Ghana - Public Sector Management Reform (Phase 2 APL) Project

Report No. PID11261 Project Name Ghana-Public Sector Management Reform (@) Project (2nd Phase APL) Region Africa Regional Office Sector Public Sector Management Adjustment; BI - Institutional Development Project ID GHPE70609 Borrower(s) REPUBLIC OF GHANA Implementing Agency(ies) NATIONAL INSTITUTIONAL RENEWAL PROGRAMME (NIRP) Address: P.O. Box 1618, Accra/Ghana Contact Person: Dr. Appiah Koranteng, National Coordinator Tel: +233-21-780295 Fax: +233-21-780294 Email: NIRP@africaonline.com.gh Environment Category C (Not Required) Date PID Prepared May 28, 2002 Auth Appr/Negs Date January 2003Bank Approval Date August 2003 1. Country and Sector Background In 1994, the Government of Ghana (GoG) created the National Institutional Renewal Programme (NIRP) in order to focus and give strategic direction to the many reform activities taking place within the public sector. In October 1997, the government issued the "Public Sector Re-invention and Modernisation Strategy for Ghana: Transforming Vision into Reality" (PUSERMOS). In this strategic document, the government committed itself to reforming the public sector in general and in particular review and reform public sector institutions in terms of their mandate, approach and scope of activities. The document provided a framework for integrating, sequencing and monitoring the reforms in the public sector. To coordinate the reform activities and to provide political leadership and strategic focus the National Overview Committee (NOC) was established which is chaired by the Vice President. The NOC is supported by the NIRP Secretariat which is headed by a National Coordinator. With assistance from the World Bank the NIRP Secretariat further operationalized the PUSERMOS document and developed action plans for the reform of the public sector. These plans formed the basis for the Public Sector Management Reform Program (PSMRP) supported by the World Bank. Funding for the first phase of this program (PSMRP I) was approved by the World Bank in April 1999. PSMRP I focused on three key areas: Reform of government agencies which are fully or  partially subvented by the government budget (Subvented Agencies -SAs); Restructuring of key ministries and agencies at the central government level (Central Management Agencies - CMAs); Critical systemic changes, in particular the development of a consistent human resource management system. The implementation of the program begun under the NDC government with the former Vice-President as the NOC Chairman. The general election in 2000 brought in a new government which took office in early 2001. The new government carefully reviewed objectives and design of PSMRP and ultimately confirmed its importance for the national development agenda. The new government recognized public sector reform as a crucial building block for the Ghana Poverty Reduction Strategy (GPRS). The NOC was reconstituted with the Vice President as the Chairman. The size of NOC was reduced to improve effectiveness; the new composition includes more Cabinet ministers. A midterm review of PSMRP I was carried out shortly after the new government came into power. The review showed mixed results of the implementation of PSMRP I. While significant progress had been made in the reform of the subvented agencies the restructuring of the CMAs was moving slowly. Key problems included the lack of incentives to implement change and resistance to the change process. An action plan was developed and agreed upon with the government to address these issues. In the context of the review of the PSMRP the new government identified additional elements to be addressed under the public sector reform agenda. These elements include the restructuring and modernization of the Office of the President which was initially not part of the program. In addition, the Government intends to strengthen the policy management process to improve policy design, coordination and implementation. Finally, the new government has requested assistance to develop and implement a comprehensive public sector pay policy reform. A related reform initiative by the old government did not make any progress. A PHRD grant will finance some preparatory work for the salary reform including a public service census. These elements are considered important for a fundamental reform of the public sector; they are therefore including in the second phase of the PSMRP. In October 2001, the NIRP Secretariat organized a workshop with key stakeholders to discuss the lessons learnt from the pilot phase and the consequences for PSMRP II. The findings and recommendations of this workshop form the basis for the proposals presented in this document. At the end of 2001, the NOC discussed focus and government priorities for the second phase of the program, in particular the targeted ministries, departments and subvented agencies. It is presently anticipated to extend the first phase of the ongoing project beyond its closing date until early 2003 to allow the government to finish the reform agenda. -2-  2. Objectives The development objective of the program is to improve the efficiency, effectiveness and quality of public services and policy management in Ghana. It is expected to improve Ghana's overall fiscal performance in the medium term. 3. Rationale for Bank's Involvement World Bank experience with public sector reform projects in other countries will add substantial value to the reform process in Ghana. This particularly applies to the conceptual design of the different components of the reform program. The second phase foresees a further expansion of the assistance of the UK to the program which will continue to provide much needed strategic advice to the NIRP Secretariat. The proposed design of phase II reflects lessons learnt from other projects, in particular the need to ? Take a strategic, integrated approach which is based on a clear vision of the role, mandate and operational objectives of the reformed public sector; ? Appropriately time and sequence the different components of the reform agenda; ? Build strong stakeholder commitment during project preparation; and to ? Effectively integrate ongoing activities of other donors. In addition, World Bank projects in Ghana cover a wide range of reform activities. Because of its far-reaching Ghana program the World Bank has strategic advantages for the support of a comprehensive public sector reform program because it can build on extensive experience in many other sectors. 