What is the context in which UK support is provided?
The Government of Khyber Pakhtunkhwa is committed to improving service delivery. This is evident in its current budget where the Chief Minister and departmental secretaries took a tough decision (especially given imminent elections) to have a budget that is about consolidation and improvements in existing service delivery rather than construction of new infrastructure. The Government of KP began a public sector reform programme during the MMA government in 2006. This reform exercise has survived through successive quite different provincial governments and through changes in devolution and local government structures and is now in its second phase. The main features are 1) accelerating human development through education and better health; 2) Addressing disparities in development across genders, rural-urban divide and across regions, and develop social safety nets for the most deprived in society; 3) invigorate private sector business activities in the province; and 4) enhance the efficiency of public expenditure and improving social services delivery by improving governance and enhancing accountability. This programme arose in response to the governments request asking for continued DFID support for pillar 4 of the governments Provincial Reform Programme (PRP). It succeeded a programme of support for the first phase of reforms.
The increasing influence of the Pakistani Taliban (TTP) in the Federally Administered Tribal Areas (FATA) in KP has a direct and daily impact on governance and poverty. UNESCO data shows girls’ education to be severely affected by the conflict and rising militancy has triggered an increase in annual police budgets from Rs 7 billion to Rs 20 billion in the last three years squeezing sums available for other services. DFID’s 2011 Country Governance Analysis (CGA) notes that political instability has escalated since 2008 putting the government under severe pressure. The human costs of conflict are high - terrorist attacks, security forces operations, ethno-political violence, inter-tribal clashes, drone attacks, and cross-border attacks cost 7,107 Pakistani lives in 2011. This has declined by over 25% since 2009, but is still an eight-fold increase since 2006. The 2011 World Development Report concludes that ‘poverty reduction in countries affected by major violence is on average nearly a percentage point slower per year than in countries not affected by violence’. This is borne out in Pakistan and KP bears the brunt of it - the government estimates the economic costs of the insurgency at $35bn over the last 8 years. 36% of the Province’s 35 million people live in poverty – higher than the national average – and perceptions of corruption are particularly high.
Output 1: Government of Khyber Pakhtunkhwa budget that is strategic, performance oriented, and accountable
Output 1 score and performance description: A++ Substantially Exceeded Expectation
Progress against expected results: Results: Results have included process and systems improvements leading to reduction in service delivery costs and political wins. Fourth year targets were:
- the Budget Strategy Paper reflected in the 2011-12 budget and expenditure decisions consistent with the fiscal framework and sector strategies under the comprehensive development strategy
- At least 3 departments and 1 district have OBBs approved by government
- At least 12 departments are preparing OBBs as input to the 2012/13 budget
At least 3 departments achieve 50% of delivery targets. The rollout of OBB in 2 districts (more than the target) has helped to tie finance to direct results for users of public services. Involving parent teacher councils (PTCs) in procurement of material for school construction has reduced construction costs by 45%. OBB conditional grants are seen by the government as innovative and the way forward and continue to enjoy senior level political support. The DFID supported health and education pilot in districts DI Khan and Buner – two of KP’s poorest and most difficult to work in districts - will help government to improve resource transfer to all districts. Currently 97% of funds at district level are spent on salaries; leaving only 3% for operations, and so staff therefore often lack the means (equipment, materials etc.) to do their job. In parts of DI Khan before this pilot the government had not been doing any immunisation outreach campaigns due to lack of equipment and facilities. Conditional grants methodology (where district governments are required to submit business plans that commit them to service delivery targets and the provincial government contract third parties to audit and evaluate achievement) is becoming a key driver for districts to improve service delivery. 1, Budget Strategy Paper 1.2 The first output 1 target has been substantially exceeded: budget Strategy Paper (BSP) was approved by cabinet and BSP priorities included in the budget. In the first six months, the budget variations have been 5% exceeding the log frame target of 10%. Annual Development Plan (ADP) reporting indicates a 22% reduction in the budget throw forward from a baseline of 28.3% compared to the target of 10% reduction. 2. Output Based Budgeting: 2.1 OBB will replace automatic incremental budgets that have no relation to the quality of services nor require meeting any targets. Based on the evidence generated from OBB piloting the KP Cabinet has decided that the OBB framework will replace the usual incremental budgeting across the whole of Government. This will be done using government funds with modest backstopping technical assistance support from DFID. At the district service delivery level DFID provided £2M as financial aid for OBB pilots in two of the poorest and most challenging districts, DI Khan and Buner. The whole amount of DFID financial aid has gone towards direct service delivery improvements with government paying for all staff costs and general accommodation running costs. This innovative OBB approach was not implemented outside of government systems and did not need any additional government personnel. The OBB required both provincial and districts governments to present a business plan to cabinet with specific service delivery targets. Funds are released against achieving targets in the business plan. D I Khan and Buner are making good progress on this as pilot districts. Conditional grant MoU’s were signed after negotiations between province and districts on district business plans in which the District Coordination Officers and Executive District Officers were asked to specify time bound service delivery targets. They had to demonstrate how services were prioritised through civil society engagement using citizens voice studies completed during the review period (see output 4). DFID Health and Education teams provided quality assurance and ensured that service delivery targets were appropriate and sufficiently stretching. Preparation and approval of district business plans and government preoccupation with budget preparation did delay start up by 8 weeks but the government has been making up the lost time. According to audit reports and 3rd party validation health targets are likely to be met quickly. These are mainly on increased immunisation coverage and antenatal services and equate to 58,000 children under two years immunized (an increase of 33,000) and 95,000 women accessing antenatal care (an increase of 31,000). Through grants to Parent Teacher Councils (PTCs) education targets on missing facilities were 30 to 40% complete by mid January 2012. Full completion was judged likely by the end of the project. However, the impact of this activity on net enrolment will not be measured until after 31 March 2012 when school enrolment figures for the period become available. 