The World Bank

Rwanda’s New Decentralization: Design and Implementation Issues

Kigali, Wednesday, September 21, 2005

DRAFT, September 21st, 2005

The World Bank

Context

• Rwanda is in the midts of a major territorial reform aimed to improve decentralized service delivery

• Provinces are deconcetrated entitities, and may be phased out over time

Provinces (12)

Districts (106)

Sectors (1516)

Facilities (00s)

Cellls (~9000)

Provinces (4+1)

Districts (30)

Sectors (416)

Facilities (00s)

Cells (9165)

Local Gov

The World Bank

Challenges

• What do your structures cost and how are they financed?• What would the new structures look like, what would they

cost, and how would they be financed?• What are critical implementation issues during the transition

period?

The World Bank

Stocktaking

• The analysis needs to occur at both districts and provincial level

• Available Data– 2004 & 2005 (1st Semester)

• What do existing figures express?– Expenditure Realization on a cash basis or actual expenditure

commitments made?• Former will underestimate actual expenditure responsibility

• Difference between the two represents hidden debt accumulation on an annual basis

• VALUE OF THIS ANALYSIS DEPENDS ON HAVING QUALITY DATA…

The World Bank

Key Expenditure Categories

• Permanent Staff Expenditures– Wages– Frais Sociale

• Temporary Staff Expenditures• Operations & Maintenance

– Electricity & Water

• Other Recurrent Costs– Social Welfare

• Capital– Revenue Generating– Infrastructure

The World Bank

Own Source Revenues

• Calculate Existing Magnitude• Identify Alternative Revenue Options

– Administration Problems Under Existing Tax Structure– Any choices at all

• Are all (legal) tax options being fully exploited

– Options for Additional Assignment• Available bases

Own source revenues serve resource mobilization purposes, but also have key roles in enhancing local autonomy and accountability

The World Bank

Central Transfers

• Minaloc Recurrent Transfers– Realizations Matter (as opposed to budget data)

• CDF Transfers• Note that many investment projects will impose future

recurrent responsibilities• Donors Funding

The World Bank

Debt Financing & Arrears

• How to you deal with existing debt stock?– Accumulation of past annual deficits

• How do you close the existing annual deficits?– Difference between actual expenditure obligations incurred during

the year and own source revenues + transfers

The World Bank

Existing Debt Stock

• Estimate Magnitude– Rwf 3.5 billion

• About same as annual Minaloc recurrent transfer

• How to clear the debt stock?– Declare existing districts bankrupt– Have Minecofin do bailout– Have new districts become liable for existing districts debts

• How do you assign (e.g., prorate by sectors)?

• How do districts repay?– OSR (but may only be viable for some…)– Central Transfers

» But money fungible, so payment from OSR will require bigger transfers

The World Bank

Existing Local Debt

Structure of Debts 1

15%

9%

17%

20%

25%

1%

13% Banks

Private

Salaries

RRA

CSR

FARG

Others

Source: Note on Debt Structure of Rwanda’s Local Governments (9/2005)

The World Bank

Existing Debts: By Vintage

Structure of Debts 2

42%

58%

Ex-communes

Districts

Source: Note on Debt Structure of Rwanda’s Local Governments (9/2005)

The World Bank

Existing Debt: By Province (% of OSR+Minaloc Tran.)

Debt Ratio

0

10

20

30

40

50

60

70

80

VILLE

KIG

ALI

KIBUNGO

GIKONGORO

UMUTARA

GISENYI

RUHENGERI

KIBUYE

BYUMBA

GITARAM

A

BUTARE

CYANGUG

U

KIGALI

NGALI

Pct.

Source: Note on Debt Structure of Rwanda’s Local Governments (9/2005)

The World Bank

How to deal with existing deficits?

• Impose Hard Budget Constraints– Monitoring– Enforcement Mechanisms

• Intercepts (take out of transfers)– May be politically difficult

• Moral Suasion

• Need Realistic Financing Arrangements– Create Realistic Expenditure Responsibilities– Ensure sufficient financing to ensure expenditure responsibilities

• Own source revenues base• Transfers

• Effective Establishment & Enforcement of Borrowing Restrictions– Link to capacity to repay

• Revenue Generating Projects• Own source revenue

The World Bank

Current Wage Expenditures to Minaloc Transfer (%)0

10

20

30

40

50

Fre

quency

0 200 400 600sh_w ages_lab

DRAFT WITH INCOMPLETE DATA!!!

