (2008-09) and OSR + GPF12 as a percentage of total expenditure were 43.2 percent for Municipalities. The commission noted that finances in Municipalities need improvement since own fund does not cover even 50 percent of the total expenditure.

Regarding finances of Gram Panchayats the commission also concluded similar trends. Own Source Revenue of Gram Panchayats was 12.6 percent of the total receipts in 2008-09 (on the basis of 921 Gram Panchayats). The Own Source Revenue grew at a rate of 11.5 percent during 2004-09 while the growth rate of total tax revenue was at a lower rate of 7.8 percent per annum. The rate of growth of non tax revenue in the same period was 16 percent. The total tax revenue primarily comprise of Property tax (47.4 percent) and Profession tax (47.2 percent) in 2008-09. The property tax grew at a very slow rate of 4.5 percent per annum and entertainment tax at a negative rate of -3.2 percent per annum during 2004-09. The Profession Tax grew at a rate of 12.9 percent during the same period. The Advertisement tax grew at the rate of 30 percent per annum but its contribution was only 0.2 percent in the total tax share (2008-09). It was observed that the contribution of property tax in the OTR and OSR has significantly declined during 2004-09 and the profession tax and non-tax revenue were actually maintaining the OSR of the Gram Panchayats. The rate of growth of OSR in Gram Panchayats was found to be slower than increase in total expenditure which grew at a rate of 15.4 percent per annum during 2004-09, which was considered as unhealthy from the perspective of public finance. The commission concluded that the tax collection, notably property tax collection of the Gram Panchayats is poor and requires to be stepped up.

The fourth State Finance Commission were of the conclusion that not enough has been achieved in increasing own source revenue of LSGs and made the following observation - The constraints in the revenue mobilization have indeed adversely affected the quality of civic services imparted by the Local Governments (Section 7.1). The commission based on revenue mobilization pattern during 2004-09 also concluded that - the existing potential has not been tapped effectively and efficiently by the Gram Panchayats and Urban local governments. Therefore we do not propose any new avenues of taxation. The LGs need be equipped to explore the existing sources more effectively (Section 7.3).

The commission while recommending several measures, amendments and rules for local government for enhancing own revenues; recommended that part of the development fund be based on performance of local government on the basis of tax effort criterion. The recommendation on tax effort, which has been accepted by the Government are as follows

A maximum of 10 percent of the total devolution under Development Fund to local governments would be based on the tax effort criterion and this amount has to be distributed among local governments that increase their own revenue mobilization over the previous year at least by 10 percent. Out of the 10 percent set aside for tax effort criterion, the actual amount to be devolved under this criterion may be calculated as a ratio of the number of local governments that increased their OTR over previous year to the total number of LGs under each category. (Section 11.1.21)

12 Since General Purpose Fund (GPF) is an entitlement of local government in lieu of specific assigned and shared taxes such as Basic Tax, Stamp Duty and Motor Vehicle Tax it is considered as own fund of local government.

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Clearly increasing own revenues to finance local expenditure by LSGs is a critical area of performance and is one of the key priorities of the Government aimed at self sufficiency of LSGs. The performance of LSGs for revenue mobilization has been included as an important performance area in the proposed performance assessment system.

Efficiency of Revenue Collection

The efficiency of tax revenue collection of local government measures the collection of taxes against the demand raised during the year. The collection of revenue taxes during the current year comprise of current tax as well as arrear tax pertaining to tax demands of previous years. The fourth finance commission observed that the efficiency of tax collection needs major improvement.

The data collected by commission shows that the total tax arrears of Gram Panchayats in the State which was Rs. 38.3 crore in 2006-07 rose to Rs. 78 crore in 2009-10 or an increase of 105 percent in four years time. The commission also observed that - Balance as a proportion of demand which itself is not pegged on any scientific basis and has very little relation to the growing tax base, in 2006-07 was 8.3 percent. It rose to 11.4 percent in 2009-10. These are alarming trend need to be positively discouraged.

As per the Kerala Municipality Act 1994 Section 539(1) the period of limitation for the collection of dues of urban local governments is three years after which the uncollectable dues lapses. The commission also noted that that the provisions of Section 539(2) of the said act which prescribes that if the loss is due to the inaction on the part of the officers concerned to take appropriate action in time it can be realized with 12 percent interest thereon from such officers.

Clearly the efficiency of tax revenue collection is an important performance indicator that can encourage LSGs for timely collection of dues and arrest the trend of increasing tax arrears in LSGs. The performance indicator has been included in the performance assessment system with a view to motivate LSGs for better collection of dues which can increase own funds for local development. Since the property tax, profession tax and Service Tax are the major components of the Tax revenue for LSGs the same has been included for the time being. Additionally the potential of these taxes are in proportion to the population of LSGs and hence is a more meaningful means for comparing performances of different LSGs.

2.2.1.8 Application of Information Technology in LSGs

The Government of Kerala has been aggressively promoting using of information communication technologies (ICT) in local government for greater transparency and efficiency in functioning and improved service delivery through e-governance. Information Kerala Mission (IKM), the flagship e-governance project of the Government of Kerala has been established with a mandate to strengthen the local self-governance through ICT applications. The e-governance programme is intended to not only computerize all local self government institutions, but also to promote application of appropriate technology for monitoring of developmental projects, accounting and budgeting, financial management, human resource management.

The IKM has so far developed several web enabled application software specifically focusing on different aspects of LSG’s functioning and service delivery requirement and successfully implemented them through capacity building, training and handholding. Some of the key applications developed for local governments include

• Sulekha – used for plan project formulation, approval, monitoring and expenditure tracking of the plan projects of the Local Self Governments

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• Saankhya – the accrual based double entry accounting system for recording financial transaction and to generates various reports including the annual financial statements

• Sachithra – asset inventory software pertaining to the roads, buildings, land, bridges, irrigation facilities, water supply, movable assets etc. owned by the local bodies and the transferred institutions

• Sevana Civil registration – used for civil registration system (birth, death, marriage registration and certificate generation)

• Sevana Pension – for disbursing various pension under the social security services directly to the UID aadhaar linked savings accounts of beneficiaries

• Sthapana – Establishment software

• Soochika – File tracking system

The use of information technology by local government is important for improving functioning and service delivery, and consequently the availability of IT infrastructure and use of various application software developed by IKM has been included as performance parameter. IKM reportedly have developed about 15 ICT applications for local government which are in different stages of implementation. For the performance assessment of local government, ICT applications which have been reported to be deployed in local government at least six month prior to the assessment would only be considered.

2.2.2 Minimum Mandatory Condition for Project Execution and Service Delivery

Timely and proper execution of projects from KLGSDP performance grant fund has been set as the minimum mandatory conditions for LSGs. To achieve this, LSGs must have a minimum expenditure performance of 80 percent for performance grant fund and all capital works and acquisitions planned from performance grant must have taken place. Additionally, the planning and execution of all performance grant project must not fall under the regulatory list prescribed in ESMF and the ESMF screening and compliance process must have been adhered to during the preparation of DPR.

Expenditure Performance of Development fund

The development fund released to LSGs by the State Government is expected to be spent during the same financial year for implementing capital asset or infrastructure work, either new works or repairs and also for procurement of capital assets or goods. The development fund to LSGs includes Development fund-General-Capital, Development fund-Special Component Plan-Capital, Development fund-Central Finance Commission Grant-Capital and KLGSDP performance grant for implementation of projects formulated in annual plan. One of the minimum mandatory conditions for project execution and service delivery is that LSGs must have spent at least 80 percent of the development fund received in the year prior to the assessment. The information on actual receipt of fund and the actual expenditure against the receipt would be drawn from Appropriation Control Register (ACR) maintained by LSGs for the financial year preceding the assessment to arrive at the expenditure performance. Any capital expenditure during the concerned year pertaining to unspent grants funds carried over from previous years would be adjusted to arrive at the actual expenditure against the actual receipt.

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Implementation of Projects from KLGSDP performance grant fund

The second mandatory minimum condition relates to the physical execution of all projects from performance grant fund released to the LSG the year before the assessment. It is expected that all planned capital assets works or procurement from performance grant fund should have been either implemented or are in progress.

In case of capitals works, the implementation of the works would be established through verification of agreement with the contractor or resolution in case of works undertaken by beneficiary committee; entries made in measurement book, related work bills, payments made, physical verification report by LSG engineer or block engineer and actual physical verification of high value works.

Procurement of Capital Assets / Goods from performance grant fund would be established through verification of request of quotation / tender document issued, quotation / tenders received, supply order corresponding to the procurement and verification of stock / asset register.

Compliance with ESMF

The third MMC pertain to execution of performance grant project relates to compliance with ESMF process.

All sub-projects financed by performance grant fund must comply with the Environment and Social Screening and Compliance process prescribed in ESMF for KLGSDP. The projects funded through performance grant should not be in the regulatory list of activities (ESMF Proforma A) and Limited Environment and Social Assessment (LESA) for all Level-2 activities / projects must have been completed.

Approval of the sanctioning authority on Annexure 6 filled up along with DPR is also mandatory to establish that the ESMF screening and compliance process has been adhered to in the planning of projects.

Minimum Mandatory Conditions: Project Execution and Service Delivery

1. Minimum of 80% of KLGSDP performance grant, Development fund-General-Capital, Development fund-Special Component Plan-Capital, and Development fund-Central Finance Commission Grant-Capital funds spent in the financial year preceding the assessment

2. Capital works and acquisitions funded from KLGSDP performance grant in the financial year preceding assessment have taken place (work in progress/completed.)

3. Compliance with the regulatory list from the ESMF in DPR process during preparation and execution of KLGSDP performance grant projects in the financial year preceding the assessment

2.2.3 Performance Benchmarks for Project Execution and Service Delivery

As elaborated earlier, for project execution and service delivery there are several performance assessment themes, which are relevant

1. Compliance with the list of permissible work allowed by Government

2. ESMF safeguards during execution (only for performance grant projects)

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3. Transparent and appropriate methods of procurement followed and documented

4. Exceptional expenditure performance

5. Performance in implementation of projects from Development Fund received in the financial year preceding the assessment

6. Timely execution of development plans prepared

7. Critical Service Delivery Infrastructural facilities are available

8. Performance in Revenue Generation

9. Functional IT infrastructure with internet and software for performing e-governance functions

The strategic context of related objective assessment criteria have been presented in the previous section. The performance benchmarks for Project Execution and Service Delivery is summarized below.

Compliance with the list of permissible work allowed by Government

Objective Assessment Criteria

1. KLGSDP performance grant projects for the financial year preceding the assessment are permissible work allowed by Government as directed in GO (Ord) No. 1731/2011 dated 20-7-2011 & GO (Ord) No. 2668/11/LSGD dated 15-11-2011

ESMF safeguards during execution (only for performance grant projects) Objective Assessment Criteria

1. ESMF safeguards are applied in all completed KLGSDP grant funded projects for the financial year preceding the assessment

2. At least one elected member of LSG and one official involved in the preparation of ESMF projects are trained in ESMF

3. Involuntary land acquisition has not taken place.

Transparent and appropriate methods of procurement followed and documented Objective Assessment Criteria

1. Compliance with the prescribed Procurement Guidelines for Goods and Services for KLGSDP performance grant fund and other Development Fund for the financial year preceding the assessment

i) The procurement is through competitive method excluding those through Community / Beneficiary based Direct Implementation

ii) Procurement opportunities of goods, and services are posted on the notice board or advertised in the newspaper for open tendering / QCBS

iii) Requests for Quotations / Tender Document / Request for Proposal gives full description of specification / scope of work

iv) Requests for Quotations / Tender Document / Request for Proposal does not indicate brand name or tweak specifications

v) Public opening of quotation / tender

vi) No quotation / tender is rejected without adequate reasons as specified in procurement guideline

vii) No evidence of price negotiation with any supplier / bidder except in presence of at least three Social Audit Committee members where lowest evaluated quote / tender / preferred bidder exceeds pre-tender cost estimates

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viii) No direct purchase of goods from dealers not registered under DGS&D

ix) Procurement process is properly documented

2. Compliance with the prescribed Public Works Rules for Works executed from KLGSDP performance grant fund and other Development Fund for the financial year preceding the assessment

i) The procurement is through competitive method excluding those executed through Beneficiary Committee or directly by LSG

ii) Notice Inviting Tender for Works are posted on the notice board and advertised in the newspaper for open tendering or tendering through pre-qualification tender

iii) Notice Inviting Tender gives full description of work and tender requirement

iv) Public opening of tender

v) No tender is rejected without adequate reasons

vi) Tender awarded to lowest tender or to next higher tender under prescribed conditions

vii) Sanction of the district technical committee where the excess over the estimated amount is more than 5%

viii) No evidence of price negotiation with any bidder (for Works under KLGSDP only)

ix) Tendering process is properly documented

3. Procurement complaints and associated actions are properly documented as per Guidelines for the Procurement of Goods and Services in LSGs - GO (P) 259/2010/ LSGD dated 8/11/2010

4. Social Audit Committee (SAC) as prescribed is established and it undertakes procurement monitoring

Exceptional expenditure performance Objective Assessment Criteria

1. More than 95% of KLGSDP performance grant, Development fund-General-Capital, Development fund-Special Component Plan-Capital, and Development fund-Central Finance Commission Grant-Capital spent in the financial year preceding assessment

Performance in implementation of projects from Development Fund received in the financial year preceding the assessment

Objective Assessment Criteria 1. Percentage of Capital Works (infrastructure projects) completed from Development fund-General-Capital, Development fund-Special Component Plan-Capital, Development fund-Central Finance Commission Grant-Capital and KLGSDP performance grant for the financial year preceding the assessment 2. Percentage of Capital Assets procurement completed from Development fund-General-Capital, Development fund-Special Component Plan-Capital, Development fund-Central Finance Commission Grant-Capital and KLGSDP performance grant for the financial year preceding the assessment

Timely execution of development plans prepared Objective Assessment Criteria

1. Percentage of spillover projects in the annual plan for current financial year which are carried over project from previous years preceding but one to the assessment

Critical Service Delivery Infrastructural facilities are available Objective Assessment Criteria

1. Following critical service delivery infrastructural facilities are available in LSG area i) Crematorium / burial ground ii) Slaughter houses iii) Solid /Liquid/ Plastic waste management facilities iv) Public toilets v) Front office and visitor friendly facilities (Sitting Space and Drinking Water) in LSG office

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vi) Street lights vii) Fish/ Vegetable markets viii) Safe drinking water facilities ix) Basic infrastructure (Road, Drinking Water and Electricity) in Scheduled Caste & Scheduled Tribe

colonies x) Anganwadies

Performance in Revenue Generation Objective Assessment Criteria

1. Percentage increase in Tax Revenue Collection (Current) of LSG in the last financial year (preceding the assessment) as compared to the previous financial year

2. Efficiency of Tax Revenue Collection by LSG for the financial year preceding the assessment

3. Percentage increase in Non Tax Revenue Collection of LSG in the last financial year (preceding the assessment) as compared to the previous financial year

Functional IT infrastructure with internet and software for performing e-governance functions Objective Assessment Criteria

1. At least three computers are functional and connected to the internet at the LSG

2. Number of software functional at the LSG out of those prescribed and reported to be operationally deployed by IKM prior to the assessment

2.3 Accounting, Financial Reporting and Audit

Local Governments are entrusted with significant amount of public resources and they have the responsibility of managing these resources with prudence and probity with due regards to economy, efficiency and effectiveness. The local governments have legal and moral obligations to be completely accountable of all public funds put under their custody and control and must ensure that funds are properly spent and accounted for. The performance of LSGs in Accounting, Financial Reporting and Audit is of critical importance from the perspective of public and democratic accountability envisaged in the inter-governmental fiscal relationship in the multi-tiered Indian federal polity. Commensurating with the fiscal accountability of LSGs, KLGSDP aims to significantly strengthen the financial management systems at local governments.

The financial accountability framework for local government has three broad dimensions; i) Internal Financial Control, ii) Financial Reporting, iii) Auditing. The accountability of local government in these regards are governed by provisions and legal framework set by Kerala Panchayat Raj Act 1994, Kerala Municipality Act 1994, Kerala Panchayat (Accounts) Rules of 2011, Kerala Municipal Accounts Manual, Kerala Panchayat Raj (Manner of Inspection and Audit System) Act 1997, Kerala Municipality (Manner of Inspection and Audit System) Act 1997, National Municipal Accounts Manual, Kerala Financial Code, guidelines, standing orders and instructions issued by the Government.

2.3.1 Performance Themes for Accounting, Financial Reporting and Audit

As mentioned above the financial accountability framework for local government subsumes three important performance themes, which have been elaborated in the following sections.

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2.3.1.1 Internal Financial Control System

The internal financial management and control systems at LSGs are aimed at maintaining effective control and monitoring of all operational and transactional activities with financial implications by appropriate authorities vested with such responsibilities. The main objective of the internal control system is to minimize and control financial mismanagement and irregularities and to ensure that all public funds are managed with honesty, prudence and efficiency. Maintaining proper accounting system, reconciliation and verification of financial transaction and internal audit are some of the measures for having effective internal financial control at LSGs.

Financial Accounting

Section 215 of Kerala Panchayat Raj Act and Sections 294 & 295 of Kerala Municipalities Act prescribes that the Panchayats and the Municipalities shall maintain such books of accounts and other books in relation to its accounts and prepare an annual statement of accounts. The Acts recommend that LSGs would maintain receipts and expenditure for every financial year in forms as may be prescribed by the Government. In this regard the guidelines for maintenance of Panchayat accounts and Municipal Accounting Manual issued by the State Government stipulate the following;

• Maintaining cash book in proper format

• All Receipt and Payment to be entered in Cash Book daily

• Daily, monthly and annual closing of cash book is mandatory under the signature of the officer in charge of cash book

• Monthly closing after physical verification of cash and reconciliation of cash book balance with the balance of treasury or bank pass book / scroll under authentication.

• Multiple cash book and over writing / erasing in cash book not allowed

• Maintaining Advance Register and monitor the adjustment of all advances given to Contractors, Suppliers, etc,

• Maintaining Deposit Register to record deposits received and their adjustment

The fourth Finance Commission pointed out several issues related to proper maintenance of books of accounts of LSGs that needs improvement. The supplementary audit report by CAG for Local Self Government Institutions for 2009-10 and 2010-11 also highlight such issues in financial accounting. The commission in summarizing the situation of public accounts of local government recorded -

Of course there has been significant improvement in the writing of accounts since 2005; but it is still far from satisfactory. While the Commission does not have any reason to believe that there has been any large scale malfeasance like embezzlement or misappropriation it will fail in its duty enjoined by the Constitution of India and specifically by the terms of reference provided by the Government of Kerala if it does not sound a clear and loud warning that if the system is allowed to continue it could lead to a situation in which deviant elements could attempt massive frauds without any serious risk of being detected easily and in time. This surely can endanger the future of local democracy in the state which has been so assiduously built up in the past (Section 9.6).

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The fourth SFC highlighted the following deficiencies in relation to LSG accounts - i) Misclassification of revenues and expenditures, ii) Missing entries leading to reconciliation problems, iii) Inconsistencies in different sets of records, iv) Non closing of cashbooks on a daily basis, v) Maintenance of multiple cashbooks, vi) Diversion of funds and vii) Lack of sanctity of the Budget. The CAG Audit Report for LSGs (2010-11) highlighted that a very high proportion of sample LSGs have not prepared monthly accounts, which are to be placed before the LSG Committee / Council at its first meeting held after the 10th day of succeeding month (section 2.3.2.2). In the following section the CAG report observes that serious deficiencies with respect to proper maintenance of cash book was observed in more than half of the sample LSGs covered under supplementary audit.

Apparently the maintenance of accounts at LSGs has substantively improved after the introduction of double entry system of accounts in Saankhya Software developed by Information Kerala Mission (IKM) from April 201113. Considering the high importance of maintaining proper accounts at LSGs the same has been included as one of the key performance parameters. The performance of LSGs in maintaining proper accounts in Saankhya software as prescribed by Government and ensuring that accounts are up to date would be assessed in this regard. Performance of local government in conducting regular monthly reconciliation of cash balance with bank / treasury balance would also be assessed as a measure of internal financial control.

Asset Register

Kerala Panchayat (Accounts Rules) 2011, Kerala Municipal Accounts Manual and Government Order (December 2005) stipulate that each LSG should maintain an asset register in prescribed form containing particulars of assets (description of asset, year of acquisition and amount of acquisition) owned by it and should undertake annual physical verification of assets as stipulated in Kerala Financial Code. The CAG audit report for LSGs (2010-11) highlighted poor maintenance of asset register as one of the specific areas of improvement. It observed that whether the amount released during 2010-11 for maintenance of non-road assets was utilized adhering to norms set by Public Works Department (PWD) could not be ascertained because of poor maintenance of asset register (Section 2.1.4).

The Government realizing the importance of proper accounting of assets of local government initiated actions in this regard14. Subsequently Government ordered15 that accounting of assets acquired up to 31st March 2012 should be completed through ‘Sachithra’ software developed by IKM and completion reports be submitted to Director of Panchayats by the Panchayats and to the Director of Urban affairs by the Municipalities before 30-9-2012. It was further directed that the correctness of the asset database should be checked through District level workshops and the corrected database shall be approved by the governing body of the local government and the final database shall be submitted to the IKM before 31-10-2012.

Proper accounting and reflecting the correct position of community assets with local government is an important responsibility of local government. Maintaining proper asset register and conducting

13 Government in its order, GO (Ms) No 308/2010/LSGD dated 23-12-2010 makes it mandatory for the three tier Panchayats to adopt double entry system of accounts and to account the transactions in the Saankhya software developed by the IKM with effect from 1-4-2011. This was again reiterated in Government Order GO (Ms)/245/2011 dated 13-10-2011 14 Government initiated action for proper accounting of assets of local bodies vide order GO (Ms) No. 363/2005/LSGD dated 2-12-2005 15 Government Order GO (Ky) No. 212/2012/LSGD dated 6-8-2012 directing local government to update assets account up to 31st March 2012

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annual physical verification of assets is an important tool for internal control and has been included as one of the performance indicator.

