BRGF expenditures - National Institute of Rural Development

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BRGF expenditures - National Institute of Rural Development

First Independent Review of theBackward Regions Grant Fund (BRGF)Volume ISYNTHESIS REPORTWorld BankJanuary 7, 2010The World BanklR;eso t;rslR;eso t;rsGovernment of India


ContentsForeword............................................................................................................................................................................................... viiAbbreviations..................................................................................................................................................................................... viiiAcknowledgements...............................................................................................................................................................................x1. Background to the Study and Summary of the Findings.......................................................................................................11.1 Background and Objectives...................................................................................................................................................................... 11.2 The Team and the Working Approach................................................................................................................................................... 21.3 Summary of Overall Findings and Recommendations.................................................................................................................... 32. Development Grants......................................................................................................................................................................52.1 Size and Overall Utilization of Development Funding..................................................................................................................... 52.2 Allocation Criteria – Vertical and Horizontal........................................................................................................................................ 92.2.1 BRGF Allocation across Districts 92.2.2 Rural PRIs – Versus – Urban Local Bodies (ULBs) 102.2.3 Vertical Allocation across the PRIs 102.2.4 Horizontal Allocation 102.3 Conditions for Access to Funds..............................................................................................................................................................122.4 Flow of Funds................................................................................................................................................................................................122.5 Investment Menu and Size of Projects................................................................................................................................................142.6 Alignment and Convergence..................................................................................................................................................................202.7 Quality of the Investments.......................................................................................................................................................................202.8 Absorption Capacity...................................................................................................................................................................................212.9 Conclusions and Major Issues on the Development Grants........................................................................................................222.10 Recommendations on the Development Grant...............................................................................................................................273. Planning Issues............................................................................................................................................................................ 313.1 The Participatory Planning Process......................................................................................................................................................313.2 Institutional Structures for Planning....................................................................................................................................................35iii


3.3 Quality of the Plans.....................................................................................................................................................................................373.4 PlanPlus...........................................................................................................................................................................................................403.5 Overall Assessment of Planning.............................................................................................................................................................403.6 Recommendations for Deepening and Consolidating Planning...............................................................................................414. Capacity Development Issues................................................................................................................................................... 454.1 Capacity Building Planning......................................................................................................................................................................464.2 Capacity Building Funding.......................................................................................................................................................................474.3 CB Coordination and Monitoring..........................................................................................................................................................494.4 Functioning of TSIs......................................................................................................................................................................................494.5 Innovations in CB Delivery.......................................................................................................................................................................514.6 Assessment of Training Activities Conducted...................................................................................................................................524.7 Outcomes of Capacity Building..............................................................................................................................................................534.8 Overall Assessment.....................................................................................................................................................................................544.9 Recommendations......................................................................................................................................................................................555. Monitoring and Evaluation........................................................................................................................................................ 575.1 Systems for M&E within the BRGF.........................................................................................................................................................575.2 Assessment of the M&E.............................................................................................................................................................................575.3 Conclusions and Recommendations on M&E...................................................................................................................................586. Program Management Issues and Institutional Arrangements......................................................................................... 616.1 Overall Institutional Arrangements......................................................................................................................................................616.2 Institutions and HR Issues........................................................................................................................................................................626.3 Guidelines and manuals...........................................................................................................................................................................646.4 Recommendations on Program Management, Institutions and Guidelines.........................................................................647. Conclusions – Findings and Recommendations.................................................................................................................... 677.1 Overall Conclusion......................................................................................................................................................................................677.2 Summary of Challenges and Recommendations............................................................................................................................67Addendum from the BRGF Division of MoPR................................................................................................................................ 73Annex 1: Questionnaire for the Field-Mission............................................................................................................................... 75Annex 2: MoPR Release of Funds under RSVY and BRGF............................................................................................................ 82Annex 3: Note on Various Methods of Expenditure Needs Calculations.................................................................................. 83ivFirst Independent Review of the Backward Regions Grant Fund — Synthesis Report


TABLESTable 1: Overview of the Entitlements and Releases (Rs. Crore)................................................................................................................. 5Table 2: Average Allocation per Capita (Rs)........................................................................................................................................................ 7Table 3: Average Allocation per Capita (Rs)........................................................................................................................................................ 7Table 4: Revenue for Kushagarh Block, Banswara District 2007/08........................................................................................................... 8Table 5: Revenue for Banswara Municipality, Banswara District (2008/09)............................................................................................. 8Table 6:Table 7:Table 8:Vertical Allocation of Funds from BRGF.............................................................................................................................................11Horizontal Allocation Criteria for the 8 States – PRIs....................................................................................................................11Development Fund Releases – Timing for the FY 2007/08 Funds...........................................................................................13Table 9: Sector Composition of Use of funds – Core Areas (FY 2007/08)*.............................................................................................16Table 10: Size of the projects and Unit Costs (PRIs)..........................................................................................................................................18Table 11: Utilization of the 5 % of the Development Grant on Functionaries........................................................................................19Table 12: The Participatory Planning Process at GP level...............................................................................................................................31Table 13: State Wise Preparation of the Plan (Rajasthan)...............................................................................................................................34Table 14: Functioning of the DPCs.........................................................................................................................................................................35Table 15: Quality of the District Plans...................................................................................................................................................................37Table 16: Use of PlanPlus...........................................................................................................................................................................................40Table 17: Future Composition and Roles of DPC and HPC............................................................................................................................43Table 18: Overview of Capacity Building Planning in the States.................................................................................................................46Table 19: CB Funding and Fund Utilization for 2006/07, 2007/08 and 2008/09....................................................................................48Table 20: Summary of the Funds Released by MoPR.......................................................................................................................................49Table 21: Coordination Mechanisms for CB Support.......................................................................................................................................49Table 22: Functioning of TSIs....................................................................................................................................................................................50Table 23: Innovations Used for CB Delivery........................................................................................................................................................51Table 24: Overview of Challenges and Recommendations...........................................................................................................................67CHARTSChart 1: Composition of Discretionary Funding – Nalgonda District in the State of Andhra Pradesh.......................................... 8Chart 2:Composition of Expenditures from BRGF.........................................................................................................................................17


GRAPHSGraph 1: Per Capita BRGF allocation versus district population................................................................................................................... 9Graph 2: Per Capita BRGF and Backwardness Ranking for Districts Involved in the BRGF...............................................................10FIGUREFigure 1: Mutually Strengthening Components of a Performance-Based Grant System..................................................................26TEXT BOXText Box 1: A two-pronged approach used in West Bengal for Participatory Planning.......................................................................32Text Box 2: Experiences from Samastipur Nagar Parishad (ULB) and Malajkand municipality (Balaghat district).....................33Text Box 3: Composition and functions of the DPC (Rajasthan Panchayat Raj Act 1994)..................................................................34Text Box 4: Approval process in Madhubani District – Bihar State..............................................................................................................36Text Box 5: Rajnagur Block – Flaws in the Planning Process, Bihar State...................................................................................................39Text Box 6: Gaps in the Development Plan...........................................................................................................................................................35Text Box 7: Objectives of the National Capability Building Framework.....................................................................................................45Text Box 8: Overview of Monitoring and Evaluation for CB............................................................................................................................50Text Box 9: Improvement in Financial Management: A Case of Bankura District, West Bengal State.............................................54viFirst Independent Review of the Backward Regions Grant Fund — Synthesis Report


ForewordBRGF was launched with considerable expectations inFebruary 2007 and is about to complete three years of itsexistence. It intends to:a.b.c.Ensure convergence of a plethora of Central/StateSchemes and pooling of resources for betteroutcomes.Bridge critical gaps in the local infrastructure andother development requirements that are not beingadequately met through the existing inflows; andBuild capacity of Panchayats & Municipalitiesin participatory planning, decision making,implementation and monitoring to reflect local feltneeds and counter possible efficiency and equitylosses.The scheme gives discretion to the local bodies in therural and urban areas to plan and implement works andactivities.The duration of BRGF, as of now, is for the period up to 31 stMarch, 2012. Thus, a mid-term independent review of theScheme was considered desirable. The World Bank readilyagreed to undertake the task and engaged a team ofreputed experts for the purpose. The Study Team had goneabout its task energetically and methodically. It collectedand analyzed core information, made many field visits andinteracted with a cross section of the stake holders. Thishas made the study well founded in its data base and theconclusions that it has arrived at. I appreciate the efforts putin by the World Bank and the Study Team in bringing outthis report in a very short time.MoPR has followed this Study with seriousness right fromthe commencement. On receiving the draft of the Studyreport, MoPR placed it for discussion with the BRGF Stateson 10 th August 2009 in a meeting convened to review theimplementation of the BRGF Scheme. This was followed byimplementation of some of the findings of the Study evenwithout waiting for the final report. For instance, Stateshave been advised to notify the allocations for individuallocal bodies quickly and to complete the preparation ofthe District Plans for 2010–11 by January 2010. Statesand the Districts have been advised to refrain frommodifying the plans prepared by the local governments.Further, the Ministry has undertaken the implementationof the Capacity Building Program through professionalagencies in public-private partnership mode.It may mention here that a National Advisory-cum-ReviewCommittee has been set up with the following TORs: Assess the extent to which objectives of BRGF ( includingredressing backwardness and decentralizedplanning ) have been fulfilled; Need for modification in the objective and designof BRGF including the Block as the Unit for BRGFfunding. Review the quality of program management atCentral, State and District levels; and adequacy of themonitoring mechanism. Assess the quality of district plans, frequentlyoccurring deficiencies, aspects of capacity building,planning process, role of TSIs etc. Any other matter relevant to the subject.I hope the two reports in conjunction, would providesufficient insight for improving the quality and pace ofimplementation of BRGF and also its reassessment andrestructuring, if need be.A.N.P. SinhaNew DelhiSecretary to the Government of India29 th December, 2009 Ministry of Panchayati RajForewordvii


AbbreviationsACA.P.BDOBIPARDBRGFCBCBOCDCEOCHMICSODDCDLTTDPMUDPRDODPTDRPDTCETCFCFYGoIGPGPFTGPMSGSHDIHPCHRIAMRIAYIPIPEISDPISROISSJSYKVKAnganwadi CentersAndhra PradeshBlock Development OfficerBihar Institute Public Administration and Rural DevelopmentBackward Regions Grant FundCapacity BuildingCommunity Based OrganizationCapacity DevelopmentChief Executive OfficerCommunity Health Management InitiativeCivil Society OrganizationDeputy Development CommissionerDistrict Level Training TeamDistrict Project Management UnitDistrict Panchayats & Rural Development OfficerDistrict Planning TeamDistrict Resource PersonDistrict Training CentreExtension Training CentreFinance CommissionFinancial YearGovernment of IndiaGram PanchayatGram Panchayat Facilitating TeamGram Panchayat Management SystemGram SansadHuman Resource IndexHigh Powered CommitteeHuman ResourceInstitute of Applied Manpower ResearchIndira Awas Yojana (GoI sponsored rural housing scheme for poor)Intermediate PanchayatInfrastructure Professionals Enterprise LtdImproved Service Delivery by PanchayatsIndian Space Research OrganizationInstitute of Social SciencesJanani Suraksha Yojana (GoI sponsored safe motherhood scheme for poor)Krishi Vigyan KendraviiiFirst Independent Review of the Backward Regions Grant Fund — Synthesis Report


LLGMLAMISMoPRMPNABARDNERIWALMNIRDNGONREGSPAAOPAOPBGSPDOPMGSYPMUPRDDPRIPSPSFTRMROTRsRSVYSCSFCSGSYSHGS1DASIPRD/SIRDSMTTSRDSTTDCCTFCTOTTSIULBZPLakhsLocal GovernmentMember of Legislative AssemblyManagement Information SystemMinistry of Panchayati RajMadhya PradeshNational Bank for Agriculture and Rural DevelopmentNorth Eastern Institute of Water and Land ManagementNational Institute for Rural DevelopmentNon-Government OrganizationNational Rural Employment Guarantee SchemePanchayat Audits and Accounts OfficerPanchayat Administrative OfficerPerformance-Based Grant SystemPanchayat Development OfficerPradhan Mantri Gram Sadak Yojana (GoI sponsored rural connectivity scheme)Project Management UnitPanchayat & Rural Development DepartmentPanchayati Raj InstitutionPanchayat SamitiPanchayat Samiti Facilitating TeamReview MissionReceive Only TerminalRupeesRastriya Sama Vikas YojanaScheduled CastesState Finance CommissionSwarnjayanti Gram Swarojgar Yojana (GoI sponsored SHG)Self Help GroupSwedish International Development Cooperation AgencyState Institute of Panchayats & Rural DevelopmentState Master Trainers’ TeamStrengthening Rural DecentralizationScheduled TribesTraining & Development Communication Channel12 th Finance CommissionTraining of TrainersTechnical Support InstitutionsUrban Local BodyZila ParishadAbbreviationsix


AcknowledgementsThe independent evaluation of BRGF was the result of closecollaboration between the World Bank, the Ministry ofPanchayati Raj (MoPR), UNDP, and Steffensen Consult ApS.The Review Team was led by Dr. Yongmei Zhou of the WorldBank and consisted of Jesper Steffensen (Lead Consultant,Steffensen Consult ApS) and his colleagues Yadab Chapagain,Emmanuel Ssewankambo, Vijay Tandon and Gerhard van’tLand; Soma Ghosh Moulik and Amarendra Singh from theWorld Bank; and Sumeeta Banerji, Ritu Mathur, Shailesh KSingh, Ruchi Pant, Ambika Prasad and Amit Anand from theUNDP. Sujata Pradhan of the World Bank assisted with theorganization of the review and editing.The World Bank team wishes to thank the following people fortheir support. Foremost of all, we thank Mr. A.N.P. Sinha, IAS,Secretary, and Mr. Sudhir Krishna, IAS, Additional Secretaryand National Project Director for BRGF, MoPR for entrustingus with this important task. We thank the leadership ofthe MoPR and its staff in the BRGF Division as well as thePlanning Commission for their valuable suggestions andprofessional inputs at various stages of the study.We would also like extend our sincere thanks to the politicalleaders, authorities, line agencies, and the general public inthe States, Districts, and at PRIs and ULBs for their cordialityand hospitality extended to the Review Mission. It was onlywith their enthusiastic cooperation, input and support thatthe mission was successful to gather host of information, ina very short time. Furthermore, the mission is thankful to theofficials of the institutions involved in capacity development,including the State Institutes for Rural Development (SIRDs),who shared their experience with the Review Team andprovided professional observation and valuable insightsof the situation and the challenges in the operations ofthe BRGF. The nodal officers of all the participating statesdeserve special thanks. The meetings and field-missionshave been superbly organized and all meetings have beenconducted according to the original requested field-plan.The World Bank Team benefited from insightful commentsfrom the following reviewers: Jeff Hammer (Prof. ofEconomics, Princeton University), Manvinder Mamak (SeniorFinancial Management Specialist, South Asia Region, WorldBank), V. Ramachandran (Chairman, National Advisory andReview Committee for the BRGF, Government of India),Shekhar Shah (Economic Advisor, South Asia Region, WorldBank), Vivek Srivastava (Senior Public Sector Specialist,Africa Region, World Bank), and S. M. Vijayanand (PrincipalSecretary, Local Self Government Department, Governmentof Kerala).The World Bank Team wishes to acknowledge generousfinancial support by SIDA.The World Bank Team takes the responsibility for anyomissions of important information and any inadvertentmisinterpretations or shortcomings that might haveoccurred.First Independent Review of the Backward Regions Grant Fund — Synthesis Report


2Development GrantsThe Review Mission reviewed the design and operationsof the development grants under the BRGF, including thenature, size, the horizontal and vertical allocation, thesystems for releases and flow of funds, the use of fundsand various issues related to the execution of the projects.This section contains the main findings on these issues,followed by a discussion of selected core topics and therecommendations.2.1 Size and Overall Utilization ofDevelopment FundingFor the year 2006–07, the allocated budget for BRGFamounted to a total of Rs 3,750 crore, divided intwo parts: Capacity Building fund of Rs 250 crore, atRs 1 crore per district, and an untied grant of Rs 3,500 crore.This allocation, however, was reduced to Rs 1,925 crore atthe Revised Estimates stage. For 200708, the budgetaryallocation was Rs 4,670 crore, a Capacity Building Grant ofRs 250 crore and a total Development Grant of 4,420 crore.This allocation was reduced to Rs 3,600 crore at the revisedestimate stage. The allocation for the year 2008–09 is4,670 crore.The table in Annex 2 presents the budget allocations andrelease under the RSVY and BRGF for the last two fiscalyears. A significant amount of allocated funding under theBRGF was not disbursed to the States: Rs 1,898 crore andRs 1,526 crore, for 2007–08 and 2008–09, respectively. Thisunder-spending reflects teething problems of the relativelynew program with regard to operational challenges inthe BRGF system and procedures, combined with a newadministrative set-up at the district, sub-district and ULBlevels.Table1 below shows the status of the entitlement, releasesand the utilization of funds for FY 2007/08 and FY 2008/09 forthe eight states in the sample. Some of the just mentionedproblems with delays in spending are reflected in data forsome of the States.Table 1:Overview of the Entitlements and Releases (Rs. Crore)StateBudget-EntitlementSanctioned/approved amountReleasedamountUtilizedamountCommentsFY 2007/08Andhra Pradesh 335.28 325.47 312.73 278.03 90 % of funds + part of second (10 %) releaseAssam* 157.00 134.64 59.98 59.78Second installment is not released from the StategovernmentBihar 603.99 603.55 603.55 417.19 Two installments utilized 69 % based on UCsChhattisgarh 236.75 226.27 226.21 208.54No utilization as the funds from FY 2006/07 is beingusedMadhya Pradesh 428.4 428.4 423.9 357.83 Used 83.6 % of the budget and 84.4 % of the releasesOrissa** 305.67 305.67 298.05205.13**Used 68.8% of releasesRajasthan 250.99 250.99 300.9074.99 +29.58Utilization till May 2009Development Grants


Budget-EntitlementSanctioned/approved amountReleasedamountUtilizedamountStateCommentsBudget entitlement does not include Rs19.88 Cr ofremaining due 2006–07West Bengal 244.9 244.9 187.25 20.18 Released amount includes Rs 30 Crore of2006–07 entitlementRs 157.25 Cr. released by MoPR in Jan-Feb, 2008FY 2008/09Andhra Pradesh 335.28 226.79 113.39 12.95 Released 34 % of the annual amountAssam 157.00 157.00 53.00 0 As 2006/07 funds are being usedBihar 602.99 357.17 357.17 0Chhattisgarh 235.48 192.45 192.45 019.93 Crore released against balance amount ofdistrict annual plan 2007–08. As FY 2006/07 funds arebeing used.Madhya Pradesh 428.4 428.4 247.5 112.95 Used 26.4 % of budget and 45.6 % of releasesOrissa 305.67 305.67 169.42 0.0 Utilization based on UCsRajasthan 250.99 250.99 183.50West Bengal 244.9 244.9 142.55 139.83Budget entitlement does not include dues for 06/07and 07/08.; Out of total released amountRs 79.05 Cr was not actually received by State FinanceDepartment in FY 2008–09; Released amount alsoinclude due amount of 2006–07 & 2007–08Source: State Reports from the Review Team and data provided by the States.* In the case of Assam all figures pertain to fund for FY 2006–07. There is difference between the released amount shown on the website and thestatement provided to the mission. In the case of Bihar and Chhattisgarh there are small deviations between budget figures received from the Statesand the web-pages of MoPR.** Re. Orissa: based on UCs submitted, the expenditure during the year was much smaller: Rs 60.0 crore. For FY 2008/09, the expenditure in thisyear was Rs 199.40 crore, but the UCs show 0. Notes: Rajasthan: The budget, sanctioned and released amounts are from http://www.brgf.gov.in/fundsmanager/factfile.asp (please note that this is not consistent with what was presented in the BRGF progress note by the State to the ReviewTeam). Utilization – quote from the BRGF progress note to the Review Team: “… an expenditure of Rs 7499.97 lakhs and Rs 2958.26 lakhs had beenmade till May 2009”.The lack of utilization could lead to the conclusion thatthere is lack of absorption capacity amongst the PRIs andULBs, but the Review Team concluded that this is not thecase. Instead, the cumbersome operating procedures of theBRGF are the main reasons for delayed implementation .One of the biggest challenges for the BRGF, stronglyemphasized by all respondents in the eight States, is thesmall size of the BRGF. There are various ways of measuringsize, but the point made by all the respondents is thatthe size of the grants it too small to achieve the BRGFintended outcome of “closing the regional imbalance and thefiscal gap”.as other schemes in India. Most importantly, the grantsare small relative to the great investment needs in areastargeted by the BRGF – (see below under the SectionInvestment Menu ).It is also important to note that the size of the grants shouldbe in a reasonable balance with the efforts made at thelocal level in areas such as participatory planning, projectmobilization and monitoring. In several of the districtsvisited, there were serious concerns that, unless the sizeof the grants could be increased, it may be hard to ensurecontinued active participation by citizens in the localplanning process. In some places it was even discussed toIt is indeed the impression of the Review Team that theallocation is small, in terms of per capita allocation andin comparison to the overall budget of the PRIs as wellPlease refer to the Planning Section of the Review for a discussion of these issues.Based on the current year budget, BRGF only constitutes less than 0.5% of thetotal public budget and is less than 10% of NREGS budget.A full expenditure need calculation is outside the scope of this review, but this willrequire clarification of the PRI functional assignment, minimum service standards,unit costing, review of the fiscal potential, of other funding schemes etc., a verycomprehensive exercise, which will require several years of analytical work, seeenclosed Annex for various options for the methodology on costing.First Independent Review of the Backward Regions Grant Fund — Synthesis Report


have a planning process going only once every 3–4 years,whereby various PRIs would receive funds on rotation, i.e.not every year 10 . The size of the grants also has an impacton the options for convergence and interests of the sectorsin coordination with the PRI institutions (see the discussionunder Convergence in the Planning Section of this Report).However, it should be noted that despite these challengeswith the size and the requests to increase the level offunding, the BRGF constitutes the single most discretionaryfunding source for all the PRIs studied and even for some ofthe ULBs, which typically have some own source revenues.The average per capita amount from the BRGF developmentgrant varies greatly across the 250 BRGF districts. Onequarter of the districts receive less than Rs 81 per capita; onequarter receive between Rs 81 and Rs 111 per capita; onequarter receive between Rs 111 and Rs 176 per capita; andthe other quarter of the districts receive between Rs 176 andRs 3,162 per capita. Those districts that receive exceptionallyhigh per capita allocation are very small districts. With theexception of the outliers, current allocation to BRGF is highlyinsufficient to close the fiscal gap and seriously address thechallenge of regional imbalance. A PRI with an average sizeof population will typically only be able to make 1–2 smallerinvestments per year from this source of fund.The allocation per capita for the States, visited on the fieldmission,is shown in the Table below:The Table shows that the per capita allocation ofdevelopment grants under the BRGF is generally modest,but that it varies greatly across the districts due to theTable 2: Average Allocation per Capita (Rs)10StateThis was discussed e.g. in Andhra Pradesh.Average amount allocated per capitaaverage for alldistricts in the stateValues in the twodistricts sampledAndhra Pradesh 83 75 and 94Assam 165 149 and 165Bihar 75 52 and 58Chhattisgarh 171 104 and 202Madhya Pradesh 162 128 and 159Orissa 149 72 and 145Rajasthan 195 93 and 112West Bengal 59 68 and 79Source: Data from the State Reports in most case figures from FY 2007/08.Andhra Pradesh: Sanctioned figures FY 2007/08. Bihar: Estimated amountfor FY 2007/08.criteria applied (see below). The large fixed share – 10 croreper district - tends to favor allocations per capita in districtswith smaller population size and disfavor larger districtssuch as the ones in the States of Bihar and West Bengal,which have a very high population size. In some districts,the per capita allocation is 4 times higher than in others, notalways related to the level of backwardness (compare Biharwith Chhattisgarh).Size of the Allocations from BRGF Comparedto Other Revenue SourcesThe team did not receive copies of the full PRI budgets andaccounts from all places visited, but for the cases reviewed,it was clear that the BRGF was not the only or even mainrevenue source. Other sources such as funding of salariesand the NREG scheme were often larger. But BRGF was by farthe most important discretionary source for funding of localdevelopment projects which can be used in accordance tolocal needs. Most of the other funding sources are earmarkedor tied to specific delivery mechanisms. For example, theNREGS, which is often the largest single revenue sourcefor PRIs, has the restriction that the infrastructure must bedelivered through locally employed unskilled labor. It shouldbe noted that the 12 th Finance Commission (TFC) grant isnot fully discretional as there is guideline for PRIs to use thegrant on operating and maintaining existing infrastructureand to give priority to water schemes.In the State of Rajasthan, detailed data on the other revenuesources were obtained (see Tables 3–5 below). AlthoughTable 3: Average Allocation per Capita (Rs)Source Amount in Lakhs % of Total RevenuesBRGF Entitlement 3.0 5.4IAY 1.0 1.8NREG 45.0 81.1SFC 2.0 3.6TFC 3.0 5.4General (Tribal AreaDevelopment Grant,MLA DevelopmentFund etc) 1.5 2.7Total 55.5 100.0Notes:a) Source: GP Cash Book for BRGFb) 3.29 Lakhs were received in April 2008 for 2007/08 BRGF entitlementc) Though 3 Lakh from BRGF is very small in the overall budget (5.4%), it isabout 50% of the discretional resources of the GP which include mainlySFC and TFC (discretionary resources defined as resource where the GPshave some decision-making power on where and how to spend the funds).Development Grants


the BRGF may constitute a small percentage of the totalresources of a local body, the BRGF constitutes a largeproportion of the total discretional development grants atthe different tiers. Similar information was provided fromother States.Table 4:Revenue for Kushagarh Block, BanswaraDistrict 2007/08Source Amount in crore % of TotalBRGF 1.5 5.0NREG 25.0 82.7Other schemes 3.5 11.6TFC 0.2 0.5SFC 0.1 0.2Total 30.2 100.0Notes: Though BRGF is only 5% of the PS budget, it is 87% of the discretionalfunds which include SFC and TFCChart 1 from Nalgonda district in the State of Andhra Pradeshillustrates a common situation in many districts, whereBRGF is the single most important source of discretionarydevelopment investments.The situation portrayed above is not the always the casefor the ULBs, which often have better access to othersources such as own source revenues – various taxes, feesand charges and other schemes (see Table 5, for example).The contribution of BRGF to the discretional developmentfunding varied between 5 – 40 % in the ULBs reviewed,depending on the size and revenue potential of the ULBs.Still, as the wage bill is expected to increase significantly thisyear due to the 6 th Pay Commission recommendations, ULBsfound the BRGF an important revenue source to financediscretionary development activities.Table 5:Revenue for Banswara Municipality,Banswara District (2008/09)Source Amount in crore % of TotalBRGF 0.9 10.5Own revenue 2.2 24.9Octroi compensationgrant 3.3 37.4TFC 1.7 19.3SFC 0.7 7.9Total 8.8 100.0Notes: Aside from BRGF, the municipality has 7.9 crore of income fordiscretional use, just enough to cover 6.7 crore of salary and operationalexpenses. This year, there will be an increase of 1.4 crore in the salary billas a result of the 6 th Pay Commission. Therefore, the BRGF will be the onlydiscretional resource for development spendingChart 1: Composition of Discretionary Funding – Nalgonda District in the State of Andhra Pradesh2008/09: Composition of Funding of theDiscretionary Development Projects in Nalgonda District4% 13%5%78%BRGF SFC TFC Own Source RevenuesSource: Data from Nalgonda District Reports.First Independent Review of the Backward Regions Grant Fund — Synthesis Report