4. Description The (revised) program will address four different areas which have been identified as the essential elements for the public sector reform agenda: ? Reform of Subvented Agencies (SAs) PSMRP II will continue to support the government's objective to make the subvented agency sector more cost- effective and to reduce government subsidies to the sector by critically reviewing the mandates of subvented agencies, closing down those without a clear mandate, and restructuring those with a viable mandate. The selection of these agencies will be based on (i) the objectives of the GPRS, (ii) the strategic importance for public service delivery, and (iii) the potential for employment generation. The second phase will also finalize the restructuring of those agencies that have been targeted under the pilot phase of the program. ? Adjustment of central government structures and organizations Under this component the government will finalize and further deepen the restructuring of the Central Management Agencies (CMAs) which has begun under PSMRP -3 -  I. Key objective will be to continue the implementation of the restructuring plans for each individual CMA which is of critical importance for the rationalization of central government functions. After the CMA-reform is finalized the project will support the reform of key sector ministries including the relevant departments. Key objectives are to (i) clarify roles and responsibilities at the various institutional levels, also in respect of Ghana's progressive decentralization policy, (ii) improve overall service delivery, and in this context (iii) define and operationalize the relationship between the public and the private sector. The ministries and departments will be selected by the government on the basis of their importance for the implementation of the GPRS and for the generation of employment. ? Improvement of systems and processes PSMRP II will continue to address the system constraints in Ghana's public sector. To this end, the project will finalize the implementation of critical elements for public sector operations which were developed in phase I, in particular the human resource management system and the regulatory framework for the subvented agency sector. The second phase will focus on the further refinement and introduction of a comprehensive incentive system for the public sector, in particular the remuneration policy reform. ? Improvement of national policy management This component is aimed at complementing ongoing activities of other donors (UNDP, Canada, Germany) to enhance policy analysis capacity and to improve efficiency and transparency of policy design, co- ordination and implementation in critical areas of government, in particular in the Office of the President and the Cabinet office. This component will also improve communication, information sharing and consultation between the Office of the President and policy formulation units in MDAs especially the Policy Planning, Monitoring and Evaluation Divisions (PPMEDs). It will support the design of a framework for electronic governance and enhance work on effective networking which has already been started by the Office of the President including the conversion of Cabinet Paper Files into electronic files. This will include complementary funding for the introduction of a Cabinet Handbook with guidelines and procedures for effective policy management. 5. Financing Source (Total ( US$m)) BORROWER ($0.00) IDA ($80.00) Total Project Cost: $80.00 -4-  6. Implementation As in phase 1 the Government of Ghana - through the Vice President and the Chief of Staff in the Office of the President - would be responsible for ensuring that the program is undertaken as planned. The reform will be implemented under the umbrella of the National Institutional Renewal Programme (NIRP) which provides the strategic focus. The governing council of NIRP is the National Overview Committee (NOC). NOC which is chaired by the Vice President will continue to play the key role for the implementation of the reform agenda and for monitoring the reform process. Project management & coordination The project coordination would be ensured by the Office of the President (which oversees NIRP) through a National Coordinator selected by the GoG. The National Coordinator will be responsible for the NIRP Secretariat which runs the day-to-day operations. He reports to the NOC. Executing agency, program monitoring & evaluation The different components of the reform agenda would be managed by the NIRP-Secretariat. The role of the Secretariat is to catalyze, monitor & evaluate the reform process, and to publish progress reports on a regular basis. Consequently, it will contract out all consultant assignments. At the level of ministries, departments and agencies Change Management Teams will manage the different elements of the reform. The Change Management Team consists of key stakeholders, including the MDAs concerned, a civil society representative, and an OHCS representative. NOC will sign performance contract with the senior management of the targeted institution which is held accountable for the successful implementation of the reengineering plans. The senior management will report to NOC on a regular basis. Implementation will be monitored by the NIRP Secretariat which will provide advice and quality control during the change process. Financial Management The NIRP Secretariat will continue to be responsible for the financial management of the project. A financial assessment was carried out before the pilot phase of this project. A comprehensive financial management and accounting system has been established which meets World Bank requirements. The finance and administration unit of the NIRP secretariat will be responsible for disbursement under the project. It has demonstrated during the pilot phase that it is able to effectively manage the implementation of the project. Cofinancing Several donor activities run parallel to this program and close collaboration is ensured. During phase I DFID provided significant support to the NIRP Secretariat to (i) assist in the design and implementation of the SA reforms, and to (ii) adequately design and implement a comprehensive social impact assessment. This support will continue during phase II. DFID has also decided to align its Civil Service Performance - 5 -  Improvement Programme (CSPIP) under the NIRP umbrella to ensure consistency of reform activities targeting the CMAs, ministries and departments. Under the new arrangement the NIRP Secretariat will remain responsible for the implementation of the overall reform program with DFID providing technical assistance and strategic advice for the design and implementation of all components of the program. DFID will continue to provide capacity building support to the OHCS and thus enable them to effectively facilitate the internal change management process of the MDAs. DFID's ongoing support to modernize IPPD (Integrated Personnel and Payroll Database) is complementary to the reform in public sector pay policy and the human resource management system. UNDP continues to provide support to the government through the National Governance Program. The program focuses inter alia on strengthening the role of the Office of the President. This area is also supported by Canada on the basis of its Economic Governance Project. A key objective of this project is to improve the policy management process at the Cabinet level. Other donor activities include: Financial Management Reform (Canada, UK, EU), and Decentralization (Germany, Denmark, Canada, Netherlands). 