Demand, Collection and Balance Register

The role of internal control system in local government is not limited to accounting and financial transactions alone, but is equally important from revenue mobilization perspective. The Demand, Collection and Balance (DCB) Register maintained physically or in software (being developed by IKM) is an important means of tracking revenue generation efforts of LSGs. The LSGs have the responsibility of not only maintaining the DCB register, but also reporting the Demand, Collection and Balance figures of revenue (tax and non-tax) each month to their respective controlling officers. With regards to DCB, the fourth SFC observed that the figures in the Demand Collection Balance (DCB) do not agree with the figures in the Annual Financial Statements for many LSGs and reportedly the DCB figures are in variance with data received from different sources.

In order to encourage the LSGs to properly maintain DCB register in software being developed by IKM or manually and report DCB figures regularly; the same has been included as a performance measure of good internal control for tracking revenue mobilization.

2.3.1.2 Physical and Financial Reporting

Physical and financial reporting as prescribed in relevant Acts, rules and government order is an important obligation of local government. The local governments are custodian of public funds meant for development purpose and financial reporting are important mechanism to ensure accountability for effective and efficient use of funds. For performance grant projects a new semi-annual physical and financial progress reporting has been introduced to monitor the proper use of fund received from KLGSDP.

Annual Financial Statement

The Kerala Panchayat Raj Act, 1994 with the Kerala Panchayat Raj (Manner of Inspection and Audit System) Rules, 1997 and the Kerala Municipality Act, 1994 with the Kerala Municipality (Manner of Inspection and Audit System) Rules, 1997 stipulate that the LSGs shall prepare Annual Financial Statements (AFS) containing all receipts and payments and Demand, Collection and Balance (DCB) Statements and forward them to the Director of Local Fund Audit (DLFA) after approval by the Panchayat Committee / Municipal Council.

After the introduction of Saankhya (April 2011), the annual financial statements like Receipt & Payment account, Income & Expenditure account, Balance Sheet and supporting schedules should be prepared before 15th May of succeeding year in the case of Panchayats and first week of June in the case of Municipalities16.

The fourth State Finance Commission in their report has made several observations regarding Annual Financial Statement of LSGs indicating the need for serious efforts to ensure that LSGs prepare and present accurate financial statement which is one of their statutory obligations. The commission observed that the AFS of most of the Municipalities are not prepared meticulously resulting in incorrect entry of figures. Further, the figures entered in the AFS do not agree with those in the relevant registers even where it has been audited. While certain items are not entered,

16 As per Chapter VII 62 (5) (AFS) of Kerala Panchayat Raj (Accounts) Rules 2011 (SRO No. 266/2011) and section 294 of Kerala Municipality Act 1994.

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several others are clubbed with other items as there is no relevant head to which the data can be entered (ex. pension contribution of collection establishment is clubbed with salary expenditure). The commission also observed that in majority of the cases the closing balance at the end of a financial year does not agree with next year’s opening balance. Section 5.19 of the reports while presenting issues related to Panchayat Raj Institutions observes that figures in AFS are not in conformity with the subsidiary registers and closing balance of a financial year does not match with the opening balance of the next year in most of the cases even in the cases of audited accounts.

The audit report of LSGs by CAG (2010-11) also made some related observations on AFS. The audit report highlighted significant delay in submission of AFS (delay of 2 to 25 months) during the period 2004-09. It also observed that in 12 percent of the sample Gram Panchayats covered under supplementary audit the opening / closing balance of AFS did not match with opening/closing balance of cash books maintained for period 2004-09 (Section 2.3.2.1).

It appears that timely submission of accurate annual financial statements is indeed one of the critical performance requirements of LSGs. Apparently the errors associated with annual financial statements has reduced after the introduction of Saankhya software since the AFS is generated automatically based on entries in receipt and payment and other subsidiary registers. Keeping in view the improving situation of AFS in LSG and considering the practical difficulty in ascertaining inaccuracies in AFS, its timely submission has been fixed as a yardstick of performance for LSGs.

Annual Administration Report

According to the Kerala Panchayat Raj Act, 1994 (Section 192) and the Kerala Municipality Act, 1994 (Section 63), the LSGs have to prepare Administration Report every year by 30 September of the succeeding year and forward them to the officers authorized by the Government for consolidation and submission to the Government and the Legislative Assembly. If the report is not received within the said time limit, Government may withhold the payment of grants due to the Panchayat.

Though the local governments have statutory obligations in ensuring annual administration report is prepared and submitted in time, which is to be consolidated and submitted to Government and state legislature by appropriate authority; not much progress have been made by responsible institutions. The CAG audit report for LSGs for 2009-10 and 2010-11, observed that the administration reports have not been prepared by LSGs for several years and therefore consolidated reports have not been shared with Government and Legislature. The reports also observed that no punitive measures have been taken by the government against erring LSGs as envisaged in the Acts.

Submission of Annual Administration Report on time is an important obligation of LSGs that would enable the Government and Legislature to have a consolidate view of the local development and administration. As such the same has been fixed as one of the performance indicator for the LSGs.

Physical Progress Report on Performance Grant

KLGSDP as part of the grant strategy have introduced half yearly administrative reports for the local government for upward accountability. The half yearly administrative report in the first two financial years of the project (or phase 1 grant period) would comprise of physical and financial progress and performance information for the schemes funded by the performance grant from the project. Subsequently, in the two remaining financial years the administrative report would cover

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physical and financial progress in all schemes implemented in the annual plan, and capital maintenance works. The LSGs have to submit the semi-annual physical progress report for the period April to September by 31st October and for the period October to March by 30th April either through Sulekha software or manually.

The submission of physical progress report in prescribed format and within stipulated time to KLGSDP and other authorities as may be prescribed after due approval of LSG committee / council is an important performance parameter included for enhancing upward accountability of LSGs.

2.3.1.3 Audit

Auditing is aimed at promoting transparency and accuracy in the financial disclosure made by LSGs and to reduce the risk of unfair transactions and financial irregularities. Both, internal and external audit is applicable for local governments in the state.

Rule 3 of Kerala Panchayat Raj (Manner of Inspection and Audit System) Act, 1997 and Rule 3 of Kerala Municipality (Manner of Inspection and Audit System) Act, 1997 prescribes that there shall be a Performance Audit Authority at the State Level for conducting performance audit. State Performance Audit Officer shall assist the Performance Audit Authority and the Regional Performance Audit Officers shall conduct performance audit of LSGs every quarter. Presently, the internal performance audit is being conducted for the Panchayati Raj Institutions only. The annual performance audit reports are prepared and submitted to Government for their action.

Section 215(3) of Kerala Panchayat Raj Act, 1994 and Section 295(3) of Kerala Municipality Act, 1994 prescribes that Director of Local Fund Audit (DLFA) shall be the auditor of Panchayats/ Municipalities for conducting statutory external audit. The Local Fund Audit Department is responsible for receiving the financial statements, scrutiny of accounts and conducting audit of local government institutions as per the provisions of Kerala Local Fund Audit Act, 1994. The auditors based on financial reports and audit of accounts provides overall audit opinion and present their specific observations and recommendation on the accuracy and quality of accounts and financial statements presented. The local government institutions are expected to address material deficiencies, correct inaccuracies and take appropriate actions against issues raised and recommendation made by the auditors.

With respect to audit the CAG audit report for LSGs (2010-11) highlights several areas that need improvement. According to Kerala Local Fund Audit Act, 1994 it is mandatory for the LSGs to submit their accounts to DLFA for audit by 31st July every year. Further, Rule 16 of Kerala Local Fund Audit Rules, 1996, empowers the DLFA to carry out proceedings in a Court of Law against the Secretaries of the LSGs who default in the submission of accounts. The report observes that as on 31st July 2011, 221 accounts pertaining to the period from 1996-97 to 2010-11 were in arrears.

The audit report or certificate issued by the auditor provides reasonable assurance that the financial disclosure by LSGs are fair in all material respect and presents a true view in accordance with the financial reporting framework. Clearly a clean audit report for LSG is a testimony that LSG have taken all measures to ensure internal control of financial management is robust and worthy. This is an important performance yardstick for the LSGs and has been proposed in the performance assessment system.

The efforts made by LSGs to rectify and correct discrepancies pointed by auditors in their audit report is an equally important performance parameter. The DLFA issues fresh clear audit certificate once it is established that a particular LSG has rectified all mistakes pointed by auditors and

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suggested remedies are complied. The performance assessment would also measure efforts made by LSGs in complying with audit observations and qualifications.

Considering the importance of the external audit opinion, it has been fixed as the minimum mandatory condition for the performance area. LSGs having “Adverse” or “Disclaimed” opinion would fail to meet the MMC set. Additionally for LSGs with Qualified audit opinion the observations / opinions expressed by the auditors should not indicate significant financial management weaknesses. Clearly, LSGs with clean audit certificate or qualified audit report with not serious qualifications by auditors would only be considered for performance based grants.

2.3.2 Minimum Mandatory Condition for Accounting, Financial Reporting and Audit

The audit report or certificate issued by the external auditor is an important assurance regarding robust financial management system followed by LSGs. It indicates that the local government has exercised adequate internal financial control and has prepared accurate financial statements which are adequately substantiated by accounts and other financial records maintained and the auditors did not had any issues in concluding that they represent a true and fair view of finances. Considering the importance of audit opinion expressed by statutory external auditors, the same has been included as minimum mandatory condition.

Clean Audit Opinion

A clean audit opinion by the external auditors has been set as the first minimum mandatory condition. The LSG in order to qualify the MMC must not have an “Adverse” or “Disclaimed” opinion for last to last year preceding the assessment. The auditor’s opinion for the immediately preceding year to performance assessment has not been suggested since the auditor’s report or certificate might not have been issued to all the LSGs by the time the performance assessment is conducted.

An “Adverse Opinion” would be established based on the auditor’s report containing statement which reads as - (in the auditor's opinion) The Annual Financial Statements do not properly present the picture of income, expenditure and closing balance.

A “Disclaimed Opinion” would be established based on the auditor’s report containing statement which read as - We (i. e. the Auditor) have not been able to form an opinion as to whether the Annual Financial Statements properly present the picture of income, expenditure and closing balance.

Audit Observation

A clean audit report, which is not “adverse” or “disclaimed” can still have several observations by the auditors and the audit report might be a qualified report. A qualified auditor’s report with serious audit observations still indicates serious weaknesses in LSG financial management system and hence it has been set as another disqualification criteria as the second minimum mandatory condition.

In order to ensure that the qualifications are correctly interpreted as serious audit observations the presence of following observation/s in auditor’s report would be verified during assessment

• The closing balance/s as taken in the Annual Financial Statements do not match with the closing balance/s as per the Cashbook

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• The figures taken in the Annual Financial Statements do not match with the relevant figures as per the Receipt Register or the Payments Register

• Opening balance in the cash book does not match with the closing balance in the cash book of the previous year.

• Cashbook or the Receipt Register or the Payments Register is incomplete

• Cashbook or the Receipt Register or the Payments Register was not produced for audit

• Any other qualification which significantly affects the integrity and proper presentation (true and fair view) of the Annual Financial Statement

Minimum Mandatory Conditions: Accounting, Financial Reporting and Audit

1. “Clean” external audit (not adverse or disclaimed) for the immediately preceding year but one to assessment

2. External audit for the immediately preceding year but one to assessment does not include “Serious Audit Observations”

2.3.3 Performance Benchmarks for Accounting, Financial Reporting and Audit

The performance benchmark for Accounting, Financial Reporting and Audit has been decided based on rationale presented earlier on four important themes

1. Audit and Audit Follow up

2. Submission of relevant reports to the State Government

3. Annual Financial Statements and Administration Report

4. Maintenance of Books of accounts

The performance criteria and Objective Assessment Criteria for Accounting, Financial Reporting and Audit are summarized below.

Audit and Audit Follow up Objective Assessment Criteria

1. Latest Audit certificate issued by Local Fund Auditors to LSG for the immediately preceding last three years but one to the assessment is “Clean” in the first instance itself

Regular reports prepared and submitted to the State Government / KLGSDP on time Objective Assessment Criteria

1. Semi-annual Physical Progress Reports prepared in format Annexure-IX (1) provided in KLGSDP Project Implementation Manual (PIM) and submitted manually or electronically through Sulekha to KLGSDP within the following month of September and March for the financial year preceding the assessment (only for KLGSDP performance grant fund)

Annual Financial Statements and Administration Reports are prepared and submitted on time Objective Assessment Criteria

1. Annual Financial Statements (Receipt & Payment account, Income & Expenditure account, Balance Sheet and supporting schedules) for the last financial year preceding the assessment are prepared and submitted to Local Fund Authorities by Gram Panchayat before 15th May and by Municipalities before first week of June of succeeding year

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2. Annual Administration Report of LSG for the financial year preceding but one to the assessment submitted to the Deputy Director Panchayats/ Regional Joint Director Municipalities by 30th September of the succeeding year

Books of accounts are regularly maintained and reconciliations are performed regularly Objective Assessment Criteria

1. Books of accounts of LSG are maintained in Saankhya software

2. Books of Accounts are updated till the last month immediately preceding but one to the assessment

3. Maintenance of Demand Collection & Balance (DCB) register and submission of DCB monthly reports to higher authorities for the last month immediately preceding but one to the assessment

4. Asset Register is maintained in Sachithra software and is up to date for the financial year preceding the assessment

5. The book bank balance has been reconciled with the bank statements up to the last month immediately preceding but one to the assessment

6. Annual physical verification of assets and stock & stores was conducted by LSG for the financial year preceding the assessment and Annual Asset Verification Report prepared

2.4 Participation, Transparency and Accountability

The foundation of democratic decentralization process rests on improving accountability of the governance to its constituents and people. In general sense, accountability of local government refers to the mechanisms that make these institutions more responsive to their particular publics or essentially greater downward accountability. Participation within democratic decentralization is mainly concerned with the role of people in providing inputs into the local governance, besides participating in the political process for electing government which provide the most obvious accountability. But, elections are mostly overall judgments and cannot substitute for accountability required during the course of governance when particular acts or omissions arise. Accountable local governments are expected to create adequate space for people to participate in the process of governance and the act of governance needs to be also transparent. Accountability of local government to the deprived, vulnerable and marginalized sections of the community in ensuring that their welfare receives utmost priority is one of the embodied principles of social justice envisaged in our Constitution. Participation of these particular groups and women in the governance process and also in deriving benefits from different development programme and schemes is an important performance measure for local government. Affirmative action by local government for these constituents represents higher moral accountability of governance.

Accountability of local government is expected to result in transparent discharge of governance. Disclosures related to plans and decisions, implementation of development programme and schemes, financial transactions, etc. to general public for information and potential public scrutiny through Gram / Ward Sabhas are necessary features of transparent and accountable local government.

The state over the last two decades have made exemplary efforts for deepening democratic decentralization and to make local government accountable to people. Institutionalizing people’s planning process, strengthening process of Gram Sabha, mechanisms such as Social Audit, Citizen’s Charter, etc. has all been aimed at stronger public and social accountability of local government. Kerala is the second state in India next to Madhya Pradesh to have enacted the Kerala Right to Service Act, which indicates strong commitment of Government in pursuing further service delivery accountability of local government.

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Naturally, Participation, Transparency and Accountability of local government emerge as an important performance area that needs to assessed and improved upon. With increasing decentralization of functions, functionaries and funds to local government the importance of this performance area is considerable and requires greater attention.

2.4.1 Performance Themes for Participation, Transparency and Accountability

2.4.1.1 Participation of Vulnerable Groups

One of the major efforts since the decentralization initiatives were introduced in the State has been to ensure that the interests and the benefits of the vulnerable groups receive the highest attention it deserves from the local government. Ensuring economic development and social justice for these groups is one of the fundamental obligations envisaged in the Constitutional mandate for local government. One of biggest drivers for the launch of People’s Plan Campaign in Kerala was people’s participation and in particular participation of the most vulnerable and deprived groups in the planning process. The state five year plans have repeatedly focused on the development issues of vulnerable groups and women.

The Special Component Plan (SCP) and Tribal Sub-Plan (TSP) are major programs aimed at addressing problems of Scheduled Castes (SCs) and Scheduled Tribes (STs) respectively. The responsibility of formulating and implementing these plans has been transferred to local government from ninth plan onwards. Kerala is perhaps the only state in India where two-third of the allocations for SCP and half of the allocations for TSP have been transferred to the local government. The government decision for giving local government a greater control of funds meant for vulnerable groups was considered necessary not only from the point of view of increasing financial decentralization but also to make local government more accountable to these groups.

On similar reasons the Government of Kerala introduced Women Component Plan (WCP) to meet the specific development needs of women and to ensure gender equality in development outcomes. A minimum of 10 percent of the Plan funds must be earmarked for projects on women development, apart from providing special consideration for women in other development projects. For the benefits of aged, physically and mentally challenged persons and for children a mandatory minimum allocation of 5 percent of the total plan allocation by LSGs is prescribed by the Government17. Besides, there are several other development programs for vulnerable groups where local governments have important role in its implementation.

Fund allocation for Vulnerable Groups

Clearly, role of LSGs in ensuring that various vulnerable groups including women benefit from the development programmes is an important performance parameter and as such it has been included in the proposed performance assessment system. The LSGs must ensure that mandatory allocation of 5 percent for aged, disabled and children and 10 percent for women development are met. Development of plan proposals for SCP and TSP funds allocated to them is equally important aimed at benefiting scheduled caste and scheduled tribes. The performance parameter would assess the extent to which the LSGs have ensured that development funds meant for vulnerable and deprived groups are provided for in the annual plan and budget.

17 The Government in GO (Ms) No.173/12/LSGD dated 21-6-2012 issued directions for allocation of 5 percent of development fund for elderly, handicapped and disadvantaged groups, palliative care, etc. and 10 percent for Women component Plan (WCP).

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Implementation of Projects for Vulnerable Groups

While one aspect of the performance is to ensure proper allocation and development of proposals for vulnerable groups, another is to ensure that planned proposals are timely implemented. Both, expenditure performance and actual implementation of proposals meant for vulnerable groups are critical performance criteria in this regard. Expenditure performance of Special Component Plan, Tribal Sub Plan and Women Component Plan would act as a measure for timely expenditure of funds allocated for vulnerable groups. The physical progress in implementation of project proposals target towards vulnerable groups is also equally important to ensure that all planned investments are made during a financial year.

Vulnerable Groups Development Framework (VGDF)

KLGSDP as part of the project design have evolved a Vulnerable Groups Development Framework (VGDF) to further strengthen the planning process for vulnerable groups. It is aimed that during the project the VGDF framework would be operationalized by sensitization and capacity building of LSGs and use of VGDF checklist in planning process for funds earmarked for vulnerable groups. LSGs are expected to use the framework for planning of SCP, TSP and WCP funds allocated. The use of Vulnerable Groups Development Framework in planning and implementation of schemes for vulnerable sections have been included as an important performance indicator.

2.4.1.2 Transparency and Accountability

Improving downward accountability of local government has been one of the main challenges of the decentralization process in the country. The Government of Kerala through various people centric guidelines and legislations have progressively taken steps to make local government more accountable and transparent to people. The public and social accountability of local government in general and for service delivery in particular are the most important parameters of good governance. Transparency in governance is an important feature of accountability for local government and reflects commitment of local government to be accountable to citizens.

There are several contemporary themes that are relevant for local government to be transparent and accountable and are important performance dimensions.

Public Reports

The preparation of plan and budget is the most important responsibility of local government that sets the agenda for social and economic development of people. The development planning process adopted by local government ensures that people participate effectively in setting local agenda for development. However, local governments also have the responsibility of widely disseminating information regarding local plans and budget to ensure that people are well informed about development decisions taken by the local government. The public reports on plans and budget is an important means of communicating the development plans to the people and hence this has been set as Minimum Mandatory Condition for accessing KLGSDP performance grant fund.

Disclosure of Summary of Works

The development fund to LSGs has been increasing each year and the efficient and effective use of the fund is an important mandate for local government. Equally important is the disclosure by local government regarding how the funds have been used for public. The LSGs have the obligation of

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placing before the Gram Sabha full details of development projects and works undertaken from the development fund. The details of works also needs to be disclosed at the work site and in the notice board18 of LSGs to ensure that the public receive complete information about works executed by the local government. These important disclosure requirements for LSGs have been included as performance parameters in the assessment system.

Citizen Charter

Section 272A of Kerala Panchayat Raj Act, Kerala Panchayat Raj (Preparation of Citizen Charter) Rules, 2004 and Section 256A of Kerala Municipality Act, Kerala Municipality (Preparation of Citizen Charter) Rules, 2000 makes it mandatory for local government to formulate and publish citizen charter regarding the different categories of services rendered to the citizens. It also envisages that the citizen charter will be renewed and updated periodically, but at least once in a year. Local governments are accountable for service delivery standards set in citizen charter and have obligation to provide services and entitlements to citizens as per quality and standards of various services set in charter. The citizen charter of local government needs to be displayed at the LSG office and at ward level for information of citizen. The citizen charter ensures strong service delivery accountability of local government and its publication and exhibition in public places are important performance parameters.

Right to Information

The Right to Information (RTI) Act 2005 provides for setting out the practical regime of right to information for citizens. Under the provisions of the Act, any citizen may request information from a "public authority" (a body of Government or "instrumentality of State") which is required to reply expeditiously or within thirty days. The Act also requires every public authority to computerize their records for wide dissemination and to pro-actively publish certain categories of information so that the citizens need minimum recourse to request for information formally.

The local governments are also under the ambit of RTI Act and must take all measures as per the provisions of the act to ensure transparency of information. Even before the enactment of the RTI Act 2005 by Parliament, Kerala Municipality Act 1994 (chapter XXIV A Section 517) and Kerala Panchayat Raj Act 1994 (Chapter XXVA Section 271, A to E) provided that every person bona fide requiring any information shall have the right to get such information from the Panchayat / Municipality in accordance with the procedure prescribed.