2.2 Allocation Criteria – Vertical andHorizontal2.2.1 BRGF Allocation across DistrictsAccording to the BRGF Program Guidelines, grants shouldbe distributed to the districts using three criteria:1.2.3.An equal share (Rs 10 crore per district p.a.) and theremaining as:Share of the population (50 % weight of the balance),Land area of the district (50 % of the balance).It should be noted that this formula does not reflect anybackwardness criteria, contrary to the overall objectivesof the BRGF. Smaller districts in terms of population andwith a large territory (low density) will typically receive asignificant higher per capita allocation from this allocationformula (see above).The graphs below show the correlation between populationand per capita allocation for all the 250 districts involved inBRGF. The larger districts receive much less per capita thanthe smaller districts. This is primarily a result of the largeproportion of the Development Grant, Rs 2,500 crores outof Rs 4,400 crores, which is allocated equally to all districtsregardless of their size.The graph below shows that there is no positive relationshipbetween the per capita allocation to districts and thedistrict backwardness ranking determined by the PlanningCommission and used to identify the 250 BRGF districtsalong with other considerations. It is important to notealso that the BRGF districts are not all among the 250 mostbackward districts. A significant number of the relativelywell-off districts receive BRGF funding, sometimes at a veryhigh per capita allocation level.According to the BRGF guidelines, each State will determinethe normative formula for allocation of funds to eachPanchayat and ULG (excluding capital/cities with a populationof 1 million or above). According to the central BRGF ProgramGuidelines, the normative formula shall consider the shareof each LG institution category within the district and thenorms governing the inter-se share of each Panchayat orMunicipality concerned. The formula may include any indexfor backwardness and address priorities identified in theenvisioning exercise and a reasonable percentage of thefunds may be earmarked for performance incentives. 11 Thereare great variations across the eight States on how they usethis possibility to set state-specific criteria, see below:Graph 1: Per Capita BRGF allocation versus district population3500Per capita BRGDF & district population30002500200015001000500001000000 2000000 3000000 4000000 5000000 6000000 7000000 800000011See p. 6 in the BRGF Program Guidelines.Development Grants


Graph 2: Per Capita BRGF and Backwardness Ranking for Districts Involved in the BRGFPer capita BRGF & backwardness ranking35003000250020001500100050000 100 200 300 400 500 600 7002.2.2 Rural PRIs – Versus – Urban LocalBodies (ULBs)All States, except Orissa, use the size of the population as theonly criterion for the division of funds between rural PRIsand ULBs. 12 It should be remarked that none of the Statesare using indicators of backwardness like % of populationliving below the poverty line, % ST/SC population or % ofagricultural labor as share of the work force for allocationbetween urban and rural authorities.2.2.3 Vertical Allocation across the PRIsThe table below provides an overview of the criteria used forvertical allocation of funds across the tiers of PRIs – districts/Zila Parishads (ZPs), Intermediate Parishads (IPs) and GramParishads (GPs):As it appears, most States allocate the highest share to the lowestlevel of government – the GPs. In two States, Chhattisgarh andMadhya Pradesh, funds are not allocated/or reserved prior tothe beginning of the planning process, but will be disbursedto each tier depending on the presented plan proposals (i.e.12 The State of Orissa is also using the population criterion, but adding a specialcriterion which ensures that 15% extra is allocated to the ULBs, subject to amaximum ceiling of 40 % of the total funds. In practice this means that if the ULBsin a district are entitled for 12% share (based on population), they will receive27% of the funds; if however the share is say 27%, they will receive the maximumshare of 40% being the ceiling. The differentiation is based on the perception thatULBs have higher expenditure needs, though the calculations are ad hoc. As resultof the State allocation formula, and the benefit of 15% extra for urban area, theurban share has increased from 13.2% to 27.1%.no fixed amount per PRIs or no fixed relative share per tier ofGovernment). However, in Chhattisgarh and Madhya Pradeshthe selection of projects is done in such a way that largeramount of total fund (or more than 50%) is channeled to theGPs. As it appears from the Planning Section of this Report,even in States where there is a set allocation for each tier,the upper tier, especially the DPC, may in some cases try toinfluence the spending-decisions in the IPs, GPs and ULBs. Thispressure seems higher in places where ZPs have no share or asmaller share, e.g. in Rajasthan and Bihar (in the first year in FY2007/08, where the ZPs only had their own small 2% share).2.2.4 Horizontal AllocationPRIs: Table 8 below shows a comparison of the criteriaand percentages for the horizontal allocation formulas asapplied in the eight States for PRIs.Few of the States have elaborated backwardness targetingcriteria for allocations and targeting as envisaged in theBRGF guidelines. Some States – e.g. Andhra Pradesh andRajasthan - have elaborated relatively simple criteria forallocation. The indicators used in West Bengal are subjectfor discussions and future refinements.The BRGF guidelines encourage projects focusing onthe SC/ST segments of the population, but only AndhraPradesh includes the relative size of SC/ST population asa criterion in the allocation formula while the same Statealso keeps a good record of projects targeting SCs/STs. In10First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Table 6: Vertical Allocation of Funds from BRGFStates ZP IP GP RemarksAndhra Pradesh 20 % 30% 50%Assam 20 % 30% 50%Bihar (2007/08) 2% 6% 92% The allocation was changed, based on aBihar (2008/09 -) 10% 20% 70% study commissioned by GoBChhattisgarh 100% 0% 0%Disbursement to GPs and IPs is based onDPC approval of projectsMadhya Pradesh 100% 0% 0%Disbursement to GPs and IPs is based onDPC approval of projectsOrissa 20% 30% 50% See 2.2.2Rajasthan 0% 0% 100%Some attempts from DPC to influence theprioritiesWest Bengal 20% 20% 60%Source: Data based on the state reports, see annexes.Ganjam District (Orissa), all GPs in 22 Blocks were classifiedunder five indices to arrive at the status of backwardness ofthe respective GPs. These five indices were: percentage ofpopulation BPL, relative size of the SC and ST population,size of the un-irrigated area and distance from the town.There is an obvious need to review the formulas in some ofthe States to try to identify simple, reliable, targeting andtransparent criteria for backwardness, such as the relativesize of the SC/ST population, population BPL, percentage ofagriculture labor force of total labor force, etc.Urban Local Bodies – Horizontal Allocation: Similarly, forthe urban local bodies, only some (4) of the states are usingbackwardness criteria in the allocation across UBLs. Thecriteria applied are as follows:Table 7:Horizontal Allocation Criteria for the 8 States – PRIsStates IP GP RemarksAndhra Pradesh50% population50% SC/ST pop.Source: Data based on the State Reports, see Volume II.50% population50% SC/ST pop.Assam 100% population 100 % population No targetingBihar 100% population Equal share allocation No targetingChhattisgarhNo criteria for PRIs& 100% population for ULBsNo criteriaMadhya Pradesh No criteria No criteriaOrissa No criteria No criteriaRajasthanWest BengalNo funds to the blocks50 % population50% Below Poverty Line families50% population (1991)50% populationthose reflecting backwardness 13 (1991)50% based on 7 criteria, some of 50% Non-literate populationReflect backwardness criteriaScheme based allocation, may or maynot be targetingScheme based allocation, may or maynot be targetingScheme based allocation, may or maynot be targetingBackwardness criteria appliedBackwardness criteria applied.Some discussions on the reliability of thedata and whether or not the formula istoo complicated.13 The formula is a follows: 50% is allocated as per population census 2001 and 50%based on indicators of backwardness broken down as follows: 7% populationdensity (2001); 7% rural population (2001); 8% population of ST as per 1991census; 7% population of SC as per 1991 census and minority as per 1981 census;7% non literate population (2001); 7% infant mortality (2001); and 7% per capitanet District Domestic Product at constant price (1999–2000).Development Grants 11


Andhra Pradesh: 50% population and 50% slumpopulationRajasthan: 50% population and 50% BPL populationOrissa: 85% for population and 15% weight for SC/STpopulation of ULBWest Bengal: (i) total population (50%), (ii) densityof population (12.5%), (iii) SC & ST population as per1991 census (12.5%), (iv) illiterate population (12.5%) and (v) length of kutcha drains in a Municipality(12.5%).Assam, Chattishgarh and Bihar are using the size ofpopulation. In Madhya Pradesh, the allocation depends onthe discussions of the proposals by the DPC.It should also be noted that none of the States haveelaborated the envisaged criteria or system for performancebasedallocation. However, there is a strong support to theseideas in several of the States, such as West Bengal, AndhraPradesh and Bihar.In Ganjam District (Orissa), the planning process seeks toprovide incentives for GPs to create wage employment forwage seekers as part of the prioritized projects. Two GPsin each block have been selected (44 in all) on the basis ofthe number of person-days of wage labor generated andwho will be ‘rewarded’ with Rs 5 lakhs per GP to implementeligible projects of their choice. 142.3 Conditions for Access to FundsThe conditions to access the BGRF funds are clearly stated inthe central BRGF guidelines, (page 16). Most States complywith these minimum access conditions and triggers forreleases of funds. However, there are many instances whereutilization certificates (UCs) are not fully completed prior tothe next release of funds, or where these UCs are treatedwrongly, e.g. in Bihar where, in one of the districts, releaseswere treated as ‘utilized funds’ within the BRGF reportingsystem. Audits of the BRGF expenditures have only startedin the few States, and it is major problem that the delays inthe release of funds have delayed spending as well and thesubsequent audit. Funds for FY 2007/08 are largely used inFY 2008/09 and even in FY 2009/10, which has led to delaysthroughout the chains of accountability and auditing.14 “International Experiences from Performance-Based Grant Systems-Conceptand Lessons Learned” by Jesper Steffensen, one of the coauthors of this report,provides an overview of experiences in various countries with the design ofperformance-based grant systems.None of the States have added additional access minimumconditions to BRGF and as mentioned none of the Stateshave introduced performance rewards or sanctions.2.4 Flow of FundsFlow of funds and information on thisThe field-missions revealed poor awareness amongstparties in almost all districts, IPs, GPs and ULBs about thesize of their entitlements, transfers of funds, and utilizationof funds. There are severe delays in disbursement of BRGFfunding and the predictability in fund is perceived as low.The present regulations on the requirement for minimumspending prior to next installments are seen by moststakeholders as overly complicated and non-appropriate.There is a need for a simpler system, which ensures thatsufficient funds are available in due time.ULBs are particularly suffering from lack of informationabout their entitlements and future flow of funds as well asthe releases. In some places, ULBs have just received the firstinstallment in June 2009 (e.g. the ULBs in Andhra Pradesh).Release of fundsTable 9 documents the general delays in releases of fundsfor the FY 2007/08. Further details are available in the statereports.Releases to PRIs and ULBsFund releases are generally delayed in all States and fundsonly arrive towards the end of each FY and parts of it evenwithin the subsequent year(s). Table 9 above provides ageneral overview for FY 2007/08, although there are somegaps in the information from the field.The following example from the State Report on Orissa showssome of the problems related to the delay in the release offunds from MoPR and its credit to the account of the finalrecipient district. “A release of Rs 25.50 Crore - Rs 11.89 croreto Dhenkanal against the plan for 2007–08 and Rs 13.61 croreto Sundargarh against the plan of 2008–09 was sanctionedat MoPR on 20-04-09 (No. N-11019/47/2009-Pol. I) and arelease advice to Reserve Bank of India Nagpur were issued on08-05-09 for credit to the Orissa state account. Orissa state byorder dated 11-05-2009 released the funds to SIRD, which SIRDcould draw from the state treasury on 29-6-2009 and remittedthe funds through its banker on 03-07-2009. The funds12First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Table 8:Development Fund Releases – Timing for the FY 2007/08 FundsStates From GoI to the States States to the PRIs and ULBs RemarksKhammam: January 7, 2008March 2008 (1 st release to PRIs, 90 %)Severe confusion about theAndhra PradeshMarch 2009 and April 2009 (2 treatment of the ULBsNalgonda: January 7, 2008nd release toPRIs)AssamBiharChhattisgarh– DhamtaridistrictChhattisgarh– BilaspurdistrictMadhya PradeshOrissaRelease for Morigaon District during2009/10No release yetSamastipur: January 7, 2008March and May 2008 for the two districtsvisited (1 st installment)Madhubani: January 7, 2008ULBs: 1 district: May 20081 district June 2009First: 11-12-2007 Rs 1194.68 First: 16-01-2008 (Rs 716.8) and 07-03-2008(Rs 477.88)Second: 31-12-2008 (Rs 241.32)According to BRGF: Releases to all 13Second: 16-02-2009 (Rs 241.32)districts January 2008.First: 06-12-2007 (Rs 1878 lakh) First: 16-01-2008 (Rs 1126.8 lakh); and07-03-2008 (Rs 751.20)Second: 25-11-2008 (Rs 209.0 lakh) Second: 10-02-2009 Rs 209.0 lakhBalaghat: October 10, 2007Seoni: October 31, 2007Dhenkanal: May 8 2009Ganja: December 27 2007December 7, 2007December 7, 2007July 3, 2009January 29, 2008RajasthanMarch 8, 2008 (90 %) andMarch 2009 (10%)May 2, 2008 (90 %) and July 2009 (10 %)West Bengal February 2008 (90 %) February 2008 (90 %)Was using the funds for FY2006/07Confusion about thetreatment of ULBsRelease made in FY2009/10 due to latereporting of UCs and otherdelaysSource: Based on the state reports. The delays continue in FY 20008/09 as well, and in the FY 2009/10. Planning for FY 2009/10 is not completed in mostof the States visited and in some districts it has hardly started (e.g. some districts in Bihar). Please refer to further details in the state reports.were finally credited to the district (Dhenkanal) account on10-7-2009 (the day when the Review Team visited Dhenkanal).The whole process from date of sanction at MoPR (20-04-09) todate of credit to district account (10-07-09) took 80 days”.For FY 2006/07 only some of the States received BRGFallocations. In Madhya Pradesh the releases were made byMarch 7, 2007, in Orissa on June 7, 2007 and in Rajasthanthe funds were received by November 1, 2007 and January4, 2008. In Assam, the PRIs and ULBs only received fundson January 1, 2008. The remaining States started from FY2007/08, but in most places, the funds only arrived towardsthe end of the FY.The general picture is that there is one or even sometimestwo years of back log in the releases of funds. There aredelays in all stages from releases of funds from the GoI tothe States and the onwards transfers from the States to thePRIs and ULBs. For FY 2009/10 there will be further delays as(i) many of the districts have not yet submitted their plans tothe States and (ii) the rules on minimum spending of fundsfrom previous Fiscal Years do not yet allow a great part ofthe grants to be released.There was a high level of confusion and frustrations amongstall stakeholders about the delays. Several reasons for thesedelays were mentioned by various stakeholders, the mostimportant ones being:1. Planning starts late: The start of the planningprocess is always delayed; its start is often launched inFebruary/March or even later, while the next FY startsfrom the 1 st of April. According to the guidelines, theplanning should start much earlier, i.e. in July and becompleted prior the start of the FY;2. Multiple approval steps: The system with multipleapproval steps, from the approval by each PRI/ULB to the approval in the DPC and HPC and thenDevelopment Grants 13


3.4.5.final endorsement by MoPR, is cumbersome, somesteps redundant and against the spirit in the BRGFprogram and a decentralized planning system.It will always lead to delays, even if meetings areplanned as efficient as possible. Secondly, there areoften discussions between various tiers about theappropriateness of various investments, which againdelays the final approval of plans and projects;Delays in transfers of funds, worsened by themany steps in the flow of funds (several gatekeepers):In all States, except Madhya Pradesh 15 ,funds are flowing from the GoI to the States and fromthere to the PRIs and the ULBs through the districts’accounts. Each step may take several months,particularly at the state level, e.g. in Rajasthan whereit took between 2–4 months to complete the onwardtransfers of the funds to the PRIs (i.e. more than thestipulated 15 days from the guidelines). The case ofAssam is unique where the funds for 2006–07 under2 nd installment received from GoI during 2008–09have not been transferred by the State Governmentto the Districts 16 ;Demands in the system of ceiling of utilization: Thecomplicated system of minimum level of spending(rules on 100%, 75% and 60% 17 ), creates confusion andfurther delays. Firstly, it may be hard to spent funds(that arrive with delay towards the end of the FY andoften in the rainy season) within a few months in eachFY, and as each transfer year is treated separately (i.e.there has to be 100 % spending of FY 2006/07 prior toreleases on FY 2008/09 and single projects can hold upthe entire system). The requirement not only createsdelays, it also adds to lack of up-to-dated auditingand reduced accountability. It is overly complicatedand the guidelines are hard to understand for thePRIs/ULBs;Delays in submission of utilization certificates(UCs): The entire system of UCs is unclear for moststakeholders; in some places it requires manysignatures, in others additional meetings in Gram15 Madhya Pradesh has introduced a new commendable system for rapid transfers,see the State Report.16 It was not possible to define the main reason for this during the mission to theState.17 According to the guidelines from MoPR (not part of the up-dated BRGF guidelines),the second installment can only be released if 60% of the first installment hasbeen used. The first installment for a coming FY can only be released if 100% ofthe funds from the two years ago have been utilized and if 75% of the funds fromlast FY have been utilized.6.Sabhas; in other places, the lack of consolidation ofthe UCs in a few PRIs, leads to delays for all the otherPRIs in this area. There is a need to install a very simplesystem of regular reporting on the use of funds andprogress reports, instead of the complicated systemof UCs as triggers for funds;Elections: The delays as experienced were prolongedby the elections, where several States referred toModel Code of Conduct as the reason for such delaysof all transfers (not only BRGF) before and after theelections. In some cases, such as Andhra Pradesh thishas delayed the flow of funds by up to 4 months, asthe State received the funds for FY 2008/09 in March2009, but only released the remaining 50% in July2009. As there are often elections taking place, thereis need for a system that avoids severe delays inregular project implementation.The delays in releases of funds lead to a large gap of timebetween planning and actual implementation, therebyhampering the relevance of the entire planning process. Thedelays also cause confusions and reduce transparency in theoverview of fund utilization, leads to cost increases, rushedproject execution. Over time, it will reduce people’s interestin planning and trust in the local government system.Special Urban IssuesThe delays in the release of funds have, at least in someStates, been worse when it comes to transfers to ULBs. Forexample in the State of Andhra Pradesh, the ULBs had justreceived the first installment from BRGF in June 2009, andthere has been a severe lack of communication, lack ofissuing of guidelines and CB support to prepare the ULBs totake active part in the BRGF scheme.2.5 Investment Menu and Size ofProjectsInvestment Menu – Overall ConsiderationsThe investment menu, defined in the BRGF guidelines, isbroad and funds are largely untied and available top PRIsas a discretionary source for the PRIs’ investments. TheBRGF Program Guidelines set a few strings on the use offunds, e.g. maximum 5 % of the funds can be allocated forprovision of adequate functionaries for the Panchayats forplanning and implementation, and the funds cannot bespent for construction of religious structures, construction14First Independent Review of the Backward Regions Grant Fund — Synthesis Report


of welcome arches or similar activities 18 . There is also ageneral agreement or practice that funds cannot be spenton maintenance or recurrent costs.Furthermore, the BRGF guidelines (page 8) stipulate thata special sub-plan for use of scheme-wise allocationsfor SCs/STs and schemes benefiting SCs/STs, should beprovided with a total budgeted amount at least reflectingtheir proportion of the total population. Amenities such asschools, anganwadis (kind of kindergarten), health centers,etc. should be given a strong priority in villages that havea substantial SC/ST population (page 8, section 2.2). Annex4 of the BRGF Guidelines provides an indication of theexpected use of funds for the priority schemes earmarkedfor SC and ST development. The guidelines do not have aclear distinction between capital and recurrent costs andAnnex 4 for SC/ST projects encompasses training activities.This despite the fact that the description regarding thecapacity building support under the second window of theBRGF -the CB grants to the States -, indicates that financingof CB activities will be covered by the 250 crore fund for CB(1 crore per district).Some of the States such as Andhra Pradesh provide furtherguidelines on how funds can be used, whereas othersleave it for a dialogue at local levels (e.g. Bihar). However,the general impression from the field is that there is needfor further clarification of the investments menu or eligibleexpenditures. The following points need attention:18Need to ensure that funds are untied within thebroad mandates of the PRIs and ULBs for capitalinvestments;Need to clarify the use of BRGF development fundsfor maintenance within e.g. a ceiling, see below;Need to clarify the use of the 5 % for provision ofadequate number of functionaries as described onpage 9 in the BRGF guidelines;Need to simplify the approval procedures for theuse of funds related to the planning process, see thePlanning Section;And finally and although not yet seen as a problemdocumented in the field-mission reports, it may beprudent to specify that the investments should be inpublic services/infrastructure, rather than in privateprojects, which are benefiting only a few people oran individual.Page 15 in the BRGF Program Guidelines.Sector Composition - Experiences from theFieldThe BRGF development grant has funded more than 100,000investments in the 8 States visited (in Andhra Pradesh alone,about 28,000 investment project were realized and in Orissa40,000).Below are examples of the sector-wise use of funds. It showsthat the investment focus varies greatly across the Statesand the Districts. There are several examples of rather similarinvestments within a district across e.g. the GPs or the IPs.One of the reasons for this has been the strong “guidance”from the districts/DPCs on highly prioritized investments,e.g. anganwadi centers, in some Districts/States.The investments are focusing on local small scaleinfrastructure and most of the funds are used on anganwadibuildings, GP buildings, drinking water, drainage and roads.Anganwadi buildings, which are probably the single mostsignificant investment area, is a multi-purpose center, whichsupport women, children, it serves important nutritionpurposes and minor health issues can be dealt with. Thefield-work indicated that these facilities were often locatedin areas where there is a high concentration of SCs/STs.In some districts (particularly in Bihar), a significant shareof the funds is used on electrification as well, typically onsmaller solar cells for various purposes, and in some places(particularly in Andhra Pradesh), street lighting is becominga popular investment type. Districts in Assam 19 are focusingmore on agriculture and fishery promotion, including (fish)markets, etc. at the district level, whereas investments by IPsand GPs still are focusing on other public services.The general picture is that districts are focusing on core publicservice investment areas targeting the MDG developmentobjectives – health, education, water and infrastructure,please see the table below. It should be noted that moredetailed information on the sector utilization is availablefrom the state reports in Volume II of this Review.The Chart below provides an overview of the compositionof expenditures (non-weighted average for 6 districts in5 States and 3 State results).19 Morigaon ZP in Assam was an exemption from the general spending pattern. Itspent its share (i.e., 20% of the grant amount) on agriculture and fisheries andrelated activities, perhaps to promote economic development (worth noting thatit is a district whose economic base is agriculture). But the rest of 80% (IP and GPshare) were used for public services. Moreover the expenditure on development ofexisting beels and ponds (fisheries), support to self-help groups and cooperatives,awareness raising activities were included, i.e. not entirely private consumption,but in the grey area.Development Grants 15


Public – Private ServicesField findings suggest that most of the investments wereconducted in genuine public services such as education,health, water, drainage, core administrative buildings, etc.– with projects benefiting more that 50 people in each case.However, there are few exemptions from this in MadhyaPradesh and Assam.Table 9: Sector Composition of Use of funds – Core Areas (FY 2007/08)*StatesAndhraPradesh– Entire State(exp.AP– KhammanDistrict(exp.)AP- NalgondaDistrict (exp.)AssamBongaigaonDistrict(2006/07)AssamMorigaonDistrict(2006/07)Bihar– SamastipurDistrict (FY2008/09)Chhattisgarh– StateMadhyaPradesh(State)OrissaRajasthan– StateWest Bengal(BankuraDistrict)AngawandiBuildings/women& childdevelopmentGP BuildingsandadministrationHostelsDrinkingwater/irrigationHealthElectrificationSchools/class-roomsRoads/drains/CulvertsOthers25.0 % 9.6% 1.9% 13.6% 2.0% 4.4% 16.3% 0% 27.1%49% 3% 1% 27% 7% 4% 8% 0% 1%6% 5% 0% 40% 1% 44% 0% 0% 4%0% 7% 0% 2% 0% 0% 0% 45%0% 0% 0% 0% 0% 0% 0% 0%23 %0%40 %(infrastructure,mostbuildings41 %(infrastructureand houses)0% 0%46%(agric +livelyhoods,market)100%for agric +fishery5% 4% 23% 7%36%Healthandnutrition8% 4% 3% 8%44% 0% 0% 13% 5% 2% 14% 9% 13%No sector overview is available but most projects are within Anganwadi Centers, Roads, Culverts, classrooms, watersupply and rural electrification.47% 4% 0% 0% 9% 0% 4% 17% 19%28% 10% 0% 7% 1% 0% 2% 22% 30%Source: Based on calculations from the State Reports. Please note that in some States, the breakdown of expenditure groups does not match the formatof the table. *) If the data is from another year, this is mentioned in the table. The figures presented for the two districts of Assam are the expendituresby ZPs under the ZPs share of 20% of the fund.16First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Chart 2: Composition of Expenditures from BRGFComposition of Expenditures from BRGFOther26%Angawandi buildings/women22%Roads/culverts13%GP buildings12%Education /classrooms4%Drinking water/irrigation10%Electrification6%Health7%Source: State Reports, Volume II. The data is non-weighted average of Khammam and Nagolda districts in Andhra Pradesh (FY 2007/08), Assam:Bongaigaon District (2006/07); Assam Morigaon District (2006/07); Bihar – Samastipur District (FY 2008/09); Chhattisgarh – State (FY 2007/08); MadhyaPradesh State (FY 2007/08), Rajasthan – State (FY 2007/08) and West Bengal, Bankura District, (FY 2007/08)In Madhya Pradesh, some part of the support was addedby the State to a special sub plan “Apna Ghar” 20 (My Home)as per the norms of “Indira Awas (housing) Yojna (scheme)”(IAY). BRGF guidelines - p15–4.32c- permit augmentingthe scheme Indira Awas Yojna to meet a portion of thebacklog in the provision of new housing. Madhya Pradesh,according to the Review Team, has taken it as a quickwin and has decided to extend one house in every GP foreach year of the scheme (#GP*5). The permitted amountis up to Rs 35,000. The scheme has restrictions - allotmentin the name of the women, no engagement of contractor- payment to the beneficiary direct on progress of work etc- the construction takes 2–3 months. Furthermore, MP hasdecided to provide Rs 6,000 annually to each GP in the nameof rural connectivity. The costs of these two initiatives, theIAY and Rural connectivity were estimated to take up about12% of the BRGF funds.The issue for concern is the manner in which the upper tierhas already withdrawn a part of the funding from the grantsfor tied investments (although these tied investmentsin this case benefited needed people). In this case theschemes are also focused on supporting social sector20 This scheme supplements the Chief Minister Awas Yojna run by the state in nonbackward districts in MP.schemes and individuals instead of functioning as a gapfilling investment scheme for service and infrastructure.These issues should be clarified in the guidelines. Socialwelfare schemes and targeting of individual needs willdemand another set-up and organization, includingmonitoring.In the case of Assam, there were few examples of supportto livelihood, agriculture fertilizers, support to individualfarmers etc., also an area which can potentially distract theprogram from its core objectives of public service delivery/capital investments. There is a need to clarify this in thefuture guidelines.Size of the ProjectsThere is a tendency to undertake smaller and smallerprojects under the BRGF. Even at the district level there arerather small investments compared to what may have beenexpected as districts were supposed to focus on cross-IP andcross GP-projects. In many cases, districts are adding a smallamount (topping up) to the smaller investments at the GPand IP levels instead of focusing on larger projects. This maycompromise the rationale for vertical allocation, where thedifferent levels are supposed to make concrete investmentsunder their respective mandates.Development Grants 17