7. Sustainability The implementation of the reform program will be ensured by the current and successive governments. While the transition of power from the old to the new government after the general elections in 2000 created implementation delays the political spectrum in Ghana broadly supports comprehensive reforms of the public sector. Experience from the pilot phase confirms that it is of crucial importance to maintain a participatory approach involving all relevant stakeholders during the implementation of the reform program. Comprehensive institutional and systemic changes which are part of the reform agenda will only be effective if they are widely publicized, accepted and integrated into day-to-day operations. The government will therefore continue to effectively build ownership and internal/external support for the different components of the reform agenda. The comprehensive social assessment which is part of the program will pave the way for a broad participatory approach and consultation process. At institution level mechanisms for internal feedback and opportunities for process innovations (quality circles, focus groups etc.) will be strengthened to increase motivation and to provide upward feedback to management. It will also be important to provide support for the different components of the reform agenda beyond implementation. This refers to staff, infrastructure and maintenance which is needed to sustain changes, administer new systems as well as other components. The government is aware that ongoing donor support after the implementation of the reform agenda is unlikely. The necessary subsequent costs of the reforms will consequently be taken into consideration and integrated into the government's budget. -6-  8. Lessons learned from past operations in the country/sector At end of Phase I significant progress has been made in implementing the SA reform while the reform of the CMAs and the removal of systemic constraints has proved to be difficult. The reform process for phase II of the program will be adjusted based on the experience of the pilot phase. Key areas of modification include: ? Phase II will provide explicit incentives to public sector agencies targeted by the reforms: (i) The NOC will sign performance contracts with the Chief Executive Officer of the targeted institution with specific performance targets. The implementation progress will be monitored by the NOC on a regular basis. (ii) Public agencies undergoing the reform will receive additional funding as an incentive for the successful implementation of the reengineering plans. (iii) PSMRP II will assist the government in developing and implementing a comprehensive public sector remuneration policy reform. ? Phase II will improve ownership of reforms. The pilot phase has shown that external technical assistance is most useful when the leadership of the targeted public institution is ready to reform. Under PSMRP II the NIRP Secretariat will primarily select and support agencies according to the demand expressed by them. The capacity developed within OHCS under the CSPIP program will be utilized in this process. OHCS will provide advisory service to the sector ministries in the change management process. ? Phase II will move to reform subvented agencies in specific sectors. The pilot phase adopted an agency-by-agency approach to the SA reform. The evaluation of phase I confirms that: (i) it provides more synergies to address the subvented agencies in the context of a strategic review of the entire sector. The review should first clarify the division of responsibilities between the public and private sectors in service delivery. And to adequately determine the commercialization potential of a subvented agency it is better to look holistically at the service delivery functions of the sector. (ii) The reengineering proposals for the subvented agencies typically imply policy changes that have to take into considerations sector-wide implications. An example is the proposal to move to a fee- for-service concept for some subvented agencies in the education sector. The introduction of such a concept has broader implications for the entire sector. (iii) The ultimate responsibility for the reengineering process of a subvented agency should rest with the parent ministry to improve ownership and the vertical integration of the reforms. In this context, the NIRP Secretariat should focus on assisting the sector ministry, on providing quality control and on monitoring progress. -7-  Phase II will finalize and further deepen the reform of the CMAs before targeting other sector ministries. Phase I left an unfinished agenda, in particular in the area of the CMAs. It is the intention of the government to finalize these reforms on a priority basis. The evaluation of phase I also confirmed that there is the need to continue to support the restructuring of the CMA beyond the level that was initially anticipated by the project. This mainly relates to equipment and strategic staffing where PSMRP II will provide additional support. Phase II will add public sector remuneration policy reform to the overall reform program. The experience in phase I confirms the critical importance of this reform initiative which did not make much progress under the old government. The new government has declared pay policy one of its strategic priorities to reform the public sector and has requested Bank assistance for the design and implementation of an adequate reform proposal. This support will be provided by PSMRP II. It is expected that the modified approach outlined above will enable the NIRP Secretariat to maximize the impact of the reforms. Continuous independent monitoring will ensure further refinement of the interventions. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues Not applicable 11. Contact Point: Task Manager Guenter Heidenhof The World Bank 1818 H Street, NW, Washington D.C. 20433 Telephone: 202-458 5591 Fax: 202-614 1191 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 8 -  This PID was processed by the InfoShop during the week ending June 7, 2002. -9-