The RTI act requires that all public authority must publish various categories of institutional information and is available in public domain. This is an important parameter of performance for local government to ensure that institutional information related to the following categories are published and updated regularly at least once a year.

i) the particulars of its organization, functions and duties;

ii) the powers and duties of its officers and employees;

iii) the procedure followed in the decision making process, including channels of supervision and accountability

iv) the norms set by it for the discharge of its functions;

18 Section 17, Kerala Panchayat Raj (Execution of Public Works) Rules, 1997 and Kerala Municipality (Execution of Public Works and Purchase of Material) Rules, 1997

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v) the rules, regulations, instructions, manuals and records, held by it or under its control or used by its employees for discharging its functions;

vi) a statement of the categories of documents that are held by it or under its control;

vii) the particulars of any arrangement that exists for consultation with, or representation by, the members of the public in relation to the formulation of its policy or implementation thereof;

viii) a statement of the boards, councils, committees and other bodies consisting of two or more persons constituted as its part or for the purpose of its advice, and as to whether meetings of those boards; councils, committees and other bodies are open to the public, or the minutes of such meetings are accessible for public;

ix) a directory of its officers and employees;

x) the monthly remuneration received by each of its officers and employees, including the system of compensation as provided in its regulations;

xi) the budget allocated to each of its agency, indicating the particulars of all plans, proposed expenditures and reports on disbursements made;

xii) the manner of execution of subsidy programmes, including the amounts allocated and the details of beneficiaries of such programmes;

xiii) particulars of recipients of concessions, permits or authorizations granted by it;

xiv) details in respect of the information, available to or held by it, reduced in an electronic form;

xv) the particulars of facilities available to citizens for obtaining information, including the working hours of a library or reading room, if maintained for public use;

xvi) the names, designations and other particulars of the Public Information Officers;

xvii) such other information as may be prescribed;

Kerala Right to Service Act 2012

Kerala is the second state in India next to Madhya Pradesh to have enacted the Right to Service Act (2012) to provide for the delivery of services to the general public within the stipulated time limit. As per the provisions laid out in Section 3 of the Act, every Department of the Government, every head of Department, every Local Self Government Institution and every statutory body shall within six months of the commencement of the Act, notify in the Gazette the services that will be rendered, the designated officers, the first appellate authority, the second appellate authority and the stipulated time limit for the services that will be rendered. The Act confers that every eligible person shall have the right to obtain the services notified within the stipulated time limit. The Act also provides for punitive measures against errant public servant who is deficient in providing the service stipulated under the statute.

Government in pursuant to the above Act have notified the Kerala State Right to Service Rules (2012) which prescribes the rules associated with application, display of notified services and stipulated time period, process of appeal, etc. Based on the Act, the Government notified the services, time limit, authorized officer, first appellate authority and second appellate authority

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coming under Panchayat Department and likewise a similar notification was issued by the Department of Urban Affairs19.

The Right to Service Act makes it obligatory for local government to notify services to be rendered and the stipulated time frame for services, which principally aims to enhance prompt service delivery. The implementation of the Act and the performance of local government in providing services to citizens in a timely manner is an important parameter.

2.4.2 Minimum Mandatory Condition for Participation, Transparency and Accountability

The LSGs have the obligation and moral responsibility for disseminating widely information related to local plans and budget. The development planning process includes several processes such as Gram / Ward Sabha, forum of working groups and development seminars, which are principally aimed at providing information, soliciting opinion / suggestions and generating public consensus regarding local plans for development. Usually summary notes / handouts are prepared and shared with public during development seminar. The annual plan and budget is also made available to public during its finalization. Considering the importance of public reports on annual plan and budget for greater transparency and accountability, the same has been set as minimum mandatory conditions.

The first MMC relates to public report on budget and the second MMC relates to public report on annual plan and the LSG must have prepared and made available these public reports to qualify the two MMCs.

Minimum Mandatory Conditions: Participation, Transparency and Accountability

1. Preparation of a public report on the annual budget for the current financial year

2. Preparation of a public report on the annual plan for the financial year preceding the assessment

2.4.3 Performance Benchmarks for Participation, Transparency and Accountability

The performance of LSG in the area of Participation, Transparency and Accountability assumes importance in six important performance assessment themes

1. Public Reports

2. Participation and benefits for Vulnerable Groups

3. Citizen Charter

4. Disclosure of Public Works

5. Disclosing institutional information (Right to Information Act)

6. Notification and delivery of services (Kerala Right to Service Act)

The previous section elaborated the importance of issues in these performance thematic areas. The performance criteria and Objective Assessment Criteria for Participation, Transparency and Accountability are summarized below. 19 GO (Ms) No. 03/2013/LSGD dated 1-1-2003 issued by Panchayat department notifying 45 services to be provided by GPs and GO (Ms) No. 02/2013/LSGD dated 1-1-2003 issued by Department of Urban Affairs notifying 49 services to be provided by Municipalities

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Availability of public reports on Annual Budget for the current financial year at the ward level Objective Assessment Criteria

1. Budget summary for the current financial year was received / seen by at least 75% of the households

Vulnerable groups participate in and benefit from planning and execution Objective Assessment Criteria

1. At least 10 percent and 5 percent of the total Development Fund is allocated for Women Component Plan and for Aged, Disabled & other weaker section respectively in Annual Budget and project proposals with respect to SCP, TSP, WCP and Aged, Disabled & other weaker section are included in Annual Plan for the financial year preceding the assessment

2. At least 70 percent of SCP / TSP / WCP / Aged, disabled & other weaker section allocations in Annual Budget for the financial year preceding the assessment was actually spent during the financial year

3. SCP / TSP / WCP / Aged, disabled & other weaker section plan investments for the financial year preceding the assessment have taken place

4. VGDF guidelines has been followed in the planning and implementation process for SCP / TSP / WCP / Aged, disabled & other weaker section schemes

Citizen charter developed and displayed Objective Assessment Criteria

1. Citizen charter has been prepared and is displayed at the LSG office at a place where public can see it

2. Citizen charter is displayed at the ward level

Details of works executed by LSG disclosed to public through prescribed means Objective Assessment Criteria

1. Details of all Works executed from Development Fund in the financial year preceding the assessment is published in LSG notice board and also exhibited in a conspicuous part of the respective Work Site with the following details: Name of work, Work Executed by LSG, Contractor or Beneficiary Committee, Name of the concerned person (Contractor, Convener of the Beneficiary Committee or Members of Executive Committee), Estimated amount and period, Date of Commencement of work and completion of work, and other associated details

LSG has disclosed institutional information through publications as prescribed in the Right to Information Act during the financial year preceding the assessment

Objective Assessment Criteria

1. Publication by LSG containing Institutional Information related to 17 categories as prescribed in Section 4(1)(b) of Right to Information Act 2005 during the financial year preceding the assessment

LSG has notified or disclosed to public the services as per stipulations in Kerala Right to Service Act 2012 and services are provided in time

Objective Assessment Criteria

1. Relevant information related to Services (Services rendered, designated officers, first appellate authority, second appellate authority and stipulated time limit for providing services) as prescribed in Section 3 of Kerala Right to Service Act 2012 has been notified in Government Gazette or disclosed in notice board by LSG and services mentioned in the notification are delivered within the stipulated time limit prescribed therein.

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3. Design of Performance Assessment System

The design of the performance assessment system is based on the performance assessment framework elaborated in the previous section. The following guiding principles have been considered for design of the performance assessment system for LSG.

1. Relevance: Performance assessment should relate to aspects of performance that are important for local government and reflects contemporary focus of the State Government.

2. Credibility: The performance assessment should be accepted as reliable and accurate by stakeholders and be amenable to independent verification if considered necessary.

3. Timeliness: Performance assessment system should be capable of providing information to policy makers and project authorities at times when they need it.

4. Clarity: Performance assessment should be simple, well-defined and easy to understand and use.

5. Focus: The system should focus on performance indicator considered to be important aspects of local government performance and provide them with key messages on desirable performance.

6. Comparability: Performance assessments should be comparable across local government and over time without any prejudice.

7. Attribution: Performance assessment is based on performance issues attributable to local government and not issues over which local governments have little control.

8. Cost Effectiveness: It must be possible to collect the data used for assessment at a reasonable cost and in reasonable time period.

9. Responsiveness: Assessments should be able to accommodate future changes in policies or priorities of Government.

The performance assessment system for LSGs comprises of four broad performance areas. Each performance area comprises of several performance themes corresponding to which performance criteria has been proposed. Each performance themes have several sub-themes corresponding to which Objective Assessment Criteria has been selected. The performance parameters for the local government proposed in the system has been broadly structured in two different groups. The performance parameters relating to most basic and primary functions of the local government has been categorized as Minimum Mandatory Conditions, while performance parameters relating to good governance, local administration and functioning which are likely to vary among institutions has been categorized under performance benchmarks comprising of performance criteria and related objective assessment criteria.

3.1 Minimum Mandatory Conditions

The Minimum Mandatory Conditions are the most basic and primary performance of local government which it must meet during performance assessment. In each of the four performance area the MMCs relates to the mandatory performance the LSGs must achieve to be considered for performance grant fund from KLGSDP. The Minimum Mandatory Conditions for LSGs were

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agreed as part of the loan agreement between Government of Kerala and World Bank during finalization of KLGSDP.

In total there are nine Minimum Mandatory Condition of performance for LSGs. LSGs who fail to meet any of the MMCs would not be considered for KLGSDP performance grant fund even if they have scored enough in performance criteria. The rationale for having MMCs for LSGs is to ensure that local government must demonstrate that they have achieved minimum levels of performance in fundamental and obligatory functions.

3.2 Performance Benchmark

Performance benchmark comprises of performance parameters on various themes related to governance and institutional functioning of local government. The benchmark for each performance area consists of several performance criteria and related objective assessment criteria for local government. Among several potential performance parameters, the most critical performance parameters relating to good governance and functioning of local government has been selected for the system. The performance criteria selected are consistent with the legislative and policy environment of the local government in the state and important administrative directions and guidelines issued by the state government has been considered while deciding the criteria to be included in Performance Assessment System.

The performance assessment framework in Annexure 1 gives the details of performance criteria and objective assessment criteria to be used for local government.

Means of Verification

The means of verification for each objective assessment criteria explains the method to be used for assessing the performance of local government. Several issues have been considered while proposing means of verification for performance assessment. In order to ensure that performance assessment is objectively undertaken, the means of verification emphasizes review of various documents and records maintained by local government. The documents and records to be reviewed are standard documents maintained by Gram Panchayats and Municipalities and are as prescribed by the State Government. This ensures that documents referred to are those in vogue and the sources of information are same for all the LSGs. The performance assessment teams would collect signed and sealed copies of all important documents referred in means of verification which would be annexed with the assessment instrument for a particular LSG. The performance assessment supervisors would refer to these documents to ascertain whether correct information has been recorded in assessment instrument / questionnaire during quality review. The quality assurance and audit teams would similarly undertake sample review. The list of documents to be prepared and kept ready by LSGs would have to be communicated to LSGs by KLGSDP well in advance of the performance assessment. This would ensure that all LSGs have adequate information about performance assessment requirement and they have fair opportunity to score well in the performance assessment.

For some performance indicators the means of verification requires sampling such as sample of works, procurement, citizens, etc. since full review is not feasible. In such cases the sampling requirements have been explicitly specified as part of the means of verification. The performance assessment manual would elaborate the methodology for random selection of samples to be followed by the assessment teams. In case of sampling of households or citizens the means of verification prescribes that the signature of the concerned person be taken to ensure that the information received are properly authenticated by the information provider. This is an important

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measure to curtail frivolous feedback and opinion, and would act as a safeguard against future contentions.

3.3 Performance Scores

Performance of LSGs would be measured in terms of performance scores they receive out of a total performance score of 100 marks. The performance assessment framework gives the maximum performance score against each objective assessment criteria. The performance score was decided through several rounds of consultations with different stakeholders wherein important feedback and suggestions were received regarding performance dimensions that are critical for local government. Greater allocation of scores has been made for performance indicators considered to be relatively more important and critical than others. The emphasis of the project and the Government is also clearly reflected in the distribution of performance scores.

The following table gives the maximum performance scores for the four performance areas for the LSGs.

Performance Area Revised Marks 1. Planning and budgeting 10 2. Project Execution and Service Delivery 40 3. Accounting, Financial Reporting and Audit 25 4. Participation, Transparency and Accountability 25

Total Score 100

In the planning and budgeting area, all the five objective assessment criteria under “Compliance with prescribed development planning process” have been given equal weightage since all of them were considered to be equally important for a successful planning process at the level of local government.

Project execution and service delivery is the most important mandate for local government and accordingly a higher score has been allocated to this area to emphasize the need for improving performance. Performance of LSGs in revenue mobilization (tax and non-tax), expenditure performance and compliance with transparent and competitive procurement of goods, works and services among other performance parameters are more important and accordingly higher scores have been allocated for these performance parameters. Compliance with the Environment and Social Management Framework (ESMF) of the KLGSDP applicable for projects / works undertaken from performance grant fund has also been greater weightage considering the importance of environmental and social safeguards during execution.

In Accounting, Financial Reporting and Audit area higher scores have been allocated for maintenance of proper books of accounts; Audit and timely preparation of annual financial statements to encourage LSGs to adopt strong financial management system.

Under Participation, Transparency and Accountability area higher weightage has been given to participation and development of vulnerable groups, disclosure through public reports and exhibiting details of works undertaken, and citizen charter. Compliance with Right to information and Right to Service Act has also been stressed through proportionately higher allocation of score.

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3.4 Performance Assessment Questionnaire

The performance assessment of local government would be undertaken using a performance assessment questionnaire designed based on the performance assessment framework. The questionnaire has been designed in a structured manner to record all information necessary for measuring objective assessment criteria using means of verification prescribed.

The assessment questionnaire has the following provisions

• Specifies clearly the source of information i.e. Report, Form, Performa, Books, Statements, etc. that need to be referred for getting information on the indicator

• Specifies the exact information / data to be recorded with units defined

• The exact document / evidence that needs to be collected

• Provision for recording related remarks or associated details for veracity check

• Provision for recording names, signature and seal of LSG members, office bearers and performance assessment teams to duly authenticate that the information recorded are correct

• A section on endorsing or certifying where all over-writing were done in the questionnaire with proper seal and signature (all overwriting and corrections have to be certified properly)

• A undertaking that the performance assessment was undertaken using all fair means and is based on material evidence available with the LSGs and those collected and attached for the purpose

• A checklist for all enclosures

The assessment questionnaire has been designed considering some of the well accepted principles of survey and assessment. The questionnaire captures primary data / information required to arrive at a performance measure and not calculated values, which often is a big source of mistake in assessment. The performance assessment teams during actual assessment would not be required to do any mathematical calculation, but rather record primary data which the PA database software would use to automatically calculate the performance measure and generate scores. There are several performance measures where the performance scores would be generated on a pro-rata basis and there is a strong possibility of mistakes if calculations are done during assessment. For these reasons and other strategic considerations, calculation of performance scores is not envisaged at the field assessment stage and hence no provisions have been made in the questionnaire about this. Both, performance assessment teams and LSGs would not be able to know the performance score immediately after assessment and therefore can be a good deterrent against deliberate mistakes.

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Section 5: Workshop on Performance Assessment and Pilot Field Testing

The performance assessment framework for local government was prepared after a thorough review of the framework proposed in the Project Implementation Manual. Review of relevant literature and relevant Acts applicable to local government, Government orders and new policies and initiatives by government was also undertaken for the purpose. New initiative by Government like Social Audit, Right to Service Act, Development of double entry system of accounts in LSGs, etc. were also taken into account. More over the IKM had developed several software like Saankhya (accounting software), Sulekha (plan uploading, monitoring and reporting software), software, Sachithra (asset inventory software) etc specifically for LSGs. Several rounds of consultations with the PMU officials; meeting with World Bank team, SPAO, KILA, SIRD and GIFT to sought their inputs for the framework was also held. Based on the information emerging from the studies and consultations conducted, a revised performance assessment framework was finalized. In order to get feedback on the revised framework a workshop on performance assessment and pilot testing in sample LSGs was conducted.

1. Workshop on Performance Assessment

The Project Management Unit convened a multi-stakeholder workshop on 18th April 2013 to get feedback from different stakeholders and in particular from SPAO. The workshop was conducted to create awareness among the stakeholders and supporting institutions and the LSG department officials, LFA department, State Performance Audit officers, etc. regarding the proposed performance assessment of Gram Panchayats and Municipalities and to present the draft PA Framework for discussion and suggestions.

The workshop was inaugurated by Dr. M K Muneer, Minister of Panchayats. The participants included World Bank Team, Director and Officers from PMU, Deputy Directors of Panchayat, Joint Regional Directors of Municipalities, Director and Faculty from KILA, Officers from the Local body wing of the Government Secretariat, Officers from State Performance Audit Office, Team Leader and Senior Consultants of Lead Firm, etc.

The gathering was addressed by the Hon. Minister, Task Team Leader of the World Bank, Project Director KLGSDP and Director of KILA. A detailed presentation about the PA Framework was given by the Finance Management Specialist of PMU. Afterwards a presentation of the results of pilot test conducted in few GPs and Municipalities was given by the Team Leader of the lead firm. The weak areas of performance by LSGs noticed during pilot test, the deficiency in maintenance of records, non compliance of basic criteria, the practical difficulties faced by the LSGs, etc. were highlighted during the presentation. This was followed by a brief presentation on the lessons and learning from conducting Annual Performance Assessment in Institutional Strengthening of Gram Panchayats Project (ISGPP), West Bengal by the lead firm team was made.

1.1 Key Suggestion and Discussion

During the workshop the World Bank officials, the officers from PMU, the Deputy Directors of Panchayats, officers from Government Secretariat, etc. actively participated in the discussions and made several suggestions. They pointed out the constraints and difficulties in observing the Minimum Mandatory Conditions (MMC) and Performance Benchmarks and made suggestions for changes in some of them. It was also stressed that the Local Self Governments are not much aware of the performance assessment process and orientation programmes for them would be useful.

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Some of the key suggestions that emerged during discussion in the workshop are given below.

• Budget of local bodies are passed at the end of March of previous year and hence sending the copy to higher authorities in March itself may not be practical. (MMC 1.1.1)

• Copy of annual plan documents are not generally given to higher authorities because for the last few years the plan documents are uploaded through the Sulekha software and the same can be viewed by the Dy Directors of Panchayats/ Joint Directors of Municipalities in Sulekha reporting software developed by IKM as the respective officers are having the passwords. Hence there was no requirement for sending physical copies. (MMC 1.1.2)

• Achievement of 80% expenditure of KLGSDP funds during 2012-13 may not be practical as the KLGSDP funds were released during March end only. (MMC 2.1.1 )

• Exceptional expenditure performance of 95% of KLGSDP funds during 2012-13 may not be practical as the KLGSDP funds were released during March end only (PB 2.2.4.1)

• There is delay in issuing audit certificate by LFA department because many Panchayats migrating from manual system to computerized system in Saankhya are facing difficulties in carrying over the closing balance of previous year to the opening balance of subsequent year. As the balances are not tallying the LFA department is not issuing the audit certificates in many cases. (MMC 3.1.1)

• Preparation of Public report on annual budget is not prescribed in rules and hence it is not generally complied with (MMC 4.1.1)

• Notification of the details of services under Kerala Right to Service Act 2012 in the gazette was not done in any case. The reason is stated to be due to difficulty in incurring of expenditure to the extent of Rs. 60000/ by each LSG.

• The performance of LSGs in revenue mobilization, both tax and non tax revenue should be given higher weightage

• The use of various e-governance softwares by LSGs developed by IKM should be included as a performance parameter

• The publication of information prescribed by RTI Act was suggested as another performance parameter

2. Pilot testing of Performance Assessment framework

2.1 Objective and Coverage

The main objective of the pilot testing was to test the performance assessment framework proposed for the local government. The performance assessment questionnaire developed for conducting assessment was also tested to verify their appropriateness and effectiveness to capture accurately performance of GPs and Municipalities.

The main objectives of the pilot testing exercise were to

• Verify whether the performance assessment framework proposed need any changes based on the results of the pilot testing

• Verify whether instrument design is correct or need some modification

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• Identify whether means of verification or measurement proposed for the indicators are robust for measuring the performance or changes is required

• Identify potential issues that PA team are likely to encounter during PA process and means of addressing them

• Identify issues and challenges in performance assessment that need management attention of KLGSDP

• Make necessary modification in PA framework and strategy, and instrument based on the lessons and findings of the piloting

The pilot testing was conducted in the sample of 15 GPs and 3 Municipalities selected by the PMU. The sample selected for the pilot testing is given below

1. Alapuzha: Pulinkunnu GP

2. Ernakulam: Kalamassery Municipality

3. Idukki: Velliyamattom TGP, Marayoor TGP

4. Kannur: Pappinissery GP

5. Kasargod: Meencha GP

6. Kollam: Chavara GP

7. Kottayam: Ettumanoor GP

8. Kozhikode: Unnikulam GP

9. Malapuram: Malapuram Municipality

10. Palakkad: Agali TGP, Pudur TGP

11. Pathanamthitta: Naranamuzhi GP

12. Trichur: Adaat GP

13. Trivandrum: Pallichal GP, Varkala Municipality

14. Wayanad: Noolpuzha TGP, Tirunelli TGP

Accordingly the pilot teams comprising of experts from financial management and procurement, Safeguard specialist and Institutional experts were formed to cover different districts. A training programme on the framework and questionnaire was organized wherein detailed instructions about the methodology to be adopted, documents to be verified and collected, etc. in respect of each themes and sub themes of performance, filling up of the APA tool (Questionnaire) was provided. The pilot testing teams used the draft APA tool prepared for conducting the performance assessment and recorded the required data. Feedback on all issues, problems and difficulty they faced during the process, deficiencies noticed in the APA tool, etc. was reported by the teams. The teams also undertook discussions with LSG members & officials and community to seek their opinion and views on the following;

• Performance assessment area and indicators

• Performance assessment criteria proposed

• Their views on the performance assessment process to be followed

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2.2 Key Findings from the Pilot Testing

Based on the feedback given by the pilot testing teams, a detailed presentation was prepared by the consultant and was presented in a meeting with PMU official and World Bank mission team. Key findings from pilot testing in cases where the performance was nil or very low (below 50%) is extracted below.