The Manual for Integrated District Planning (pages 40–45),could be useful reference point in this respect for the BRGFguidelines; especially the example from West Bengal (page41) on subsidiarity shows how investment responsibilitiescan be divided.The Table below provides an overview of the average sizeof projects.For the ULBs there is a tendency to go for larger projects,typically in the range of Rs 5–8 lakhs (Assam only average2.5 Lakhs) focusing on areas such as roads, drainage,drinking water, and facilities, but there are also examples ofprojects up to about Rs 25 lakhs. 21 However, in some ULBs,the Review Team noted the same tendency as in the PRIstowards fragmentation of projects and proposals submittedwith numerous smaller projects exceeding the allocationceilings (e.g. the ULBs in Bihar).Unit costsMost schemes have a cost range between 0.5–2.0 lakhs.However, in some places, such as Madhubani andSamastipur districts in Bihar (within the PRIs), there werecommendable attempts to limit the number of projectsto ensure that each project would have a real impact onservice delivery. However, in general, there is a tendencyin many places to fragment the already limited amountof funds and to try to ensure that each ward in the IP orin the ULB gets a project, even if the funds are meager.An example of this was Samastipur Nagar Parishad inSamistipur District which has submitted 830 proposalsfor just one FY of BRGF allocation, where the fundscould allow for only 5–10 real investments. Guidance oreven ceilings on the maximum number of projects tobe implemented to avoid this fragmentation could beTable 10: Size of the projects and Unit Costs (PRIs)StatesOverall Unit Costs perProject – State (Lakhs)ZP projects(Lakhs)IP projects(Lakhs)GP projects(Lakhs)Andhra Pradesh (FY 2007/08) 1.1AP- Nalgonda District (2007/08) 2.4 2.1 1.0Assam Bongaigaon District (2006/07) 2.91 2.91 0.87 1.95Bihar (2007/08) 2.8Bihar – Madhubani District (plannedprojects 2007/08)2.5 0.9 2.7 2.6Bihar- Samastipur District(approved projects 2007/08)4.5Chhattisgarh 1–2Chhattisgarh- Dhamtari District 2.0Chattisgarh – Bilaspur District 2.8Madhya Pradesh (2007/08)* 1.7Orissa (2007/08)District DhenkanalOrissa (2007/08)District GanjanRajasthan (2007/08)West Bengal: District PuruliaWest Bengal: District BankuraRural PRIs: 3.0ULBs: 3.8Total: 3.2Rural: 2.9ULBs: 5.5All: 3.3PRIs: 1–2ULBs: 5–10All 4.3ULBs: 2.7All 4.4ULBs: 6.1Source: Based on the state reports.*In Madhya Pradesh a large project – a bridge over a river – took up Rs 99.7 Lakhs (executed by the ZP).11.2 3.4 3.28.4 9.4 3.221 In Orissa Berhampur ULB there was construction of a Diamond Jubilee Town hallfor Rs 24.5 lakhs.considered. It was also observed that the higher level ofPRIs, the ZP, did not focus on the larger projects, but in18First Independent Review of the Backward Regions Grant Fund — Synthesis Report


needs and in some States more than 50 % of the positionsPradesh, July 2009many cases also focused on multiple smaller schemes,22 See the State Report for Andhrae.g. in Andhra Pradesh 22as GP secretaries are vacant), the 5% allowed to supporthiring of functionaries has only been used in a very fewLack of Clarity on the Investment Menuplaces. (See Table 12 below for details).In many of the districts, the Review Team observed a lackThis is surprising as these functionaries are pertinent forof clarity regarding the eligible expenditures. Variousareas such as planning, financial management, monitoringmessages from the ZPs, the DPCs and the Stateand evaluation. The main reasons mentioned for the lackrepresentatives (and in some cases the training institutions)of utilization of the funds (for purposes outside of the corewere not always clear in this respect. There were also severalareas stipulated in the guidelines) are lack of clarity, guidanceexamples –in most States- of a higher authority trying toand support from the central government on how to handleinfluence the priorities at the lower level of PRI throughthis. The other issue is that States are reluctant to stimulatevarious kinds of guidance regarding the menu. Especiallyincreases in the numbers of staff, fearing an accumulatedin the States where PRIs had not been given allocatedpermanent liability, even if it is temporarily financed byplanning budget figures, this type of interventionsBRGF, which is only a 5-Year Plan program.appeared more obvious. Notwithstanding this and despitesome examples of clear control of the investment menu,the overall picture is that the discretionary nature of theallocations is being highly appreciated. In most places, thepriorities of the GPs, IPs and the ZP were either adhered withby the upper tier/the approval body, or at least somehowtaken care off.A few special areas require clarification in all districts met,- and example of this is the 5% for staffing support and thearea of maintenance, see below.Optional Use of the 5% for FunctionariesDespite the strong need to support the staffing capacity ofthe local administrations within the PRI and the ULBs (mostPRIs and ULBs have severe staffing gaps and uncoveredExpenditure on Operations and MaintenanceO&M should not be restricted to BRGF funded investments– actually BRGF could be mainly used to repair and expandexisting facilities rather than constructing new ones.The issue of maintenance of BRGF investments requiresfuture considerations. The field-work found that thereare few examples of BRGF schemes where there are anyplans and budget in place for the costs of operationsand maintenance of the infrastructure/buildings. This iscontrary to some of the other types of larger investmentschemes, e.g. within roads where O&M costs are includedin the investment plans for several years and part of theagreements with the contractors.Table 11: Utilization of the 5 % of the Development Grant on FunctionariesStates Status of the use RemarksAndhra Pradesh5 % has been deducted by the State, but it has not yetbeen usedThe modalities for the use is being discussedAssam5% not yet used for the purpose of functionariesTransferred as part of the development grants to thePRIs/ULBsBihar5% not yet use of the purpose of functionariesTransferred as part of the development grants to thePRIs/ULBsChhattisgarh Not used for functionariesOne district used the funds for training activities(against the guidelines)Madhya Pradesh Started using it by the State Still kept at the State levelOrissa 5 % not used for the purpose of functionaries Transferred as part of the development grantRajasthanTransferred as part of the development grantOriginally budgeted under CD yet it is supposed to bedrawn from the development fundWest Bengal Not used in FY 2007/08 and FY 2008/092009–10 Fund will be used for payment of honorariumof Jeebika Sevaks.Development Grants 19


Several stakeholders stressed the problems related tomaintenance. Although there is a provision to use part ofthe 12 th Finance Commission’s grant on this, the issue onmaintenance is often not clarified prior to the investmentsand very few of the projects visited had a plan formaintenance and clearly identified source for this in thebudget or agreements with agencies/beneficiaries on howto handle this. It was not clarified whether the maintenancewould be managed from the line departments, source fromown source revenues, from contributions from the FinanceCommission or agreements with users/committees/groups ofbeneficiaries. E.g. in Orissa and Madhya Pradesh, the ReviewTeam was informed that the assets created out of the BRGFfunds, where the prime responsibility of its development lieswith the line departments, are transferred to the departmentsupon completion – these departments are then obliged tocover maintenance and recurrent costs; examples are AWC(child and welfare), sub-health centers (health), class rooms/libraries (education), roads/culverts/bridge outside the GPhabitation (public works). Buildings like GP Ghar, communitycentre and rural roads within GP area are retained by the GPfor maintenance. In case of municipalities and notified areacouncils (NAC) all assets are constructed, and retained bythem for operation and maintenance.In most other places, there was no clear agreement onmaintenance, e.g. in the States of Bihar and Andhra Pradesh.In Rajasthan the community members perceived O&M tobe the responsibility of the PRIs and ULBs. For example inUdaipur municipality while visiting drainage channels, thecommunity members complained that the ULB does notregularly clean the drainage.The general picture is that PRIs do not plan and budget forO&M and the resources for O&M for ULBs that sometimesattempt to budgets are meager.The funding of maintenance costs implications of BRGFinvestments is particularly critical as the systems for PRI ownsource revenues are non-existing in most of the States orvery incipient. There is therefore a need to clarify this issuein the refinement of the BRGF guidelines. There is need tointroduce stronger incentives for the PRIs/ULBs to pay moreattention to this pertinent issue. The CB support, e.g. supportto elaboration of assets registers, planning and budgetingfor maintenance, project management etc. could also bemore focused in this area. It could also be considered topromote Public Private Partnership arrangements in O&Mof facilities.2.6 Alignment and ConvergenceThe alignment and convergence of BRGF investments withfunding schemes from other sources, particularly the linedepartments, is very limited. Very few of the BRGF supportedinvestments at the PRI levels are combined with investmentsfrom other schemes or coordinated with these schemesprior to the decision made on construction. However, thereare few examples of co-funding of school structures in theStates of Bihar (Samastipur District) and Orissa (GanjamDistrict), which are very promising for the future schemesand there is a lot of un-tapped potential for corporation andcoordination which are not utilized due to resistance fromthe line departments or lack of awareness. Please refer tothe Planning Section for further information.The vertical coordination is stronger than the horizontaland there are often intense interactions between tiers ofgovernment about various investments. Some may evenargue that in States where there has been a “centralization”of the allocations at the ZP level, this coordination is beyondthe intentions in the BRGF guidelines where each tier of PRIwas supposed to have its own planning and budget figure.The grants from the finance commissions and own sourcerevenues are contributing to some of the schemes, but withvery small amounts. In some States/districts, project fundingfrom BRGF is integrated with funds from own source revenuesand funds from the finance commissions. In the ULBs thereare greater potential for merging of funds with own sourcerevenues, but most of the ULBs projects have been delayeddue to lack of information, support and coordination fromthe State and Central level. Please refer to the PlanningSection for more information on convergence.2.7 Quality of the InvestmentsQuality and BenefitsWithout conducting a detailed review of the quality ofthe investments and technical features, the team couldonly get an impression from various types of investmentsseen during the field-trip to various PRIs and ULBs. A totalof 53 projects were reviewed (community centre, roads,anganwadi, drains, water supply schemes, gram Panchayatbuildings, classrooms, walls etc.) and from pictures,cost documentation and other sources, interviews withbeneficiaries, engineers and others, the Review Team got20First Independent Review of the Backward Regions Grant Fund — Synthesis Report


the impression that the investments are generally costefficient and of sufficiently high quality. Most of the projectsare within the following areas: anganwadi buildings,GP buildings, roads and culverts, wooden and concretebridges, small irrigation canals, classrooms, school walls andelectricity/street lighting. The general quality and costs ofthe projects seem satisfactory, also when compared to otherstructures and investments in the local areas. It should alsobe noted that the Review Team did not note any examplesof clean “white elephants” or projects which were outside ofthe set investment menu.Interviews with beneficiaries of the more than 50 facilitieslargely confirmed that they were satisfied with the results,there quality of the work and there were few complaintsduring the meetings with larger citizen groups and GPrepresentatives when the attention came to BRGF projects.However, there were examples of the opposite, e.g. inRajasthan were a hand pump was established right next toanother existing hand pump in a ULB and also a cloggeddrainage, which people complained about – people didnot complain about the quality of the construction as such– for drainage they complained about non-maintenance/lack of cleaning and for water about the technologicaloption that was provided – a borehole instead of a highpowered source). Most of the projects benefit 50–100people, and many of the projects are targeting SC/STcommunities, particularly in Andhra Pradesh, where thereis a good overview of the special projects targeting thesegroups.It is too early to judge the impact of the projects on thegeneral service delivery and living standards of thepopulation in the areas covered by BRGF, but it shouldbe noted, that in most PRIs with e.g. 5,000–7,000 people,the funds allocated for BRGF only allows for 1–2 smallerprojects per year. The review documented a tremendousneed for investments in most sector areas, particularlyfor anganwadi centers, roads connectivity and electricity.Classroom constructions are typically better funded by theexisting schemes. Investments in health centers are alsorequired, but the costs of these centers, often supersedethe amounts available in the BRGF scheme. Please refer tothe State Reports for further details.SupervisionThe system of technical supervision is well elaborated inmost places, through various levels of engineers, Dependingon the size of the projects, junior, assistant or chief engineerswill handle the supervision and control of the projects, andalthough there is lack of engineers in some places, thissystem is generally working with a good support from theIP and ZP levels to the administratively weaker GPs. Statedefined standards for constructions are applied, as well asthe specified unit standard costs.ContractingThe means of service production vary greatly from placeto place, ranging from organization of the work by anidentified and trusted person, e.g. the secretary of the GPor an engineer from the IP level; or the Block DevelopmentOfficer; community contracting; delivery by the linedepartments to genuine contracting out/tendering ofworks to private companies.In most States, there is a need to clarify the rules and proceduresfor this, and to ensure sufficient check and balances, withoutinstalling cumbersome and expensive procedures.There are several good examples of established vigilancecommittees, which are supposed to monitor and addresscomplaints about conducted work, but the actual activitylevel of these was hard to ascertain.The implementation of the BRGF schemes are generallylabor intensive, but there is no general and consolidatedoverview of the use of man-power for the schemes. In theongoing schemes visited 5–10 workers were often activelyinvolved in the constructing, generating useful localemployment and income for the local areas.2.8 Absorption CapacityAbsorption capacity can be measured in various ways. It isoften measured as the level of utilization of funds againstthe releases, but there are many other factors which haveto be reviewed, including the speed of implementation,achievement of planned target, capacity to implementproper quality in investments and possibilities to cater formaintenance and recurrent costs implications of investments.Many of the PRIs and ULBs in the States visited have a ratherlow level of utilization. Often only between 60–80 % of theresources are spent by the end of the Finance Year, andthere are many examples of less spending. Even after twoyears, there are only few examples of 100 % spending (ofFY 2007/08 allocation). However, there are several reasonsfor this, which are not related to the operational capacityDevelopment Grants 21


of the PRIs/ULBs to absorb, but rather related to thesystemic and operational features of the BRGF. Some of theimportant ones are: delays in announcement of the startof the planning process and information about availablefunds for the PRIs and ULBs, late start of planning process,several steps of cumbersome approval (PRI, DPC, HPC andCentral level review, each requiring planning, mobilizationof people and time for preparations), late transfer of fundsto the PRIs, when plans have been approved, hence most ofthe funds arrive a full year or more after the start of the FY.When the funds are finally deposited at the PRIs’ bankaccounts, the experiences in most of the districts visited werethat the projects are implemented quickly, commonly within3–6 months and in adherence with the planned design.When reviewing absorption capacity, it is also importantto review the needs for investment in the targeted BRGFactivity areas, which were considered to be very high in all16 districts and 16 ULBs reviewed. The investments madewere all required and appropriate in the aim to addressthe strategies in each place to improve services andinfrastructure.When this is said, there are some administrative constraints,which need to be addressed in all places. Amongst the coreones are: lack of administrative capacity of the GP levelwithin areas such as accountability and handling of UCs 23 ,and lack of capacity within planning cells at the districtand IP levels. There were numerous examples of districtswhere lack of submission of the UCs delayed the progressin implementation as new funds could not be released dueto lack of accountability for previous funds. This is oftenworsened by the way systems are operating, where lack ofsubmission of accountability by one GP may harm all otherGP in the Districts for release of funds. There are also casewhere the HPC only meet when a certain number of reportsfrom the PRIs/ULBs have been generated, causing delays inthe approval and releases of the next installments.At the ULB level, the procurement issues were mentionedas one of the bottlenecks in some of the districts, e.g. in theULBs in Madhubani District (Bihar) and Purulia District (WestBengal).Identification of land for the investments is anotherincreasing challenge in most ULBs and some PRIs, e.g. inPurulia District, and it is important to emphasize that land23 It several districts, it was mentioned that delays in submission of UCs delayed therelease of subsequent transfers.issues should be part of the appraisal process, not an issueto be addressed only after final decisions have been madeon project selection. 242.9 Conclusions and Major Issues onthe Development GrantsSize of BRGF Development Grants andAbsorption CapacityOne of the most frequently mentioned complaints fromthe PRI and ULBs as well as the state level representativeshave been the meager size of the BRGF compared to thefar-reaching objectives of the grant scheme. The funds aresimply not sufficient to make a significant mitigation ofthe level of backwardness in the targeted districts. The sizeis small when compared to the total public expenditures(BRGF constitute about 0.4–0.5% of the 2009 Budget), tothe funding available under the line departments (someof the funding schemes are 5–10 times higher per capita)and to the expenditure needs at the local level. The fundscan typically only cover 1–2 relevant projects per PRI peryear, and a few additional projects in the ULBs. With thepresent funding levels and activities within the BRGF, itis not possible to achieve the core objective of the BRGFwhich is addressing regional imbalances and significantlyreduce/eradicate backwardness. However, the fundscan strengthen PRIs/ULBs to proactively deal with localdevelopment challenges, enhance their capacity andimprove operations.It is not possible to determine in a scientific manner aspecific level of funding required to close the “fiscal gap”and to achieve the outcome that none of the districts arebackward any longer, without a comprehensive study ofthis issue. Fiscal gap analysis faces a number of challengesand pitfalls, such as lack of clarity on the expenditureassignments, particularly with shared functions, lack ofminimum service delivery standards, lack of overviewof the revenue potential, and lack of overview of what iscovered by other funding schemes, particularly by theline departments. It is a tremendous task, only very fewcountries have tried, and in these countries there arestill discussions on the establishment of a “correct andspecific” figure for what is required in terms of closure24 In Purulia District, it was reported that some of the newly elected bodies/representatives did not want to implement the projects/schemes approved bytheir predecessors.22First Independent Review of the Backward Regions Grant Fund — Synthesis Report


of the fiscal gap of backwardness amongst local bodies.The paper by Jesper Steffensen, one of the co-authors ofthis report, “Introduction to the Principles for Design ofIntergovernmental Fiscal Transfer Systems-an internationalcomparison of allocation criteria and modalities” providesan overview of various methods, should the GoI decide togo along this way.However, in the absence of such a detailed study, it ispossible to come up with some rough estimates aboutthe required level of investments, also to make local levelplanning more meaningful and participatory. A golden ruleof thumb is that a local planning unit should be able tomake 4–5 meaningful investments every year.The review has shown that the capacity of the PRIs and ULBsis available to handle more funds from the BRGF, despite thepresent delays in utilization 25 . The Review Team suggeststhat the present BRGF per capita level can be increasedby 2–3 times without creating any absorption capacitychallenges. Such an increase in the funding level will havethe following advantages: It will make the local planning process moremeaningful for everyone involved; It will enhance the interests of the communities inthe scheme and thereby strengthen accountability; It will make the line departments more interested inthe funding schemes and convergence; It will make it possible to cover more than one sectorneeds per year per unit; It will contribute more significant to the improvementof the situation in the backward regions.An increase of funding may be combined with issuing ofregulations on a maximum number of investments per PRIplanning unit, in order to avoid a continued fragmentationof funds (e.g. the existing divisions of the funds acrossthe wards in some places). However, it should be notedthat putting such conditions may constrain efforts ofconvergence with other programs and mobilization of localresources.As a counterargument for increasing the funding, some mayargue that the PRIs/ULBs lack absorption capacity, evidencedby the documented in the level of unspent funds. However,the findings of the Review Team suggest that:25 The delays are caused by features in the planning and release systems, which canbe addressed by technical measures.PRIs/ULBs have significant capacity to implementprojects when the funds hit the ground. Delaysare due to systemic and operational issues, mostlyoutside of the PRI control;The general systems for preparations, monitoring andexecution of local projects are in place, with variouslevels of engineers, and support staff to monitor andcontrol the projects;The more than 50 projects reviewed had a satisfactoryquality and were implemented within short time(typically 3–6 months) or were in the process ofbeing implemented;There is a support from the upper tier of PRI incase the lower tier has less capacity, particularlythe IP development officers and the engineers areinstrumental in this respect, but also the DDC/DEOsand the planners at the district level;With additional funds, it may be possible to have a higherlevel of economies of scale, as some of the projects willbe reproduced in several places, e.g. the anganwadicenters and systems for rural electrification.However, even if additional funding cannot be raised, theBRGF could be more efficient through a better targeting ofthe funds to the backward regions.It is important to keep the links between the funds forinvestments (development grants) and CB support, but thetargeting of allocations can be improved with a few simpleallocation criteria (see below). It is also important to notethat a review of an adjustment of the BRGF cannot be seenin isolation from the other funding schemes benefiting thePRI and ULBs, such as particularly the grants from the 12 thFinance Commission and the State Finance Commissions(SFCs), and the level of decentralization in each State. A majorreview of all these funding schemes could be warranted.Allocation Criteria and Improved Targeting 26The allocation of funds is supposed to target the backwardregions and the backward PRIs and ULBs within thoseareas. A number of challenges have been identified. Firstthe criteria used to allocate funds across the 250 districtsare not backwardness oriented, but provide much morefunds per capita to the smaller districts, which tend to beless backward, see charts 1 and 2. These smaller districts canget many times more per capita than the larger districts,26 Part of the section draws from earlier work by the authors.Development Grants 23


and sometimes these larger districts are poor and deprivedareas, such the districts in Bihar. Second, within the Statesand within the inter-district allocation there is some roomfor improvement in most places. Some of the States such asAndhra Pradesh and West Bengal have developed criteriafor backwardness, but there has been limited discussionsand sharing of experiences across and within the States.Generally, the allocation criteria and the number of thesedepend on the functions to be financed by the grants, andthe complexity of services to be provided 27 . The allocation ofgeneral grants and equalization grants, of which the BRGF isa good example, should typically be based on criteria like:Size of the Population: This is often the most importantcriterion in the allocation formulas for general transfersin most countries. The importance of the populationbasedcomponent in transfer formulas reflects theassumption that a LGs’ expenditure needs generallygrow proportionally or largely proportional with thenumber of inhabitants in a LG; The size of the populationis used in the general grant system in various countrieslike Denmark, Norway, Sweden, the Philippines, Nepal,Bhutan, Cambodia, East Timor, Bangladesh, Tanzania,Uganda, Kenya, Rwanda and many others.Demographic composition (population age structure):Experiences have shown that the demographiccomposition has a great impact on the costs of the LGmandatory functions, e.g. a high number of childrenin the school going age groups has a great impact onthe LG costs within the education sector, number ofelderly people on the costs within the health sectoretc.; These criteria are applied in countries such as theScandinavian Countries, Germany, Australia, Japanand Uganda (in the equalization grant scheme)amongst others.Socio-population structure: Some sections of thepopulation need more support, e.g. in areas ofdiseases, areas with high unemployment rate, areaswith refugees, etc. (examples of this is the Danishsystem where unemployment rates is factored in)and some sections are more vulnerable. In India thereis a good argument for inclusion of the size of theSC/ST population as a criterion as done by several of theStates included in the review (e.g. Andhra Pradesh);Costs of the Service Provision: The costs of the sameamount of services may vary from LG to LG due toother reasons than demographic factors, e.g. dueto remoteness, lack of accessibility (geographicallylarger LGs will have to spend more on transportation,infrastructure and less possibilities for economies ofscale and or bundling of services, e.g. due to lowdensity of the population. The costs of services mayalso be higher in certain areas with higher demandon the goods (urban areas), and or less supply oflabor, differences in salary costs, and various goods,etc. The impact of this has to be measured/estimated,if possible by construction of a cost index reflectingthe cost differences of various key LG goods andservices across LGs; 28 (Nepal as an example has madea rough cost index, which is applied in the generalgrant system and the size of the territory is appliedin many countries, e.g. in Uganda, Tanzania and EastTimor, as well as in the BRGF criteria applied acrossthe districts, but not within the districts) 29 ;Demand for service: Certain areas or type of LGsmay have a need for higher standards or additionalservices, like street lightning or solid waste treatment.The opposite may also be the case, e.g. in areas with ahigh level of poverty, where there is a need to spendmore on water supply, health care and other services.Sometimes, proxies for this can be applied 30 ;Level of Development as the Point of Departure: Often,the existing distribution of infrastructure variesgreatly from the more prosperous to the poorestLGs. This may lead to a wish to equalize the level ofservices by counting the number of schools andwater taps, etc. and provide additional sources tothe LGs with a low endowment of specific services.Although the objectives behind this initiative may benoble and understandable, this procedure of tyingthe size of an intergovernmental grant to a particularlevel of infrastructure availability is considered a“bad” practice in design of intergovernmentalfiscal transfers. The reason for this is that it creates27 As mentioned by Jørgen Lotz “There is a balance between the degree of simplicityof the system and its ability to smooth out important differences on needs. Ifyour criteria are not the best possible, the whole decentralization will not work.Inefficiencies and personal inequalities will arise and result in political pressurefor recentralization. If the equalization system cannot be designed to capturethe important differences in expenditure needs, the system becomes politicallyunacceptable”, Council of Europe, 1999.28 These criteria are typically applied at a rather advanced stage.29 Yemen uses the criteria in the opposite manner, where the population density is acontributing factor in the allocation system.30 Norway is an example of a country, which is supporting defined remote areas inthe Northern part of the country and Denmark provides special support to theislands.24First Independent Review of the Backward Regions Grant Fund — Synthesis Report