The World Bank

Ratio Wage Expenditures to Own Revenues (%)0

510

15

20

Fre

quency

0 100 200 300 400 500sh_w ages_osrDRAFT WITH INCOMPLETE DATA!!!

The World Bank

LOOKING FORWARD

What would the new structures look like, what would they cost, and how would they be financed?

The World Bank

Operationalizing Expenditure Assignments

• Rwanda has a unique opportunity to apply best practice in the design of its decentralization– National Conference of Dialogue Expenditure Assignments with all

Sectors (September 15-17, 2005)

• Government commitment to rationalize exiting structures for more effective decentralization of service delivery

The World Bank

Functional Assignments Methodology

– Unbundling of Service Delivery• Ten Sectoral Working Groups Worked through Specific Functional Assignments

(September 17, 2005)• Result: Policy Making, Standard Setting, Administration/Contracting, Production,

Monitoring & Evaluation by sectors/new structural levels• Further Validation On-Going

– Broadeing: Were all sectors covered?

– Deepening: Appropriateness of Assignments/Sub-Sector Issues?

– Working Group Results were mapped into roles & responsibilities of structures

– Roles & Responsibilities Assignments were mapped into potential staffing needs

• Cadre Organique for Province/District/Secteur Level

– Costing Simulations• Staff at various levels costed for levels/wage rates• Addition O&M responsibilities also considered

The World Bank

0

5

10

15

20

25

30

Center

Province

District

Secteur

Cellule

Other

Functional Assignments: Working Group Results

The World Bank

0

10

20

30

40

50

60

Center & Province

Local Government

Functional Assignments: Central versus Local

The World Bank

Main Conclusions of Working Groups

Participants’ assignment were meant to use the Accountability Framework to clarify roles and responsibilities for different actors for service delivery functions

• Main messages• Central level must remain strong on policy making and on

standard setting• But local governments should take an increasing role in the day

to day administration and contractual side of service delivery• Local goverment should be more involved in providing the

financing for services (expenditure, collecting revenues, capital investments, wages, O&M, etc.)

• The private sector and the NGOs should be called upon to provide financing and service delivery

The World Bank

0

5

10

15

20

25

30

District

Secteur

Functional Assigments: Districts versus Secteurs

The World Bank

Roles for Districts and Secteurs

• Districts– Should be more involved in the administration, the regulation and

the financing of services

• Secteurs– Should focus on delivering services

• They evenly share the responsibilities for the monitoring and evaluation of service delivery

The World Bank

The New Cadre Organique: Addressing Human Resources

• Minimum Cadre– District– Sector Level

• Adjust Minimum Cadre– Size & Scale of District– Flexibility at Decentralized Level?

• Provision Staff– Teachers, Health Workers, Extension Workers, Road Maintenance– Civil Service/Public Sector versus Contracted Out

The World Bank

I. Construct the Structure to Deliver Functions

• Draft an Organizational Chart• Populate Chart with Posts• Decides Grades & Posts for Each Level• Write Job Descriptions for all Posts

– Indicate Tasks & Outputs

• Decide the Required Qualifications & Experience for Each Post

• Produce Final Version of the Proposed Organization

The World Bank

II. Implement the Structure

• Implement an Action Plan• Implement a Communications Strategy

– Ensure everyone knows what is happening

• Develop and HR Database• Assess existing staff

– Performance & Qualifications Against Existing Requirements

• Recruit/select existing/new staff into the new structures• Implement a Strategy for Dealing with Redundancies

The World Bank

III. Manage the Performance of the Structure

• Maintain HR Database– Use reports to make accurate, timely decisions

• Manage & Train the Existing/New Managers & Staff as Required

• Develop and Implement Performance Appraisals Procedures for All Staff

• Review overall performance against strategic plan• Aim for Continuous Improvements in Staff, Services,

Targets

The World Bank

Staffing Simulations

• Step 1: Indicative Mapping of Existing Staff into New Structures– New Districts– New Regions/Provinces

• Step 2: Compare Current Staffing Levels with Indicative New Cadres

• Step 3: Identify Mismatches– By Major Skill Categories– By Current Costing

• Revenue Projections of Old Districts Mapped into New Structures

The World Bank

Local Civil Service Projections

0

1000

2000

3000

4000

5000

6000

Oct-05

Nov-05

Dec-05

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06

Aug-06

Sep-06

Oct-06

Nov-06

Big Bang Stability

New Structures, New FY, Interim Admin.