• Forwarding the budget for 2013-14 to LSGD before 31 March 2013 was generally not done in any case. (MMC 1.1.1)

• Annual Plan documents were not sent to higher authorities in any case stating that the details are available in Sulekha reporting software. (MMC 1.1.2)

• Minimum of 80% of performance KLGSDP grant funds spent for those LSGs which received the grant in the financial year preceding the assessment was achieved only in 5 out of 18 Local Self Governments pilot tested. (MMC 2.1.1)

• Documentation in support of Procurement complaints redressal mechanism and associated actions were not available in all cases. (PB 2.2.2.3)

• Expenditure performance of more than 95% of KLGSDP performance grant funds in the financial year preceding assessment was achieved only in 2 cases out of 18 LSGs pilot tested. (PB 2.2.4.1)

• Expenditure performance of more than 95% of Development fund-General-capital in the financial year preceding assessment was achieved only in 7 cases out of 18 LSGs pilot tested. (PB 2.2.4.2)

• Expenditure performance of more than 95% of Development fund- Special Component Plan-capital in the financial year preceding assessment was achieved only in 6 cases out of 18 LSGs pilot tested. (PB 2.2.4.3)

• Expenditure performance of more than 95% of Development fund- Central Finance Commission Grant- capital in the financial year preceding assessment was achieved only in 5 cases out of 18 LSGs pilot tested. (PB 2.2.4.4)

• Performance in revenue generation in last financial year (preceding the assessment) as compared to previous financial year could not be assessed in any case as the accounts were not finalized. (PB 2.2.6)

• The position of “Clean” external audit (not adverse or disclaimed) for the immediately preceding year but one to assessment was as follows. 9 certificates were Clear, 4 certificates were not Received, 3 certificates were Qualified and 2 certificates Disclaimed. ( MMC 3.1.1)

• Submission of Semi-annual Physical Progress Reports of performance grant projects was not submitted to the PMU within one month for the financial year preceding the assessment in any case. ( PB 3.2.2.1)

• Annual Administration Report of LSG for the last applicable financial year preceding the assessment was submitted to the Deputy Director Panchayats/ Regional Joint Director Municipalities in only 7 cases out of 18. ( PB 3.2.3.2)

• Books of Accounts (Cash Book) were update till last transaction date only in one case out of 18 (PB 3.2.4.3)

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• Bank / Treasury Reconciliation Statements up to the last month was done in only one case out of 18 (PB 3.2.4.4)

• Annual physical verification of assets and stock & stores was not conducted in any case. (PB 3.2.4.5 )

• Preparation of a public report on the annual budget was not done in any case stating that no such report is prescribed. (MMC 4.1.1)

• Preparation of a public report on the annual plan was not done in any case. But Final Plan document was available. (MMC 4.1.2)

• Only in three cases out of the total sample, 75 percent of households have received handout on LSG Annual Plan and Budget. (PB 4.2.1.1)

• VGDF checklist has been used in the planning and implementation process for all relevant schemes in no case. It was stated that such a checklist is not available. (PB 4.2.2.4)

• Citizen charter was displayed at the ward level in no case. ( PB 4.2.3.2)

• Exhibition of details of works executed in public notice boards at Panchayat/ Municipality and at ward level and worksites was done in 2 cases out of 18. ( PB 4.2.4)

• Notification of the details of services under Kerala Right to Service Act 2012 was not done in any case. (PB 4.2.6)

• Overall, out of 18 LSGs covered under pilot testing, 6 got 50% to 59% marks and 5 got 60% and above marks.

2.3 Changes in the Performance Assessment Framework

Based on the outcome of the pilot test some changes were suggested in the meeting held at PMU in which World Bank Team, PMU team and Lead Firm team attended.

The following changes were proposed and agreed.

• The due date of forwarding the budget for 2013-14 to LSGD is changed as 30th April of the current year instead of March 31st. ( MMC 1.1.1)

• Availability of Annual Plan documents in Sulekha reporting software need be verified and that would deem to have been submitted to LSGD. (MMC 1.1.2)

• For minimum of 80% of performance KLGSDP grant funds spent the period for two or more month’s period in 2013-14 can be considered with consent of Government.

• Updation of Books of Accounts till the last month immediately preceding but one to the assessment only need be insisted. (PB 3.2.4.2 )

• The reconciliation of book bank balance with the bank statements need be insisted up to the last month immediately preceding but one to the assessment. (PB 3.2.4.5)

• The annual budget summary can be reckoned as the public report on the annual budget (MMC 4.1.1)

• Final plan document can be reckoned as the public report on Annual Plan. (MMC 4.1.2)

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• Compliance of VGDF guidelines will be satisfied if the plan proposals are made according to the allocation prescribed by Government in planning process based on the VGDF guidelines in the case of SCP / TSP / WCP / Aged, disabled & other weaker sections. (PB 4.2.2.4)

• Exhibition of services under Kerala Right to Service Act 2012 in the notice board of the LSG can be reckoned as compliance of the requirement. (PB 4.2.6.1)

The performance assessment framework was revised to accommodate the above changes, which has been presented in the previous section. Suitable changes in the questionnaire were also made accordingly.

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Section 6: Institutional Arrangement for Performance Assessment System

The performance assessment system for LSGs during the tenure of KLGSDP would be under the stewardship of PMU KLGSDP anchored through Performance Audit Department under Local Self Government Department. Eventually, the system would be institutionalized under SPAO within the overall supervision and administrative control of Local Self Government Department.

During the implementation of KLGSDP, the performance assessment system would be used to conduct annual performance assessment of LSGs for administration of performance grant fund. Subsequently, depending on the policies of the State Government, the performance assessment system would be adopted for administration of performance based grant fund to local government.

The performance assessment system for LSGs under KLGSDP would also be used for planning and implementing capacity building strategy (Component 2). The annual performance assessment (APA) data and reports would highlight specific areas of capacity gaps which would be bridged through training programme by partner institutions, KILA and SIRD. The APA would also identify specific areas where system and e-governance improvements would be necessary, which would be anchored through KLGSDP partner institution, IKM. Improvement and trends in service delivery as evident from consecutive APAs and other special consultancies or survey conducted under KLGSDP would be analyzed for policy reflections by DAC (GIFT) and reported to LSGD and Government of Kerala.

The overall institutional arrangement for implementation of performance assessment system is presented below.

The project strategy envisages that the annual performance assessment in the first one or two years would be conducted through independent external firms with support from performance assessment lead firm responsible for developing strategy and design of the system. Subsequently, their role would diminish and the performance assessment system would be completely owned by the Performance Audit Department under LSGD. In the interim period the performance audit officers

Support to PMU

PA Support in the first Year

Local Self Government Department

Government of Kerala

Project Management Unit

KLGSDP

Local Self Government

(LSG)

Performance Audit

Department

Project

Facilitators

Lead Consultant PA PA Firms

KILA GIFT SIR

D

IKM

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under SPAO would also be involved in the process of APA for monitoring and survey as would be strategically decided by the LSGD. The project facilitators at the district and block level would also be involved in the process of APA for monitoring, quality checks, generating lessons and devising strategies for their mentoring and handholding services to LSGs.

The institutional arrangement for performance assessment system has been suggested based on the prevailing institutional structures at the state level and institutional and management arrangement established for KLGSDP.

1. Role of key Institutions for Performance Assessment System

The institutional arrangement reflects the inter-institutional linkages for coordination and implementation of the performance assessment system. Key institutions have important roles in successful implementation of the performance assessment system, which have been elaborated below.

1.1 Project Management Unit, KLGSDP

The Project Management Unit (PMU) within LSGD has the primary responsibility for providing management oversight, coordination, and administrative arrangement for the implementation of Performance Assessment System in KLGSDP. The PMU would coordinate with all key institutions and stakeholders under the policy and administrative guidance of LSGD and other relevant departments of Government of Kerala. The institutional arrangement between PMU and Performance Audit Department during the KLGSDP period for implementation of performance assessment system would be guided through administrative process of LSGD.

The PMU under the leadership of Project Director would be responsible for the following strategic and management roles:

• Ensure all policy and administrative approvals from Government for smooth implementation of Performance Assessment System

• Provide management and organization support for planning, resource allocation, administrative approvals, implementation support, procurement and contracting, monitoring and review, and overall regular coordination for implementation of performance assessment system

• Establish inter-institutional coordination with all key institutions through LSGD

• Quality control and Monitoring of services by all external firms for performance assessment and establish independent review mechanism

• Organize capacity building programme for various stakeholders to provide orientation and training in using performance assessment system

• Update the performance assessment system periodically to include new performance parameters or to delete / modify existing performance parameters for LSGs under the guidance of LSGD

• Organize workshops and stakeholders meet for creating awareness and dissemination of lessons learnt in establishing performance assessment system

• Provide necessary direction to project teams to coordinate, collaborate and provide support during annual performance assessment

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1.2 Performance Audit Department

The Performance Audit Department within LSGD has equally important responsibility for providing management and administrative support for implementation and institutionalization of Performance Assessment System in the department. The Performance Audit Department under the leadership of State Performance Audit Officer (SPAO) would establish coordination with all key institutions and stakeholders including district performance audit officers under the policy and administrative guidance of LSGD.

The Performance Audit Department under the leadership of State Performance Audit Officer would be responsible for the following strategic and management roles:

• Ensure all policy and administrative approvals from Government for smooth institutionalization of Performance Assessment System

• Provide management and organization support for planning, implementation, monitoring and review, and overall coordination for conducting annual performance assessments

• Establish inter-institutional coordination with all key institutions through LSGD

• Update the performance assessment system periodically to include new performance parameters or to delete / modify existing performance parameters for LSGs under the guidance of LSGD and other relevant department of Government of Kerala

• Organize capacity building programme for performance audit officers for undertaking performance assessment

• Organize workshops and stakeholders meet and for creating awareness and dissemination of lessons learnt in undertaking performance assessment

• Prepare performance assessment report for LSGD and Government of Kerala after the system has been institutionalized in the department

1.3 Supporting Institutions for Implementation of KLGSDP

KILA, SIRD, IKM and DAC (GIFT) are the supporting institutions for implementation of KLGSDP and these institutions have also important role in successful implementation and institutionalization of Performance Assessment System for LSGs. These institutions in coordination with PMU KLGSDP would use the performance assessment system to identify critical areas for providing programmatic support to KLGSDP. After institutionalization of the system with Performance Audit Department the support of these institutions would continue under the administrative guidance of LSGD.

KILA and SIRD

KILA and SIRD are the nodal institutions in the state for providing capacity building, institutional strengthening and system improvement support to LSGs. The capacity building programme comprising of institutional training of LSGs, manual development for LSG systems and developing new training courses and curricula for LSGs under KLGSDP would be based on specific capacity gaps and weakness of LSG system identified during annual performance assessment. These nodal institutions would be responsible for the following important capacity building roles

• Analyze the findings of annual performance assessment to inform the capacity building programme being designed

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• Conduct institutional training in coordination with KLGSDP on specific capacity gaps identified in the annual performance assessment

• Develop institutional manual for LSG system in coordination with KLGSDP on specific system weaknesses identified in annual performance assessment

• Develop new training programme, course curricula and orientation and exposure programme for LSGs drawing upon performance assessment of LSG

• Develop capacity building programme for Performance Audit Department officers under administrative guidance of LSGD for institutionalization of performance assessment system

IKM

IKM is the nodal institution for development of all e-governance systems for LSGs in the state. IKM is providing programmatic support to KLGSDP for development and institutionalization of e-governance system at LSGs. It is envisaged that IKM would provide necessary support to KLGSDP for institutionalization of the Performance Assessment Database Software being developed.

DAC (GIFT)

The decentralization analysis cell has been established in the Gulati Institute of Finance and Taxation (GIFT) which will undertake policy advisory function providing independent analysis on the performance of the State’s intergovernmental fiscal system and service delivery system and provide ongoing policy advice to Government of Kerala and the State Finance Commission on local and intergovernmental fiscal and institutional issues. The DAC would also be responsible for establishing database for LSGs and LSG service delivery survey data. It is envisaged that DAC would draw upon the performance assessment data for their analysis of trend in service delivery and fiscal issues pertaining to local government.

1.4 Project Facilitators of KLGSDP

The project facilitators at the district and block level are under management and administrative control of PMU KLGSDP for implementation of the project in their area. The project facilitators would provide important support during the execution of annual performance assessment. They would

• Provide orientation and preparatory assistance to LSGs in ensuring necessary documentation are made available during performance assessment

• Coordinate with performance assessment teams in conducting performance assessment

• Undertake monitoring and quality review of the performance assessment process

• Address local issues arising during performance assessment and highlight issues that need intervention of PMU

1.5 Local Self Government (LSG)

The local self government institutions are the principal stakeholder for successful implementation of performance assessment system in the state. The performance assessment is an intensive

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participatory process that requires strong ownership and involvement of LSGs for its successful implementation. LSGs are also the principal direct recipient of findings and results of the performance assessment and it is expected that LSGs would demonstrate strong commitment for improving their performance based on the participatory performance evaluation exercise. LSGs have several critical roles and responsibilities in this regard

• Demonstrate strong commitment in improving performance in governance and service delivery by owning, actively participating and using the results of the performance assessment system

• Participate fully and provide all relevant data and information that would enable a good, fair and objective performance assessment

• Identify and acknowledge specific areas of performance that needs improvement and take strong measures in improving them by involving LSG members and office bearers

• Demand from KLGSDP / LSGD support for orientation and training in areas where LSGs are of the opinion that expert advice and institutional support is necessary

• Maintain fairness and integrity in the process of performance assessment to ensure that only deserving LSGs benefit from the performance grant

1.6 External Performance Assessment Firms

KLGSDP is recruiting external performance assessment firms for conducting performance assessment in the interim till the system is institutionalized. The obligations and responsibilities of these independent firms are according to their terms of reference prepared as part of the contracting process. Some of the important responsibilities of these independent firms for conducting performance assessment are reiterated below;

• Undertake performance assessment in full fairness, objectively and transparently as expected from independent assessment firms

• Adopt participatory assessment principles and protocols for performance assessment and maintain acceptable decorum in all engagement with local government, officials, citizens and other stakeholders

• Adopt the methodology proposed in performance assessment strategy (this document) and performance assessment manual being prepared

• Abide by the performance assessment methodology, protocol and general conditions of conducting performance assessment elaborated in the performance assessment manual

• Ensure that qualified, skilled and well trained performance assessment teams are deployed in adequate numbers to complete the task in allocated time frame

• Comply with the reporting, quality audit and monitoring mechanisms prescribed in performance assessment strategy and manual

• Remain solely and fully accountable for the veracity of the data and information collected and be answerable to any queries and grievances that might arise as a result of the performance assessment process

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• Maintain proper records of all tools and supporting documents that would be collected and enter by them in the relevant system suggested and be open to scrutiny of both as called for

• Abide by the recourse measures suggested under quality assurance and audit plan in strategy and manual of performance assessment and promptly take actions as directed by the PMU

• Collaborate and coordinate with the lead firm for Performance Assessment to ensure a high quality and accurate performance assessment of LSGs

• Participate in all training programme, review and monitoring meetings, workshops and discussions as directed by the PMU

• Prepare necessary reports and analysis as suggested by the PMU and lead firm for Performance Assessment

• Remain fully accountable to PMU KLGSDP and Government of Kerala for their services

1.7 Performance Assessment Lead Firm

KLGSDP has recruited an external firm as Lead Firm for Designing and Implementing the Performance Assessment System through three external PA firms being recruited separately by PMU. The role of the lead firm is to assist the PMU in designing, implementing and institutionalizing the performance assessment system for LSGs. The obligations and responsibilities of the lead firm are as per the terms of reference for the consultant. Some of the important responsibilities of the lead firm are reiterated below;

• Assist PMU in finalizing a Performance Assessment framework for LSGs in the state through a consultative process with key stakeholders

• Assist PMU in finalizing a performance assessment strategy for implementation and institutionalization of the system in relevant department

• Assist PMU to finalize a performance assessment manual, tools and questionnaires for performance assessment, M&E framework for the project and other relevant material for communication to LSGs

• Developing training modules for performance assessment and conducting training for PA firms and other stakeholders as organized by the PMU

• Assist and monitor the annual performance assessment on behalf of PMU

• Provide technical backstopping and assistance to three external performance assessment firms for conducting APA

• Undertake quality audit and assurance and suggest to PMU recourse measures as per the PA strategy and manual

• Assist PMU in establishing and implementing objection, appeal and remedies for performance assessment

• Develop and train PA firms and other stakeholders in using Performance Assessment database software

• Assist PA firms in developing reports on annual performance assessment for PMU

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• Assist PMU in other related activities for implementation of performance assessment system

• Abide and comply by all conditions, methodology, protocol and general conditions of conducting performance assessment elaborated in performance assessment strategy, manual and direction from PMU

• Undertake all measures to ensure that independent PA firms undertake performance assessment with full fairness, objectively and transparently using participatory assessment principles and protocols

• Prepare necessary reports and analysis as per the terms of reference

• Remain fully accountable to PMU KLGSDP and Government of Kerala for their services

2. Government Control and Policy Oversight

The Performance Assessment System for LSGs is under the overall policy and administrative oversight of Department of Local Self Government of Kerala (LSGD) and it will be responsible for issuing necessary guidelines and policy framework for institutionalizing the system. All related aspects of performance assessment of LSGs would be in accordance to the legislations, rules and government orders in force and directions issued by the department. The department would accord all sanctions and approvals that are necessary for implementing and using the system in a manner as prescribed from time to time. All stakeholders would be under obligation to comply with all such administrative and policy directions with respect to Performance Assessment System for LSGs.

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Section 7: Capacity Development for Performance Assessment System

The performance assessment system for LSGs is being newly introduced and hence its operationalisation would require capacity building of all institutions and stakeholders responsible for implementing and managing the system.

1. Capacity Development Strategy

The capacity building of all institutions responsible for implementing and institutionalizing performance assessment system would aim at building knowledge, skills and capabilities for effectively using and managing the system. The capacity building programme envisaged in this regard would have both short and long term approaches keeping in view that the system would be continued beyond the KLGSDP duration.

In the short term the capacity building would essentially focus on three aspects of conducting annual performance assessment.

i) Building adequate conceptual understanding about the performance assessment framework and related Monitoring and Evaluation concepts

ii) Build capacities in conducting annual performance assessment of LSGs

iii) Using and managing performance assessment database software

In the long term the capacity building would focus on building expertise and skills for updating the performance assessment framework and system to ensure that the performance assessment system remains contemporary and relevant with changing policies and priorities of the Government. It would also require that the performance assessment criteria and indicators, means of verification and assessment questions are also appropriately revised with such progress and changes.

2. Role of key Institutions

KLGSDP and in the interim period the lead consultant on behalf of PMU would be responsible for building capacities of key institutions involved with the performance assessment process. However, this would have to be suitably complemented by a longer term capacity building initiatives using leading institutions like KILA and SIRD. Performance Audit Department under LSGD and Decentralization Analysis Cell (GIFT) need to also support the capacity building process and to ensure that the Performance Assessment System is suitably modified in future.

In the interim period KLGSDP with support from lead consultant for PA would organize the capacity building programme for personnel and staff working in KLGSDP, Independent Assessment Firms to be engaged for conducting performance assessment, personnel of state performance audit office and other stakeholders involved in annual performance assessment.

3. Capacity Development Process

The performance assessment system for LSGs is a longer term initiative of KLGSDP under LSGD and therefore there is a need for adopting a process approach for capacity development. The capacity development as a process is considered to be a sustained effort in building expertise, skills and knowledge and keeping them updated through continued interventions. In contrast capacity building has a shorter perspective of interventions. Considering that performance assessment system for local government and performance based grant allocations are likely to receive

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considerable focus in future policies on decentralized governance in the State and elsewhere in India, it would be more meaningful to have a process approach for capacity development.

The capacity development process includes several other interventions besides training. It is suggested that the longer term capacity development process should focus on other important means of capacity building such as mentoring and hand-holding support, discussion and deliberation sessions, experience sharing workshops and learning forums, etc. For capacity development, the lead firm for performance assessment on behalf of PMU would organize training programme and provide technical-backstopping and hand-holding support to performance assessment firms and other institutions involved in annual performance assessment. PMU would organize experience sharing workshops and learning forums, round tables discussions and deliberation sessions, mentoring and technical backstopping through project teams and other mechanisms of capacity development throughout the project duration.

3.1 Training Programme on Performance Assessment System

The training programme for performance assessment system would focus on building conceptual understanding about the performance assessment framework, nuances involved in undertaking performance assessment and using performance assessment questionnaire for undertaking APA. The training manual or modules separately being developed gives full details of the training coverage.

A training manual may be particularly useful as:

• an introduction to subject matter prior to training

• an outline to be followed during training

• a reference to subject matter after training

• a general reference document

• a tool for skill acquisition and up-gradation

A training manual is an important part of a formal training programme. It will help in enhancing the skill levels, ensuring consistency and uniformity in presentation of content and structured instructional techniques to various batches of trainees. It would also ensure that all training information on exercises, procedures, skills, processes, and other information necessary to perform tasks is together in one place. The following section gives an overview of the scope of training programme to be organized.

3.1.1 Building Conceptual understanding about Performance Assessment Framework

The training programme would try to build good understanding about the performance assessment framework first before covering details of the annual performance assessment process. It is envisaged that developing conceptual clarity regarding following thematic areas would be necessary considering that assessment teams from the three PA firms might not be familiar with the subjects.

• Evolution of PRIs and Municipalities & Constitution of Gram Panchayat/ Municipality

• Development Planning Process in LSGs

• Environment and Social Management Framework

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• Procurement guidelines for Goods and Services

• Consolidated Work Rules for LSGs

• Development Fund for LSGs

• Special Component Plan, Tribal Sub Plan and Women Component Plan

• Tax and Non Tax Revenue

• E-governance software developed by IKM

• Audit and Audit Observations

• Accounting and Annual Financial Statements of LSGs

• Books of accounts maintained at LSGs

• Vulnerable group development framework

• Citizen Charter

• Right to Information Act

• Right to Service Act

• Various Acts, Rules and Government Orders relevant for performance assessment

• Basic Accounting and Financial Statement and recording of Expenditure

• Other related thematic areas

The training programme on enhancing conceptual understanding about performance assessment would also cover the following fundamental areas related to M&E and Assessment

• Basic concepts on M&E and Assessment

• Performance Measurement Indicators and Means of Verification

• Performance assessment process

• Participatory process for undertaking assessment

• Performance assessment protocols

• Data Collection and Recording System

The training programme would use combination of methods, lectures, presentations and small group exercise for enhancing knowledge and understanding of the underlying subjects and concepts for performance assessment.