disincentives to improve on the service delivery, asimprovements will be punished in the following years’grant allocation. It is therefore better to develop theother indicators, mentioned above, and/or combinethese with proxies for poverty, poverty count, (povertyindex) like Human Development Index and income/consumption statistics, level of child mortality rates,illiteracy rates, etc.. Examples of countries, which areusing poverty figures or proxies for poverty/level ofdevelopment in the allocation criteria for some of thegrants are: Nepal, Bhutan, Uganda and Tanzania;In addition, use of physical infrastructure measuresshould be avoided, e.g. the number of hospital bedsor the number school class rooms to allocate grantsamongst LGs. Similarly, the number of class rooms ina LG area is a very poor measure of the educationalneeds of LGs. Wealthier LGs, with greater resourcesavailable for education, would likely have more classrooms and thus receive more compensation percapita under such a scheme, while poorer LGs wouldreceive fewer resources. Thus, allocating resourcesin proportion to existing capital infrastructure wouldperpetuate historical disparities over time or createincentives not to improve the coverage rates.Based on the BRGF field-missions, the following criteriacould be considered: The existing criteria size of population and area, with asmall weight for equal share; Size of the SC/ST population; Level of illiteracy; Number of people living below the poverty line.For urban areas, in addition to these criteria – the numberof citizens living in slum areas seems to be a prudentcriterion.It is important to keep the overall system simple and it isgenerally recommended to start with only a few criteria - 3–5criteria will often explain most of the variations in expenditureneed. The criteria need to be backed up by reliable, transparent,up-to-date and non-manipulated information.It is also important not to consider the BRGF grant asthe only scheme for leveling out of the fiscal gap – otherschemes such as SFC, the 12 th FC and the sector specificschemes, also needs review for better targeting of funds.It is also important, not only to consider the fiscal gapobjective in the BRGF, but also its role in stabilizing the localstructures, promoting local planning and enhancing theperformance of PRIs and ULBs. On the latter, it is surprisingthat none of the States have yet tested performance-basedallocation criteria, as this is an option mentioned in theBRGF guidelines and as this is strongly supported amongstmany of the stakeholders met. There is a great room forintroduction of various measures for performance rewards,to promote better PRI/ULB performance in various areas.Performance CriteriaAccording to the BRGF guidelines, the States are guided touse performance measures in the allocation. There are manygood reasons to apply a performance-based allocationin the case of the BRGF grants, as some of the objectivesare to enhance the PRI/ULB performance and functionalcapacity to perform their mandates. Performance-basedGrant Systems (PBGS) have a strong potential to supportthe existing impact of the development grant and capacitybuilding support, by creating a mutually strengtheningcircle between the development grants – the capacitybuilding support – and the regular assessment of the PRI/ULBs’ performance with clear indicators for measurementof this. The assessment and incentive system promoteefficient use of the CB support, and the CB support is usedto enhance implementation efficiency in the handlingof development grants. More effective spending, andperformance will be rewarded and this promote strongerperformance, see the figure below, which summarizes thelessons learned from similar schemes around the world 31 .A paper by Jesper Steffensen, one of the co-authors of thisreport, “International Experiences from Performance-BasedGrant Systems-Concept and Lessons Learned” elaboratesthe international experience.Some of the indicators to be considered in the future systemunder the BRGF could be: Performance in PFM Adherence with the submission of plans ontime Quality of the plan, including visions, strategy,challenges and linkages to projects Planning and budgeting for maintenance andmanagement of assets Status of the books of accounts Use of UCs31 As mentioned, Orissa has planned experimenting with performance-basedallocations, and West Bengal has commissioned an ongoing study to review thevarious options.Development Grants 25


Figure 1: Mutually Strengthening Components of a Performance-Based Grant System1. CAPITAL/DEV. GRANT• Clear formula-based distribution• Performance-based award• Significant local discretion3. CAPACITY BUILDING GRANT (Demand Driven)• More easily available than capital grant• Combination of local discretion and supply-sideconstraints/inputsInstitutional Set-Up2. ASSESSMENT PROCESS/INCENTIVES• Assessment manual with clear indicators• Annual assessment process (contracted out)LGLGLGLGs use capacity-building resources to improve performance in response to incentives!Timeliness in reportingFollow-up on audit reportsIn places where PRIs have been assigned ownsource revenues – the trends in revenues andthe methods of collection could be included asindicators.Governance and Transparency Publication of plans, budgets, accounts andaudit reports Involvement of the people in Gram Sabhas andlevel of dialogue Social audit Existence of project sign boards and projectbooksProject implementation performance % of projects implemented on time Targeting of projects towards SC/ST groupsOne of the most important lessons from the design ofimplementation of the PBGS is to keep it simple, transparentand with a high degree of neutrality and quality in the regularassessments of the local performance. Otherwise, it will defeatits purpose and may lead to arbitrary allocations and ad hocmeasures. The review has documented the need for testingof systems like this in India, but also the design challenges interms of the vast number of smaller PRIs to cover, includingthe logistical challenges in the assessment process. As thesystem of local governance in many areas is rather incipientwith relative few functions devolved to the PRIs/ULBs andrelatively low PRI autonomy, the identification of indicators,which are under the PRI/ULB control/attribution, is going tobe an important part of the work.Timing of releases and Procedures for TransfersWhen the size of funds has been determined and theallocation criteria fixed, another bottleneck for the efficientoperation of the BRGF has definitely been the system ofapproval (see the Planning Section), for fund release andprocedures for transfers. As mentioned in the descriptionabove, funds are released by the end of each FY andsometimes even after this. The Review Team assesses that: The system is too complicated with the variousceilings and requirements on utilization prior to nextreleases. The implications of this are irregular, nonpredictableand delayed transfers; It is not possible to treat funding year by year inisolation as it is done, but that the most important is to26First Independent Review of the Backward Regions Grant Fund — Synthesis Report


eview the cumulative spending, total transfers againstthe use of funds, review the size available at the bankaccounts to ensure some absorption of funds;The system does in many cases collectively harmdistricts which have prepared plans in time, as theseare handled by HPCs in batches;The delays undermine the credibility of the localplanning and budgeting process;The fund release goes through too many layers andsteps in each, demanding a period of 3–4 monthsfrom approval of plans and releases to the fundsare available for the GP, the fund release system ofMadhya Pradesh should be studied and if feasiblerolled out;UCs should be clarified and be a part of the reportingfor use of funds, physical and progress reporting;The transfers in the end of each FY or even after theFY allows for less time for spending prior to reporting,which again harm the next installments;The delays in funds may lead to a tendency to initiatesmaller projects, which can be implemented quickly,i.e. a factor deterring larger investments (withpotential larger impact);As mentioned in the Program Management Section,each tier of government should be strengthened toavoid delays due to man-power limits.Autonomy and Use of fundsThe basic principle behind the BRGF is that it should provideuntied grants for the PRIs/ULBs to use and to strengthenthe entire processes behind local planning, governanceand decision-making. This is also the case in some of theStates and in many districts. However, in others Statesthrough various forms of guidelines and interventions,and in practices applied at the DPC level, the upper tier hasoften a strong “hand” in guiding or in some cases “dictating”the range of most feasible expenditure areas, such as e.g.GP buildings and/or anganwadi buildings. This is of coursea learning process at the nascent stage of the program,and it will require more awareness raising and knowledgeabout the basic ideas behind the program. However, insome States, it has led to some frustrations about the lackof influence from the grass-root levels, and this may overtime impact negatively on the incentives to be involved inplanning if the local priorities are overridden by a higherauthority. It will require stronger guidance from the centrallevel about the principles behind the program and furtherclarification of the investment menu for the developmentinvestments in the BRGF guidelines.MaintenanceMaintenance of the accumulative larger stock of investmentsis going to be an increasing challenge, without clear rulesand principles for who is in charge, how is it funded, theprocedures for planning and budgeting of maintenance,etc. It is necessary to provide more detailed guidelines onthis, and allow the PRIs/ULBs an option to use up to a certainshare (e.g. 5%) of the development grant on maintenance oflocal assets. Proper handling of the maintenance issue couldalso be one of the potential performance areas measuredin the future more performance-based grant allocationsystem. Finally, the CB support should also focus on issuessuch as asset management and registers.2.10 Recommendations on theDevelopment GrantBased on a review of the development funding componentof the BRGF in the eight (8) States, sixteen (16) districts andeight (8) ULBs, the Review Team recommends the following(main responsible tier is in bracket) 32 :Coverage of BRGF: (Central level): There are many other backwardregions not tackled by the existing scheme, but anup-scaling of the program cannot take place withthe existing resources available for the BRGF, andshould not happen prior to refinement of some ofthe operational bottlenecks identified in the review; (Central and State levels): The involvement of theULBs should be clarified in all guidelines at thecentral and state levels. The ULBs need to receivemore information about the resource envelope,support to the planning and CB;Size(Central level): Increase, if possible, the amount offunding available for each PRI/ULB involved in theBRGF, as the present level is the bare minimum formeaningful investments for each unit and largely32 More state specific recommendations are included in the State Reports, seeVolume II.Development Grants 27


inadequate to address the regional imbalances 33 .This problem is also related to the lack of targetingin the allocation formulas across districts and withindistricts. The increase in the overall BRGF allocation isimportant to make the PRIs/ULB more relevant playersin the local planning process, to enable the PRIs/ULBs to make more significant investments in localinfrastructure and to strengthen the local governancesystems and procedures. Various means for this shouldbe explored through a “sourcing study”, review ofthe overall funding system for PRI infrastructure andservice delivery, possibilities such as merging of otherfunding streams, increasing the GoI priorities for BRGF,involvement of development partners, etc.Convergence (Central and State level): Convergence can besupported at the margin through stronger pressurefrom the top level on the line department torelease information on expenditures, breakdown ofbudgets on tiers of government and institutionalstrengthening of the cross-sectoral bodies, suchas the HPCs. However, the real convergence willonly take place if the way resources are transferredfrom GoI to the States and from the State to thePRIs changes, shifting the balance towards a higherlevel untied funds to the PRIs, and/or genuine sector(conditional) grants to the PRIs to ensure that PRIshave a strong say on sector priorities and possibilitiesto coordinate across the sectors and the local levels.Flow of FundsCurrently, MoPR and States rely on utilization certificatesby PRIs/ULBs as the primary tool for fiduciary assurance.Internal and external audit are weak in most states. Twosets of recommendations are made below, the first onemodifying the current approach and aiming for moderateimprovement, and the second one adopting the true spiritof the BRGF and emphasizing strengthening PRI/ULBaccountability systems.Option 1 (State level): Introduce a system of quick bankreleases, directly from the State level to the PRIs/ULBs, learning from the apparently successful systemintroduced in Madhya Pradesh;33 Only 1–2 meaningful projects per year per PRI unit seem to be limited comparedto the existing service gaps and the operations and costs of a participatoryplanning process.(Central level): The system of requirements forutilization and releases should be reviewed andreformed with the aim to ensure that funds areavailable in a timely manner for investments, includinga system with a higher level of up-front loading offunds and funding flow, e.g. replenishments, basedon maximum levels of funds on accounts. Thedivisions in funding years and fixed percentages foreach year should be abolished. There are variousoptions for a more reliable and robust flow of fundsprocedure, such as:1. Quarterly or biannual transfers against properreporting on use of funds with allowed time-lagfor utilization/check of reports within a certainceiling – funding of next installment depends onproper reporting of last installment but one;2. Various systems of replenishment with highlevel of front loading of funds to ensure thatfunds are always available within a ceiling,permission to keep a higher level of unspentfunds;3. The discussed system between the MoPR and thebanks whereby each PRI/ULB has a drawing rightup to an authorized ceiling, funded by the statebank, which gets replenishment from the centralbanks, which in turn is funded by Reserve Bankof India from the MoPR authorization. Paymentsare done using checks, which are authorized upto the ceiling for allocation for each PRI/ULB. Inthe case of MP, the banks are funded up-frontfor these services. Certain issues will have tobe resolved such as establishment of imprests,and/or payment of interest rates for the out-outof funds;4. Special replenishment system: As an alternativeto the present system of release of fundsbased on percentage release, MoPR shouldconsider providing an ‘Imprest Fund’ to Stateswhich is restricted to a special size, e.g. # ofdistrict x Rs 10 crore (the uniform allocation fora district). On a quarterly basis the districts willraise a claim to the MoPR for reimbursementof the expenditure incurred during the quartersupported with UC for the completed schemes. Asat present, MoPR will ensure that the UCs includeonly those completed schemes which wereincluded in the Annual Plan approved by theHPC, and where necessary by MoPR, subject to28First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Option 2changes in the approval procedures for projects.If found in order, the funds will be released toreplenish the imprest fund. Thus at all times thestate will retain a fixed imprest. In the last year ofthe scheme - whichever year it is - this amountwill be adjusted.It should also be considered to reallocate unspentbalances of slow PRIs/ULBs to fast ones within a FY;In all cases, there should be a better communicationabout the size and flow of funds;Each PRI should be treated individually, i.e. thedelays in planning and reporting in one PRI shouldnot impact negatively on all the others.Given the low level of funding for PRIs/ULBs, a furthersimplified approach could be considered. It providesone-tranche transfers and puts much more emphasis onstrengthening the state systems that relate to PRI/ULBaccountability. This is a preferred approach. For each year, the total annual allocation for eachdistrict should be released in a single tranche fromthe Center to the State. The only requirement for therelease of the funds would be that the draft DistrictDevelopment Plan consolidated by the DistrictPlanning Committee is endorsed by the State High-Powered Committee. The State, in turn, should release in single tranche(through direct electronic transfers into PRIs/ULBsbank accounts) their annual allocation based on theagreed formula. The financial transfers from the State to the PRIs willconstitute program expenditure for the purpose ofBRGF. The State will submit UCs to the Centre to theextent of the release of the block grants to the PRI/ULBs. BRGF will not track expenditures at the PRI levelbut will rely on the fiduciary systems at the state toensure the necessary oversight of public expenditureat the PRI/ULB level. This system is predicated on the State’s abilityto efficiently and effectively oversee the publicexpenditures at the local government level throughfinancial reporting and auditing systems. States willneed to follow up on issues raised by audit reports,and local government reporting against plannedand budgeted activities and outputs. The financialreports should incorporate all sources of funds at thePRI/ULB level, including BRGF funds.The State systems, especially the performance andfinancial reporting system and the auditing andoversight system, should be assessed by MoPR andspecific strengthening activities incorporated intothe design of the State capacity building program.The BRGF Unit of MoPR and the State nodal agenciesshould pay specific attention to the working of thesesystems during periodic supervision.Approval Steps and Planning (State level): In some States, the districts (ZPs) arekeeping the funds for allocation based on projectsof IPs and GPs. This practice should be avoided.Resource envelopes to the PRIs of all tiers shouldbe provided and the GPs should know the resourceenvelope before they start planning. Similarly, sincethe IPs are independent planning units, they shouldalso be provided with fund allocations; (Central level): The involvement of higher tiers in theapproval of prioritized projects should be reducedto ensure that the priorities of the PRIs are reflectedin the final decisions; and to avoid delays. PRIs/ULBsshould be allowed to make the final decisions withinthe prescribed guidelines, subsequent to effectivemonitoring and auditing (including follow-up on theaudit results). The system should move away fromex ante control to ex post audit, monitoring andevaluation; (State level and PRIs/ULBs): The planning processshould start much earlier e.g. in July (instead of March).All upper tiers should ensure proper information tothe PRIs/ULBs about the size of the budget envelopeand ensure that they can plan within this. Strongertechnical guidance from the DPC secretariat shouldbe pursued prior to the PRIs’ adoption of the plans,instead of after the point of time where the planshave been adopted; (PRIs and ULBs): Planning with hard budget constraintright from the GP level should be practiced. At presentthe GPs identify projects without having knowledgeof the resource envelope. This has resulted into GPplans being mere wish lists on the one hand, anddevelopment of ‘planning fatigue’ among the GramSabha members on the other.Development Grants 29


Targeting of resources and Allocation Criteria (Central level): In order for the BRGF to follow theequalization objectives and targeting of backwardregions, the GoI should challenge the States toimprove the targeting of the allocation of funds acrossthe districts by inclusion of better data on expenditureneeds and backwardness. Expenditure needs data suchas the size of the ST/SCs, population BPL, compositionof labor force, etc. should be explored and robust andreliable criteria included in district allocation formula; (State level): The States should work on animprovement of the targeting of funds across thePRIs/ULB (and within each tier) through elaborationof various backwardness criteria, based on objectiveand robust principles; (State level): It should be considered to create arelation between the allocation of funds and the PRI/ULB performance in areas such as timing of planning,quality in plans and timely accountability, in order toavoid that funds are lost due to lack of absorptioncapacity at some places and delays in others andto promote improved performance. Work shouldbe initiated on elaboration of performance-basedallocations using simple system for assessing theperformance of the PRIs/ULBs, with a set of indicatorsof performance, a manual and a performanceassessment system (of a high level of credibility andneutrality) – and a reserve fund for topping up of thebest performing PRIs/ULB.Investment Menu and Maintenance (Central and State level): Ensure strongerconsiderations on the maintenance issues throughissuing of guidelines on this. CB support should berendered to establishment of assets registers andmaintenance plans for PRI/ULB investments shouldbe planned for an executed, with clearly identificationof source for maintenance and budgeting for thesecosts. PRIs/ULBs should be allowed to use up to 5 %of the development grants on maintenance; (State and DPCs): Allow PRIs/ULBs full discretion inthe investments within the prescribed investmentmenu/eligible expenditures and continue withgenuine untied grants. It should be ensured thatthe PRIs/ULBs have undergone sufficient CB supportand training to fulfill their roles and mandates and toenable their decisions to be taken, backed by a solidevaluation of the existing service gaps and needs.The BRGF guidelines should be clarified and theinitiative should be regularly followed-up;(Central level): The districts are not using the 5% amountof development grant for salaries for new functionariesbecause of their inadequate understanding of theguideline. The BRGF guideline allows that a State candevelop its own guideline within the spirit of BRGFshould be clarified on this point;(Central): Clarify in the BRGF guidelines that thefocus on the investments should be on public goods/infrastructure and not on support to individualneeds/private goods;(State level): Ensure clear rules on focusing ofinvestments on the SC/ST groups in the spirit of theBRGF Guidelines;(PRIs/ULBs): Pursue to avoid splitting of the fundsfor investments across all wards, as this leads tofragmentation of projects and lack of tangible impact.There is a tendency to have very small projects toplease all the wards at the block level, but this maynot be the most efficient approach in terms of impacton service delivery and reduced backwardness. (Statelevel): It should be considered to fix a maximumnumber of projects to be launched each FY for eachPRI (e.g. 4–8 projects) depending on the type of PRI/ULB and the available resource envelope.Communication and guidelines (Central level): The GoI should collect and disseminateinformation on good practices for flow of funds,including exploring the reasons why some of theStates manage to release grants to PRI much earlierand faster; (State level): The State should improve informationto PRIs/ULBs on allocation of funds and allocationcriteria and strengthen the communication strategyand dissemination of information, including goodpractices; (Central level): Clarify the UC instrument, includingwho, how and when as part of the general up-dateof the BRGF guidelines; (State level): Should strengthen monitoring andevaluation of the UCs, based on clarification of thisissue as part of the BRGF guidelines (see M&E Sectionof Report; (State): Issue clear guidelines on local PRI procurement.30First Independent Review of the Backward Regions Grant Fund — Synthesis Report


3Planning IssuesAs mentioned in the introduction, planning is one of thecore areas to be supported by the BRGF. Within the area ofplanning, the BRGF Guidelines provide among others that:a.b.c.d.e.Each Panchayat or Municipality within the backwarddistrict concerned will be the unit for planning underBRGF;Panchayats at the village, intermediate and districtlevel, as well as municipalities, will undertakeplanning and implementation of the program;PRIs and ULBs shall prepare a participatory districtdevelopment perspective plan to address thebackwardness;Programs and projects identified for implementationunder the Fund will be selected through people’sparticipation;The participatory plans prepared by each Panchayatand Municipality will be consolidated into the districtplan by the District Planning Committee (Article 243ZD of the Constitution).This section describes and assesses the participatoryplanning process being used, the institutional arrangementsfor planning, the quality of the plans produced, and theuse of PlanPlus software. It gives an overall assessment ofthe integrated district participatory planning process andmakes a number of recommendations that could supportthe deepening and consolidation of the planning process.3.1 The Participatory Planning ProcessThe guidelines for planning are provided in the BRGF ProgramGuidelines 34 and detailed in the Manual for IntegratedDistrict Planning. They are based on the Constitution’s 73 rdand 74 th Amendments that mandated local planning tothe village Panchayat, intermediate Panchayat and districtPanchayat levels as well as to urban local governments, andtheir consolidation into a District Plan in each district. Theguidelines, among others, provide that the plan preparationshould start at the Gram Sabha level with the GP finalizingthe plan based on the priorities from the Gram Sabha. 35Table 12: The Participatory Planning Process at GP levelAdherence to a PlanningTime Table enablingfinalization before the FYDisclosure of LineDepartments Commitmentsand Expend 35StateConsultative Processfrom Gram Sabha (PRI)Awareness of BRGFBudget Envelope by GPsAndhra Pradesh Yes No No NoAssam Yes Yes No NoBihar Est. 40 % of the GPs No No NoChhattisgarh Yes No No NoMadhya Pradesh Yes No No YesOrissa Yes No No YesRajasthan Yes No No NoWest Bengal Yes Yes No NoSource: State reports34 Please refer to Chapter 2 and Annex 2 of the BRGF Guidelines.35 The details are discussed under the quality of the plan, convergence sub-section.Planning Issues 31


Table 13 below gives an overview of the extent to which theparticipatory planning process has been implemented atGP level in the sampled States.From the Table above and according to the informationgathered in the field discussions, a number of observationsand inferences can be made in regard to a number of issuesrelated to planning.Consultative Process from Gram Sabha (levelof participation)In the PRIs, the planning process was reported to bestarting from the Gram Sabha level. Whereas the level ofparticipation of citizens in the Gram Sabha meetings variesgreatly from place to place, there is anecdotic evidenceto suggest that the level of participation in the GramSabhas meetings has gradually improved in all States. Thisimprovement was associated to the BRGF that providesa significant proportion of the discretional developmentfunds for GPs (see Section 2). In Rajasthan State for instance,it was argued that, notwithstanding the differences in thequality of participation, with the introduction of the BRGF,the plans have for the first time been generated from theGram Sabha level. In West Bengal State, a two prongedapproach has been employed to elicit the participationof citizens in the planning process as shown in the boxbelow.However, there were a number of concerns in regard to thenature and depth of participation.a.Some Gram Sabha meetings had only experienceda low level of attendance. This was attributedto the often sub-optimal preparations of thesemeetings in terms of timing and announcement ofmeetings.b.c.d.There are also a few cases where the Gram Sabhameetings are not conducted. For example in BiharState, it is estimated that only about half of the PRIs 36have well- functioning Gram Sabha with regularmeetings amongst the villagers.The planning guidelines require that special attentionbe given to women and disadvantaged groups so asto enable them to take a lead in planning. Regardingwomen participation, in Chhattisgarh State, onlya few of the women the Review Team interactedwith had attended Gram Sabha meetings and inAndhra Pradesh State, it was reported that womeninvolvement was low but improving since the start ofthe BRGF, although this is hard to ascertain without aclear baseline and more quantitative survey methods.Regarding the involvement of SC/ST groups, no realtargeting has been done, although, some of thedistricts have started making good records of theshare of projects benefiting the SC/ST segments ofthe population, e.g. in the districts visited in AndhraPradesh.In case of the ULBs, the Review Team noticedthat the planning process does not involve theholding of Ward Sabha meetings as prescribed inthe planning manual. In Banswara Municipality,Rajasthan State for example, it was reported thatthere are no Ward Sabha meetings and the WardCouncilors bring the priorities to the municipallevel. There are also cases where the communitymembers submit their proposals directly tothe Municipality. There were similar cases inSamastipur Nagar Parishad, in Bihar and MalaikandMunicipality in Madhya Pradesh as described intext box below.Text Box 1: A two-pronged approach used in West Bengal for Participatory Planninga.An intensive approach implemented in 921 GPs which is highly participatory from the Gram Sabha level. It was reportedthat this process has increased ownership of the process and outputs by the people and facilitated the identification of localresources. The above notwithstanding, the process was reported to be highly resource (financial, human and time) intensiveand may face challenges in replicating and scaling up. For example, the State estimated that “It would take 6 more years ofcontinuous efforts and 5 times of the currently available resources to cover the State”b.A non-intensive approach where planning process is supported at the GP level. This approach was reported to be modest butpractical within the available resources in 2474 GPs.36 This is based on interviews with State level representatives and representativesfrom the two districts.32First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Text Box 2: Experiences from Samastipur Nagar Parishad (ULB) and Malajkand municipality(Balaghat district)The planning of the proposals for the BRGF has been very confusing for the ULB, Samastipur Nagar Parishad – Bihar State. For FY2007/08, the ULB was not consulted and projects were selected by the district without sufficient involvement of the ULB. The ULBnow have great difficulties in identifying land for these selected projects.For FY 2008/09 The ULB has submitted projects in the tune of Rs 8 Crore (813 projects, a very high and unrealistic number), butthese have now been reduced to 18 projects by the district technical planning unit (Rs 72.90 lakhs) without consultations withthe ULB. These changes have caused frustrations and lack of ownership to the projects. A new meeting between the ULB and thedistrict to discuss these issues was agreed during the meeting with the Review Team. The ULB has been poorly informed about theavailable resources, the need to submit proposals within these ceilings and the eligible expenditures from the BRGF. The BRGF ishighly appreciated by the ULB, but the implementation has been highly flawed with lack of information and support.In the case of Malajkand municipality (Balaghat district), MP, it was observed that sanctioned works for Rs 23.5 lakhs for 2007–08were dropped/changed by the municipality on the ground that funds for these were since obtained under a loan from Housing andUrban Development Corporation. It was also observed that schemes proposed by the municipal council for year 2008–09 for Rs 232lakhs were later substituted at DUDA/DPC level with schemes for Rs 40.2 lakhs which do not fall under the municipal functions andare the prime responsibility of the line departments e.g. one school library and two anganwadis. This is a clear case of interferencein the municipal affairs and disregard to the municipal council powers to select schemes.Publicizing Relevant Information Prior toPlanningIt is a requirement in the guidelines for the PRIs and ULBsto indicate the broad order of resources that would beavailable to the different levels and each local governmentprior to the planning process.In West Bengal State, information relevant to planningwas publicized and circulated to people in the respectivevillages (for example through wall writings) emphasizingthe importance of and procedures for participation in theplanning process.However, save for Assam, there were concerns in the otherStates. Some of the examples are given here below:a.b.In Bihar State, in 2007/08, the PRIs submittednumerous proposals without any links with theresource envelope available. Even in FY 2008/09, theproposals submitted to the block and the DPC levelsgreatly exceeded the amounts available. The projectwere therefore cut off at the technical preparatorylevel (district planning team) 37 , leading to somefrustrations amongst the political representatives;In Chhattisgarh State, a Sarpanch noted that this(planning) exercise is therefore not rewarding tothem, and there is no enthusiasm among GramSabha people in the planning exercise;37 Consisting of the DDC, the chief planning officer, the engineer and some of theheads of departments.c.d.In Rajasthan State, in many cases, information onallocations was posted on the websites, but these wereseldom visited by the ordinary citizens necessitatingthe need to complement this communication modewith other information dissemination mechanisms.Starting this year, the allocations have beendisseminated, but the GPs have been requested toplan for 150% of their allocation. Whereas this mayspeed up the planning process, it may compromisethe quality of prioritization as the ‘priorities’ willalways exceed the available resources, rendering thefinal decision-making to another level. The foregoingnotwithstanding, this is clearly a compromise to dealwith unpredictable budget release to GPs;In addition to lack of sufficient information about theamount of funds available, many people were notaware of the allowed expenditure areas. In RajasthanState for instance, some projects (like construction ofperimeter walls) were dropped at the DPC level onclaims that they were not eligible, yet the communitymembers were not provided with this information.This created a lot of frustration.Adherence to a Planning CycleIn all States, frequent non-adherence to the planning cycleand delays to submit plans was observed. In Bihar, regarding2009/10, only one out of 38 districts had submitted theplanning input from the DPC to the State by the time theReview Team visited the State, yet the July 15, 2009 deadlinePlanning Issues 33