Post-Local Elections, New Leadersip

Current District, Secteur, Provincial Staffing

Local Elections

The World Bank

Staffing Disparities

Ratios of Existing to Projected Cadre Organique Staff (%)

0

50

100

150

200

250

300

350

400

NYARUGENGE

RULINDO

KICUKIR

O

BYUMBA

RWAM

AGANA

GASABO

GAKENKE

NYARUGURU

NYABIHU

CYANGUGU

GIKONGORO

KAMONYI

NGORORERO

GATSIBO

NYAMASHEKE

GISAG

ARA

BURERA

RUHENGERI

RUTSIRO

KAYONZA

GITARAM

A

GISENYI

KIBUYE

BUTARE

NYANZA

UMUTARA

RUHANGO

ratio

DRAFT WITH INCOMPLETE DATA!!!

The World Bank

Financing Modalities

• Conditional versus Unconditional Grants to Districts• Transfers to Secteurs

– Via Districts?

• Transfers to Facilities– Wage Payments to Schools

• Effective Linking Different Expenditure Types– Wages– O&M– Capital Investments (& forward costs)

The World Bank

Implementation Recommendations

• Articulate Road Map for Transition• Assess Needs for Critical External Assistance• Improve Data Management

– Use Common Codes– Staff Inventory– Fiscal Information Data

• Service Delivery Conference Follow-up– Integrate Findings in Revisions of Discussion Draft for Policy

Development– Further Validate Findings (Sectoral Dialogues/Analysis)

The World Bank

Q & A

The World Bank

Roadmap (Draft, 1 of 3)September, ImmediateDraft hand over report( assets,liabilities,bank statements, projects, contracts)Discussion w/ Minecofin on local government debt

October 5th, 2005: FY 2006 Budget Submissions

Options on Staffing Scenarios / HR Management in Transition

Draft Guideline Organizational Charts / Job Descriptions for (Key) Posts

Legal Advice on Each Option – Solicitor General

Costing: Retrenchment Packages & Wage Adjustments Estimates (by Scenario)

Policy on Decentralized Wage Setting (Uniform Service/Rates or Devolved Responsibilities)

Interim Policy on Recruitment

Transition Budget

Existing Debt Strategy

October 27-28th, 2005: Donor Retreat

Decision on Staffing Scenarios / HR Management in Transition

Options on Managing Donor Projects in the Transition Period

Strategic Issues for Design & Management of Post-Interim Period Projects

Agree on key issues

Define strategic options

Program (finalized by 10th)

Site

Invitations & Budgets, other logistics

Needs Assessment (broken down by components)

The World Bank

Roadmap (2 of 3)November 1st

Draft Accounting Manual and Option for District Computerization (e.g., chart of accounts)

Finalize Scope & Structure of Handover Reports (see Dec): e.g., asset & liabilities inventory, state of accounts, verification of latest standing of human resources database, projects (ensure participatory manner)Strategy on Local Taxation, especially with respect to role of secteur

November 15th, 2005: Final Expenditure Call for FY 2005

Decide which key interim position, people in those positions, notify the people

Send General Notification to All Existing Staff Singnalling Process/Continuity

Initiate induction training for core interim staff (est. min 6*30=180 + 416)

Interim Regulations and Guidelines Prepared for Training, including PFM

Cost Estimates for Implementing Induction / Reorganization

Communications Strategy: Radio, Newspaper, Stakeholders/Rallies, Flyers

Decide of Formula for Distributing Minaloc 3% transfer to districts (also CDF)

November 27th, 2005: National Dialogue Meeting @ Parliament

Mapped out all strategic issues and provides responsibilities

December 2, 2005: Development Partners Meetings

“Old” Districts & Provinces Prepare Final Handover Reports

The World Bank

Roadmap (3 of 3)

January 1, 2006: New Structures Implemented

Tuesday, January 3rd, 2006

Registrations & Orientation

January 15, 2006: Handover Completed

January 26, 2006: First Month Accounts

Final First Monthly Payroll for Districts

March 6, 2006: Elections