3.1.2 Training on Performance Assessment Questionnaire and Process

The training on performance assessment tool would be a combination of classroom sessions followed by field work to familiarize the performance assessment teams with actual process of undertaking assessment. The classroom programme would focus on the following aspects of the performance assessment

• Performance assessment process as elaborated in performance assessment manual

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• Means of verification and cross checking for each criteria and performance assessment question

• Data recording and filling-up of questionnaire

• Collection and retention of reference document and means of verification

• Sampling techniques for questions based on sample

• Process of scrutiny and verification by performance assessment supervisors

• Protocol for rectification and correction of questionnaire

• Record keeping and documentation process

The classroom session would comprise of presentations, discussions and filling up actual questionnaires based on training handouts to participants, which would be copies of LSG documents that needs to be referred during actual assessment. The actual questionnaire filling exercise would be specially designed to ensure that all participants do a full dry run of the process based on reference documents provided. As an example copies of Appropriation Control Register (ACR) of a sample LSG would be provided and the participants would be asked to record the receipt and expenditure from the sample ACR, which would be verified by the trainers. This process would ensure that trainees are completely familiarized with the means of verification and data recording from the reference document in the classroom itself prior to field visit. More details regarding the process is presented in training manual and module.

3.2 Training Programme on Performance Assessment Database Software

The training programme for performance assessment database software would be organized for three different sets of personnel; i) Data entry operators of the PA firms responsible for entering data in the software, ii) Software administrators responsible for managing, controlling access and setting performance yardstick in subsequent years, and iii) Personnel using software for data analysis or generating performance assessment reports. The related details of the training would be provided in the training manual and the software user manual being prepared, however an overview of the training programme is presented below.

3.2.1 Training of Data Entry Operators of PA Firms

The data entry operators to be engaged by the PA firms would be provided training only on the Data Entry module of the software. The data entry module planned in the database software is based on double data entry system which ensures that there are no data entry errors. The data entry operators would be broadly provided training on the following aspects of the software

• Logging in to the data entry module

• Double data entry of the same schedule

• Document uploading method

• Data editing and saving

• Training on data entry supervision methods for data entry supervisors

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3.2.2 Training of software administrators

It is envisaged that the software administration would be with KLGSDP, which would be subsequently transferred to Department of Performance Audit under LSGD. The administrators have several important roles in managing and maintaining the software and the following broad areas of trainings are envisaged

• Installation and management of software

• User access control and levels

• Setting performance cut-offs for each APA

• Enabling and Disabling performance indicators based on revision of PA framework in subsequent years

• Creating new performance indicators

• Edit control and access

• Data backup system

• Web hosting and data fetching from other linked software

• Other database management features and access control

3.2.3 Training of Software Users

It is likely that there would be several users who be accessing the software for analyzing performance assessment data or generating performance assessment reports. Personnel of PMU, staff of PA firms and personnel in other related institutions would require a good orientation in accessing performance data, related analysis and report generation. The training programme for these personnel would cover the following areas

• Training on accessing in-built report, list, charts, results framework indicator, etc.

• Training on generating target list of LSGs based on query features

• Training on generating customized / query based reports

• Training on exporting performance assessment data from the software

• Training on planning capacity building and mentoring interventions based on targeting tools

3.3 Refresher Training of Performance Assessment Team

Need based refresher training would be organized for performance assessment teams in areas where most of them face difficulty. Quality issues identified during monitoring and Quality Audit process would also be addressed through such refresher training. Depending on the requirement, the refresher training would be organized in early phases of the assessment to ensure that conceptual issues and problems in assessment are spotted and rectified at the earliest.

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3.4 Technical back-stopping and handholding support to assessment teams

During the performance assessment the field assessment teams are likely to have some queries and doubts, which need to be promptly addressed through technical backstopping and handholding support. The field supervisors and the core team of the performance assessment firm would provide the technical backstopping and hand-holding support to their teams on an ongoing basis. This would be complimented by technical support by the lead firm and experts of PMU on issues, which remains unresolved at the supervisor level. The teams from lead firm and PMU responsible for monitoring the performance assessment would provide handholding supporting to assessment teams during their field visits. The monitoring teams would review the completed assessment questionnaires and undertake discussion with assessment teams and guide them on technical issues where they are facing any problems.

3.5 Other Capacity Development Initiatives

PMU KLGSDP with support from lead firm would intermittently organize discussions and review meetings to clarify doubts on technical issues emerging during performance assessment. Workshops and learning forums would be used to share the experience and lessons drawn from the performance assessment process. The findings of these workshops and roundtable discussion would assist in making necessary changes in the performance assessment process to be followed in subsequent areas. All lessons generated from the performance assessment process would be documented and shared with all key stakeholders.

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Section 8: Planning and Execution of Annual Performance Assessment

The process of conducting annual performance assessment would be elaborated in the performance assessment manual, which would be the reference document for the external performance assessment firms and other stakeholders involved in the process. The broad strategy and approach for conducting the annual performance assessment is elaborated in this section.

1. Planning of Annual Performance Assessment

The annual performance assessment should ideally start in August and end at November so that performance grant allocation for the ensuing year is announced alongside the State Budget and disbursement of grant is made in April for the financial year. The grant disbursement cycle elaborated in the Project Implementation Manual gives the timeline to be followed in this regard.

The annual performance assessment needs to be meticulously planned keeping in view the number of assessment teams to be deployed and the time frame by which the APA process has to be completed. While preparing the performance assessment plan the PA firms need to consider the following;

• The performance assessment requires presence of LSG members and office bearers and hence can only be undertaken on a working day. The planning should exclude Sundays and public holidays.

• The assessment would require at least 2 days, but ideally the assessment should be planned for 3 days.

• Each assessment team must complete the assessment for a particular LSG before starting the assessment in the next LSG

• Considering the possibility that there would be instance when the planned assessment would not be possible due to unforeseen circumstances, the assessment team needs to keep some buffer days during each month, when the cancelled assessment would be rescheduled. The PA firms needs to keep some buffer days in each month for corrections in questionnaires identified by the supervisor and other monitoring teams.

A planning template would be proposed in the PA manual to be used by the performance assessment firms for preparing annual assessment plan which would be approved by the PMU. The planning template would also have a section on supervisor cross-checking and verification plan, which would be used by assessment supervisors to undertake cross-checking and field verification of completed assessment.

2. Assessment teams and their deployment

Each assessment team would comprise of three researchers and the team would complete assessment of a LSG in three days. The terms of reference for the PA firms indicate that the performance assessment of LSGs would be completed in 10 weeks. Considering this time frame and the number of LSGs to be covered in different regions, a large number of PA teams would be required. The PA firms would also require at least one research supervisor in each district responsible for scrutiny of all completed assessment questionnaires and undertake random sample checks as elaborated under monitoring section later.

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PA Firm 1 PA Firm 2 PA Firm 3

District No. of LSGs District No. of LSGs District No. of LSGs

Trivandrum 73 GP + 4 Municipality Idukki 53 GP + 1 Municipality Malappuram 100 GP + 7 Municipality

Kollam 70 GP + 3 Municipality Ernakulam 84 GP + 11 Municipality Kozhikkod 75 GP + 2 Municipality

Pathanamthitta 54 GP + 3 Municipality Trichur 88 GP + 6 Municipality Wayanad 25 GP + 1 Municipality

Kottayam 73 GP + 4 Municipality Palakkad 91 GP + 4 Municipality Kannur 81 GP + 6 Municipality

Alappuzha 73 GP + 5 Municipality Kasargod 38 GP + 3 Municipality

Total 343 GP + 19 Municipality Total

316 GP + 22 Municipality Total

319 GP + 19 Municipality

The PA teams comprising of researchers and supervisors would be supported by a core team of experts who would be responsible for guiding the teams in undertaking assessment and responsible for internal quality checks.

It is assumed that the performance assessment teams and supervisors would be locally recruited by the PA firms. The PA firms while recruiting and deploying performance assessment teams must ensure the following;

• The performance assessment team members must have the minimum qualification and experience as elaborated in their terms of reference prepared by PMU.

• The assessment supervisors must be post graduate with at least 5 years experience in assessment, research, survey, PRIs, rural development and related field.

• The team should be formed with members having complementary skills such as member with commerce or accounting experience should be put in team with members from social development experience along with members having experience in evaluation / survey

• The deployment of research team should be carefully done and team members from a particular block should not be allocated their home blocks for undertaking assessment. Similarly, supervisors should be given the responsibility of a district other than his home district. These measures are necessary to ensure that a fair and impartial performance assessment is undertaken.

3. Roles and responsibility of assessment teams under PA firms

3.1 Expert team of PA firms

The expert team of PA firms under the guidance of the team leader would have the following responsibilities;

• Recruitment and training of performance assessment team and supervisors

• Monitoring of performance assessment undertaken by the team

• Scrutiny and verification of completed assessment questionnaire

• Sample field validation and verification of completed assessment

• Technical backstopping and hand-holding support to field assessors and supervisors

• Supervision of data entry

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• Data analysis and report preparation

• Other deliverables and responsibilities as per the terms of reference prepared by PMU

3.2 Field supervisors of PA firms

The field supervisors of PA firms under the guidance of the core team would have the following responsibilities;

• Monitoring of performance assessment undertaken by the assessor as per approved plan

• Scrutiny and verification of completed assessment questionnaire

• Sample field validation and verification of completed assessment

• Technical backstopping and hand-holding support to field assessors

• Coordination with KLGSDP District coordinator and other staffs

• Other deliverables and responsibilities as allocated by the core team

3.3 Field Assessors of PA firms

The field assessors of PA firms under the guidance of the supervisors and core team would have the following responsibilities;

• Undertake performance assessment of LSGs as per approved plan

• Undertake correction and rectification based on scrutiny and verification of completed assessment questionnaire by supervisor, core team and external monitoring team

• Keep district coordinator and supervisor / core team informed on field movement plan and on issues emerging during assessment

• Other deliverables and responsibilities as allocated by the core team

4. Communication and Information to LSGs on Performance Assessment

The performance assessment should provide a fair opportunity to LSGs to participate effectively in the process. In this regard it is necessary and important that LSGs must be fully informed about the assessment process, the assessment parameters and the means of evaluation. The LSGs must also know the documents that would be verified during assessment and must keep them ready for performance assessment. Considering that the assessment in each LSG would be completed in maximum of three days the availability of relevant documents to be verified for assessment is absolutely necessary. The presence of LSG members and officials on the scheduled date is also critical for the process.

The PMU would circulate in advance the details of the performance assessment process and the documents that must be kept ready for verification including photocopies that would be collected by the performance assessment teams from LSGs. It is important to note that failure to produce the relevant documents by the LSG at the time of assessment would mean that the concerned LSG has failed to meet the relevant verifiable assessment criteria. The PA firms on their own must also contact the LSGs directly prior to the process and ensure that documents and their copies are in readiness for their visit.

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5. Conducting Performance Assessment

5.1 Principles and Approach

The performance assessment must be conducted in an objective, fair and transparent manner by ensuring that LSGs have been provided enough opportunity to present their facts and information to the assessment team. The following principles of participatory assessment would be adopted during the process.

Proper Articulation and Communication

The performance assessment team must articulate and explain to LSGs the performance parameters, the assessment criteria and the methodology of assessment that is being followed. The teams must ensure that full and complete information must be provided including answering queries and questions that might be raised by LSGs. This is critical not only to maintain complete transparency regarding the process, but more importantly to articulate the importance of various performance parameters and motivating the LSGs to recognize the need for improvement. The performance assessment should be both an assessment as well as a sensitization process for local government regarding good governance and effective service delivery.

Objectivity

The performance assessment framework has been designed to be as objective as feasible and therefore recommends exact documents to be referred and verified at LSG. The performance assessment team must maintain complete objectivism during assessment and must refrain from making decisions which are judgmental and opinion based in all circumstances. The performance assessment is quite similar to audit process where conclusions are made only on the basis of material evidences presented. The performance assessment team must follow this principle rigorously which would ensure that the process is fair and only deserving LSGs would eventually receive the performance grant from the project.

Conduct

The performance assessment team must adopt appropriate code of conduct at all times even if there are any disagreement. The assessment team must behave professionally, maintain general decorum of behavior and communication, be people and gender sensitive, display integrity and honesty, be respectful of local culture and norms, and all engagement should be polite and respectful. Disagreement of any nature need not be resolved at the field level and must be promptly brought to the notice of PMU through the concerned team leader. The protocols for the performance assessment are detailed in performance assessment manual.

5.2 Field Assessment

The field assessment must be undertaken keeping in view the following requirements

• It needs to be undertaken during the official hours of LSGs on scheduled dates. It is therefore important that all assessment teams must reach in time and stay for the duration to ensure enough time is available for conducting detailed examination and assessment.

• The team members according to their expertise must divide the work and allocate responsibility to ensure that all members are able to contribute to the process

• The team must collect signed copies of all supporting documents, which is non-negotiable and any lapses in this regard would be rectified by the PA firms on their own. It is

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important to note that failure to produce the relevant documents by the LSG at the time of assessment would mean that the concerned LSG has failed to meet the relevant verifiable assessment criteria.

• All signature and seals suggested in the questionnaire must be complied and any deviation in this regard would be rectified by the PA firms on their own. All the pages including supporting document would have to be attested by all the parties involved in assessment

• A copy of the complete assessment questionnaire must be provided to the LSGs for their records and a receiving proof should be taken and kept

• The team must ensure that assessment is completed during the scheduled dates and any problems related to this must be brought to the notice of concerned team leader, who would promptly address the problem

• Any information and data found missing at any stage would be collected by the assessment team in person

5.3 Information Collation, Verification and Documentation

The assessment teams must keep all completed assessment questionnaire and supporting documents in a systematic manner till the same is handed over to supervisor for their scrutiny. The PA firms must ensure that a proper verification and documentation system is adopted so that documents and information can be quickly retrieved as and when necessary. All documents are the property of PMU and the PA firms must act as a professional custodian of the documents till the end of assessment process, after which all documents would be submitted to PMU.

Following supporting documents would be collected (details in the questionnaire)

• Electronic copies of all documents being assessed or, in cases where electronic copies are unavailable, scanned copies of cover page and relevant pages to substantiate the assessment result

• Photographic evidence as prescribed for assessment

• Photo copies of reports, statements, registers, minutes, etc. as prescribed in the assessment

Important supporting documents would have to be scanned and attached / uploaded during the data entry by PA firms. The documents to be scanned and uploaded would be suggested by the PMU later. The Consultant shall upload the region wise consolidated report (as advised by the PMU) on the defined portal online.

6. Monitoring and Quality Assurance Audit

A robust monitoring and quality assurance audit would be followed during the performance assessment by PA firms, lead firm for PA and PMU, KLGSDP. The details have been elaborated in a Section 8.

7. Data Entry and Analysis

The PA firms after proper verification and scrutiny would enter the performance assessment data in the PA database software. The data entry would be undertaken by each PA firm in a centralized location under the overall supervision of team leader supported by data entry supervisor. The lead

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firm on behalf of PMU and experts of PMU would visit the centralized location intermittently to observe the process adopted by PA firms.

In order to ensure that the data entry is error free a double data entry process would be followed. Each performance assessment questionnaire had to be keyed in twice and only when all the data matches the data would be accepted by the system. In case of mismatch, the system would show the data where mismatch has occurred and the data entry supervisor then must verify the questionnaire and advise the two data operators to correctly enter the data. After due correction, the data would be accepted by the system.

The PA firms would undertake data analysis based on suggestion by PMU. The PA firms would export the data from database software and use relevant statistical package such as SPSS, STATA or SAS for data analysis.

8. Report Preparation

The PA firms would prepare a report on the performance assessment and provide a list of qualifying LSGs for performance grant. The assessment report must include the following

• Performance of LSGs vis-à-vis full assessment against the indicators in the respective performance area and themes

• Performance scores of each LSG

• LSG, block or district wise analysis of performance and highlight specific issues related to the performance criteria

• Provide a list of LSGs qualifying for performance grant with clear reasons for qualification / disqualification

• A separate analysis of tribal areas in the region

• Summary of performance assessment; providing an overview of the results, performance issues, and related suggestions.

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Section 9: Monitoring and Quality Assurance of Performance Assessment

A robust monitoring and quality assurance process would be adopted to ensure that the annual performance assessment of LSGs is undertaken in a neutral, objective and professional manner. The external performance assessment firm, the lead firm for performance assessment and PMU KLGSDP would be responsible for monitoring and quality assurance of APA.

1. Monitoring and Quality Assurance by external PA firms

The three external performance assessment firms responsible for conducting APA would establish strong internal supervision and monitoring mechanism to ensure that APA is conducted without any errors. The performance assessment supervisors and the core team experts would have specific responsibilities in this regard.

1.1 Scrutiny and Verification of Assessment Questionnaire

The district level field supervisor of PA firms would conduct scrutiny of all completed questionnaire and verify that they are accurately filled with complete details and copies of all relevant documents referred (means of verification) are annexed to the questionnaire. The field supervisors would undertake the following desk based scrutiny and verification of all questionnaires

• Ensure that all assessment questions have been answered and there are no blank response cells, Blank cells are identified and marked

• All data has been recorded is correct place and unit. Mistakes are spotted and marked.

• The data recorded in the questionnaire matches with the data / information available in the copies of LSG documents attached to the questionnaire. Data mismatching with LSG documents are identified and marked.

• All overwriting and corrections are duly signed and certified by assessor as well as the LSG members and office bearers

• Inconsistent data are identified and clearly marked for verification, example, numbers entered against “Yes / No” response

• Data outside the logical range are identified and clearly marked for verification, example, number of wards entered as 100 (Maximum number of wards is 50)

• Correct number of sample / responses has been covered for questions where sample size has been suggested

After the scrutiny and verification process, the supervisors would discuss the corrections required in the questionnaire with assessors and the same would be rectified by the assessors with follow-up field visits. The follow-up field visits by assessors would be carried out on buffer days earmarked in the planning template. The PA firms would share with the PMU the plan for follow-up visits of assessors and only after its approval and communication to concerned LSGs the same would be conducted. The supervisors after correction would re-verify the questionnaires and certify them to have been scrutinized and verified. Data entry of only those questionnaires which have been verified and authenticated by supervisor or core team members of PA firms would be undertaken.

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The core team members of the PA firms would similarly scrutinize 15 percent of the questionnaires after verification of field supervisors. The core team among other things would verify whether the scrutiny and verification process followed by supervisors have been robust and the questionnaires do not have any visible errors. The sample of questionnaires should be proportionately selected from all performance assessment teams engaged for the APA. Follow-up corrective measures would be undertaken as necessary on the instance of the PA core team members.

1.2 Field Verification of Performance Assessment

The PA firms would undertake field verification of performance assessment in at least 20 percent of the LSGs. The sample check would be undertaken by the core team members and field supervisor of the PA firms after the assessor has completed his assessment. Core team members and supervisor would each independently undertake 10 percent sample check. The samples should be randomly selected in proportion to LSGs covered by each performance assessment team. The sample verification of performance assessment would be a strong internal quality control measure of the PA firms and should identify areas where the assessors are committing mistakes and provide them with necessary guidance to rectify them. The assessors and supervisors would be responsible for making necessary corrections based on the field verification results. The PA firms must submit a report to PMU on results of sample verification conducted internally by them, highlighting measures such as training, hand-holding, corrections of questionnaires, etc. taken by them.

1.3 Technical backstopping and handholding support to assessor

The PA firms must establish internal arrangements to supervise the assessment process in the field and provide assessor & supervisor with technical backstopping support. The core team of PA firms must clear all doubts related to indicators, methodology, documents to be referred, identification and segregation of figures from financial statements, field related issues and questions, etc. on a day to day basis. It is envisaged that the need for handholding support is likely to be high in the first 15 days of performance assessment and would gradually diminish as the assessors acquire sufficient skills and understanding of the process.

2. Monitoring and Quality Assurance by Performance Assessment Lead Firm

The performance assessment lead firm on behalf of the PMU would establish a monitoring and quality assurance mechanism for the annual performance assessment. The PA lead firm would undertake Quality Assurance Audit and provide technical backstopping support to external performance assessment firms for monitoring and quality assurance.

2.1 Quality Assurance Audit

The main purpose of the quality assurance audit (QAA) would be to verify the quality of the performance assessments undertaken by the three external PA firms. The quality assurance audit would be undertaken by the lead firm on a sample basis and would proportionately cover samples of LSGs from the three firms responsible for undertaking performance assessment. In total a sample of 10 percent LSGs would be covered under quality assurance audit.

The quality assurance audit would have the following objectives

• Assess the quality of performance assessment undertaken by the external PA firms

• Ascertain that objective, fair and impartial assessment was undertaken

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• Ascertain that assessment teams have indeed followed the assessment protocols elaborated in PA Manual

• Identify areas where majority of the mistakes are occurring and implement corrective measures

• Provide handholding support to assessors to address common queries and mistakes

• Organize refresher training if necessary depending on the extent of mistakes

• Recommend to PMU the corrective measure to be adopted by external PA firms according to the QAA policy elaborated below

2.2 Policy on Quality Assurance Audit

2.2.1 Focus of Quality Assurance Audit

The quality assurance audit in principle has two fundamental focuses. Firstly, it needs to ensure that the performance assessment has been undertaken in a fair and impartial manner without any possibility of collusion or malafide intention. Secondly, to identify and capture errors resulting from poor understanding of the assessment teams, confusion and lack of clarity on certain performance measures. Clearly, willful errors and conceptual errors need to have different recourse measures. However, it is practically difficult to establish willful errors and hence the margin / extent of errors should be used as a yardstick to decide on the recourse measure to be followed irrespective of the reasons of error.

2.2.2 Recourse Measures based on Tolerance level of Errors

The LSGs qualifying the MMCs and scoring above the cut-off performance score would qualify for the performance grant from KLGSDP. This requires that the performance scores are based on accurate performance assessment since mistakes in performance assessment could eliminate deserving LSGs or could include undeserving LSGs.

The PA lead firm based on the assessment questionnaire along with copies of LSG documents submitted would conduct a desk review followed by field verification on a sample basis. The desk and field audit would be used to identify the mistakes in performance assessment committed by the PA teams and the error in performance scores would be computed accordingly. Based on this audit the PA lead firm would establish the error margin in scores and depending on the error margin the recourse measures would be initiated.

Error Margin of Less than 5 Marks

If the error in performance score is within 5 marks the following measures would be taken by the external PA firms

• The concerned performance assessment team would conduct re-assessment of all the questions where the mistakes were found in all the LSGs for which they are responsible. The set of questions where re-assessment would be undertaken would be different for each assessment team depending on the QAA results

• The PA firms must re-submit the assessment questionnaires duly certified that all the questions have been re-assessed and clearly indicate how the data has changed after re-assessment. The assessment questions where re-assessment was undertaken should also be

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certified by the concerned LSG members and office bearers. A re-assessment plan accordingly would have to be prepared by the PA firms and submitted to PMU for approval

Error Margin of 5 or more Marks

The following measures would be taken by the external PA firms in case the error margin in performance score is 5 or more marks or in case any mistake was found in MMCs.