set by the State of Bihar for the DPCs to submit their plansfor 2009/10 was approaching. Therefore it was expectedthat only a few would be able to comply.The planning process is delayed due to various reasons.The main one is the delay in starting the process. Forexample, Rajasthan State informed the Review Team thaton the basis of funds provided by GoI for the 2008/09 FY,all the districts have been given detailed instructions tosubmit their plans by end of June 2009. Table 14 shows thetimeline for State wise preparation of the BRGF plans. 38 Itshows that the planning exercise started at best very lateand did not follow the process as detailed in the planningguidelines.Another cause of the delays is the multiple approval levelsespecially by the DPC and the High Powered Committee(HPC). Yet the BRGF guidelines state that avenues ofconsultation have to be open, but without too many stepsbefore plan approval (BRGF Guidelines page 38).Table 13: State Wise Preparation of the Plan (Rajasthan)Sr. No Description of the Work Plan Date of Completion1 To prepare Vision list by Gram Sabha 15 th June, 20092 Preparation of work plan by each Panchayat and Municipality/Municipal Corporation 25 th June, 20093 To prepare integrated District Plan for the year by the District Planning Committee 30 th June, 20094 Approval of District Plan by State Level High Powered Committee 31 st June, 2009Source: BRGF progress note by Rajasthan State to the Review Team. As there is no 31 st of June, the note must be changed to July 1, 2009.Text Box 3: Composition and functions of the DPC (Rajasthan Panchayat Raj Act 1994)The DPC shall consist of a total of 25 members, out of which 20 will be elected representatives of Zila Parishad/MunicipalCorporation based on the proportion of population in rural and urban areas.a.The DPC shall have the following 5 nominated members:a. District Collector;b.c.d.Chief Executive Officer – Zila Parishad;Additional Chief Executive Officer – Zila Parisjhad; andTwo members from the MP/MLA or person nominated by the State Government from the heads of GovernmentInstitutions/Bodiesb.c.The Zila Parishad Chairperson is the head of the DPC and the Chief Planning Officer is the Secretary.As per Constitutional mandate, the main work of the DPC shall be to consider and consolidate the plans prepared by thePanchayat Samities and integrate them into a District Plan for the development of the District and forward the same forconsideration and approval of the State GovernmentA case of Madhya Pradesh District Planning Committee Act 1995All the 48 districts have duly constituted DPCs and with duly elected representatives. The District Planning Committees are headedby the Minister in-charge of the District as Chairman with elected members from the Panchayat and Urban Local Bodies as members.The elected Members of National Parliament (MPs) and Members of State Legislature (MLAs) are permanent special invitees.The function of the District Planning Committee is to prepare a consolidated district development plan for the entire district. In2001–02, the decentralized planning process was introduced in Madhya Pradesh and distribution of state budget into districtbudget was introduced so that the resources are available for different schemes of various departments in the district. The DistrictRural Development Agencies (DRDAs) continue to exist as separate and distinct bodies with President of the Zila Parishad asChairperson. Funds pertaining to many rural development programs are channeled through DRDAs.Source: For Rajasthan see - BRGF progress note by Rajasthan State to the Review Team.38 Please refer to the State Report, Volume II.34First Independent Review of the Backward Regions Grant Fund — Synthesis Report


3.2 Institutional Structures forPlanningThe 73 rd and 74 th Amendment to the Constitution made itcompulsory to constitute the District Planning Committeesin the States together with the constitution of three-tierPanchayat system and constitution of Urban Local Bodies.Under Article 243ZD of the constitution, the District PlanningCommittees have a mandatory function of formulation ofdistrict plans, monitoring and evaluation at district level.The DPC has also been enshrined in the respective StatePanchayat Raj Acts. For example, the Rajasthan PanchayatRaj Act 1994 section 121 and Madhya Pradesh DistrictPlanning Committee Act 1995 provides for the DistrictPlanning Committee (DPC). The composition and functionsof the DPC are presented in Text-box 4 below.Table 15 presents the existence, roles and functioning of theDPC in the respective States.Existence and meetings of the DPCDespite the fact that in some districts DPCs meet sporadically,the requirement by the BRGF to have the DPC formed andplans approved before funds are released has supported theimplementation of the Constitutional Mandate for DPCs.However, the formal composition of the DPC is dominatedby the elected members (at least 80%) and there is no formalrequirement to have representation from line departmentsand NGOs. The implication is that the planning potentialof the line department’s staff has not been maximallyexploited.The DPC Secretariat and Support MechanismsThe Planning Offices in the respective districts are supposedto provide the secretariat for the DPC with the ChiefPlanning Officer as the Secretary. However, the capacity ofthe planning secretariats is generally weak.In Udaipur ZP, Rajasthan State there is one person ina district (Chief Planning Officer) who is supposed tocoordinate all line departments, but the officer does notseem to have the requisite skills to manage the planningprocess in the district. The situation was reported worsein the ULBs where there is nobody performing thedevelopment planning function making the functionbeing performed on an ad hoc basis. In Assam, in thetwo districts visited, the CEO of the ZP is the sole officerresponsible for planning as there is no specializedplanning unit.In Andhra Pradesh, the two districts visited were supportedby facilitators (TSIs) in one full planning cycle (FY 2008/09),but this support has been discontinued, as it was seen to besub-optimal.In Bihar State, in both districts visited, district planningteams which prioritize projects prior to the DPC meetings,have been established. These planning teams compriseof the chief planner, the DDC/CEO, some heads ofdepartments and the engineering department. However,the role of this unit in planning, particularly in the approvaland prioritization vis-à-vis the PRIs should be clarified. Someof the PRIs complained that this unit changes the projectpriorities submitted from the grass-roots.Table 14: Functioning of the DPCsStatesRegularMeetings DPC Secretariat (Planning Team)Role of DPC (planning support,approval and monitoring)Participation of LineDepartments in DPCAndhra Pradesh Yes No Prioritize and approve plans Participate – not activeAssam When needed No Approve plans Participate – not activeBiharSource: State Reports.NoChhattisgarh When needed NoStrong role in final prioritizationand decision-makingDiscussion forum and formalendorsementProject approval – some timeschange prioritiesParticipate – not activeParticipate – not activeMadhya Pradesh When needed Yes Prioritize and approve plans Participate – not activeOrissa When needed Yes Approve plans Participate – not activeRajasthan Yes One Planning OfficerProject approval – some timeschange prioritiesParticipate – not activeWest Bengal In some districts SRD Cell Project approval ParticipatePlanning Issues 35


In West Bengal State, the capacity of the DPC secretariat (SRDCells) was satisfactory possessing sufficient numbers, skills,commitment and clout to facilitate the planning process.Whereas all the information on the line departmentswas not provided, the SRD cells attempted to exploit theplanning potential of the line department staff at the Blocklevel through involving them in the planning meetings.Role and Work Modalities of the DPCDuring the DPC meetings, the elected representatives andthe line department officials are supposed to deliberateupon the merit of the proposals. They approve a number ofthese and sent the proposals for High Powered Committee’sfinal approval.In this approval process, the priorities from the GP level arenot necessarily adequately addressed. As the costs of theprojects in the GP submitted plans often exceed the amountsavailable, the final decision made by DPC is likely to lead to areduction of the number and size of the projects or changesmade in the same. In Madhya Pradesh State, discussionsin some of the villages revealed that village priorities hadeither not been addressed in the plans or had somehowbeen sidelined. For instance Magarkatha GP revealed thatit required a pucca AWC, drinking water facility and toilets,but had instead received a community center, which is notcurrently used. Since construction was completed five (5)months ago, and despite the fact that eight (8) weddingswere held in the village, it has never been used by villagers.In Banswara District, the DPC approved the construction ofhostels without reference to the priorities emanating fromthe GP levels. In Rajasthan State, it was argued that thepractice of the DPC not honoring the GP priorities could bebecause the GPs are not provided with budget allocations toaddress their priorities, thereby increasing the temptationfor the DPC to interfere. Overall the fact that the DPC makesthe final decision compromises the intended local decisionmaking and governance.In Bihar, it was noted that the function of DPC as a coordinator,as well as body that screens projects and provides guidanceis still not well performed, and most of the decisions andactivities are taken at the technical level. DPC interventionsare too late, and it is not active in providing guidance andmonitoring the PRIs/ULBs. It was noted that the preparationof the members for the DPC is weak, with lack of sharingof minutes, lack of supporting materials, such as overviewof spending and plans, etc. Text box 5 gives a case of theText Box 4: Approval process in Madhubani District – Bihar StateThe proposals from the GPs and the Block levels always greatly exceed the amount of funds available. The proposals are firstscreened by the Block Development Officer and then by a technical expert group at the district level, consisting of the CEO, theheads of departments, the Chief Planning Officer, Engineer and others. This group scrutinizes the proposals and reduces budgets incase where these are exaggerated (which is nearly always the case), withdraws proposals, excludes projects, which according to thetechnical review, should be conducted under other schemes, and withdraw schemes, which are outside the investment menu suchas maintenance projects.DPC formally approve this, but there are few meetings in the DPC and these are not well prepared. There is no documentationavailable on the previous use of funds at these meetings, no information on sector investments, etc. The proposals for 2009/10 fromthe PRIs/ULBs were not available at the point of time for the meeting in the DPC on July 11, 2009. There was only one meeting in2008 (May) and one on July 11, 2009. In the meeting on July 11, 2009, the proposals from PRIs/ULBs were not even presented indraft format for the members, but the District Planning Committee with strong guidance from the DDC/CEO, authorized the DDC/CEO to approve all plans when proposals were received from the PRIs/ULBs, without any further meetings; This contrary to the rulesabout the role of the DPC.In reality, the proposals are submitted to the State Government without a real approval, but based on the proposals from PRIs/ULBs,with administrative changes, and without any confirmation and agreements from all PRIs that some changes have been made. Allthis is basically caused by delays in the planning process, cumbersome approval and fund release procedures and a wish to processthe proposals fast to avoid further delays, and lack of awareness/understanding of the spirit in the BRGF local planning process.At the DPC meeting on July 11, 2009, several of the members of the DPC from the Zila Parishads complained that proposals werechanged without prior information and endorsement of the respective PRIs. They also complained that they had not been informedabout how funds from last year were spent, and there were no documents at the meeting clarifying this. One member said: “Wedon´t know what is going on, and we are supposed to be accountable to our constituency”. The CEO just concluded the FY 2009/10 DDCplanning meeting saying that: “we will proceed with the plans of the PRI at the technical level and send them to the State Government”as soon as possible.36First Independent Review of the Backward Regions Grant Fund — Synthesis Report


However, the planning ‘infrastructure’ at the GP and IPapproval process in Madhubani District to illustrate some of39 Please refer to page 43 of BRGF Program Guidelines.the work modalities of the DPC.levels is weak without separate planning units. The blockdevelopment officers are overloaded and not sufficientlyParticipation of Line Departments in DPCThe relationship between the DPC and the line departmentsis unclear. This issue was raised several times, for exampleduring the meeting in the DPC in Madhubani District onJuly 11, 2009. Overall, the DPCs are still not sufficient strongto ensure convergence, and the line departments are mostlyacting as observers during the meetings.oriented on how to facilitate participatory planningprocesses.The role of the High Powered CommitteeThe plans approved by the DPCs are sent to the High PoweredCommittee for final approval. The role of the HPC regardingapproving all district plans was perceived as an addedburden that contributes to the significant delays. Review ofPlanning institutions at the GP andminutes from some of the HPCs meetings in some StatesIntermediate Panchayat Levelsrevealed that the approval is more a formal endorsement.The BRGF guidelines provide for the Gram Panchayatto nominate two facilitators, one male and one female,identified unanimously for each Ward Sabha 39However, frequent delays in organizing such high-levelmeetings create bottlenecks in the entire planning process.Some of the officials met suggested that the role of the HPCshould be to ensure information sharing, coordination andWest Bengal State has formed and trained DecentralizedPlanning Facilitation Cells in all Zila Parishads (districts). Ininteractions with the line departments and giving strategicdirections, rather than approval of PRI/ULBs plans.Andhra Pradesh, the planning facilitators are PanchayatSecretaries, but need training and orientation. In Assam,The PRIs receive support from TSI, but the effectiveness of 3.3 Quality of the PlansTSI support in Assam is mixed depending on the serviceThe District Planning guidelines require the preparationprovider. In the seven districts where NIRD worked as TSI,of an integrated district plan which estimates the resourcethe planning process involved formation of planning teamsenvelope available for planning, incorporates the plansat each level of PRI hence, in each district, a District Planning(and resources therein) of the SHGs, Financial institutionsTeam; Block Planning Teams; and Gram Panchayat Planninglike Commercial/Cooperative Banks, and other privateTeams.players operating in the district. In the same vein, theTable 15: Quality of the District PlansStateLinkage to SituationAnalysisIncorporation of priorities fromGPsConvergenceIncorporatingULBsAndhra Pradesh No direct linkage Reflected Only BRGF Plan NoAssam Some places Reflected Only BRGF Plan YesBiharOnly BRGF Plan - in practiceNo direct linkage and Not traceable – GPs submittedsome coordination in specificsituation analysis wish listsprojectsNoChhattisgarh No linkageNot traceable – GPs submittedwish listsOnly BRGF PlanYesMadhya Pradesh Linkage in place ReflectedConvergence with someschemesYesOrissa Linkage in some areas ReflectedMainly BRGF Plan - coordinationin few specific projectsYesRajasthan No direct linkage Not clearly traceableState gave instruction for BRGFto fund gapsNoWest Bengal Linkage exists Reflected in the District Plan Convergence with SFC YesPlanning Issues 37


BRGF guidelines warn against schematic planning andemphasize that planning needs to be done without givingany schematic overlay to BRGF that would be subversive ofthe principle of local prioritization in planning.Further, the BRGF guidelines call for a benchmarking studyto help later evaluation and also development of a ‘wellconceived participatory perspective plan for the district’ toaddress the backwardness of the region during 11 th five yearplan period. It calls for adherence to District Planning (DP)guidelines for undertaking the envisioning and situationanalysis of the districts constraints and drivers for growth.It is expected that each district will produce an annual planwith interventions, grouped under different sector areasnamely: education, health, nutrition, infrastructure, energy,livelihood, housing, connectivity/road, civil empowermentand others. Table 16 below presents an overview of thequality of the District plans in the sampled States.Existence of the Plans and Linkage toSituation AnalysisThe quality of the Perspective and Annual Plans varies greatlyacross districts, and most focus in the first years has beenon data collection. The variances notwithstanding, a reviewof both the Perspective and Annuals Plans of the districtsvisited revealed that there is a vast amount of informationincluded in these plans. In Rajasthan, for example, theperspective plan of Udaipur District provides a detailedsituation analysis of the human (health, education andwater), economic (livelihood options, agriculture, livestock,cottage industries, vocational training) and infrastructure(roads and electricity) dimensions for all sectors in thedistrict. It identified the key causes of backwardness inthe district per sector, set goals and objectives, identifiedstrategies, funding requirements and sources and thegaps that could be filled by the BRGF. In addition to thePerspective Plan, districts formulated integrated DistrictAnnual Plans incorporating line department schemes.Madhya Pradesh District Perspective Plans 2008–12 forBalaghat and Seoni also provide similar detailed situationanalysis and infrastructure gap analysis.However, save for West Bengal and Madhya PradeshStates, where the activities prioritized were related togaps identified in the baseline survey, there is no directand strategic link between the analysis and the suggestedprojects and no strong evidence that the analysis did providesignificant input to the prioritization of projects in the plan.In Rajasthan, for example, it was noted that there was noexplicit linkage between the Integrated District Annual Planand the BRGF Perspective Plan. In Udaipur District, it wasreported by the Chief Planning Officer that the PerspectivePlan is not being used because it is only in English. InBanswara District, they reported that the Perspective Planwas just received and will only be used for future planning.Moreover, the situation analysis is not regularly up-datedand the level of detail varies greatly from place to place. InSamastipur District in Bihar, the perspective plan is not yetfinalized, but the current draft is just a long list of projects,whereas in Madhubani District (Bihar) there was an attemptto work on the vision, challenges and overview of existingservices and infrastructure, but not a direct link betweenthese and the projects listed. Often, the projects weremerely a wish-list without links to the available resourcesand/or service gaps.Incorporation of priorities from GPsIn Andhra Pradesh, Assam, Madhya Pradesh, Orissa andWest Bengal States, the priorities in the Gram Panchayat,Panchayat Samiti and ULBs Plans were reflected in thedistrict plan.However, the projects and priorities are largely infrastructurein nature and there is little attempt from the district level tofocus on larger cross GP investments. This is also reflected inthe size of the projects (see Section 2).Whereas the BRGF Guidelines stress the importance ofhaving untied grants, there is often a very “strong guidance”from the upper tier of government. In a PRI (IP) in Khammam,representatives mentioned that “we got the impressionthat health and schools should be the only investments (FY2007/08)”.In Rajasthan, the investment menu also seemed unclear.Rajasthan gives a long list of investment ideas to GPs andbestows the discretion to make final decisions to the DPClevels. Instead of removing a community prioritized projecton the asserted reason of not fulfilling certain conditions,it may be better to provide a negative list in advance forthe community members to know what is eligible and not.This was the same case in Bihar State as shown in Text box6 below.ConvergenceThere were some signs on early convergence in someStates, but the general picture is that planning is done asilo-based manner. In Madhya Pradesh and West Bengal38First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Text Box 5: Rajnagur Block – Flaws in the Planning Process, Bihar StateDue to pressure to finalize the planning process quickly, the priorities from the PRIs were not taken into account in the FY 2007/08plans. The input to the planning process did not originate from the local level, but from the district technical planning team, whichplanned that all Gram Panchayats should invest in community halls/buildings for this FY. However, there was an agreement thatthis process has changed in FY 2008/09 and that the PRIs should be in charge of their own planning priorities. But, the wish-listapproach observed will again lead to cut-down in proposals from the upper tier (here the technical planning team).States, there were cases of PRIs converging BRGF with otherschemes. In Bihar, the visits to Samastipur District revealeda few examples of emerging convergence and cooperationbetween the sectors and the cross-cutting BRGF schemewithin the area of Education. In Kalyanpur Block, fourclassrooms were constructed of which two were sourcedfrom the BRGF and two from the School Development Fund.It is expected that the road leading up to the school can beco-funded from the NREGS (for earthworks) and BRGF forfinalization of the construction, and various options forshared funding are currently explored.However, project proposals, particularly at the GP and IPlevels are normally BRGF specific and without linkage withother initiatives. There is a lack of convergence and noincentives for the Line Departments to participate actively,as they have their own funding streams while the funds fromthe BRGF are still meager compared to these sector flows.In Andhra Pradesh, the district heads of departments clearlyexpressed this point during the meeting in KhammamDistrict: “We have no role in this BRGF”. The Line Departmentsdo not even disclose their plans and investments for the PRIsin due time to allow the PRIs to address the service deliveryand infrastructure gaps. This was a general problem in mostdistricts visited.In Bihar State, notwithstanding the few instances ofconvergence, there is a general mistrust between theline departments and the PRIs/ULB 40 . Several of the DPCmembers in Madhubani District stressed the lack of interestsof the line departments to take active part in the prioritiesand coordination: “We do the envisioning and priorities, butthe departments do continue with their own work as usualwithout coordination”. The DPC is only dealing with BRGFissues and not the sector funding schemes, and sectors donot disclose information about sector schemes and gaps.Lack of convergence is likely to lead to the followingproblems: Inefficiencies in coverage of the critical gaps inservice delivery; overlapping investments; and increasedfiduciary risks as some projects may be accounted fortwice.Incorporating ULBsApart from Andhra Pradesh, Bihar, and Rajasthan States, inother States, the districts were incorporating the ULBs plansin their plans. The major gap in the ULBs was the absenceText Box 6: Gaps in the Development PlanThe following gaps were noted in most of the perspective plans:Limited linkage between vision, goal, targets, activities;Non-inclusion of sector/line department’s activities;Non-inclusion of other external initiatives, NGOs, CSOs;Poor links between the perspective plans and annual plans;Limited analysis and coverage of cross-cutting issues in the plan such as poverty, environment, and gender;Lack of planning for asset management as well as operation and maintenance.40 Expressed by many respondents, including the Secretary PRI, State of Bihar.Planning Issues 39


of linkages between development planning and physicalplanning.As a summary of this section, Text Box 7 summarizes themajor gaps in the quality of the development plans:Despite the weaknesses observed, there was a generalperception amongst the officials and politicians met thatthe local planning process has improved over the past 2–3years, from a point with hardly any plans to a situation withfirst steps towards 5 years perspective plans and annualproject priorities.3.4 PlanPlusNIC developed the PlanPlus software for the MoPR, to simplifyand strengthen the decentralized planning process. Thissoftware has just been introduced and it will need more timefor in depth assessment. The foregoing notwithstanding, theteam made an assessment of the extent to which PlanPlus isbeing used as depicted in Table 17 below:PlanPlus software was introduced and Panchayat staff wastrained by NIC. The use of PlanPlus as a potential tool forplanning and prioritization has started in most districts. As aresult, the majority of districts are entering and up-loadingtheir previous plans in the system to establish base-linesand data focal points. However, none of the districts haveused the PlanPlus as a planning and prioritization tool in theannual or strategic planning exercises, and the introductionis at a very incipient stage. Officials met generally praisedthe system for being easy to use.However, the efficient use of PlanPlus has been constrainedby a number of challenges as outlined below:a. PlanPlus is perceived as a BRGF specific software;b.c.d.e.Line department plans and allocations are not yetentered into PlanPlus. In Rajasthan, it was reportedthat staff of the line departments formulated theirplans using own templates before PlanPlus wasintroduced and have not been trained. The tool willalso not realize the full benefits, before the sectorsdisclose data and cooperate;In the ULB, use of Planplus has not yet beenintroduced;There is no connectivity at Block level in many of thedistricts. In Banswara District, Rajasthan State, it wasreported that since PlanPlus is online, most of theBlocks are currently not using it. Moreover some ofthe GPs are not equipped with computers, facilitiesand skills; andPRIs perceived PlanPlus more as a reporting anddisclosure tool than a genuine planning andprioritization tool.3.5 Overall Assessment of PlanningFrom the discussion above, it is clear that a number ofattainments have been realized in the area of planning.They include: gradual improvement in the quality ofparticipation in the Gram Sabha meetings as a resultof BRGF providing discretionary funds to PRIs; BRGFsupporting the constitutional mandate to have the DPCsformed; having in place the perspective and annual planswith vast amount of information; and the introduction ofPlanPlus software. Perspective plans have been formulatedin most districts for the first time, and there is an emerginglink with the annual plans. First attempts to coordinate theplans at the DPC levels are made, merging the inputs fromall PRIs and the ULBs. BRGF has strengthened the attemptTable 16: Use of PlanPlusStateAndhra PradeshAssamBiharChhattisgarhMadhya PradeshOrissaRajasthanWest BengalUse of PlanPlusIntroduced but Line Departments data not entered – used most as reporting toolProcess initiated13 out of 37 have started inputting data for FY 2007/08, not yet used as a planning tool.Process initiatedProcess of uploading GP annual plans initiated – 8958 under pipeline (uploaded) - 4525 for 2007–08, 3947 for2008–09, and 485 for 2009–2010. Line department data is not yet initiatedProcess initiated – progress unascertained. Line department data not initiatedIntroduced but Line Departments data not entered – used most as reporting toolIntroduced but Line Departments data not entered – used most as reporting tool40First Independent Review of the Backward Regions Grant Fund — Synthesis Report