2.2 The OBB model has eliminated the role of Provincial Works Department (PWD) on missing school facilities such boundary walls, water supply, toilets or needed additional classrooms. Funds are transferred to Parent Teacher Councils (PTCs), reducing leakage by a target of 10%. Government of KP Finance Controller and Independent auditors confirm that already there has been an overall 45% reduction in the cost of construction of a class room by putting money directly in to the hands of parents. Dialogue with provincial government including joint visits to districts will need to continue in order to keep momentum behind OBB juncture, ensure lessons are learnt and ensure that quality is maintained during scale up.. 2.3 We assess that the PFM agenda has strong traction with Government. This is evidenced by the level of senior level government involvement (including Secretary and Minister of Finance), by plans to put more of their own resources behind it, and by their action in contracting third party OBB validation (see below). The cabinet has approved the extension of OBB budgeting to all departments for the 2012/13 budget (from just health, education and social welfare now). This programme has supported 12 of the highest spending and is now supporting four more (exceeding the log frame target). Ceilings have been prepared in line with the log frame target. Cabinet has asked for departmental service delivery targets to be presented to them before conditional grants are approved. Cabinet owns the targets and indicators. The current year budget was prepared under the OBB approach. The Minister of Finance extended support through the budget speech and this was approved by the Provincial Assembly. One key capacity-building result has been observed: this time round the government did not require help to prepare the budget strategy paper and estimate the budget ceilings. 16 budget officers have been trained. 25 master trainers have been trained. These are grade 16 officers, ensuring capacity will remain within the provincial services. OBB has been included in performance based job descriptions for budget officers and will form part of their annual performance appraisal. Government ambition is to maximise the embedding of OBB in order to minimise reliance on external Technical Assistance. Overall the programme has already substantially exceeded the log frame targets for this output and related outcome level indicators, or is on track to exceed them 3. Continuous Audit and 3rd Party Validation: 3.1 An international organisation (Grant Thornton) has been procured and put in place by the Finance Department to provide third party validation (TPV) of OBB results. DFID has contracted Deloitte, an independent category A audit firm to provide continuous audit of the £2M financial aid. Both the TVP and continuous audit reports form the bases for funds released to the districts. The Provincial Finance Controller will only allow release of funds to district governments once verified by the Director General for M&E and the international civil society organisation providing TPV. The KP finance department has established an audit cell mandated to coordinate future cross government audits procured from private sector. It is anticipated that future continuous audits will be managed through this cell. 3.2 To make OBB sustainable it has been included in the new budget rules. As well as securing long-term value from DFID investments to date, it will increase the value for money of any future DFID or other donor investments. . The budget rules have been sent to cabinet for approval. 4. Improved Financial Reporting and Auditing: 4.1 A recently published Public Finance Management and Accountability strategy developed through this programme has been approved by the cabinet. This was presented as part of the budget strategy paper. There is sufficient senior political level buy-in to the strategy with the consensus of the line departments. We assess that, as well as improving the transparency and accountability of the provinces own spend, it will provide sufficient technical and legislative basis for ongoing disbursement of DFID funds. This additional result will help sustain some of the initiatives started through this programme. 4.2 In addition three PRP-supported workshops with civil society, including the business community and academia, were held to consult on the budget and improve its transparency (see Output 3). 5. Gender:
5.1 Government of KP does not have a gender policy. The Comprehensive Development Strategy, both the Budget Strategy Paper (BSP) and the Citizen Voice Study do have a gender component embedded in them. For example, BSP has gender disaggregated data while the Annual Development Plan has 70% of new schools for girls and 30% of new schools for boys. OBB data is also gender disaggregated. All school construction activities for missing facilities specifically target girls’ schools. Improvements in enrolment will be measured by the number of girls enrolled in the new academic year starting in April 2012. Recently the Secretary of Higher Education was nominated as GoKP’s gender champion. This is an opportunity to have a more strategic approach to gender across GoKP. A formal dialogue between DFID and Government of KP on gender policy is highly desirable. Our scaled up support to Education and Health, and the Aawaz Programme, provide an ideal opportunity and leverage to start this dialogue.
Recommendations: Weekly reporting from independent auditors based in the districts provide substantial real time monitoring and follow up with provincial government. OPM’s joint visits with government and ongoing reporting add an additional layer of monitoring. These mechanisms provide good enough quality information. Ideally, however, should there be a security window, the Subnational Governance, Health and Education teams should visit in order to hear directly from the people and providers.
DFID Provincial Representative continues a dialogue to encourage early approval of the budget rules by the cabinet.
DFID remains engaged in supporting this activity for another round allowing it to be sufficiently embedded (this is covered in the design of the new Subnational Governance (SNG) programme and meanwhile a no-cost extension is recommended).
More robust strategic communication should be done to demonstrate the objectives and results and secure buy-in across government and with citizens (in future through SNG programme and Aawaz).
The Provincial Representative lead on this dialogue in coordination with Health, Education and Democracy & Accountability teams.