• The concerned performance assessment team would be dropped by the external PA firms and they would not be allowed to do any performance assessment further.

• A fresh performance assessment would be conducted once again in all the LSGs covered by such teams for which the external PA firms must submit a plan for approval of PMU. The fresh performance assessment would be conducted by either new teams or existing team who qualified the QAA process. Preference should be given to the existing performance assessment team who qualified the QAA process.

• The fresh performance assessment should be undertaken using the prescribed methodology and would be monitored and scrutinized by core team of PA firms as done in other cases.

• The PA firms must submit the old questionnaire as well as the new questionnaire where re-assessment was conducted to the PMU for their verification

2.3 Quality Assurance Audit Process

The lead firm would undertake the quality assurance audit on a proportionate sampling basis in such a manner that samples from all the performance assessment teams are selected.

2.3.1 Phasing and Sampling for QAA

The sample for QAA process would be selected randomly from the list of LSGs provide by the external PA firms where performance assessment has been completed. The samples of LSGs selected would be communicated to the PMU and the PA firms. The PA firms would submit to PMU a photo copy of the completed questionnaire and the LSG documents collected for all LSGs selected for QAA which would then be provided to the lead firm.

The QAA process would be undertaken in two phases considering the actual assessment is planned to be completed in 10 weeks duration. The first phase would start after five weeks of grounding actual assessment and sample of LSGs would be selected from LSGs covered during that period. The second phase would start after ten weeks of grounding actual assessment and sample would be selected from LSGs where assessment was completed during 5th and 10th week. In total a 10 percent of the LSGs would be covered under quality assurance audit process.

2.3.2 Desk audit and review of assessment Questionnaire

A desk based audit would precede the field based audit of performance assessment. The lead firm team would review the questionnaire and ascertain whether they have been correctly filled using data from the LSG documents attached. The desk audit would also examine whether data for which supporting documents are not collected are of correct type, in correct logical range and in correct unit. Unfilled data would be marked and whether correct sampling was done for questions based on sample would also be ascertained during the audit.

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The field audit would follow the desk audit and following quality checks would be undertaken

• Correct LSG documents was referred by the assessment teams and copies of the same has been collected

• Date which appears to be incorrect would be verified by LSGs for questions, particularly where no documentary proof has been collected

• Ascertain whether sample size was correctly selected and verify the missing data

2.3.3 Computing the error in Performance Score

The lead firm team on the basis of desk and field audit would identify performance assessment questions where mistakes have been committed by the assessment team and compute the error in score based on those questions. The QAA team would compile the list of deviations and reasons for each of the sample LSG covered under QAA and present the finding to the PMU with explanation and reasons for the same and the error margin in performance score as a result. The PMU KLGSDP as per the agreed QAA policy would suggest the recourse measures to the external PA firms.

2.4 Refresher training in significant areas of error

The lead firm would organize refresher trainer as necessary in areas where significant errors are observed to ensure that assessment teams do not repeat the mistakes in future. All such training would be organized by the PMU on recommendation by the lead firm.

2.5 Technical backstopping by lead firm

The lead firm would provide necessary technical backstopping as required by the external PA firms. The PA firms through their team leader would inform to the lead firm the areas where they are facing difficulty or where they have technical and conceptual queries and other field level issues encountered during the assessment, which would be promptly addressed by the lead firm.

The lead firm on behalf of PMU would organize discussions and meetings with all the external PA firms to resolve queries and provide technical support as would be requested. Interim review sessions will also be organized to help them to resolve technical issues/ methodological problem and to monitor the quality control mechanisms placed by external PA firms.

3. Supervision and Monitoring by PMU

The PMU would undertake independent supervision and monitoring of performance assessment conducted by external PA firms. This would comprise of review meetings and discussions with all external firms responsible for performance assessment. The district coordinator and other experts of PMU as directed by the project director would be responsible for sample checks or monitoring as necessary. District coordinators would visit sample LSGs while the performance assessment is in progress and provide necessary feedback on the process and quality of performance assessment being carried out by independent external firms.

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Section 10: Objection, Appeal and Remedies during Performance Assessment

The performance assessment of LSGs is envisaged as an intensive participatory process involving officials and elected leaders of LSGs. The assessment has been designed as an objective and evidence based process where documents maintained and held by LSGs would be used as means of verification to ensure that the assessment is robust and is executed objectively and fairly. The performance assessment questionnaire after assessment would be countersigned and assented by members and officials of LSGs as a proof of their acceptance of findings recorded, as well as by the performance assessment teams. Copies of all documents of LSGs which were referred for data and information would also be countersigned by all parties present and would be annexed to the questionnaire. A copy of the completed assessment questionnaire countersigned similarly would be provided to the LSGs for their records. It is expected that these measures would ensure that the assessment process is evidence based, findings are accurate and legitimately recorded, all parties are well informed and there is complete agreement regarding the findings recorded in the assessment questionnaire. It is expected that these mechanisms would minimize the possibility of disputes and appeal by LSGs. However, in order to resolve any objections that might arise during or after the performance assessment process a proper policy for objection, appeal and remedies needs to be established by the PMU.

1. Policy for Objection, Appeal and Remedies

The LSGD / PMU would establish a clear policy for dealing with objection, appeal and remedies related to performance assessment of LSGs. In this regard, an Appellate Authority would be established for dealing with matters related to objections and appeals by LSGs. The constitution, functioning and process to be followed by the Appellate Authority would be prescribed by the LSGD in due course. If considered necessary a Second Appellate Authority would also be established. The following section gives an overview of the policy that would be adopted by the KLGSDP.

2. Structure and Constitution of First Appellate Authority

An Appellate Authority for Annual Performance Assessment would be constituted by the Local Self Government Department under the Chairmanship of the Project Director and comprise of two other members. The other two members would be nominated by the LSGD and one of the members would be designated as Vice Chairman who in the absence of Chairman would discharge all such functions for which Chairman is responsible. The appellate authority would be housed at the PMU office of KLGSDP.

The chairman, vice chairman and member shall hold office of the Appellate authority for the period or duration as prescribed in its notification.

2.1 Roles and Responsibility of the Appellate Authority

The Appellate Authority is envisaged to be an authority responsible for conducting enquiry on appeals and grievances brought to it by LSGs in relation to performance assessment and to redress the appeal or grievance as per the approved policy. The specific roles and responsibilities of the Authority will be as follows

• To receive the appeals in matters related to the performance assessment of LSGs

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• To conduct hearing on the appeals in case it is required

• To order examination of the appeal through field verification, hearing, etc. as deemed to be necessary

• To take appropriate decisions based on the examination of the appeal

• Issue orders redressing the grievance / dismissing the petition based on the final decision

• Issue orders to the petitioner, giving justification of the decision taken

3. Structure and Constitution of Second Appellate Authority

A Second Appellate Authority for Annual Performance Assessment would be constituted by the Local Self Government Department as considered necessary for filing appeal by the appellant or the defendant if aggrieved by the decision of the first appellate authority. The structure and constitution of second appellate authority would be as prescribed by the LSGD.

4. Process of Objection, Appeal and Remedies

4.1 Filing of Objection and Grievance

Any LSG aggrieved by the performance assessment process and the scores assigned to them may within fifteen (15) days from the date of publishing the score may submit an appeal to the Appellate Authority in specified form as may be prescribed, duly signed by the President of the Gram Panchayat or Chairperson of the Municipality. The appellant local body shall pay a non-refundable appeal fee to be fixed by the concerned authority.

4.2 Verification of Appeal

The Appellate Authority would constitute a project committee or direct such persons in project as it may deem fit for reviewing the appeals filed by LSGs. If the complaints / appeals filed are prima facie bona fide the authority will conduct a hearing of the aggrieved parties and if necessary depute a team of experts to verify / cross check the complaint and submit reports. The authority will examine the appeal on the basis of the hearing/ report to provide an effective and efficacious remedy to the appeal.

Depending on the nature of appeal or objection, the need for re-verification of records or reassessment would be decided by the Appellate Authority. The Appellate Authority will decide to fix the responsibility of verification to be followed and entrust the duty to either the external PA firms or a team of Lead Consultants or a team of officers from the PMU, depending on the nature of the appeals or the number of cases under consideration. The team entrusted to do verification or reassessment will submit their report with supporting evidence to the Appellate Authority within the specified time frame.

4.3 Decision and Closure of Appeal

The Appellate Authority will take the final decision on the objection or appeal of the LSG, after analyzing the facts / information collected and verified in this connection. If necessary a hearing will be conducted to hear the arguments of the appellant. The external performance assessment teams may also be called if required. If the Appellate Authority while deciding an appeal comes to a conclusion that the petitioner has been denied justice, it may pass an order directing those

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concerned to correct the defects and deliver justice to the applicant. Or if the appeal filed by the petitioner is found to be non-tenable, the Appellate Authority will finally dispose off the case and close the matter. The Appellate Authority should see to it that the justice is not only done but it should also appear to have been done. In order to do so, the order passed by the Appellate Authority should be a speaking order giving justification for the decision arrived at and the same will be communicated to the petitioner.

The Appellate Authority would dispose an appeal within 30 days of receipt of the appeal. In exceptional cases, the Appellate Authority may take 45 days for its disposal. However, in cases where disposal of appeal takes more than 30 days, the Appellate Authority should record in writing the reasons for such delay.

4.4 Appellate Order

The first Appellate Authority will communicate the decision on the appeal to the concerned LSG by registered/speed post and if necessary place the order on the project website.

4.5 Appeal to Second Appellate Authority

If the appellant or the defendant is aggrieved or not satisfied by the decision of the first Appellate Authority then the appellant can file an appeal before the second Appellate Authority within 15 days from the date of communication of the first appellate order to the appellant. The second Appellate Authority will hear the appeal filed by the LSG against the first Appellate Authority`s decision in respect of performance assessment. The order passed by the second Appellate Authority after hearing all arguments or based on any verification ordered or based on any additional information called for, would be final.

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Section 11: Performance Assessment Database Software

Performance assessment database software would be designed for recording performance assessment data, calculation of performance scores and displaying results of the performance assessment. The database software would be web based and would be used by the PA firms to enter performance assessment data online. The performance assessment database software will perform several roles in assisting robust performance monitoring, grant administration and planning and identification of strategic interventions for capacity building component. The performance assessment database software would be user friendly application designed using technology recommended by the PMU and would be hosted on recommended server with IT mission with back-up server at the PMU.

A system requirement study was conducted to ascertain the technology to be used and assess the requirement of different stakeholders, which would guide the design of the application software. The PMU through IT mission would undertake necessary security audit and suggest protocols to be followed by the software development firm. A system requirement study report would be prepared and submitted to PMU for approval of the design. The details of the software would be presented in the SRS, but the following section gives an overview of the same.

1. Technology for Software

A detailed discussion with PMU, World Bank, IT Mission and IKM was undertaken to guide the selection of technology for the PA database software. The database software would be based on Microsoft Dot Net platform based solutions and .Net 3.5 or .Net 4 will be used to develop and deploy the solution online. The PMU through IT Mission would arrange high end windows based server with 4GB+ Ram and 360GB+ Storage web space for final solution hosting keeping in view that scanned documents would also be uploaded along the assessment data. The backend database server will be MSSql Server 2008 or higher which would be would be arranged by the PMU through IT Mission. PMU would also procure all other related hardware and licensed version of technology platforms used for software development.

For the development of the software the RDP Access to the web server through static IP from Delhi office of Software development Agency would also be organized. The PMU would also confirm on data linkages or data pulling from other Government Software/ servers like Saankhya, Sulekha etc., using the online API access and provide the API access information needed by Software Developer.

2. Software Architecture

The performance assessment database software would have the following modules

• Multi user online data entry module

• Cross verification module managed by software administrator

• Scanned document or image for support document uploading

• Excel based data export for raw data

• Tabular analysis and reports generation and charts

• Basic/advance data sharing with stakeholders

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• User level access control

• Master Management

• Administration Panel

The overall architecture of the performance assessment software and data flow diagram is presented below

3. Recording and Displaying Results of Annual Performance Assessment

The software would record the performance assessment data based on the questionnaire used and self generate the performance scores. This would ensure that the calculations of scores for different performance indicators are not manually done at the field level where potentially mistakes can

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occur. The software would therefore be a database of all record and data from the performance assessment and would automatically generate and display scores in a manner that it can be used and exported as necessary.

The cut-off performance scores for each year would be set by the software administrator based on decisions taken by PMU / LSGD and the list of qualifying LSGs would be generated.

4. Comparative Annual Performances

The most important objective of KLGSDP is to strengthen the performance of LSGs for improved governance and service delivery. The performance assessment of LSGs would be an annual exercise and would be repeated in the second year for performance grant allocation. The software therefore would have provision for multi-year data entry and generation of performance scores accordingly. It would also have features to compare results of different years and depict the trend of performance indicators to highlight areas of improvement or changes. The trend reports and charts would be useful for planning capacity building activities and in identification of policy changes that would be required for strengthening of LSGs.

5. Targeting Tools for Planning

Since the database software records the performance of LSG in all thematic and sub-thematic areas of performance, the software would have features to identify or list out LSGs who are weak on specific areas of performance and the same can be used as targeting tools for planning specific training, capacity building and mentoring support to them. While the capacity building component would aim to strengthen the capacity of all LSGs, the targeting tools would assist the PMU or training support organization (KILA and SIRD) to identify LSGs who need training and support in specific areas.

6. Results and Reports from the database software

The software would have inbuilt reports and charts based on the requirement of the project and other stakeholders. The in-built reports would include

• LSG wise performance scores with thematic and sub-thematic break-up

• Aggregate level analysis showing distribution of LSG by range of performance scores

• Aggregation wise report such as district, region, tribal and non-tribal areas, etc. on distribution of LSG by range of performance score

• Trend reports or year-on-year improvement report both for each LSG or at different aggregate level

Besides, the in-built report, the software would have features to generate customized query based report such as

• Various types of targeting tools or list of LSG with specific performance range for themes and sub-themes

• Specific district and region-wise report

• Specific period wise report

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7. User Guidance Manual

A user guidance manual would be prepared that would assist the user to install and run the software easily. The user manual would elaborate and provide all guidance related to

• Installing the software

• Process of Data Entry and using all in-built features of adding, editing, deleting and saving data

• Generation of in-built report

• Guidance on generating customized query based report

• Troubleshooting issues encountered

• Importing and Exporting data from the software

• Admin and user protocol, features and password, etc.

• Database maintenance guidance

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Section 12: Way Forward

The performance assessment system for local government is the first step towards evolving a fiscal framework for inter-governmental transfer based on objective performance assessment in the State. Although, the performance assessment framework and strategy has been designed within an immediate focus on the KLGSDP, the system by all means is applicable for performance assessment of local government in the broader context of local governance and service delivery prevailing in the State. Consciously and by design the performance dimensions included in the system are not limited to areas of interventions envisaged in KLGSDP, but reflect broader perspective of governance and service delivery and the Government mandate. The performance assessment system must be changed with time to reflect progress and changes in policies and governance systems in the state.

During the KLGSDP tenure the performance assessment system would be used to decide eligible local government institutions for performance grant allocation. It is expected that the use of the system in KLGSDP would provide enough lessons that can provide strong grounding for eventually institutionalizing the system towards a performance based development fund transfer. However, any new system would require supporting policies, stakeholder consensus and appropriate institutional structure, which is only possible with strong will and consensus for change. The road map for institutionalizing performance assessment system would be based on these approaches.

1. Stakeholder Sensitization and Consensus Building

The need for stakeholder sensitization and consensus building is imperative for creating a strong will and response in favor of adopting the system. The role of PMU and LSGD in this regard would have significant impact in building consensus among various stakeholders regarding the need for such performance assessment system for local government. Workshops and Learning forums for dissemination of lessons and results would be useful in influencing the discourse on the subject.

2. Mentorship by Local Self Government Department

The leadership and mentoring by Local Self Government Department in creating an enabling environment and bringing in consensus among different stakeholders is of critical importance. The design and use of the system in KLGSDP itself communicates a strong message to all stakeholders on the intent of the department. The LSGD would continue to provide mentorship and guidance towards institutionalization of performance based system for local government.

3. Establishment of Appropriate Institutional Structure

Establishment of appropriate institutional structure for performance assessment system would be necessary for its integration with the department. During KLGSDP, the PMU would anchor the implementation of performance assessment system, but a longer term institutional structure would have to be evolved by the Government.

4. Enabling Policy Changes for Performance Assessment

Government of Kerala has been the frontrunner in India for evolving and establishing policies for democratic decentralization movement in the state. The Government would have to provide the

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necessary policy foundation for implementations of a performance based fiscal framework for local government in due course. The lessons and experience from KLGSDP would inform the need for and the requirement of policy measures to support the shift towards a performance based grant transfer for local government.

Appendix 1: Reference Documents

Key Acts and Rules Referred

1. Consolidated Works Rules for LSGs

2. Guidelines for the Procurement of Goods and Services in Local Self Governments in Kerala (2010)

3. Kerala Financial Code

4. Kerala Municipal Accounts Manual

5. Kerala Municipalities (Preparation of Estimates of Receipts and Expenditure) Rules, 1962

6. Kerala Municipality (Execution of Public Works and Purchase of Materials) Rules, 1997

7. Kerala Municipality (Manner of Inspection and Audit System) Act 1997

8. Kerala Municipality (Preparation of Citizen Charter) Rules, 2000

9. Kerala Municipality Act, 1994

10. Kerala Panchayat Accounts Rules, 2011

11. Kerala Panchayat Raj (Execution of Public Works) Rules, 1997

12. Kerala Panchayat Raj (Manner of Inspection and Audit System) Act 1997

13. Kerala Panchayat Raj (Preparation of Citizen Charter) Rules, 2004

14. Kerala Panchayat Raj Act, 1994

15. Kerala Right to Service Act 2012

16. National Municipal Accounts Manual, issued by Comptroller and Auditor General

17. The Right to Information Act, 2005

18. Relevant Government Orders

Important Reports Referred

1. Accountability of Local and State Governments in India: An Overview of Recent Research, Dilip Mookherjee

2. Accountability of Local Governments, CAG’s Initiatives and the Challenges Ahead, R N Ghosh

3. Action taken Report (ATR) on the First Part of the Report of The Fourth State Finance Commission, Government of Kerala

4. Report of the CAG of India (Local Self Government Institutions), Government of Kerala, 2009-10

5. Report of the CAG of India (Local Self Government Institutions), Government of Kerala, 2010-11

6. Deepening Decentralized Governance in Rural India: Lessons from the People’s Plan Initiative of Kerala, Shri. M.A. Oommen

7. Democratic Accountability in Local Governance Institutions, Experiences from South Asia, PRIA Global Partnership

8. Draft Outlines of Approach Paper, 12th Five Year Plan, State Planning Board, Kerala

9. Environment and Social Management Framework, KLGSDP

10. Kerala – A Case Study of Classical Democratic Decentralization (For submission to the XIIIth Finance Commission), Shri. S M Vijayanand, Principal Secretary to Govt., Local Self Government Department, Government of Kerala

11. Project Appraisal Document KLGSDP

12. Project Implementation Manual KLGSDP

13. Report of the Fourth State Finance Commission Kerala

14. Vulnerable Group Development Framework

Annexure 1: Performance Assessment Framework KLGSDP

Performance Assessment Framework

Kerala Local Government Service Delivery Project (KLGSDP)

1. Performance Area

i. Planning and Budgeting.

ii. Project Execution and Service Delivery

iii. Participation, Transparency and Accountability.

iv. Accounting, Financial Reporting and Audit

2. Performance Scores

The performance scores for the four areas has been revised based on detailed discussion with all key stakeholders to reflect current priorities of performance.

Performance Area Revised Marks

5. Planning and budgeting 10

6. Project Execution and Service Delivery 40

7. Accounting, Financial Reporting and Audit 25

8. Transparency and Accountability 25

Total 100

Performance Area 1: Planning and Budgeting

1.1 Mandatory Minimum Conditions for Planning and Budgeting

Minimum Mandatory Conditions Objective Assessment Criteria Means of Verification

1.1.1 Budget for the current financial year prepared and approved by the Committee / Council of LSG and copy availed to LSGD by the end of April of the succeeding financial year

1.1.1.1 Budget for the current financial year prepared in Form Bud 4 (National Municipal Accounts Manual) or Form A (i), A (ii), A (iii),B,C,D,E by Municipalities as prescribed under Kerala Municipalities (Preparation of Estimates of Receipts and Expenditure) Rules,1962 OR Detailed Budget as prescribed in Form 1, 2 and 3 for Gram Panchayats 1.1.1.2 Budget for the current financial year approved by the LSG Committee / Council before 31st March of the preceding financial year and copy availed to LSGD before end of April of the current financial year

1. A budget document in Form Bud 4 (National Municipal Accounts Manual) or Form A (i), A (ii), A (iii),B,C,D,E under Kerala Municipalities (Preparation of Estimates of Receipts and Expenditure) Rules,1962 for Municipality or Detailed Budget as prescribed in Form 1, 2 and 3 for Gram Panchayat for the current financial year (2013-14) prepared before 31st March of previous financial year shown by LSGs. (Copy to be collected)

2. LSG Committee / Council Resolution / Meeting shows budget for the current financial year was approved before 31st March of previous financial year. (Copy to be collected)

3. Letter to Deputy Director of Panchayat by Gram Panchayat or to Regional Joint Director (Municipality) by Municipality for submission of approved budget of current financial year before 1st May of current financial year. (Copy to be collected)

1.1.2 Annual Plan for the financial year preceding the assessment approved by both the Committee / Council of LSG and DPC

1.1.2.1 Annual Plan document for the financial year preceding the assessment furnished in Sulekha software using Forms 5 and 6 (mandatory) and relevant forms among form 1 to 4. 1.1.2.2 Annual Plan document for the financial year preceding the assessment has been approved by LSG Committee / Council 1.1.2.3 Annual Plan document for the financial year preceding the assessment has been approved by the DPC

1. Sulekha Software shows Annual Plan document for the financial year 2012-13 using Forms 5 and 6 (mandatory) and relevant form among form 1 to 4. (Copy of Annual Plan to be Collected)

2. LSG Committee / Council Resolution / Meeting show that the Annual Plan for the financial year preceding the assessment has been approved. (Copy to be collected)

3. Consolidated proceedings issued by the DPC and signed by the District Collector showing approval of the total plan projects of the LSG for the financial year preceding the assessment.