to merge the plans at the DPC levels, but real coordinationin the sense of overall visioning, integration of plans(where 2+2 is more than 4) and cross-unit priorities is yetvery embryonic.The effectiveness of the planning process is constrained bya number of factors which include:a.b.c.d.e.f.g.h.Gram Sabha meetings are either not convened forpurposes of planning (especially in ULBs) or havelimited attendance, especially of women and SC/ST members in many places. However, it should benoted that this varies greatly across the States andeven across the districts and GPs;Limited dissemination of information prior to planningnot allowing resource constrained prioritization andplanning – this is a general problem in all States;Delays in finalization of plans due to non-adherenceto the planning cycle and multiple approval requirements;Weak capacity of the planning secretariats withinadequate staff in both numbers and skills, coupledwith sub-optimal support from TSIs save for WestBengal where they receive ample support from theSRD cells. In particular the planning support at the GPand IP level is weak with the BDOs being overloadedwith work and without sufficient skills;Widespread changing of proposals from the GPsby the DPCs (or in some places at the technicallevel in the district) level without prior informationand endorsement of the respective PRIs. There wasalso reported “strong guidance” from the upper tierof government influencing the manner in whichprioritization is done;Limited involvement of line departments. They donot actively participate in the DPCs meetings and donot enter their data in PlanPlus because they havenot been trained. This among others is constrainingconvergence;Lack of a direct and strategic link between theperspective plans, analysis and the suggestedprojects in most of the districts;The use of PlanPlus being constrained by: linedepartments not entering their data; not yetintroduced in ULBs; is online yet most blocks lackconnectivity; is perceived as reporting rather thanplanning tool; and as a BRGF specific soft ware.In sum, most of the overall targets of the planning process areyet to be achieved in total. Firstly, the participative planningfrom the grassroots level upwards, led by local governmentsso that plans relevant to the local area are prepared, withlocal communities and their local governments gaining astrong sense of ownership, is yet to be grounded, althoughsome first important achievements have been realized.Secondly, the vertical planning process has not yet beentransformed into a horizontal planning process where localgovernments and other planning entities work togetherand explore the possibilities of planning together. This is amajor issue in all places, and is not something which willresolve itself automatically. Thirdly, PlanPlus is yet to achievebetter recording of budget envelopes, prioritizing selectedprojects and works, linking them to budgets, generating,modifying and finalizing plans, projects and monitoring ofimplementation. The efficiency of the system will to a largeextend depend on the linkage with the line departments.3.6 Recommendations for Deepeningand Consolidating PlanningThe Review Team has the following mutually reinforcingrecommendations within the area of Planning:a.b.Adhering to the principle of subsidiarity: TheStates should finalize the definition of mandates/assignment of activities to be undertaken bydifferent levels of local governments. Each levelshould therefore have full responsibility toapprove investments within its mandate andhence avoid the practice of changing the priorities ofthe GPs, IPs and ULBs after they have been approvedat the respective levels. For this to be implementedin total, the States should develop and circulate a‘negative list’ indicating areas where the GPs, IPsand ULBs should not prioritize projects. In addition,and as per the planning guidelines, even if a higherlevel of Panchayat, such as a District or IntermediatePanchayat, sanctions a work of a value less than aprescribed floor limit, it should transfer the moneyallocated for that work to the Gram Panchayatconcerned for implementation. (e.g. such as the casein West Bengal);Publicizing of relevant information prior toplanning: The States and Districts should indicatethe broad order of resources that would be availableto the different levels and each local governmentPlanning Issues 41


c.d.e.over the medium term (but annually disaggregated)to enable prioritization within a resource constraint.In addition, the Centre and State should ensure thatthe Line Departments inform the PRIs in due timeabout their investments and initiatives to enableintegration and convergence. The States may needto publish a simple and illustrated guide to enhanceeffective communication and public awarenessabout the planning process, the roles of the differentstakeholders, the resources available, and theresults of the previous planning process so as tospontaneously stimulate participation;Technical support to planning: At the District andIP levels, there is need to create and strengthenthe planning cell/unit that will double as the DPCSecretariat. This will involve: having in place a personto perform the function of strategic and operationalplanning head with additional staff in the area ofplanning, economics, statistics etc.; constitution of atechnical group to support planning including linedepartment and NGO staff backstopped by the State;and providing them with equipment and facilities. Inaddition, there is a strong need to establish someform of “hands-on” in the field support, throughconsultancy inputs, inputs from facilitators etc.Whenever a TSI is commissioned to support the localbody, it should be emphasized that the local bodiesmust be in the ‘drivers’ seat with the TSI performingan animation role. This will make the local bodiesown, use and sustain both the process and outputsof such processes. This will among others require theclarification on the manner in which the 5% of thedevelopment fund for functionaries can be used tostrengthen the planning units at the district level aswell as technical cells at the block and GP levels;Composition and functioning of the DPC: The roleof the DPC should be changed from approval body(and in some cases interference in local priorities)to a body that provides guidance, TA support,consolidation, monitoring and support in line withthe Constitution. The DPC should therefore becomposed of more technical staff (including fromtechnical line departments) rather than electedleaders. The work of the DPC should start muchearlier to guide the entire planning process;Composition and functioning of the HPC: As forthe DPC, the HPC should change its role away fromapproval of plans and budgets. The HPC should focuson policy, standard setting, oversight/monitoringwithin a State (not formal approval). The HPC shouldensure a strong coordination across the sectors/lineagencies;f. The table below shows the proposed future roles ofthe DPCs and the HPCs.a. Role of the MoPR BRGF unit in Planning: The roleof the MoPR, BRGF unit should focus on nationalwide policy development, guidance and monitoring,development of new tools such as targeting ofbackwardness, assessment tools and evaluation;b. Ensure timely planning: Develop a clear planningcalendar (for each tier of government), whichshould be adhered to. This would require changesand elaboration of the planning schedule providedon page 50 of the BRGF guidelines. It would advancethe planning process, starting say in July andcompletion prior to the FY within a known resourceenvelope. As proposed above (under adhering tothe principle of subsidiarity), it is recommendedto reduce the number of approval procedures andrely on the PRIs’ approval for projects within theirmandates, combined with strong monitoring andauditing;c. Institutionalizing a horizontal planning process(convergence): This will require the provision andstrengthening of incentives for the line departmentsto participate in the cross-sector planning by (i)making it a requirements from above (like thePlanning Commission) (ii) increasing transfers toBRGF; and (iii) increased participation and supervisionby DPC. Each department should create separateline items in its budget for PRIs/ULBs and provide fullinformation about their plans and budgets to PRIs/ULBs. The second step will be to establish systemsof conditional sector grants (earmarked grantallocations to PRIs/ULBs). The integrated districtplanning process initiated by the Government shouldbe strengthened at all tiers;d. Target some of the procedural constraints forconvergence: As long as the BRGF system is associatedwith delays, inefficient and non-predictable flowof funds, it is hampering initiatives to strengthenconvergence in planning. As mentioned in Section 2the issue of delays and non-predictability should beaddressed as a matter of urgency;42First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Table 17: Future Composition and Roles of DPC and HPCInstitution Proposed Future Composition 41 Indicative Future RolesDPC Secretariat(Planning Team)DPCElected Bodies atthe respective tiers(Gram Panchayat,IPs, Zila Parishadand ULBsHPCSecretary to the secretariatDistrict Planning OfficerOther staff in areas such as developmentplanning, economics, statistics and physicalplanning (for urban local bodies)Heads of Departments of Zila Parishad and theheads of the IPsChief officer of the ULBs assisted by some headsof departmentsLine Department head in the District (to ensureparticipation of sectors);Representatives from selected main NGOsoperating in the District;Chairpersons of Standing Committees of thedistrictChairperson of Zila ParishadMPs and MLAs as co-opted membersThe chairperson should be the Chief Executive(District Collector) as this is not an approval body.The planning officer should be the secretary.The DPC should report to the elected bodies (whichare supposed to be autonomous)Overall responsible for coordinating the integratedplanning process as the DPC SecretariatReporting to the DPCPreparing for the planning process: This includesdiscussing and agreeing on the modalities to beused in the planning process;Information dissemination: The DPC shouldindicate the broad order of resources that wouldbe available to the different levels/tiers;Technical support and guidance: On one handthe DPC should facilitate and/or refresh the localfacilitators on the planning process and methods;and on the other offer “hands-on” in the fieldsupport to the IPs and GPs to formulate their plans;Project screening: appraisal of prioritizedinvestments for social, economic andenvironmental feasibility. At this stage the DPCshould identify projects that should be forwardedto the respective higher tiers for consideration;Plan compilation: This would involve consolidationof the plans prepared by the various tiers of thePRIs/ULBs and integrate them into a District Plan;development of the investment profiles; andfinalization of the development plan after approvalby the elected bodies;Feed back: DPC should give feedback to the ZP, IPsand GPs about the results of the planning process.Considering and making final approval of theplans of their respective local bodies;Submission of the approved plans to therespective higher tier for integration (not approval)Define and approve mandates of the various tiers(including positive and negative lists)ensure that the Line Departments inform the PRIsin due time about their investments and initiativesto enable integration and convergenceFormulating policy, setting standard and givingstrategic directionsPerforming overall oversight/monitoringCoordinate guidelinese.f.Quality of the plan: Provide a detailed format forthe respective plans focusing on enhancing linkagesbetween planning and budgets in the medium term(perspective plan) and annually; 41Incentives for planning: The extent to which therespective local bodies adhere to the prescribed41 The proposed composition may require amendments to the existing Acts whichemphasize having the elected representatives as the majority.g.planning process, and produce the requiredplanning outputs, should be one of the performancebenchmarks that should be annually assessed tomake a local body eligible to the agreed rewards orpenalties. The other form of incentive is to ensurethat the different levels implement the priorities theyhave planned for and on time;PlanPlus: PlanPlus need to be customized to eachDistrict and introduced to the line-departments.Planning Issues 43


h.A strong pressure from the central top authorities,including the Planning Commission, should beensured to enhance the general use of this system;Change the composition of funding at the locallevel: As mentioned in Section 2, it is important thatthe share of untied funds is enhanced to strengthenpossibilities for local priorities according to localneeds. The present level of BRGF is at the absoluteminimum to keep a local planning process runningand there is a need to increase this level in thefuture.44First Independent Review of the Backward Regions Grant Fund — Synthesis Report


4Capacity Development IssuesAlthough 42 there are significant variations across the States, Elected Representatives and Functionaries. The basicthe capacity building of PRIs/ULBs and officials associated objectives of the NCBF are summarized in Text Box 8 below.with BRGF within areas relevant for the BRG –includingThis section describes and assesses the mechanisms forperformance enhancement of PRIs/ULBs-, has beencapacity building planning, delivery, coordination andsignificantly delayed and in most places also been limitedmonitoring as well as the outcomes. Capacity Building (CB)in scope. The scope and quality of the CB rendered fromis seen as a broad range of support instruments to enhancethe BRGF has relied heavily on the capacity and strengthsthe capacity of people and institutions. It is covering theof the respective SIRDs, and States with strong institutions,provision of training, equipment, infrastructure, adequatesuch as Andhra Pradesh, have had a more comprehensivestaffing (functionaries) and technical assistance, as well as theCB program under BRGF than other States with weakerestablishment and maintenance of systems and procedures,SIRDs such as Bihar, Chhattisgarh, Orissa and Madhyasuch as accounting and auditing systems, development ofPradesh. 43baseline data bank, monitoring and evaluation. However, asOne of the stated objectives of BRGF as per the guidelines it will appear below, the strongest component of capacityis to strengthen the Panchayat and Municipality level building to-date has been the training component, includinggovernance with more appropriate capacity building, the long distance connections via the satellite program. Theto facilitate participatory planning, decision making, CB has experienced a number of challenges and operationalimplementation and monitoring, to reflect local felt needs. weaknesses in most of the States, and the section includesThe delivery of CB under BRGF is guided by the National specific recommendations on how to improve the efficiencyCapability Building Framework (NCBF) for Panchayat Raj of the future CB support under the BRGF.Text Box 7: Objectives of the National Capability Building FrameworkObjectives of the National Capability Building Framework 43a. Enabling Panchayat elected representatives to upgrade their knowledge and skills to better perform their responsibilities,such as implementing programs equitably, enabling them to think in terms of concrete actions they can take or facilitate andequipping them with the skills required for day-to-day performance of executive duties;b. Orienting key officials associated with the devolved functions to (i) better function as technical advisors and trainers and (ii)respect, be more receptive and learn from the ground level experience of elected Panchayat representatives;c. Improving the Gram Sabha functioning, particularly for the poor, to assert their demands through participative planning,monitor plan implementation and to hold their Panchayat to account through invoking Right to Information and social audit;d. Sensitizing the media, political parties, representatives in the legislatures, civil society organizations and citizens to acceptingand promoting Panchayat Raj as an effective level of local government.42 In this Report, the words “Capacity Building” and “Capacity Development” is usedinterchangeable.43 BRGF Program Guidelines, Annexe 3 – NCB FrameworkCapacity Development Issues 45


4.1 Capacity Building PlanningThe effectiveness of capacity building support dependson how the capacity building intervention was identifiedand planned. Table 18 below provides an overview of howthe respective States plan for the delivery of their capacitybuilding interventions.Existence of the CB plan as per NCBFNotwithstanding the variances in quality, all States havein place a semblance of a Capacity Building Plan thatprovides the context in which CB activities are delivered.In West Bengal and Madhya Pradesh, there is a Strategyand Perspective Plan for Capacity Building of Panchayatsand Municipalities for 2007–12 for 11 Districts which wasprepared with support from BRGF (December 2007). InAssam, a Capacity Development Plan was prepared bySIRD covering various aspects of capacity as outlined inthe BRGF guideline. The Review Team found that the visionarticulated, strategy outlined and the plan for CB under BRGFis a good attempt to address some of the urgent CB needs.Andhra Pradesh elaborated a comprehensive State Policyon Capacity Building of PRIs (Go No. 520, Dt. 07.12.2006)which outlines the medium term support and activities fora six years period with detailed work-plans and descriptionof activities. The plan has been approved by the MoPR. TheState Government has also issued comprehensive guidelineson training strategy for PRI elected representatives andofficial functionaries.In Rajasthan, the originally formulated CB Plan had too muchfocus on livelihood skill training and was not approved byMoPR. RD&PR then asked SIRD to prepare a 5-year plan,which is awaiting approval by MoPR. This CB plan wasdeveloped by SIRD without intensive involvement of theRD&PR department. The output therefore does not meetthe requirements of an Integrated State Plan and has a lotof room for improvement. In Bihar, the CD proposal is onlya list of activities with estimated budget, and several of theactivities in the plan have not been approved nor are theysupported by resources from GoI.Conducting a Capacity Needs Assessment(CAN) addressing District Specific NeedsThe NCBF details the training content and phasing of thetraining programs that are expected to be conductedacross the States. It does not require the States to conduct acapacity needs assessment to address the peculiar needs ofthe different categories of the potential capacity buildingbeneficiaries. This is one of the weaknesses in the overalldesign of the CB support.In Andhra Pradesh, no comprehensive capacity needsassessment was conducted, but Andhra Pradesh Academyof Rural Development, (AMR-APARD), has ensured thattraining requests and needs have been considered in thedevelopment of new training materials for PRIs and otherinstitutions.In Madhya Pradesh, the focus so far has only been ondelivering those trainings, whose pedagogy has remainedthe same since the past one decade. No training needsassessment or a situation assessment was undertakenbefore the beginning of the work on this component.Table 18: Overview of Capacity Building Planning in the StatesStateExistence of the CB plan asper NCBFSpecific CNAConvergence with other CDinitiativesAddressing Needs of ULBsAndhra Pradesh Yes No* Yes NoAssam Yes No Yes NoBiharNoOnly an overview of activities.No No NoChhattisgarh Yes No Limited to resource persons YesMadhya Pradesh Yes No No No (funds given but no activity)Orissa Under approval No No No (funds given but no activity)Rajasthan Yes No* No NoWest Bengal Yes No Yes Yes*In some places such as Andhra Pradesh and Rajasthan some training needs assessments were done during the orientation training. Many potentialbeneficiaries of CB were not addressed and the scope was limited. None of the States have conducted comprehensive and participatory CNA.46First Independent Review of the Backward Regions Grant Fund — Synthesis Report


As a result the State Strategies and Perspective Plans forCapacity Building of Panchayats and Municipalities arenot customized to each PRI and Municipality and arenot periodically updated to address emerging capacitydevelopment needs arising from implementationexperiences.Convergence with other Capacity BuildingInitiativesIt is good practice to ensure convergence and integration ofthe capacity building initiatives being undertaken in a State,Panchayat or Municipality. Convergence has the potentialto eliminate activity duplication and overlap, enhancesynergies and rational resource use. However, in mostof the States this was not the case. The CB plans had notindicated convergence with other CB/CD initiatives beingconducted, leading the BRGF capacity building activitiesto be implemented in solo. Nevertheless, in West Bengalthere was clear convergence of BRGF and other initiativesdelivering capacity development in the State notably SRD.Similarly, in Assam, the Review Team found that SIRD hasintegrated the training programs under BRGF and otherschemes. Because of this integration the PRI/ULB trainingparticipants had been constantly given information aboutBRGF in training programs organized under other schemesand vice versa.Addressing Needs of ULBsWest Bengal State transfers some of the BRGF capacitybuilding funds to West Bengal State Urban DevelopmentAgency (SUDA). In Madhya Pradesh and Orissa, the CBfunds were also transferred to the respective State’s UrbanDevelopment Agencies, but here there is no progressin activity implementation. In Chhattisgarh State, anencouraging observation was that the ULBs are consideredin the CB plan and are included in the training programs.This despite the fact that ULBs are not mentioned in theBRGF guidelines.However, the other States are not giving special attentionto the ULBs. In Andhra Pradesh and Bihar, the ULBs had notyet been covered by any CB support and this was seen asa major problem at the local level. In Rajasthan, the mainfocus of the CB plan is on PRIs and not addressing ULBs.There is lack of awareness and significant confusion onamounts available, eligible expenditures and management,necessitating a need to clarify the entire role of ULBs in theBRGF. Overall, the focus of capacity building activities onULBs was dismal, and this will have to be addressed if theULBs should continue to be covered by the BRGF.4.2 Capacity Building FundingAccording to the BRGF guidelines, each district is supposedto be allocated 1 crore p.a. Table 19 provides the details ofthe capacity building funding and fund utilization situationin the sampled States.Volume, Flow and Timing of FundingThe funding for CB from the Central Government tostate governments goes through the usual funding flowchannels and procedures. It should however be noted thatthere have been severe delays in the disbursements of thefunds. Four (4) of the eight States (Assam, Bihar, Orissa,Rajasthan) had only received the funds once; two of them(Andhra Pradesh and Chhattisgarh) twice and only two ofthe eight (Madhya Pradesh and West Bengal) three times.The delays were associated to slow pace of planning,multiple steps of approval and delays in utilization (andgeneration of UCs). In Bihar for example, while the Statecould have potentially accessed Rs 108 Crore from2007–08 to 2009–2010 allocations, it received only Rs 14.45Crore – a mere 13.4 percent. This is despite a dire need forstrengthening local governance institutions in the State – aneed expressed by all tiers of elected representatives andthe administration. Table 20 gives a summary of the fundsreleased.Allocation Criteria – vertical and horizontalAll districts implementing the BRGF are allocated a flat rateof 1 Crore per district. This implies that the amount of CBfunds received by the State depends on the number ofdistricts implementing the BRGF in that State. According tomany informants, especially in Andhra Pradesh, one of theproblems with the CB support is that this allocation formula(flat rate) used for the CB support across districts is notneeds based, as the funds are not even adjusted to the sizeof the districts, number of units to be trained, etc.Within a State, the funds are not distributed across thePRIs/ULBs, and are not earmarked for each district or eachtiers of government, but used according to an agreed andapproved CB plan, hence there are no vertical and horizontalallocation formulas for CB support. Allocation is based onState level planned activities, which are not customized toeach PRI and ULB.Capacity Development Issues 47


Table 19: CB Funding and Fund Utilization for 2006/07, 2007/08 and 2008/09StateSanctioned/approved amount (Rs Crore)Released amount(Rs Crore)Utilized amount(Rs Crore)CommentsFY 2006/07Andhra Pradesh 13.00 13 13Assam 9.10 9.10 9.03Bihar 14.46 14.46 4.35Severe delays in spending (30% release)and problems in getting the UCs done.Chhattisgarh 22.10Rs 9.10 crore in 2006/07 and 13 crore in2008/09Madhya Pradesh 14.96 14.96 14.96OrissaProgram not applicableRajasthan 12.00 7.87 4.87Amount received in 2007/08UC of Rs 4.72 crore submittedWest Bengal 11.00 10.50 10.50FY 2007/08Andhra Pradesh 13.00 13 13Delays due to late planning of funds,approval of plans, etc.Assam 11.00 - -BiharNo funds due to delays in the first releaseChhattisgarh - - Only releases in FY 2008/09Madhya Pradesh 24.00 24.00 19.68Orissa 19.00 19.00 11.92Rajasthan 12.00 - -West Bengal 11.00 5.02 3.82FY 2008/09Andhra Pradesh 13.00 - - Plan is pending approvalAssam 11.00 - -BiharChhattisgarh 13Madhya Pradesh 24.00 24.00 0.0OrissaDelay due to late planning and UC for2007–08Rajasthan 12.00 - -West Bengal 11.00 16.97 9.85Source: BRGF – home-page and data received from the respective StatesConditions for AccessThe CB activities proposed by the States have to be approvedby the High Powered Committee at the State level and theMoPR at the central level. These multiple approval levelswere cited as the major cause of delay to release the funds.Absorption capacityDespite the delays, most of the States had utilized theamounts dedicated for capacity building with an expressedneed for more releases. Many of the people consultedargued that the costing of the CB support in the NationalCB Framework in the BRGF guidelines is too detailed anddoes not cover the full amount required for the activities.There have been delays in spending and implementation ofactivities due to the requirements to spend a certain amounton a given point of time, prior to next release of funds and theexistence of cumbersome planning and approval procedureswith involvement of several layers of government.At the local level, the Review Team met a strong wish fromall political representatives and officials at all tiers to ensureadequate CB support in areas such as training, on the job48First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Text Box 8: Overview of Monitoring and Evaluation for CBThe primary purpose of M&E is to provide information to enable LGs to make appropriate management decisions related to CB.Information from M&E system is also used by the LGs and other stakeholders to learn from implementation experiences: identifystrategies that work and those that do not work; and build on the strengths and devise strategies to address the challenges. Furtherinformation from M&E is used during specific program design and implementation refinementCB should be monitored and evaluated at the following levels• Pre-activity level done before a CB activity is implemented to determine the continued appropriateness of activity;• Reaction level done during and immediately after CB activity implementation to determine whether the CB activity wasrelevant and appropriate;• Job-performance behavior level conducted at agreed periods within a year (quarterly, bi-annually etc..); to determinewhether the beneficiaries are applying learning and changed behaviors;• Functional and institutional level done within one year and beyond after the CB activity to determine how the changedbehavior of individuals affects the functioning of the LGs.All these elements are generally weak in the BRGF CB component.Table 22: Functioning of TSIsState Existence Perceived Quality Future PlansAndhra Pradesh Yes –district divided Moderate – limited funds and Plans to decentralizeamongst TSIlack of district presencemanagement to districtsAssam Yes – district divided Mixed -Planning to engageanother TSIBiharYes – district dividedMixed – limited ownership andlack of continuity and resourcesUnclearChhattisgarh Yes Poor -Plans to decentralizemanagement to districtsMadhya Pradesh Yes – district divided Moderate UnclearOrissa Yes - district divided Mixed UnclearRajasthanWest BengalTwo firms forsituation analysisWBSRDA (SRD cells)Comprehensive input, but notused by the districtsGood - district presence, qualitystaffUnclearMainstreamPerceived Need for CBSupport (PRIs)Strong need for supportStrong need for supportStrong need for supportStrong need for supportNo expressed need forsupportNo expressed need forsupportStrong need for supportStrong need for supportTSIs were discontinued. In Bihar State, SamastipurDistrict, the District Collector and the DDCcomplained about the quality of the support of theselected TSI and the lack of progress on the 5 yearperspective plan. The latter has just been submitted,but the quality was seen as poor. The TSI/companywas contracted centrally and in turn sub-contracteda local agency for the task, but the cooperationbetween the company and the districts has not beenintensive and strong;b.In other States, the budget for the TSIs was reportedinsufficient. This is especially because in manycases the contracted TSIs sub-contracted to otheragencies and shared the budget. For example inChhattisgarh State, it was found that the budget forthe TSI is inadequate to cover the entire district. Thegovernment gave Rs 10 Lakhs to the TSI per district.For Dhamtari and Bilaspur, the TSI identified wasNIRD. They sub-contracted the work to the companyDEBATE at half the rate (30% of which they are yet to50First Independent Review of the Backward Regions Grant Fund — Synthesis Report


c.receive). DEBATE felt the funds were inadequate tocover the district effectively;In some States, the outputs of TSIs were notoptimally used. In Rajasthan State for example, thetwo TSIs produced good quality outputs (the BRGFPerspective Plans 2007/12). However, as discussedunder the planning section, the outputs produced -notwithstanding the good quality- have till now notbeen adequately used. PRIs have little ownership ofthe products prepared by the TSIs, which is in part dueto the fact that most of the TSIs were not contractedand managed by the districts themselves.The above challenges notwithstanding, all the States(expressed a strong need for future TSI support in areas such asplanning from the GP level upwards (save for Madhya Pradeshand Orissa where there was no expressed need for support). Itwas emphasized, however, that the districts should be givenmore say in the selection and supervision of the TSIs and thatthe TSIs -when outsourced- should have a mechanism forinvolvement of the PRIs and skills transfer so that both theprocesses and outputs are sustained. A need for training of theTSI before launching their teams in the field was also expressedby several officials from the States and the districts.4.5 Innovations in CB DeliveryTable 23 provides an overview of some innovations used bythe States for CB delivery. They could be broadly categorizedinto e-based and face to face learning innovations.Interactive Satellite Training, VideoConferencing and Help lines (e-based learning)Under the NCBF, it was planned to cover all States with theinfrastructure required for Satellite training, which essentiallywould comprise of Satellite Studios and reception centers(television, satellite dishes, telephones, uninterruptedpower supply systems and miscellaneous civil works).Most of the States have established Satellite training centers.In Andhra Pradesh satellite training centers have beenestablished in all the blocks, where PRIs are connected forlong distance training, which is often a combination of films,discussions and facilitation. Facilitators are posted in eachcenter and trained in facilitation techniques. This initiativewas highly appreciated by the PRIs visited and the programswere seen as relevant and informative. The training isconducted at a fixed time every Friday and includes relevantTable 23: Innovations Used for CB DeliveryStateAndhra PradeshAssamBiharChhattisgarhMadhya PradeshOrissaRajasthanWest BengalInnovative delivery mechanismsVideo conferencingUsing the cascading model, TOT etc.Electronic facilities under constructionSupport to IT enhancement (Zila Parishads)Conferencing facility is operatingVideo conferencing (District level),Telephones in all villagesVideo conferencing (District level)Using the cascading modelHelp lines at State levelVideo conferencing facilitiessubjects and thematic areas. Participants are providedwith food and receive a smaller travel allowance (Rs 100per participant). As there can be more than 40–50.000participants per week this is major costs item under the CBsupport, but deemed essential by all people met during thefield-work. Other major costs are the KU band transmissioncharges, stationery, training costs, honorarium and lodging.In Assam, physical infrastructure for the State Level SatelliteStudio has been created at SIRD’s Kahikuchi campus.The North Eastern Space Application Centre under ISRO,Shillong/ISRO, Ahmedabad has been providing technicalguidance and support. Fifteen (15) receiving stations arebeing set up in Extension Centers and Block Headquartersfor satellite based training programs to cover both the BRGFand Non BRGF districts.In Orissa State, and taking the e-Governance applications afurther step ahead, the Panchayati Raj Department signeda memorandum of understanding with Bharat SancharNigam Limited (BSNL) for developing an exclusive andreliable broadband Internet connectivity. The Internetconnectivity, which will be a virtual-private network (VPN)of the department, will link the State headquarters with30 district rural development agencies (DRDAs) and 314blocks. BSNL will provide uninterrupted broadband serviceto all the blocks and DRDAs (344 locations) with multiprotocollabel switch-virtual private network (MPLS-VPN).With the support of the NIC, the department is monitoringaccounts and projects of the blocks online through webbased software called ‘Priyasoft’ and ‘Rural-soft’ respectively.Two other software, ‘PAMIS’ developed by XIMB and ‘Betan’by Orissa Computer Application Centre (OCAC), are alsoused for standardization of block account and preparationof pay bills of block employees respectively. All the softwareCapacity Development Issues 51


will be web enabled by BSNL in the VPN. Rs 2.54 crore wasincurred on this initiative.The NCBF suggests setting up telephone helpline. Whereasthe framework suggests partnership with the Departmentof Telecommunication, in Madhya Pradesh no suchpartnership was sought by the State government. The entirecost of setting up telephone connectivity in panchayats wasfinanced by the BRGF funds. Since no consultative processwas adopted in districts before setting up these phones inpanchayats, it was found that, in Seoni, more than 40 percentof them had been disconnected as a result of non-paymentor otherwise. It remains a concern to see how the upfrontfunds transferred to the PRIs as part of annual allocations willbe accounted for if these are not utilized for the purpose.Overall, e-governance has started, and some of PRIs are usingthe various portals for information and dissemination. InRajasthan, it was emphasized that e-based learning shouldcomplement (and not substitute) existing CB modalities(face to face training), also due to limited connectivity insome of the States, and it is important to clarify the strengthsand weaknesses of various CB modalities.The cascading modelAll States are using the cascading model that involve theuse of master resource persons at the national and the statelevels as well as resource persons at the district level mostlystakeholders and participants in Panchayat Raj. Orissa Stateselected and trained a pool of 107 State Level Trainers (SLTs)and 427 District Level Trainers (DLTs) under the projectDakshyta. The trainers were trained on various thematicmodules. Bihar is in a process of doing similar training at themoment and will deploy 4 trained officials in each district.Rajasthan is a strong case of cascading model, also becausethey do not have satellite facilities yet to reach all electedrepresentatives within the first year of election.The resource teams use a wide range of training methods andtools. For example, in West Bengal, the main focus is on capacitybuilding and learning, based on adult-learning principles.Module-based interactive sessions built in with case studies,multi-media presentation, video films/clips, brainstorming,group works and participatory reading and learning are usedincluding hybrid sessions with support of satellite-based ROTs.Overall, the training methods are innovative, can stimulatechange in attitude and can attain wide coverage.Providing training, using a cascading model, demonstratedexistence of human resource capacity that can be exploitedat the various tiers, enabled training of elected leadersnear their homes and made use of the existing network ofExtension Training Centers.4.6 Assessment of Training ActivitiesConductedThe activities conducted under the CB component of theBRGF have primarily focused on training. The priority in thefirst phases of the program has been on the training of PRIrepresentatives and officials, training of trainers at the IPlevel and establishment of volunteers at the GP level, longdistance training and interactions on a regular basis withpolitical representatives and officials from various tiers ofPRIs and training in various subjects at the State level andthrough the regional centers.For instance, in Andhra Pradesh, the training of PRIsmembers was conducted after the last election. Specialtraining has been conducted for the SC/ST members ofthe PRIs and for women representatives and this specialsupport has been highly appreciated as a tool to increaseknowledge, awareness and self confidence 44 . In the Stateof Andhra Pradesh 45 , 149,017 participants have benefitedfrom the training during last FY 2007/08. The participantsincluded ward members, sarpanches, other politicalrepresentatives and officials. The Review Team talked withmore than 100 beneficiaries, and there were no complaintsabout the quality of the training. The State has benefitedfrom a committed and well capacitated Nodal Institutionwith a strong network with other training providers.Amongst the strengths of the CD support has been thefact that it has a large coverage, it is seen as relevant -- beneficiaries have a feeling that it has enhanced theircapacity, awareness and confidence. However,a.In Bihar, the overview of the training conductedby BIPARD in 2007/08 revealed a wide range oftraining in NREGA, but limited focus on BRGFrelevant subjects such as training of politicalrepresentatives and officials from PRIs/ULBs inplanning, PFM, governance, project implementationand accountability, and the activities provided arelargely inadequate compared to the expectations inthe NCBF;44 This is based on clear results from the interviews at all tiers of government as wellas with beneficiaries of the training.45 Input to the questionnaire, delivered on July 7, 2009.52First Independent Review of the Backward Regions Grant Fund — Synthesis Report


.c.d.e.In Madhya Pradesh, the Review Team found thatthe three (3) orientation courses spread over nine(9) days as prescribed under the NCBF has beencrashed into one Integrated Course for the PRIrepresentatives. This course mainly talked about the73 rd and 74 th Constitutional Amendment and othersuch historical legislations rather than transferringto the PRI representatives some hands-on tools forensuring better envisioning, planning or calculatingtheir resource envelop for effective planning;In Assam, it was noted that the short training programsare not sufficient to actually enhance hands-on skillsto the participants. The trainees expressed that theyrequire more time on the practical aspects of thejobs, where the standard short training courses areinadequate to impart the required skills;The NCBF provides for the training of illiterateand semi-literate elected representatives for six(6) months. However, in most States, the BRGF hasnot yet started supporting this important area oris greatly inadequate to meet the needs, but thereis a tremendous scope for medium term trainingof the illiterate political representatives at the PRI/ULBs levels. Some funds are available from the SSAscheme, but there is need for convergence with theBRGF to ensure that courses/training can be moreelaborated. This is seen as an enormous task, whichwill required more resources to be fully efficient;Overall, the training programs are largely supplydriven and the PRIs cannot access training on specifictopics they are interested in.4.7 Outcomes of Capacity BuildingReviewing the outcome of capacity building is constrainedby the fact that the support has only started few yearsback, there has not been any impact assessments of the CBprovided and no base-line survey conducted of the capacityand performance of PRI officials and elected representativesprior to the start of the support. But whereas it is notpossible to draw clear scientific conclusions on the impactof capacity building on performance, there is anecdoticevidence to suggest that the capacity of the PRIs in areassuch as planning, public financial management, goodgovernance and reporting have improved over the pastthree (3) years, even though there is still significant room forfurther improvements. Most stakeholders met expressedthe view that the PRI performance has improved overthe past years and argued that this is –in part- due to thecomprehensive efforts within the BRGF CB components aswell as to the support to the planning process promotedby the development grants. Below are summarized someselected examples of the emerging impact of capacitybuilding on key functional areas of PRIs and ULBs.Impact on performance of elected leaders: A MandalElected Representative in Andhra Pradesh stated that: “theCB training has been very useful in my operations as a member,it has enhanced my understanding of the PRI´s roles andfunctioning” is very representative for the views at the locallevels, in places where training has reached.Participatory planning: There are gradual improvementsin the participatory planning process as evidenced by theavailability of action plans at the GP, PS and ZP levels inmost of the States; The TSI supported improvements in theplanning process -to make it more participatory-, althoughthere remains ample room for improvement. Most of thedistricts have been able to elaborate their first PerspectivePlan, albeit with different levels of quality in areas such asPRI visions, review of challenges, linking of activities to theanalysis, and sequencing of activities.Improvement in the area of PFM: Some of the basicsystems of public financial management are in place, suchas systems for cash books, financial and physical reporting,systems for signatures as shown in Text box 10 below. Itwas reported that the BRGF in some places have beeninstrumental in ensuring stronger accountability, but this isan area where more emphasis is required in future.In Orissa, skills have been enhanced to maintain dailyfinancial transaction at the block and District RuralDevelopment Agency levels; Panchayat Account MonitoringInformation System (PAMIS) software was developed by theXavier Institute of Management, which is a double entryaccounting system, and which has been introduced in allthe Blocks of the State, including in the backward districts.The traditional system of writing manual cash book has beensubstituted by computerized cash book, generated throughPAMIS software. With effect from July 2007, the PAMISgenerated computerized cash book has been declared asthe official cashbook of Blocks. This new system has resultedin accurate maintenance of accounts at the Block levels.But there are challenges with the bank reconciliations andmore elaborated systems such as assets registers, overviewsof maintenance cost implications etc. which are not in placeor not operational. There is a limited sharing and publicationCapacity Development Issues 53


Text Box 9: Improvement in Financial Management: A Case of Bankura District, West Bengal StateComing from a low level of performance, the district now has:190 Gram Panchayats maintaining cash book, ledger and update other registers60 Gram Panchayats are maintaining accounts through computerized Fund Management SystemOut of 22 total Panchayat Samiti, computerized Integrated Fund Management System (IFMS) is successfully running in 20Panchayat Samitiof PFM materials such as plans, budgets, accounts and auditreports in all places. Hence, there is a need for further CDsupport as new systems have been introduced in the areasof accounting and reporting, whilst the capacity of the PRIsis still generally weak 46 .Improvement in procurement: Procurement and tenderingis executed following the government procurementregulations. Procurement training has not yet been capturedin the CB support from BRGF, but is an area which needsattention and targeted CB support. There are limited checksand balances, although each GP has a vigilance committee toreview any kind of grievances. In Purulia District, West Bengal,the private firms implementing projects, especially at theblock level, were reported to have inadequate capacities insome areas. For example delay in implementation was in somecases associated to delays in the supply of materials. Problemswith procurement has also delayed project implementation inother places, e.g. in ULBs in Bihar. In Orissa all BRGF works inrural areas up to Rs 5 lakhs are executed through Village LaborLeader (VLL) system. Works over Rs 5 lakhs, which demandtechnical competency, are executed through an open tenderprocess. Where BRGF funds are dovetailed with NREGS funds,the mode of execution is set by the NREGS guidelines.In MP works up to Rs 5 lakhs are executed at the GP level,between Rs 5–10 lakhs at the IP level and above Rs 10 lakhsat ZP level. Funds for works relating to line departments aretransferred based on the cost estimates submitted by theline department who execute the works following the stateprocurement procedure.4.8 Overall AssessmentThere are a number of positive attributes in regard to theimplementation of capacity building as a key objective46 When compared to international standards for PFM performance, such as thePEFA tool, see www.pefa.orgof the BRGF, and a number of innovative tools have beentested and rolled out. Most of the CB support rendered inthe eight States has been appreciated, there are signs ofimprovement of PRI capacity in some areas (e.g. planningand PFM), but there remains a tremendous need to expandthe operations. However, the systems and procedures for CBunder the BRGF leave significant room for improvement inareas such as CB need assessment, targeting of the supportto the needed areas/stakeholders, mix between supply anddemand-based CB support, capacity of the supply side, andways and means of handling the service providers, whichalso related to PRI/ULB levels of ownership and decisionmakingwith regard to CB. Furthermore, the ULBs have notyet benefited from CB support in most of the States.Amongst the positive aspects are:a. Formulation by all States of a Capacity Building Plan(or semblance of it) that provides the context inwhich CB activities are delivered;b. Despite the delays in releases of funds each of theStates has received some funds for implementationof its capacity building agenda and launched a rangeof initial activities to support the capacity of all tiersof PRIs;c. Albeit using different strategies, all States haveexploited the provision to access technical support;d. There are a number of new innovations in CBdelivery. Most of the States have started to usea combination of e-based learning approaches,including establishing satellite training centers, videoconferencing facilities and telephone help lines andprovision of training using the cascading model. Thecascading model has demonstrated existence ofhuman resource capacity that can be exploited at thevarious tiers, enabled training of elected leaders neartheir homes and made use of the existing network ofExtension Training Centers;54First Independent Review of the Backward Regions Grant Fund — Synthesis Report


e.f.A wide range of training activities has been conductedfor PRI representatives and officials. The trainingconducted has been described as having a largecoverage, and being relevant and beneficial. Duringthe field-missions, the review team did not receivemany complaints from the beneficiaries about thequality of the training provided, however, it was oftenseen as greatly inadequate in view of the needs;There is anecdotic evidence to suggest that the capacityof the PRIs in areas such as planning, public financialmanagement, good governance and reporting havesomehow improved over the past three (3) years.However, there are also a number of systemic and operationalchallenges in the present CB support:a.b.c.d.e.The Capacity Building Plans (CBPs) are of varyingquality and in some States they are formulated bySIRD, without intensive involvement of the RD&PRdepartments. The NCBF does not require the Statesto conduct a capacity needs assessment for eachdistrict, which is a major flaw. The result is CBPs thatare not customized to each PRI and Municipalityand that are not periodically updated to addressemerging capacity development needs arising fromimplementation experiences. It is also not possibleto keep track on the development in PRI/ULBperformance and impact of the CB support. There area few cases of convergence, but in most cases the BRGFcapacity building activities are being implementedin solo. Overall, the capacity building rendered toULBs was minimal, largely due to institutional issuesand lack of clarity on responsibilities;There were severe delays in the disbursements ofthe CB funds due to delayed planning, multi-levelapprovals and delays in submission of UCs;Many of the States (Assam, Bihar, Chhattisgarh,Orissa, Madhya Pradesh and Rajasthan) do not havean effective overall coordination mechanism for CBdelivery;In most of the States, CB support does not encompasssupport to development of Human Resource (HR)units at the PRI level to coordinate capacity buildingactivities;Most of the CB support is targeting individuals andnot institutional strengthening, such as support toestablishment of stronger planning cells at the ZPand IP levels;f.g.h.i.j.k.There is inadequate monitoring and evaluation of CBat the various levels especially at output, outcomeand impact levels;Generally, the quality of the support by TSIs has notbeen satisfactory, the budget for the TSIs was reportedinsufficient and in some States, the outputs of TSIswere not optimally used. The TSIs were insufficientlyprepared for the task and they require upfront trainingcombined with systems of quality assurance;The training programs are largely supply driven andin a number of cases conducted in shorter periodsthan planned;The planned training of illiterate and semi-literateelected representatives is yet to be implemented;There is lack of incentives for the PRI/ULB bodies toutilize the CB support efficiently and improve theirperformance;Overall, it was difficult to scientifically establish in theoutcomes of the capacity building activities as theprogram has just started. Moreover, there was no baseline survey and impact assessment conducted. Hence,notwithstanding the anecdotal improvements, thereis a strong need for further CD support as the capacityof the PRIs is still generally weak.4.9 RecommendationsBased on the review and the identified challenges inthe present system and procedures for CB supportunder the BRGF, the Review Team has the followingrecommendations:Refinement of the overall strategy for provision of CB:BRGF should focus on establishing links between: (i) Thedevelopment fund, (ii) the performance assessment and (iii)CB support (promote incentives to improve performance).This will require the use of a mix of supply driven approachesmanaged by the State to deliver mandatory courses for alllocal bodies; and demand driven approaches wherebydistricts and ULBs are given discretional capacity buildinggrants to address peculiar CB needs. The performanceassessments will enable the PRIs/ULBs to know where theircomparative weaknesses are, and the flexible capacitybuilding grants will enable them to address this in a fastand flexible manner. The performance-based developmentgrants (which could be a topping up of the existingdevelopment grants of the BRGF) will promote a moreCapacity Development Issues 55


efficient use of the CB support provided, as PRIs/ULBs willget rewards for better performance.Capacity building planning: Develop a holistic CD plan,based on specific assessment of the PRIs capacity needs andestablishing a strong link between the CB needs and thesupport rendered. Whilst allowing flexibility and innovationat State level, develop format/template and guidelines forCapacity Needs Assessment and CB planning. The CB planshould integrate CB activities with those implementedunder programs of other agencies.Capacity building funding: The 5% allocation for supportto improve the staffing functions should be allowed to beused –sooner rather than later- to cover the functional gapsat the PRI levels. Some States may be reluctant to createrecurrent liability when they only have 5-Year Plan budgetfor initial hiring, hence a need to have alternative optionssuch as use of private providers to perform functions on acontract basis.An example of possible arrangements is in the case of MP,where 5% of the development fund has been earmarkedto provide specialist at PRIs, salaries of staff & otherexpenditures, monthly telephone charges of PRIs, a fixedamount for inspection of BRGF activities taken by district.Some countries allow LGs to spent a certain percentage ofthe development grants for planning, appraisal, M&E etc.and allow the LGs to decide on the mode of contracting,e.g. fixed employees and/or contracting in of support. Suchexperiences should be considered for BRGF.Capacity building delivery: Combine the mandatorycourses, with more demand driven approach to CB.Improve the CB content by developing self-learning andeasy reference materials. Provide handbooks to trainingparticipants so that they can refer to them as a guide in theiractual work situation. Make use of multiple of tools andmethods including Peer Reviews, sharing of best practices,hotlines, long distance VC connections, IT equipment, andincrease cross-learning exposure visits and seek possibilitiesto provide more hand-holding support to GP secretariesthrough expert guidance at their work. Ensure a movetowards more contracting out of services and support tovarious providers, with close monitoring.There is also a need to rethink the TSI approach. The supportis strongly required and there is need to train institutions/NGOs and other to perform this task if there are no qualifiedproviders in the current set-up. Sufficient amount of fundsshould be allocated to this important function. Zila Parishads(districts) should be allowed to employ appropriate TSI,under a system of quality control of service providers.Capacity Building for Urban Local Bodies (ULB): Ensurethat ULBs are properly covered by the CB support activities.There is need to have a different window for channeling CBfunds for ULBs in order to address their peculiar CB needs.This necessitates a need to clarify the entire role of ULBs inthe BRGF.Capacity building coordination: Strengthen the PanchayatiRaj Department to effectively guide, coordinate and monitorCD support which is spread over a number of institutions.Entrenching the demand driven CB approach requiredthe development of a human resource management/development function at the District level entrusted withthe responsibility of coordinating all CB activities includingbut not limited to: capacity needs assessment, capacitybuilding planning, organizing and/or procurement ofcapacity building providers; supervision the delivery ofcapacity building activities; monitoring and evaluating theimpact of capacity building activities. At the State level, a CBcoordination unit should be established and States shouldnominate CB coordinators as a starting point.Measuring impact of CB interventions: Establish a systemfor monitoring the development in the performance of thePRIs/ULBs. Conduct a CB baseline survey of the presentcapacity and performance of PRIs using a well elaboratedtool. The impact of the activities should be regularlymonitored for example through a system of annual reviewof the impact of CB support. Evaluation of the impact oftraining should use measures such as Tracer Studies and theinformation should be used to improve the training contentsand methods. Each of the local body should also be able toaccount for its performance. This will involve defining therespective roles, setting benchmarks, developing checklistfor measuring performance, assess performance, andproviding incentives for good performance.Further devolution as a capacity building mechanism:As provided for the Constitution, powers and functionshave to be devolved to Panchayats including the 29 matterslisted in the Eleventh Schedule. Panchayats have to be givenimplementation responsibilities and funds as this a capacitybuilding mechanism in itself – through a “learning by doingapproach”. It is therefore of utmost importance that thefuture BRGF encompasses both development grants andCB support. The PRIs/ULBs cannot “walk on one leg” and thetwo instruments should work in a mutually strengtheningmanner towards the objectives of the BRGF.56First Independent Review of the Backward Regions Grant Fund — Synthesis Report


5Monitoring and Evaluation5.1 Systems for M&E within the BRGFThe Review Team assesses that the formal monitoringsystem for the BRGF on paper is rather elaborate withguidelines, M&E formats and systems for regular reportingand monitoring. There are also clear requirements forreporting as access conditions/triggers for releases offunds. According to the guidelines, there are number ofmonitoring and assessment tools in place in additionto the regular reporting procedures, such as utilizationcertificates, financial audit, social audit and conductionof regular gram sabha meetings. The team reviewed theactual implementation of these instruments in the fieldand the efficiency of the M&E system.5.2 Assessment of the M&EAll States have a system in place for regular monthlyreporting with financial and physical progress reports,and some of the States, such as Andhra Pradesh and Bihar,have regular monthly and in some places weekly meetingsbetween tiers of government to follow-up on the progressin project implementation. However, there are a number oflapses in the operations of the M&E system in many Statesand Districts.Gram Sabha meetingsActive Gram Sabha meetings with involvement of a largenumber of villagers in the planning, decision-making andmonitoring of projects is an important part of the legalframework on local governance and is integrated in the BRGFsystems and procedures. According to the stakeholdersin the 8 States, the functioning of the Gram Sabhas variesgreatly, but has been strengthened in the last couple of years.It is assessed from the qualitative survey, review of minutes,etc. that the BRGF has been instrumental in strengtheningof this tool for direct governance. It has provided fundingto back the discussions on the local priorities and plans andit has promoted initiatives such as planning meetings anddiscussion on priorities. However, there is still great room forimprovement in most places, and operational lapses such asthe delays in the CB support has also impacted negativelyon the progress on citizens’ participation, due to lack ofawareness, knowledge and a limited facilitators to supportthe local planning and functioning of the GS. There is a needfor continued support in this area.Financial AuditFinancial audit is conducted in PRIs/ULBs in all States, somewith coverage of only FY 20007/08 (last FY, but one) andothers also covering FY 2008/09. However, in many States,the delays in the release and spending of the BRGF havecaused problems in synchronizing the audit of the generalaccounts with the audit of the BRGF expenditures, and insome States, such as Andhra Pradesh and Bihar, the BRGFaudit is still to be conducted. This may reduce the efficiencyof accountability as funds cannot be handled holistically.Audit should ideally be conducted simultaneously for allsources of funds and all expenditures. Appointment ofindependent CA firms may be considered as a means toexpedite audit to ensure reduction of fiduciary risks (aswas the case in Orissa where audit reports for 16 out of 17districts was submitted for 2007–08).Social auditSocial audit is not yet functioning in most of the districtsvisited. The States have not provided sufficient clearguidelines on social audit by Gram Sabhas in rural areasand Area Sabhas or Ward Committees in urban areas (seesection 4.15 of the BRGF guideline). This is an area in needof strengthening.Vigilance CommitteesThe vigilance committees envisaged in the BRGF guidelineare not very active or not functional at the grassroots forMonitoring and Evaluation 57


BRGF investments in many States. In other States, suchas Bihar, in the districts met, it was informed that thecommittees were in place, but it could not be ascertainedthat they have any major role to play.SignboardsSignboards for projects, including information about thesource of funding, size, responsibility authority and otherimportant information on projects are in place for mostconstructions sites visited. This is a major achievement ofthe BRGF.Monitoring of workThe current monitoring of works in progress varies in qualityfrom district to district. Some of the districts have a ratherelaborate system of engineering support to the executionand control of project quality (e.g. Bihar and AndhraPradesh), whereas there are some challenges in other cases.However, it was the impression that this is one of the areaswhere some improvements over the last 2 years have beennoted.Utilization certificatesThe accountability tool – “Utilization certificates” - has acentral position in the BRGF, and is one of the core triggersfor releases of future development funds. However, thereare a number of unclear issues in the operations of UCs,such as who should sign the UCs, who should control.What are the links to social and financial audits? When andhow? It is surprising that this process is not combined withsimilar initiatives under other programs such as NREGS.Some districts perceive funds as used and fill in the formsfor UCs when funds have been released to the IPs and GPs,exaggerating the overview of the real expenditures.Monitoring of CB SupportThe monitoring and evaluation of the CB is particularlyweak in many places. Review committees at the districtlevel have not been constituted or functional. Peer reviewof progress by Panchayats has not been put in practice inany of the visited States and sharing of best practices is veryweak or absent – only a very few examples are available atthe home-page of the BRGF.Assessment of the impact of CB support is hampered by thefact that none of the places have established baseline of PRI/ULB capacity or performance, and none of the States haveconducted regular independent assessment of the progressand developments.Functioning of HPC and DPC as MonitoringInstitutionsThe HPC and the DPCs are still weak institutional bodies interms of regular monitoring of the performance of PRIs/ULBs. The bodies are mostly focusing on approval of plansand projects.These observations suggest that there is room for improvingthe monitoring and evaluation system. It is observed thatwhile the system of monitoring of individual investmentsof BRGF is generally functional the lapses are in the areaof monitoring and evaluation of the overall programmanagement and progress in achieving the objectives of theprogram and drawing lessons to improve the performance.This is also related to the weak administrative capacity tohandle the program at all tiers of government, see Section 6Program Management.5.3 Conclusions andRecommendations on M&EThe M&E system to track the progress on the BRGFand other PRI outputs and outcomes needs furtherimprovement, particularly on the “E” part, both within thearea of utilization of the development grant and the CBsupported components. There is need for establishmentof an early base-line to use as a benchmark for thefuture improvements, and a need for elaboration of clearindicators for service needs and institutional performanceof each PRI.The Review Team recommends to: (State level): Establish a baseline for PRI performancewhich can be used as a benchmark for measurementof future improvements; (State Level): Establish as system of indicators andbenchmarks for monitoring of PRI/ULBs capacity andCB needs; (State Level): Ensure that regular assessment of theimpact of CD support are conducted, minimum onan annual basis; (State level): Improve publications of PRIs’performance and initiate dialogue on how to improvethe performance in future;58First Independent Review of the Backward Regions Grant Fund — Synthesis Report