1.2 Performance Benchmark for Planning and Budgeting

Performance Criteria Objective Assessment Criteria Means of Verification Score

1.2.1 Compliance with the prescribed Development Planning Process (Five year plan for current plan period and annual plan for financial year preceding the assessment)

1.2.1.1 Working groups are formed and they are involved in the planning process

1. Minutes Book of different Working Groups formed is available with LSG with counter signature of the LSG Secretary

2. Minutes book of different Working Groups shows proceedings of discussion on project proposals for Development Report and Perspective Plans to be presented in Gram / Ward Sabha

2 Pro-rata on number of Working Groups

1.2.1.2 Gram / Ward Sabhas / Oorukootam (Tribal hamlets) have discussed the plan proposals and made recommendations

1. Verify from 10 randomly selected Gram / Ward Sabha and all Oorukootam (Tribal hamlets) in Gram Panchayats that (a) Minutes of Meeting / Resolution of Gram / Ward Sabha

shows that meeting was held to discuss plan proposals for Perspective Plan and made recommendations

(b) Attendance register shows that the meetings of Gram / Ward Sabha to discuss plan proposals for Perspective Plans met the norms of Quorum (10% of Voters or 50 Voters for Gram / Ward Sabha meeting adjourned earlier for want of quorum)

(c) Minutes of Meeting / Resolution of Oorukootam in Tribal hamlets in Gram Panchayats shows that meeting was held to discuss plan proposals for Perspective Plan and made recommendations

(d) Attendance register shows that the meetings of Oorukootam to discuss plan proposals for Perspective Plans met the norms of Quorum (50% of Voters)

2 Pro-rata on number of sample Gram /

Ward Sabha and all Oorukootam

1.2.1.3 Standing Committees have recommended projects to LSG Committee / Council for approval

1. Minutes Book shows that all the prescribed Standing Committees for LSGs have discussed plan proposals for Perspective Plan and made recommendations to LSG Committee / Council for approval

2 Pro-rata on number

of standing committee

1.2.1.4 Development Seminar as 1. Summary of Development Report prepared for circulation in 2

Performance Criteria Objective Assessment Criteria Means of Verification Score

prescribed was conducted for discussion of Plan Proposals for Perspective Plan

Development Seminar shown 2. Minutes Book shows proceedings of discussions in Development

Seminar organized

1.2.1.5 Development Report along with the Five Year Perspective Plan for the current plan period prepared by LSG in prescribed format and approved by the LSG Committee / Council

1. Development Report along with the Five Year Perspective Plan for the current plan period shown by LSG. (Copy to be Collected)

2. Shelf of projects in Five Year Perspective Plan prepared in prescribed Form (Annex 8) as per Government Order - G.O (MS) 168/2012/ LSGD dated 15-6-2012

3. Minutes Book shows Proceedings of Discussion of LSG Committee / Council approving the Development Report along with the Five Year Perspective Plan for LSG.

2

Total marks 10

Performance Area 2: Project Execution and Service Delivery

2.1 Mandatory Minimum Conditions for Project Execution and Service Delivery

Minimum Mandatory Conditions

Objective Assessment Criteria Means of Verification

2.1.1 Minimum of 80% of KLGSDP performance grant, Development fund-General-Capital, Development fund-Special Component Plan-Capital, and Development fund-Central Finance Commission Grant-Capital funds spent in the financial year preceding the assessment

2.1.1.1 At least 80% of the actual receipt of KLGSDP performance grant, Development fund-General-Capital, Development fund-Special Component Plan-Capital, and Development fund-Central Finance Commission Grant-Capital allocation for the last financial year preceding the assessment has been spent during the same financial year

1. Receipt and Expenditure information drawn from Appropriation Control Register (ACR) maintained for recording KLGSDP performance grant, Development fund-General-Capital, Development fund-Special Component Plan-Capital, and Development fund-Central Finance Commission Grant-Capital fund transactions for the financial year preceding the assessment.

2.1.2 Capital works and acquisitions funded from KLGSDP performance grant in the financial year preceding assessment have taken place (work in progress/completed.)

2.1.2.1 Implementation of all Capital Works (infrastructure projects) funded from KLGSDP performance grant for the financial year preceding the assessment are in progress / completed. 2.1.2.2 All Capital Assets to be procured from KLGSDP performance grant for the financial year preceding the assessment are in progress / completed.

1. For all Capital Works (new or repair infrastructure projects) approved by the LSG Committee / Council for implementation from KLGSDP performance grant fund for the financial year preceding the assessment, verify whether Condition (a) AND one or more of the conditions (b) to (f) is met (a) Agreement with Contractor / Assignment of Work to Beneficiary Committee

corresponding to the Work is shown (b) Entries in Measurement Book corresponding to the Work is shown (c) Work Bills corresponding to the Work is shown (d) Payment (if made) corresponding to the Work is shown (e) Physical Verification Report by LSG Engineer or Block Engineer

corresponding to the Work is shown (f) Physical verify through site visits whether infrastructure projects valued Rs

2 Lakh and above for Gram Panchayat or Rs 5 Lakh and above for Municipality are in progress or completed

2. For all Procurement of Capital Assets / Goods approved by the LSG Committee

/ Council from KLGSDP performance grant fund for the financial year preceding

Minimum Mandatory Conditions

Objective Assessment Criteria Means of Verification

the assessment, verify whether one or more of the condition (a) to (d) is met (a) Request of quotation / tender document issued corresponding to the

Procurement is shown (b) Quotation / tenders received corresponding to the Procurement is shown (c) Supply order corresponding to the Procurement is shown (d) Stock / Asset register shows assets / goods corresponding to the

Procurement have been received

2.1.3 Compliance with the regulatory list from the ESMF in DPR process during preparation and execution of KLGSDP performance grant projects in the financial year preceding the assessment

2.1.3.1 Environment and Social Screening and Compliance process for all KLGSDP grant funded projects in the financial year preceding the assessment have been completed 2.1.3.2 KLGSDP performance grant funded projects in the financial year preceding the assessment are not in the regulatory list of activities (ESMF Proforma A) 2.1.3.3 Limited Environment and Social Assessment (LESA) for all Level-2 activities / projects funded by KLGSDP performance grant in the financial year preceding the assessment has been completed 2.1.3.4 Approval of the sanctioning authority on ESMF has been taken

1. For all KLGSDP performance grant projects in the financial year preceding the assessment the following conditions are met (a) Duly filled Environment & Social Screening and Compliance Form

Annexure 6 is attached with DPR [as per G.O.(MS) No 233/12/LSGD dated 7/9/2012]

(b) Verify that the project is not from the regulatory list (detailed in Proforma A) or for activity allowed with conditional clearance under regulatory list, the statutory clearance certificate obtained from the relevant authority is attached to the DPR

(c) Proforma-F (Limited Environment and Social Assessment) for Level-2 activities have been completed and attached to the DPR

(d) Approval of the sanctioning authority is accorded with seal and signature in the Annexure 6 Form

2.2 Performance Benchmark for Project Execution and Service Delivery

Performance Criteria Objective Assessment Criteria Means of Verification Score

Performance Criteria Objective Assessment Criteria Means of Verification Score

2.2.1 Compliance with the list of permissible work allowed by Government

2.2.1.1 KLGSDP performance grant projects for the financial year preceding the assessment are permissible work allowed by Government as directed in GO (Ord) No. 1731/2011 dated 20-7-2011 & GO (Ord) No. 2668/11/LSGD dated 15-11-2011

1. Verify that all KLGSDP performance grant projects for the financial year preceding the assessment do not fall in the list of inadmissible projects as given in the GO (Ord) No. 1731/2011 dated 20-7-2011 & GO (Ord) No. 2668/11/LSGD dated 15-11-2011

2

2.2.2 ESMF safeguards during execution (only for performance grant projects)

2.2.2.1 ESMF safeguards are applied in all completed KLGSDP grant funded projects for the financial year preceding the assessment

1. The Compliance Verification section in Annexure 6 have been verified and signed by GP Engineer or Municipality Engineer and by Block Engineer for all completed Level-1 and Level-2 KLGSDP performance grant projects for the financial year preceding the assessment.

3 Pro-rata on all

completed projects

2.2.2.2 At least one elected member of LSG and one official involved in the preparation of ESMF projects are trained in ESMF

1. Documentary evidence (from KILA / KLGSDP or LSG) shown that confirms that at least one member and one official of LSG responsible for preparation of ESMF are trained in ESMF

1 (0.5 for member +

0.5 for official)

2.2.2.3 Involuntary land acquisition has not taken place

1. For all KLGSDP performance grant projects in the financial year preceding the assessment the following conditions are met (a) Register of all land acquisitions is maintained (b) All voluntary land donation must have signed undertaking by

the donor stating that the donation is voluntary and the donor is freely relinquishing all his rights

(c) All voluntary land donation must be legally transferred / registered

1

2.2.3 Transparent and appropriate methods of procurement followed and documented

2.2.3.1 Compliance with the prescribed Procurement Guidelines for Goods and Services for KLGSDP performance grant fund and other Development Fund for the financial year preceding the assessment i) The procurement is through

1. Review 100% of procurement event of Goods and Services from KLGSDP performance grant fund and 25% randomly selected procurement event from other Development fund of value more than Rs. 5,000/- for the financial year preceding the assessment and verify whether the following conditions are met (a) Procurement file shows that the procurement of goods is

based on comparing price quotations obtained from minimum of three suppliers for contracts estimated to cost less than Rs.

3 (2 marks for

KLGSDP performance grant fund and 1 marks

for Other Development

fund)

Performance Criteria Objective Assessment Criteria Means of Verification Score

competitive method excluding those through Community / Beneficiary based Direct Implementation ii) Procurement opportunities of goods, and services are posted on the notice board or advertised in the newspaper for open tendering / QCBS iii) Requests for Quotations / Tender Document / Request for Proposal gives full description of specification / scope of work iv) Requests for Quotations / Tender Document / Request for Proposal does not indicate brand name or tweak specifications v) Public opening of quotation / tender vi) No quotation / tender is rejected without adequate reasons as specified in procurement guideline vii) No evidence of price negotiation with any supplier / bidder except in presence of at least three Social Audit Committee members where lowest evaluated quote / tender / preferred bidder exceeds pre-tender cost estimates viii) No direct purchase of goods from dealers not registered under DGS&D ix) Procurement process is properly documented

1,00,000/- using Local Shopping or Limited Tendering method OR Procurement file shows that the procurement of goods is based on Open Tendering method for contracts estimated to cost more than Rs. 1,00,000/- with tenders obtained from several suppliers OR Procurement file shows that procurement of services is based on Quality and Cost Based Selection (QCBS) for values estimated to exceed Rs. 5,00,000/- and Fixed Budget Selection / Least Cost Selection Method for values estimated to be less than Rs. 5,00,000/-

(b) Copy of advertisement / quotation shown indicating that Open tendering / QCBS for goods and services was advertised in at least one national English daily and one regional language daily OR Advertisement of notice inviting quotation was posted on the notice board of LSG

(c) Requests for Quotations / Tenders for Goods give full description of specification of items to be supplied, quantity and delivery period and place. OR Request for Proposal for Services includes Terms of Reference (ToR) that gives description of scope of work, deliverables and delivery period / timeline.

(d) Requests for Quotations / Tender Document shows that specification of goods / services does not include brand names, catalogue number or other classifications that indicates preference for specific suppliers / bidders OR Use of such references in specification was followed by qualification “or of equivalent” make / type / specification

(e) Minutes of meeting of tender opening shows Quotations / Tender Opening were publically held in the presence of representative of bidders on the same day, immediately after

(Pro-rata on sample of

procurement of goods and services)

Performance Criteria Objective Assessment Criteria Means of Verification Score

closing the submission of tenders at the same venue (as tender submission)

(f) Minutes of meeting of tender opening indicate that no quotation / tender for Goods and Services was rejected on any account during the opening AND Minutes of meeting of procurement committee for tender evaluation or comparative statement in procurement file does not indicate rejection of tender during post qualification / evaluation but only on the ground that they are non-responsive meeting one or more of the following condition/s

• Unsigned tender

• Not submission of tender security as per value and validity duration specified in the tender document

• Not meeting post qualification eligibility criteria mentioned in the tender document

• Tender not submitted for entire schedule / package if mentioned in the tender document

• Tender submitted in different currency than as specified in the tender document

• Not meeting the technical and financial capability as specified in the tender document

(g) Price in supply order / agreement issued to successful supplier / bidder is same as the price indicated in the comparative statement or price offer / quotation received by the supplier / bidder indicating no negotiation in prices (for procurement made from KLGSDP performance grant fund or other Development Fund) OR If the prices differ, than the minutes of meeting of procurement committee shows that the price negotiations was undertaken with the lowest / preferred bidder since their tender / quotation exceeded pre-tender cost estimates and the negotiations were held in the presence of at least three Social Audit Committee members (applicable only

Performance Criteria Objective Assessment Criteria Means of Verification Score

for Other Development Fund) (h) There was no direct purchase of goods from suppliers /

dealers not registered under DGS&D verified from registered supplier / dealers list

(i) Procurement file / register shows that following documents are available

• Proceeding / Minutes of Quotation / tender opening signed by participants including bidder representatives

• Comparative statement of suppliers / bidders

• Minutes of meeting of procurement committee for selection of supplier / bidder

• Supply order / Agreement issued to successful supplier / bidder

2.2.3.2 Compliance with the prescribed Public Works Rules for Works executed from KLGSDP performance grant fund and other Development Fund for the financial year preceding the assessment i) The procurement is through competitive method (excluding those executed through Beneficiary Committee or directly by LSG) ii) Notice Inviting Tender for Works are posted on the notice board and advertised in the newspaper for open tendering or tendering through pre-qualification tender (excluding those executed through Beneficiary Committee or directly by LSG) iii) Notice Inviting Tender gives full description of work and tender

1. Review 100% of procurement event of Works from KLGSDP performance grant fund and 25% randomly selected procurement event of Works (excluding Works of emergent nature) from Other Development fund of value more than Rs. 5,000/- for the financial year preceding the assessment and verify whether the following conditions are met (a) Tender register / Procurement file shows that the procurement

of Work is through Open Tendering method OR Tender register / Procurement file shows that the procurement of Works estimated to be Rs. 70 Lakh or more is based on Tender invited from panel of contractors prepared through pre-qualification tender

(b) Tender Notice posted on the notice board of the LSG office shown AND Copy of notice inviting tender published in at least one regional daily for Works estimated between Rs. 1 Lakh to Rs. 10 Lakh OR in two regional dailies for Works estimated between Rs. 10 Lakh to Rs. 50 Lakh OR in two regional

3 (2 marks for

KLGSDP performance grant fund and 1 marks

for Other Development

fund) (Pro-rata on sample of

procurement of Works)

Performance Criteria Objective Assessment Criteria Means of Verification Score

requirement (excluding those executed through Beneficiary Committee or directly by LSG) iv) Public opening of tender (excluding those executed through Beneficiary Committee or directly by LSG) v) No tender is rejected without adequate reasons (excluding those executed through Beneficiary Committee or directly by LSG) vi) Tender awarded to lowest tender or to next higher tender under prescribed conditions (excluding those executed through Beneficiary Committee or directly by LSG) vii) No evidence of price negotiation with any bidder (for Works under KLGSDP only) (excluding those executed through Beneficiary Committee or directly by LSG) viii) Tendering process is properly documented (excluding those executed through Beneficiary Committee or directly by LSG)

dailies and one English National daily for Works estimated to be more than Rs. 50 Lakh was shown

(c) Notice Inviting Tender (NIT) shown gives the following particulars of Work: i) Details of Work, ii) Time period of Completion, iii) Estimate amount, iv) Specifies whether Tender quote should be for Actual cost of work or fixed percentage above / below of estimate rate or separate rate for each item of work included in estimate, v) Amount of Earnest Money Deposit (EMD) and Security Deposit if tender is accepted, vi) Place from where tender is to be purchased, vii) Last date and time of tender submission, viii) Tender opening time and place

(d) Tender register shows that Tender Opening were publically held in the presence of representative of bidders on stipulated date and time in tender notice or as intimated to bidders

(e) Minutes of meeting of tender opening indicate that no tender was rejected on any account during the opening AND Minutes of meeting of tender committee for tender evaluation does not indicate rejection of tender during post qualification / evaluation but only on the ground that they are non-responsive meeting one or more of the following condition/s

• Unsigned tender

• Not submission of EMD as per value, specification and validity duration specified in the tender document

• Not meeting post qualification eligibility criteria mentioned in the tender document

• Tender not submitted for entire schedule / package if mentioned in the tender document

• Tender submitted in different currency than as specified in the tender document

• Not meeting the technical and financial capability as specified in the tender document

(f) The tender was awarded to the lowest bidder OR The next

Performance Criteria Objective Assessment Criteria Means of Verification Score

higher tender was selected based on a report by Secretary endorsed by LSG Engineer citing reasons for not selecting the lowest bidder which was accepted by the LSG

(g) Price in Contractor’s Agreement issued to successful tender is same as the price indicated in the comparative statement or price quote received by the bidder indicating no price negotiations was carried (applicable only for Works under KLGSDP)

(h) Tender register / file shows that following documents are available

• Tender opening signed by participants including bidder representatives

• Comparative statement of bidders

• Minutes of Meeting of LSG for selection of bidder

• Agreement issued to successful bidder

2.2.3.3 Procurement complaints and associated actions are properly documented as per Guidelines for the Procurement of Goods and Services in LSGs - GO (P) 259/2010/ LSGD dated 8/11/2010

1. Complaints register in prescribed format is maintained at LSG for recording procurement related complaints with the following details

• Serial No. of Complaints

• Date on which the Complaint was made

• Particular of person making the complaint

• Nature of Complaint

• Complaint against whom if against a person

• Details of action taken and subsequent follow ups specifying on which date the action was taken

• Whether the complaint has been satisfied if not why

• General remarks 2. Complaints related to procurement received during the last

financial year preceding the assessment and actions taken against complaint are recorded in the complaint register

1 (0.5 marks for

maintaining register and 0.5

mark for recording complaints & actions taken)

2.2.3.4 Social Audit Committee (SAC) as prescribed is established and it undertakes procurement

1. Minutes Book of LSG shows resolution for formation of Social Audit Committee comprising of 10 members of which at least 50% are women

1 (Pro-rata on sample of

Performance Criteria Objective Assessment Criteria Means of Verification Score

monitoring 2. Review of 10% randomly selected procurement of Goods and Services from KLGSDP performance grant fund and other Development fund for the financial year preceding the assessment and verify whether minutes of meeting of tender opening and tender evaluation in procurement file shows the presence of at least one-third members of SAC

procurement)

2.2.4 Exceptional expenditure performance

2.2.4.1 More than 95% of KLGSDP performance grant, Development fund-General-Capital, Development fund-Special Component Plan-Capital, and Development fund-Central Finance Commission Grant-Capital spent in the financial year preceding assessment

1. Receipt and Expenditure information drawn from the Appropriation Control Register (ACR) maintained for recording KLGSDP performance grant, Development fund-General-Capital, Development fund-Special Component Plan-Capital, and Development fund-Central Finance Commission Grant-Capital Fund transactions for the financial year preceding the assessment.

4 (More than 85% till 95% - 2, More

than 95% - 4)

2.2.5 Performance in implementation of projects from Development Fund received in the financial year preceding the assessment

2.2.5.1 Percentage of Capital Works (infrastructure projects) completed from Development fund-General-Capital, Development fund-Special Component Plan-Capital, Development fund-Central Finance Commission Grant-Capital and KLGSDP performance grant for the financial year preceding the assessment 2.2.5.2 Percentage of Capital Assets procurement completed from Development fund-General-Capital, Development fund-Special Component Plan-Capital, Development fund-Central Finance Commission Grant-Capital and KLGSDP performance grant for the

1. For Capital Works (new or repair infrastructure projects) approved by the LSG Committee / Council for implementation from Development fund-General-Capital, Development fund-Special Component Plan-Capital, Development fund-Central Finance Commission Grant-Capital and KLGSDP performance grant fund for the financial year preceding the assessment, verify whether any two condition (a) to (d) is met for all sample projects of Rs. 2 lakh and above for Gram Panchayat and Rs. 5 lakh and above for Municipality plus randomly selected 10% of the remaining projects of LSG (a) Final entries in Measurement Book corresponding to the Work

is shown (b) Final Work Bills corresponding to the Work is shown (c) Final Payment made corresponding to the Work is shown (d) Physical Verification Report by LSG Engineer or Block

Engineer corresponding to the Work shows work is complete 2. For Procurement of Capital Assets / Goods approved by the LSG

Committee / Council from KLGSDP performance grant fund for the

3 (More than 70% till 80% - 1, More than 80% till 90%

- 2, More than 90% - 3)

Performance Criteria Objective Assessment Criteria Means of Verification Score

financial year preceding the assessment

financial year preceding the assessment, verify whether any two condition (a) to (d) is met for all sample projects of Rs. 50,000/- and above for Gram Panchayat and Rs. 1 lakh and above for Municipality plus randomly selected 10% of the remaining projects of LSG (a) Supply order corresponding to the Procurement is shown (b) Final Bills corresponding to the Procurement is shown (c) Final Payment made corresponding to the Procurement is

shown (d) Stock / Asset register shows assets / goods corresponding to

the Procurement have been received

2.2.6 Timely execution of development plans prepared

2.2.6.1 Percentage of spillover projects in the annual plan for current financial year which are carried over project from previous years preceding but one to the assessment

1. Total number of projects in approved annual plan for current financial year drawn from Sulekha Software

2. Total number of projects in the annual plan for current financial year which are spillover projects pertaining to last two financial years preceding but one to the assessment as per list of projects in approved annual plans

2 (If spillover project

is 0%)

2.2.7 Critical Service Delivery Infrastructural facilities are available

2.2.7.1 Following critical service delivery infrastructural facilities are available in LSG area xi) Crematorium / burial ground xii) Slaughter houses xiii) Solid /Liquid/ Plastic waste

management facilities xiv) Public toilets xv) Front office and visitor friendly

facilities (Sitting Space and Drinking Water) in LSG office

xvi) Street lights xvii) Fish/ Vegetable markets xviii) Safe drinking water

facilities

1. For the infrastructural facilities collect and record the following details

i) Crematorium / burial ground

• Location / address of crematorium / burial ground in LSG area

• Any relevant record shown pertaining to salary paid for any staff or payment of electricity bill or expenditure on repairs and maintenance of crematorium / burial ground or record of request for cremation received, or record showing the details of persons cremated as a proof of availability of infrastructure

ii) Slaughter houses

• Number of slaughter houses in locality

• Any relevant record shown pertaining to license issued for slaughter houses or collection of fees from the licensees / owners or list of person running slaughter houses in locality as

3 (Pro-rata on

different type of infrastructural

facilities available)

Performance Criteria Objective Assessment Criteria Means of Verification Score

xix) Basic infrastructure (Road, Drinking Water and Electricity) in Scheduled Caste & Scheduled Tribe colonies

xx) Anganwadies

a proof of availability of infrastructure

iii) Solid /Liquid/ Plastic waste management facilities

• Location / address where waste management facilities in locality are located

• Any relevant record shown pertaining to details of waste management project implemented, or agency / institutions contracted for running the facility, or details of salary paid for any staff or payment of electricity bill or expenditure on repairs and maintenance of facilities, or payment made to agency

iv) Public toilets

• Number of public toilets in locality

• Any relevant record shown pertaining to order issued to individual / agency responsible for running public toilets, or collection of fees if any from the individual / agency, or details of expenditure related to wage, cleaning or repairs and maintenance of public toilets

v) Front office and visitor friendly facilities (Sitting Space and Drinking Water) in LSG office

• Photograph showing evidence of front office in LSG office

• Photograph showing sitting space for visitors in front office

• Verify whether drinking water facility is available

vi) Street lights

• Percentage of street length having lights (estimate by LSG)

• Copy of the latest electricity bill for street light and bill payment receipt shown, record consumer number

vii) Fish/ Vegetable markets

• Number of fish/vegetable markets available in LSG area

• Name of one main market verified by public

Performance Criteria Objective Assessment Criteria Means of Verification Score

• Records on collection of market fees from vendors by LSG shown

viii) Safe drinking water facilities

• Percentage of population covered by safe drinking water facilities (LSG estimate)

• Any relevant proof shown regarding expenses incurred in running or repairs & maintenance of drinking water facilities or new schemes implemented

ix) Basic infrastructure (Road, Drinking Water and Electricity) in Scheduled Caste & Scheduled Tribe colonies

• Number of SC & ST colonies in LSG area

• Number of SC & ST colonies where all the three (Road, Drinking Water and Electricity) facility is available

• Photograph of one of the SC&ST colonies showing availability of the three basic infrastructure

x) Anganwadies

• Number of Anganwadi centre in LSG area

• Copy of the list of Anganwadi centre by concerned ICDS officer / LSG shown

2.2.8 Performance in Revenue Generation

2.2.8.1 Percentage increase in Tax Revenue Collection (Current) of LSG in the last financial year (preceding the assessment) as compared to the previous financial year

1. Current year Tax Revenue collection shown in the consolidated Demand Collection and Balance (DCB) statement / register for the last financial year (preceding assessment) and the year before for the following Tax Revenue head (a) Property Tax (b) Profession Tax (Institution and Individual) (c) Service Tax

3 (More than 10% till 15% - 1, More than 15% till 20%

- 2, More than 20% - 3)

2.2.8.2 Efficiency of Tax Revenue Collection by LSG for the financial year preceding the assessment

1. Arrear and Current year Tax Revenue Collection as a percentage of Arrear and Current year Tax Revenue Demand as shown in the consolidated DCB statement / register for the financial year preceding the assessment for the following Tax Revenue head

3 (More than 70% till 80% - 1, More than 80% till 90%

Performance Criteria Objective Assessment Criteria Means of Verification Score

(a) Property Tax (b) Profession Tax (Institution and Individual) (c) Service Tax

- 2, More than 90% - 3)

2.2.8.3 Percentage increase in Non Tax Revenue Collection of LSG in the last financial year (preceding the assessment) as compared to the previous financial year .

1. For LSGs with Saankhya, the receipts shown in the Receipt and Payment in Annual account for the last financial year (preceding the assessment) and the year before against for the following codes

• 140000000 Fees & User charges

• 150000000 Sale & Hire charges

• 171000000 Interest Earned

• 180000000 Other Income OR For LSGs without Saankhya, the total receipts of Non Tax revenue shown in the Annual Financial Statements (prepared manually) for the last financial year (preceding assessment) and the year before.

3 (More than 10% till 15% - 1, More than 15% till 20%

- 2, More than 20% - 3)

2.2.9 Functional IT infrastructure with internet and software for performing e-governance functions

2.2.9.1 At least three computers are functional and connected to the internet at the LSG

1. Physically verify that at least three computers are functional and at least one computer is connected to the internet at the time of assessment

1

2.2.9.2 Number of software functional at the LSG out of those prescribed and reported to be operationally deployed by IKM prior to the assessment

1. LSG shows that the software is installed in at least one computer and data is being regularly entered in the software to establish that it is in use for each of the 7 software reported to be operationally deployed by IKM applicable for LSG

• Saankhya

• Sulekha

• Sevana Civil registration & e-filing Marriage registration

• Sevana Pension

• Sthapana (establishment software)

• Soochika (file tracking)

• Sachithra (asset account)

3 (Pro-rata on

number of software)

Total Marks 40

Performance Area 3: Accounting, Financial Reporting and Audit

3.1 Mandatory Minimum Conditions for Accounting, Financial Reporting and Audit

Minimum Mandatory Conditions

Objective Assessment Criteria Means of Verification

3.1.1 “Clean” external audit (not adverse or disclaimed) for the immediately preceding year but one to assessment

3.1.1.1 Audit Opinion in the Auditors Report for LSG for the immediately preceding year but one to assessment is not “Adverse” or “Disclaimed” as ascertained from opinion / statement / qualification i) “Adverse Opinion”

• (in the auditor's opinion) The Annual Financial Statements do not properly present the picture of income, expenditure and closing balance

ii) “Disclaimed Opinion”

• We (i. e. the Auditor) have not been able to form an opinion as to whether the Annual Financial Statements properly present the picture of income, expenditure and closing balance

1. Latest Audit certificate issued by Local Fund Auditors to LSG for the immediately preceding year but one to the assessment is “Clean” as ascertained from Auditor’s opinion OR Audit Opinion in the Auditors Report for LSG for the immediately preceding year but one to the assessment is not “Adverse” or “Disclaimed” as ascertained from Auditor’s opinion

3.1.2 External audit for the immediately preceding year but one to assessment does not include “Serious Audit Observations”

3.1.2.1 The Audit Certificate / Report does not have one or more of the following “Serious Audit Observations”

• The closing balance/s as taken in the Annual Financial Statements do not match with the closing balance/s as per the Cashbook

• The figures taken in the Annual Financial Statements do not match with the relevant figures as per the Receipt Register or the Payments Register

• Opening balance in the cash book does not match with the closing balance in the cash book of the previous year.

• Cashbook or the Receipt Register or the Payments Register is incomplete

• Cashbook or the Receipt Register or the Payments Register was not produced for audit

• Any other qualification which significantly affects the integrity

1. Review the latest Audit Report / Certificate issued by Local Fund Auditors to LSG for the immediately preceding year but one to the assessment and ascertain that following “Serious Audit Observations” are not present

• The closing balance/s as taken in the Annual Financial Statements do not match with the closing balance/s as per the Cashbook

• The figures taken in the Annual Financial Statements do not match with the relevant figures as per the Receipt Register or the Payments Register

• Opening balance in the cash book does not match with the closing balance in the cash book of the previous year.

• Cashbook or the Receipt Register or the Payments

Minimum Mandatory Conditions

Objective Assessment Criteria Means of Verification

and proper presentation (true and fair view) of the Annual Financial Statement.

Register is incomplete

• Cashbook or the Receipt Register or the Payments Register was not produced for audit

• Any other qualification which indicates that the true and fair view of the Annual Financial Statement was not presented (Record these statements).

3.2 Performance Benchmarks for Accounting, Financial Reporting and Audit

Performance Criteria Objective Assessment Criteria Means of Verification Score

3.2.1 Audit and Audit Follow up

3.2.1.1 Latest Audit certificate issued by Local Fund Auditors to LSG for the immediately preceding last three years but one to the assessment is “Clean” in the first instance itself

1. Verify latest Audit certificate issued by Local Fund Auditors to LSG for the immediately preceding last three years but one to the assessment and ascertain that it is “Clean” in the first instance itself

6 (Pro-rata for each

year)

3.2.2 Regular reports prepared and submitted to the State Government / KLGSDP on time

3.2.2.1 Semi-annual Physical Progress Reports prepared in format Annexure-IX (1) provided in KLGSDP Project Implementation Manual (PIM) and submitted manually or electronically through Sulekha to KLGSDP within the following month of September and March for the financial year preceding the assessment (only for KLGSDP performance grant fund)

1. First Semi-annual (April to September) Physical Progress Report for the financial year preceding the assessment prepared by LSG in format Annexure-IX (1) of Project Implementation Manual (PIM) shown and if submitted manually to KLGSDP the submission letter by LSG shows that it was submitted before end of the following month

2. Second Semi-annual (October to March) Physical Progress Report for the financial year preceding the assessment prepared by LSG in format Annexure-IX (1) of Project Implementation Manual (PIM) shown and if submitted manually to KLGSDP the submission letter by LSG shows that it was submitted before end of the following month

2 (1 mark for each

semi-annual report)

3.2.3 Annual Financial Statements and Administration Reports are prepared and

3.2.3.1 Annual Financial Statements (Receipt & Payment account, Income & Expenditure account, Balance Sheet and supporting schedules) for the last financial

1. For LSGs with Saankhya, Annual Financial Statements for the last financial year preceding the assessment was shown in Saankhya OR

4

Performance Criteria Objective Assessment Criteria Means of Verification Score

submitted on time year preceding the assessment are prepared and submitted to Local Fund Authorities by Gram Panchayat before 15th May and by Municipalities before first week of June of succeeding year

For LSG without Saankhya, signed copy of the Annual Financial Statements for the last financial year preceding the assessment shown

2. Copy of the letter for submission of Annual Financial Statements for the last financial year preceding the assessment indicates that it was submitted to Local Fund Authorities by Gram Panchayat before 15th May and by Municipalities before first week of June of succeeding year

3.2.3.2 Annual Administration Report of LSG for the financial year preceding but one to the assessment submitted to the Deputy Director Panchayats/ Regional Joint Director Municipalities by 30th September of the succeeding year

1. Annual Administration Report of LSG for the financial year preceding but one to the assessment shown

2. Letter by LSG for submission of Annual Administration Report to the Deputy Director Panchayats/ Regional Joint Director of Municipalities as applicable shown and the date of letter is before 30th September of the succeeding year

1

3.2.4 Books of accounts are regularly maintained and reconciliations are performed regularly

3.2.4.1 Books of accounts of LSG are maintained in Saankhya software

1. Annual Accounts for the last financial year preceding the assessment can be viewed and printed from the Saankhya software installed in LSG

2

3.2.4.2 Books of Accounts are updated till the last month immediately preceding but one to the assessment

1. Cash Book maintained in Saankhya or manually is updated till last month immediately preceding but one to the assessment

2

3.2.4.3 Maintenance of Demand Collection & Balance (DCB) register and submission of DCB monthly reports to higher authorities for the last month immediately preceding but one to the assessment

1. Demand Collection & Balance (DCB) register maintained shown

2. Copy of the DCB monthly report / statement prepared for the last month immediately preceding but one to the assessment shown

3. Copy of letter by Gram Panchayat to the Deputy Director of Panchayats and by Municipalities to the Joint Director of Municipalities for submission of DCB monthly report / statement for the last month immediately preceding but one to the assessment shown

2

Performance Criteria Objective Assessment Criteria Means of Verification Score

3.2.4.4 Asset Register is maintained in Sachithra software and is up to date for the financial year preceding the assessment

1. Asset register can be viewed in Sachithra software installed in LSG

2. The asset register shows that following type of assets are entered; i) Assets of transferred institutions, ii) Road assets, iii) Buildings, and iv) Office furniture, Computers, etc.

3. Asset register shows entries up to the end of the financial year preceding the assessment

2

3.2.4.5 The book bank balance has been reconciled with the bank statements up to the last month immediately preceding but one to the assessment

1. Bank Reconciliation Statement certified by LSG official shown for the period up to the last month immediately preceding but one to the assessment

2

3.2.4.6 Annual physical verification of assets and stock & stores was conducted by LSG for the financial year preceding the assessment and Annual Asset Verification Report prepared

1. Annual Asset/stock Verification Report prepared by LSG for the financial year preceding the assessment shown

2

Total Marks 25

Performance Area 4: Participation, Transparency and Accountability

4.1 Mandatory Minimum Conditions for Participation, Transparency and Accountability

Minimum Mandatory Conditions Objective Assessment Criteria Means of Verification

4.1.1 Preparation of a public report on the annual budget for the current financial year

4.1.1.1 A budget summary of the annual budget for the current financial year has been prepared and is available for verification by public

1. A budget summary of the annual budget prepared for the current financial year shown by LSG

4.1.2 Preparation of a public report on the annual plan for the financial year preceding the assessment

4.1.2.1 A public report (Final Plan document) on the annual plan for the financial year preceding the assessment has been prepared and is available for verification by public

1. Final Plan document for the financial year preceding the assessment shown by LSG

4.2 Performance Benchmarks for Participation, Transparency and Accountability

Performance Criteria Objective Assessment Criteria Means of Verification Score

4.2.1 Availability of public reports on Annual Budget for the current financial year at the ward level

4.2.1.1 Budget summary for the current financial year was received / seen by at least 75% of the households

1. Sample check with 21 randomly selected households in 3 randomly selected wards (7 households in each ward) and collect signed declaration of the households whether they have received / seen the budget summary for the current financial year

2

4.2.2 Vulnerable groups participate in and benefit from planning and execution

4.2.2.1 At least 10 percent and 5 percent of the total Development Fund is allocated for Women Component Plan and for Aged, Disabled & other weaker section respectively in Annual Budget and project proposals with respect to SCP, TSP, WCP and Aged, Disabled & other weaker section are included in Annual Plan for the financial year preceding the assessment

1. The fund allocation against Women Component / Development Plan and against Aged, disabled & other weaker section as compared with the total Development Fund drawn from Annexure 9(2) of the Annual Budget for the financial year preceding the assessment

2. The Annual Plan for the financial year preceding the assessment shows project proposals with respect to Special Component Plan, Tribal Sub Plan, Women Component / Development Plan and Aged, disabled & other weaker section

2 (0.5 mark each for meeting fund allocation for WCP and

Aged, disabled & other weaker section; 1 mark for

project proposals for vulnerable groups in annual

plan)

4.2.2.2 At least 70 percent of SCP / TSP / WCP / Aged, disabled & other weaker section allocations in Annual Budget for the financial year preceding the assessment was actually spent during the financial year

1. Fund allocation and actual expenditure against allocation with respect to SCP, TSP, WCP and Aged, disabled & other weaker section for the financial year preceding the assessment drawn from Sulekha plan reporting format from website www.plan.lsgkerala.gov.in/ sulekha web shown and printout taken

4 (Pro-rata for the four

categories of allocation for vulnerable groups)

4.2.2.3 SCP / TSP / WCP / Aged, disabled & other weaker section plan investments for the financial year preceding the assessment have taken place

1. Randomly select two planned investment for each of the TSP, SCP, WCP, Aged, disabled and weaker section schemes (total 8) for the financial year preceding the assessment and ascertain whether their implementation is in progress / completed.

2 (Pro-rata on sample of

schemes)

Performance Criteria Objective Assessment Criteria Means of Verification Score

For Work verify whether condition (a) AND one or more of the conditions (b) to (e) is met (a) Agreement with Contractor /

Assignment of Work to Beneficiary Committee corresponding to the Work is shown

(b) Entries in Measurement Book corresponding to the Work is shown

(c) Work Bills corresponding to the Work is shown

(d) Payment (if made) corresponding to the Work is shown

(e) Physical Verification Report by LSG Engineer or Block Engineer corresponding to the Work is shown

For procurement of goods whether one or more of the condition (a) to (d) is met (a) Request of quotation / tender document

issued corresponding to the Procurement is shown

(b) Quotation / tenders received corresponding to the Procurement is shown

(c) Supply order corresponding to the Procurement is shown

(d) Stock / Asset register shows assets / goods corresponding to the Procurement have been received

For other types of activities ascertain whether they are in progress / completed based on LSG records shown (specify and collect copy of records)

Performance Criteria Objective Assessment Criteria Means of Verification Score

4.2.2.4 VGDF guidelines has been followed in the planning and implementation process for SCP / TSP / WCP / Aged, disabled & other weaker section schemes

1. Obtain and verify that guidelines have been properly applied and approved while planning and implementing SCP / TSP / WCP / Aged, disabled & other weaker section schemes.

2 (Pro-rata for the four

categories of allocation for vulnerable groups)

4.2.3 Citizen charter developed and displayed

4.2.3.1 Citizen charter has been prepared and is displayed at the LSG office at a place where public can see it

1. Photograph of Citizen Charter displayed at the LSG office on the day of assessment

2. Citizen Charter displayed shows the details of various services provided by the LSG and the time limit for providing the services

3. Citizen charter is displayed in a public place and not obscured from view by other boards / notification / posters, etc.

2

4.2.3.2 Citizen charter is displayed at the ward level

1. Randomly select 5 wards and ascertain whether following conditions are met in each ward (a) Photograph of Citizen Charter displayed

at ward level on the day of assessment (b) Citizen Charter displayed clearly shows

the details of various services provided by the LSG and the time limit for providing the services.

(c) Citizen charter is displayed in a public place and not obscured from view by other boards / notification / posters, etc.

2 (Pro-rata on number of

wards)

4.2.4 Details of works executed by LSG disclosed to public through prescribed means

4.2.4.1 Details of all Works executed from Development Fund in the financial year preceding the assessment is published in LSG notice board and also exhibited in a conspicuous part of the respective Work Site with the following details

• Name of work

1. Randomly select 20% of Works executed by KLGSDP performance grant fund and other Development fund and ascertain whether following conditions are met for each Work (a) The details of the work is published in

LSG notice board (b) The details of the work is exhibited in a

conspicuous part of the Work Site

4 (2 mark for publication in

notice board and 2 mark for exhibiting details on work

site, both on pro-rata basis for sample of works)

Performance Criteria Objective Assessment Criteria Means of Verification Score

• Work Executed by LSG, Contractor or Beneficiary Committee

• Name of the concerned person (Contractor, Convener of the Beneficiary Committee or Members of Executive Committee)

• Estimated amount and period

• Date of Commencement of work and completion of work

• And other associated details

(c) The following details are at least available in both the locations

• Name of work

• Work Executed by LSG, Contractor or Beneficiary Committee

• Name of the concerned person (Contractor, Convener of the Beneficiary Committee or Members of Executive Committee)

• Estimated amount and period

• Date of Commencement of work and completion of work

4.2.5 LSG has disclosed institutional information through publications as prescribed in the Right to Information Act during the financial year preceding the assessment

4.2.5.1 Publication by LSG containing Institutional Information related to 17 categories as prescribed in Section 4(1)(b) of Right to Information Act 2005 during the financial year preceding the assessment

1. LSG shows publication made during the financial year preceding the assessment containing following information xviii) the particulars of its

organization, functions and duties; xix) the powers and duties of its officers and

employees; xx) the procedure followed in the decision

making process, including channels of supervision and accountability

xxi) the norms set by it for the discharge of its functions;

xxii) the rules, regulations, instructions, manuals and records, held by it or under its control or used by its employees for discharging its functions;

xxiii) a statement of the categories of documents that are held by it or under its control;

xxiv) the particulars of any arrangement that exists for consultation

2 (Pro-rata on number of

publications)

Performance Criteria Objective Assessment Criteria Means of Verification Score

with, or representation by, the members of the public in relation to the formulation of its policy or implementation thereof;

xxv) a statement of the boards, councils, committees and other bodies consisting of two or more persons constituted as its part or for the purpose of its advice, and as to whether meetings of those boards; councils, committees and other bodies are open to the public, or the minutes of such meetings are accessible for public;

xxvi) a directory of its officers and employees;

xxvii) the monthly remuneration received by each of its officers and employees, including the system of compensation as provided in its regulations;

xxviii) the budget allocated to each of its agency, indicating the particulars of all plans, proposed expenditures and reports on disbursements made;

xxix) the manner of execution of subsidy programmes, including the amounts allocated and the details of beneficiaries of such programmes;

xxx) particulars of recipients of concessions, permits or authorizations granted by it;

xxxi) details in respect of the information, available to or held by it, reduced in an electronic form;

Performance Criteria Objective Assessment Criteria Means of Verification Score

xxxii) the particulars of facilities available to citizens for obtaining information, including the working hours of a library or reading room, if maintained for public use;

xxxiii) the names, designations and other particulars of the Public Information Officers;

xxxiv) such other information as may be prescribed;

4.2.6 LSG has notified or disclosed to public the services as per stipulations in Kerala Right to Service Act 2012 and services are provided in time

4.2.6.1 Relevant information related to Services (Services rendered, designated officers, first appellate authority, second appellate authority and stipulated time limit for providing services) as prescribed in Section 3 of Kerala Right to Service Act 2012 has been notified in Government Gazette or disclosed in notice board by LSG and services mentioned in the notification are delivered within the stipulated time limit prescribed therein.

1. LSG shows the notification or publication in LSG notice board providing following information related to services of LSG (a) Services rendered (b) Designated officers (c) First appellate authority (d) Second appellate authority (e) Stipulated time limit for providing

services 2. Randomly review sample of 12 applications

for services received during last six months preceding the assessment from Tapal register maintained in the front office and ascertain from respective correspondence file whether services were provided in stipulated time as per notification / disclosure in notice board.

3 (1 mark for notification / publication of relevant

information, 2 marks for providing services in

stipulated time frame on a pro-rata basis on sample applications reviewed)

Total Marks 25