(State level): Link the actual performance of the PRIswith the support (grants) provided;(State and districts): Work to institutionalize a simplebut formal system of reviews and monitoring. Themonitoring system should not only be developedfor reporting to a higher level, but to ensure that, ifrequired, monitoring leads to corrective actions;(State level): Ensure that the State is conductingregular assessment of the impact of the CB support;(State and all PRIs/ULBs): Improve the social auditand the use of utilization certificates – these shouldbe endorsed by the Gram Sabhas. There is also a needto spot check on the UC and advance the timingof the audit of the use of funds and to control thecorrectness of the UCs;(All tiers of government): Need for improvedcommunication between tiers of government on theBRGF;(All tiers of government): M&E cells at each levelshould be created for which funds should be availableeither with fixed staff or on contracted basis. This isparticularly important at the district level. It shouldbe considered that the M&E function could beshared between the strengthened Planning Cells fordevelopment/investments and HRM Unit for CB;(State and Districts): The State should supportestablishment of a technical secretariat at thedistrict level with monitoring capacities. Similarly,monitoring personnel could be based at theblock level to support concurrent monitoring ofactivities;(Central and State level): Improve the documentationof good practices and sharing of lessons learned;(State level): Implement a peer review system asenvisaged in the BRGF Guideline;(State and Districts): Activate and broaden the scopeof Vigilance Committees formed at the GP level;(Central and State level): Strengthen the use ICT toolsto monitor physical as well as financial performanceand progress;(All tiers of government): Provide stronger support tothe entire management of M&E, see below.Monitoring and Evaluation 59


At the PRIs/ULB levels the program guideline emphasizes onstrengthening their statutory committees at the GP, IP andZP levels. The Review Team came across such committeesestablished during the field visits in some districts. However,the presence of such committees is not prominent – eitherthey were not active, or not given proper roles. In this regardthe institutional mechanism has not been effective as yet.There is a need for the following changes:Review the roles, functions and authorities of thedifferent bodies at different levels. The review mayresult into abolishing or revising the functions,powers and authorities of a body with regard to BRGFprogram implementation. As a rule of thumb theReview Team would recommend that the main rolesof the HPC would be to provide guidance, coordinateacross the departments/agencies, and focus onstrategic management of the BGRF; setting normsand standards, and encouraging good performance.Such a body should not engage in approval of plansbut can encourage, facilitate, reward, and monitorthe planning process of PRIs and ULBs. Similarly thefunctions of DPC should also be limited to what isprovided for in the constitution – i.e. to consolidatethe plans of PRIs and ULBs – and should not makeplanning decisions such as adding or deducting onthe programs identified by constitutionally mandatedbodies such as ZP, IP, GP and the ULBs. As mentionedunder planning the DPC should support the PRIs/ULBsthroughout the planning and budgeting processeswith guidance, information, and TA;Establish a system of ex-post evaluation rather thanputting emphasis on ex-ante control. Such a systemis helpful to promote local autonomy, ensure smoothoperation and at the same time steer the local bodiestowards a common goal;Increase intervention programs on strengtheningthe statutory committees at all levels.6.2 Institutions and HR IssuesCentral LevelThe current Program Management unit in MoPR at thecentral level is small and consists of an additional secretary,a director (who also has other tasks), an under-secretary, asection officer, 3 assistants, 3 consultants and a computeroperator. NIC is also supporting the unit with IT. The maintasks of the 3 consultants are currently to review the plansand proposals from the 250 districts and monitoringcompliance with various rules and regulations.The main tasks of the program management unit in MoPR 47are to: Respond to requests and questions from the office ofthe PM and other ministries; Communicate and disseminate information aboutthe entire BRGF; Review and monitoring the plans from the Statesand the Districts on CB and development grants andendorse these (major task), Issue and up-dated guidelines on the operations ofthe BRGF; Ensure that allocations are adhering with theobjectives and principles for the BRGF; Ensure that funds are flowing to the States in a timely,predictable and efficient manner; Up-date systems and procedures for the entireprogram; Be involved in related tasks such as guidelines forplanning, PFM and PlanPlus; Coordinate with other authorities, institutions andprograms.Compared to the work-load, keeping in mind that some ofthe staff have other assignments as well, the existing staffingnumber in MoPR meant to handle the BRGF is low. The ReviewTeam concurs with the officials interviewed in the field thatthere is a need to strengthen the PM cell of BRGF in MoPR.The core staffing gaps identified at the central level are: dataanalysts and monitoring and evaluation staff, statisticians,GIS, planning expertise, program management support staff,fiscal analyst, Public Financial Management Specialists andIntergovernmental Fiscal Transfer specialist, particularly toreview the allocation criteria and systems, and HR expertise.State levelOnly one of the eight States – West Bengal (throughWBSRDA) – had a special BRGF unit at the State level tohandle the vast amount of BRGF tasks.All States complained about lack of capacity to handle thetasks, which encompasses, among others:47 Based on interviews with the top officials in MoPR.62First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Coordination of the CB support and link with theNodal Institution;Support to the HR development at the PRI/ULBlevels to strengthen management of the program,including the handling of the 5 % from thedevelopment grants;Review and monitoring of plans from the DPCs;Support the operations of the High PoweredCommittee;Ensure links to MoPR and follow-up on issues such asgrant utilization;Handle releases of funds to the PRIs and ULBs;Monitoring of compliance with all guidelines;Issuing of guidelines on all aspects of the BGRF;Issuing of PFM systems and procedures;Up-dating data-banks for processing of all data onBRGF utilization;Ensuring linkage and convergence with otherprograms;Development of guidelines for districts and PRIs/ULBs; andMobilization and monitoring of TSIs.In seven of the eight States, these functions were handledby 1–3 people, often led by the commissioner in theDepartment of Panchayati Raj, who also had other tasks inaddition to the BRGF. Despite strong commitment, thesepeople were overloaded with functions and not stronglyfacilitated in terms of support staff, equipment, facilitiesand communication systems. There is a strong need for afully dedicated officer at the middle level exclusive for theBRGF coordination.District LevelAt the district level, 7 out of the 8 States (West Bengal hada special SRD unit to support), had very weak managementcapacity and support for the BRGF. Most of the functionsare handled by the CEO who has many other importanttasks. There is very limited support from the planning unitsof the districts, as these are also weak and not under thecontrol of the CEO. The coordination tasks of the districtare tremendous, both in terms of coordination of the plansfrom more than 100 units (GPs, IPs and ULBs), but alsowithin areas of CB support and monitoring. The BRGF offersvery limited support for these important functions, andthere is no support to hire extra staff, logistical support orequipment (only few places have boosted the districts withsome limited IT equipment to support the BRGF). 48There is therefore a strong need to support the BRGFoperations at the district level with dedicated staff and/orpossibilities to contract in PM support. There is also a needto support the planning functions at the district level andto establish a strong district planning cell with genuinestrategic and operational planning expertise, statisticiansand data specialists. BRGF has so far not played any rolein this area. Finally, there is a need for the districts to buildup their capacity to handle CB support in a more demanddriven manner, including capacity to elaborate CB needsassessment, monitor the capacity of various PRIs, handleown CB programs and activities etc. and to manage theinternal current organizational development, throughsupport from a HR cell in each district. The urgent staffingneeds identified at the district level were: Planning expertise, the existing data collection skillsneeds to be amended with genuine strategic andresource-based planning and prioritization skills; M&E expertise, including data-handling; CB skills and expertise; HR and capacity building expertise; Communication and information specialists; General program management support.Capacity to handle the CB supportAs mentioned under the CB section, most the CB supporthas been delayed and insufficient in most States comparedto the envisaged support in the BRGF guidelines. There isno easy solution to this major challenge, as it is caused by anumber of contributing factors, such as:1. Weak capacity of many of the nodal institutions tocoordinate and perform the functions;2. Weak overall capacity amongst service providers ofCB, e.g. States such as Bihar;3. Weaknesses in the design, such as lack of incentivesfor the PRIs to improve capacity and performance (i.e.non-utilization of performance-based instruments ingrant allocation, systems of rewards, lack of monitoringand sanctioning in cases of mal-practices, etc.);48 This is also related to the need for clarification of the use of the 5 % forfunctionaries.Program Management Issues and Institutional Arrangements 63


4.5.6.7.The large number of PRIs/ULBs involved and thetremendous need for CB to the new and relativelyweak institutions;Up-start of a new system of support whichencompasses both CB and development investmentsupport;Lack of cross-state and cross-district learning andcoordination; andWeak capacity from the upper tier to support thelower tiers of government.Coordination of PRI and ULBsThe program management of the ULBs has been particularlyweak in terms of allocation of funds, communication aboutrules and procedures and CB support to the ULBs. In additionto the challenges mentioned above for the PRIs, ULBs aresuffering from the lack of coordination at the State level inmany States between the departments in charge of PRIs andULBs. This needs to be addressed as a matter of urgency, andthe various departments have to meet regularly and needto strengthen the coordination of all information flow andguidance to the ULBs about the operation of BRGF.6.3 Guidelines and manualsThe stakeholders from the States and PRI levels appreciatedthe BRGF guidelines and formats, but could also identify anumber of gaps and areas in needs of improvement. For theULBs, there is need for specific guidelines, relevant for ULBmatters, or improvements of the existing general guidelinesto encompass the urban issues, as the existing guidelines arevery unclear and insufficient concerning the involvementof the urban bodies. Some of the States consider issuingof specific urban guidelines but delays in clarification hasdelayed the entire operations of ULBs in some places (e.g.Andhra Pradesh and Bihar). The guidelines are uniform forall types of PRIs/ULBs, which may cause high transactioncosts and lack of customization and targeting.6.4 Recommendations on ProgramManagement, Institutions andGuidelinesAs described above, there is a strong need to strengthen alltiers of the BRGF program management. The present systemis characterized by lack of resources for core managementtasks related to the BRGF, such as planning, CB coordinationand M&E, including impact assessments. This impactnegatively on some of the areas such as releases of funds,delays in approval, and lack of use of monitoring data forcurrent improvement of the program operations.Program Management and InstitutionalFrameworkThe Review Team has the following recommendations onProgram Management and Institutional Framework: Strengthen all levels of program managementthrough: (Central): Strengthen the capacity of the BRGF“cell” in the MoPR, through increasing theexisting staffing level by 4–5 additional staff,covering: M&E, planning, PFM, grant specialistand CB coordinator; (Central): Clarify the utilization of the 5 %for functionaries in the BRGF manual (this iscurrently not clear for the States/PRIs/ULBs); (State): Change the role of the HPC from thecurrent role of an approving body to guidanceand coordination, including monitoring andcoordination with the sector departments; (Central and State level): Change the rules andguidelines of the functioning of the DPC fromapproval body to a body for coordination,support and guidance and current monitoring,including clearance of grievance betweenvarious PRIs/ULBs; (Central and State level): Ensure that there arefunds available for all tiers of government forProgram Management, 1–2 % of the grantsfor the State level and 5 % for each PRIs of thedevelopment grants to ensure that functionssuch as planning, design, appraisal, monitoringand evaluation can be sufficiently covered, e.g.through contracting in of core specialists; (State and districts): Support the establishmentof dedicated Program cum Planning unit at thedistrict and block levels; (State): Devise a communication strategy forthe relationship between the States and thePRIs/ULBs;(Central and State level): Strengthen audit and expost monitoring and evaluation, including follow-upon mal practices, instead of focusing on prior controland cumbersome approval process;(Central) Within the area of CB, the weaknessesidentified in coordination and program management64First Independent Review of the Backward Regions Grant Fund — Synthesis Report


should be addressed through a number ofinitiatives; (Central): Up-date the National Frameworkfor CB support, to focus more on the overallprinciples and initiate a more demand – drivenapproach; (States): Support establishment of baseline forcapacity and general tools for measuring of PRI/ULBs capacity and performance development; Include support to improved capacity of theservice providers;Strengthen the networking of the SIRDs;Improve the tool of contracting out of the CBsupport; Strengthen the sharing of good practicesamongst the States and the districts; Strengthen the program management capacitywith a CB expert at each tier of government– central, state and district levels; Allow the districts to be entitled to a CB grantsfrom which they can buy CB support withina defined menu, including contracting in ofTechnical Support Institutions.BRGF GuidelinesThere is need for up-dating and improvement in thefollowing areas:Clarify the objectives and the hierarchy of these (p. 4).The existing objectives of the BRGF, as described on page4 in the BRGF Guideline, are a mix of input, processes andresults. A more logical framework with a clear overview ofthe inputs, processes and outputs and outcomes should beelaborated with indicators for each. As the major initiativeby GoI to “empower” PRIs/ULBs, the BRGF objective tofocus on PRI/ULB empowerment should be in the forefrontof this reformulation, strengthening LGs so that they canproactively deal with local development challenges.Utilization Certificates (p. 18). There is serious confusionin the field about the entire UC tool, particularly concerningwho should issue the UCs, when should they be issued?What are the links to the audit exercise? How is it linkedto the social audit? Etc. There is a need to clarify the use ofthe UCs in the revised BRGF guidelines. The UCs is also abottleneck for the disbursement of funds, and the systemof conditions for this should be reviewed. The PRIs/ULBs arereporting for use of funds, and these reports may be treatedas the conditions for funds access, if properly monitored andfollowed-up. UCs may be a future performance measurein the performance-based allocations. The financial auditshould be strengthened and should be timely within thearea of BRGF. Audit should move away from program audittowards integrated audit of all PRI/ULB operations.Clarify the investment menu (several places, e.g.p. 8, 9). Some of the States and DPCs are intervening in thelocal priorities and are setting very tight conditions on theareas where the BRGF funds can be utilized. This is againstthe objectives and spirit of the BRGF to strengthen thelocal planning and prioritization process under an untiedfund scheme. There is a need to specify the objectives inthe overall guidelines and for the States to consider onlya brief negative list of non-eligible expenditure areas. Thenew guidelines should allow that a certain percentage ofthe funds can be used on maintenance of investments, toensure long term sustainability and up-keep of structures.The present guidelines are silent on this issue.Clarify the 5 % allowed for functionaries (p. 9). Asmentioned, the 5 % allowed for boosting of staffing capacityat the local level (page 9 in the guidelines) is not used due toconfusion about the options and lack of guidance. However,the field-work documented a great need for this support.It is important that the future guidelines clarify this matter,and allow each level to withdraw a certain percentage of thefunds for PM. It is tentatively suggested that this percentageis set at 1% for the State level and 5 % for the District, IP, GPand ULB, i.e. each local body can use 5 % of the developmentgrants for so-called investment servicing costs, which arecosts for planning, technical design and costing, appraisal,monitoring and follow-up. 49Support to the Planning Functions (p. 50). The DPC in thedistricts are poorly functioning in most districts. In the firstplace DPCs have not been able effectively to coordinate andintegrate the plans of different agencies into a District Plan.Even some of the perspective plans prepared are of suboptimalquality. DPCs do not have a supporting secretariat. Itis necessary to develop the capacity of DPCs. There is a needto support the DPCs through an establishment of a DistrictTechnical Planning Team, composed of the planners, theengineers, the CEO/DDC, and core heads of departments,and this should be described in the future BRGF guidelines.Change the approval procedures (p. 50). The guidelinesshould make it clear that the PRI and ULBs are approving theirplans and priorities within the regulations set by the BRGF49 Similar arrangements are established in other countries such as Nepal, Uganda,Bhutan, Tanzania and Solomon Islands.Program Management Issues and Institutional Arrangements 65


and other legal documents. The role of the DPCs and HPCsshould not be to approve and change plans and proposalsand priorities from the PRIs/ULBs, but to guide, monitorand check compliance and settle grievances. The currentmonitoring and support at the district and state levelsshould be improved through boosting of the PM capacitysee above. The district planning team should support thecoordination of plans and ensure that data is available for allunits prior to the prioritization of projects. The DPC needs astrong secretariat, planning cell, where most of the work willtake place, such as guiding the PRIs/ULBs on planning, datacollection and dissemination, review of grant utilization andprogress, impact assessments etc. More specifically, there isa need to revise page 50 in the BRGF guidelines to reflectthis proposal.Simplify rules for disbursements (P. 17). The rules on90 % disbursements in the first installment and 10 %in the second, 60 % spending for the first installment toget the second, and the requirements to spent minimum75 % of the releases from last FY and 100 % of spendingfor the last year, but one, prior to release of funds for thecoming FY, are complicated, lead to misunderstandings inthe field and delays absorption of funds, particularly whencombined with delays in the start of the releases and inthe overall planning process. As mentioned under theSection on Development Grants, there is a need to revisethis system to ensure that there is front-load of funds, andregularly replenishments of funds, but with some ruleson maximum level of unspent funds on the accounts. Thesystem should be combined with a reform of the flow offunds, learning from the experiences from the State ofMadhya Pradesh.Criteria for backwardness (page 6). The national allocationacross the districts should be improved and this should bereflected in the BRGF guidelines, page 6. The guidelinesshould provide some guidance to the States on the usefulcriteria for measuring backwardness in the various regions,such as data on people below the poverty line, size of theSC/ST population, various indexes for backwardness, etc.The guideline could also provide further guidance on theperformance-based incentives mentioned on p.6, e.g. in anannex to the main guidelines.CB Framework (p. 60 ff). The National Framework forCapacity Building is an appropriate guideline tool in termsof outlining a wide range of important activities and toolsfor support to local capacity building. However, it is toodetailed in terms of determining the specific activities (notdemand driven), and in terms of detailed costing of these(page. 60). The guidelines should be refined to focus onthe general principles, areas of support, ideas for how tohandle this, and the States should fill these in, according tothe regional needs and options. Districts should be givena much stronger role in deciding the specific CB activitiesand framework (see CB Section). An annex to the BRGFguidelines can provide guidance on unit costs of varioustraining activities, e.g. rules on allowances etc.Communication strategy and future guidelines. There isa need to design a strong communication strategy for theentire BRGF, including a strategy for communication to theStates and districts, with clear time-plan, procedures etc. TheBRGF guidelines should be updated regularly and the issuingof various letters from MoPR, where fundamental issues inthe guidelines are changed, without up-dating of these ina consolidated manner should be avoided. These letters hascreated confusion about the prevailing rules and systems.State guidelines. The States should either issue the centralBRGF guideline from MoPR and endorse these as their overallguidelines, or issue a more state specific BRGF guidelines,which are “synchronized” and harmonized with the Centralguidelines, but encompassing more state specific issuesand procedures. These should also be regularly up-datedand encompass issues on ULBs (or a specific guideline forULBs should be issued).General rule concerning mentioning of specific Years(e.g., p. 49). When the BRGF guidelines are up-dated, theyshould not mention a specific year, e.g. FY 2006/07 on page49 and FY 2007/08 on page 50, but should be general anduseful for all future years. If there are specific issues relatedto a specific year, these should be mentioned in footnotes.66First Independent Review of the Backward Regions Grant Fund — Synthesis Report


7Conclusions – Findings andRecommendations7.1 Overall ConclusionOverall the BRGF has positively influenced the developmentwithin all four objectives, but the expected outcome - tomitigate regional imbalances and contribute (significantly)to reduce poverty, will require a number of bold steps andstrong measures such as: i) increased amounts of funds, ii)better convergence and coordination with other fundingsources, iii) improved targeting of the flow of funds towardsthe backward areas and iv) a number of operationalreforms within the two main components of the program– development grants and capacity building support.There are a number of serious systemic and operationalareas of the BRGF which delay the achievement of all fourobjectives, both within the development grant schemeand in the design and operations of the capacity buildingsupport. Below is a summary of these challenges and therecommendations from the Review Team on how to mitigatethem and move forward the important intergovernmentaltransfer modality which BRGF certainly is.7.2 Summary of Challenges and RecommendationsTable 24: Overview of Challenges and RecommendationsNo Issue Major Finding Major RecommendationsI. DEVELOPMENT GRANTSVolume of fundsInsufficient to bridge the fiscal gapsand address backwardness. It onlyallows for a very few smaller sizedinvestments per year per PRI.Integrated planning is hard whenPRIs/ULBs only have small amounts ofdiscretionary funds.2. Allocation criteria The district allocation is not targetingbackwardness.3. Allocation criteria andrewardsSome of the States are using variouscriteria for backwardness in theinter-district allocation (horizontalallocation across PRIs and ULBs).The funding system is notperformance-based as envisaged inthe guidelines and there is lack ofincentives to improve performance.Increase the BRGF allocation by 2–3times.Improve the targeting of districts, andinclude criteria for backwardness inthe district allocation formula, basedon experiences from the States (iffunds are increased).Improve the allocation formulas andtargeting between and within thedistricts and ULBs, by using criteriasuch as size of the SC/ST population,PBL, illiteracy rates and child mortalityrates.Make a share of the fund allocationperformance-based, adding simplecriteria for PRI/ULB performance and arobust assessment system.Main ResponsibleBodyCentralGovernmentCentralGovernmentStatesStatesConclusions – Findings and Recommendations 67


No Issue Major Finding Major Recommendations4. Allocation ofresources to thedifferent tiers5. Information onallocation ofresources across tiers6. Release andutilization of fundsIn some States, the resources are notallocated vertically, but allocated perscheme and controlled by the districtlevelNot widely knownDelays in all phases of the process ofreleasing funds7. Investment menu The investment menu is unclear formany PRIs/ULBs8. Investment menu Issues of ownership, maintenanceand assets management are notadequately catered for at the PRI/ULBlevel.9 Investment menu Some of the PRIs/ULBs have seen theirdiscretion curtailed even though thegrant was supposed to be untied.10. Investment targeting Some of the States have no goodoverview of the targeting of funds,particularly with regard to on SC/STgroups.11. Investment targeting Some of the PRIs/ULBs fragment thefunds across wards and smaller units.12. Communication There is lack of awareness/sharedknowledge regarding many of thefeatures of the development grantsystem.Resources and mandates should beallocated to the different tiers as perthe principle of subsidiarity and notkept at the district level.Improve information sharing. Notableensure dissemination of informationon the allocation criteria, on sizeof grants, on timeliness about alltransfers and on justification priorto the start of the PRI/ULB planningprocess.Earlier start on the planning process.Change present system of releasetowards system with quick bankreleases (MP model or variant of this)Change the rules about the minimumrequired spending to ensure sufficientfund availability.Clarify the investment menu (eligibleexpenditures) in BRGF guidelines.Ensure clarity on how the 5 % forfunctionaries can be used.Clarify that development funds shouldbe used on public investments, notprivate goods and livelihood activities.Ensure that a certain % of thedevelopment grants can be used onmaintenance of investments.Promote PRI/ULB planning andbudgeting for maintenance byincluding it as part of the performancereward system.Support development of assetsregisters (as part of the CB support).States and districts should refrain fromintervening in the local priorities, ifthese are within prescribed mandates,regulations and guidelines.Ensure a strong targeting of fundstowards the vulnerable areas andgroups, particularly the SC/ST, andstrengthen the monitoring for this.Ensure proper guidance on thenumber and size of the investments,eventually by setting a maximumnumber of investments by authority.Improve the communication fromthe States to the PRIs regarding theoperations and features of the BRGF.Main ResponsibleBodyCentralGovernmentStatesStatesZila Parishads tothe other tiersCentralGovernment andStatesStatesCentralGovernmentCentralGovernmentCentralGovernmentCentralGovernmentCentralGovernmentStatesStatesStatesand ZPsPRIs/ULBsStatesStates68First Independent Review of the Backward Regions Grant Fund — Synthesis Report


No Issue Major Finding Major RecommendationsII. PLANNING1. Participatory planningprocesses2. Information aboutplanning budgetfigures3. Convergence withline departments4. District PlanningCommittees5. Implementation ofprojectsTSI support has been provided inmany places. However, it has not beenoptimally utilized and sometimeslacked sufficient quality.The (upfront) information sharingabout resources available and statusof the planning process is weak inmany places.Not yet attained.Most planning is done in silos, withlack of horizontal convergence andintegration of plans.Not functional in some districts androles too much focused on planapproval.BRGF funding is sometimes amendedwith funding from the FinanceCommissions, but seldom from othersources.6. HPC The deliberations in the HPCs are oneof the reasons for the delays in theplanning process, and their role ascoordination mechanism is still weak.7. Strategy andPerspective Planfor CapacityDevelopmentIn place, but not suited to customizeCB to needs of particular PRIs andULBs8. Planning capacity The present capacity in planning isweak at the district level and below.Strike a balance between an intensiveplanning support approach and amodel that can be replicated.Ensure high quality TSIs, in a moredemand driven approach with ZP inthe contracting role.Ensure early announcement ofplanning budget figures for PRIs/ULBsand ceilings.The State Planning Departmentshould instruct sectors to provideinformation about their plans andbudgets for each PRI and ULB. Eachdepartment should create separateline items in its budget for PRIs/UBLs.Initiate elaboration of sector grantsand break down of funding acrossvertical tiers.Expand the size of the BRGF to makeit more relevant for cross-sectoralpriorities.Clarify composition, roles and workmodalities for DTC and change theirroles from ‘approval of plans’ toguidance, TA, consolidation, oversight,monitoring and evaluation, such thatPRIs/ULBs retain decision-makingresponsibilities within the planningand prioritization.Incorporate more technical expertisein the DPC, and ensure that the sectoragencies are included in the activework in the DPC.Further exploit opportunities forconvergence (particularly co-funding).The role of the HPC should move awayfrom rubber-stamping or vetoingdistrict plans towards a focus onstrategic management, oversight andcoordination of BRGF.Use a mix of supply and demanddriven approaches in CB.Support establishment of a strongDistrict Planning Unit to ensureintegrated planning, and to act asthe secretariat for the DPC and tocoordinate all planning in the district.Main ResponsibleBodyStatesZPsStatesStatesCentralGovernment andStatesCentralGovernmentCentralGovernment andStatesStatesStatesPRIs/ULBsCentralGovernmentthrough guidelinesStatesPRIs/ULBsCentralGovernment andStatesSupported by theZP.Conclusions – Findings and Recommendations 69


No Issue Major Finding Major Recommendations9. Planning calendar Planning is seriously delayed, andthere is no fixed planning calendar inthe States.10 Quality of planning There are no clear formats for plans– the existing District Manual is toocomplex for the GP and IP levels.11. PlanPlus PlanPlus has been introduced inmany places and has the potentialto be a very important planningtool; however the full potential is notrealized due to lack of coordinationwith sectors.III. CAPACITY BUILDING1. Strategy The possible synergy of linking thedevelopment grants, the CB supportand performance incentives are notoptimally explored and used.2. Supply versusdemandThe existing approach is supplydriven, providing each PRI/ULBwith the same support withoutlocal discretion (and hence withoutconsidering actual needs).3. Assessments CB needs assessments and baselinestudies have not been conducted.4. Capacity buildingdelivery andcoordinationIn many places the CB is conductedwithout clear convergence of BRGFand other initiatives.5. CB Providers capacity In some States the capacity ofthe service providers, incl. nodalinstitution(s), is weak, causing delaysin implementation of CB support.6. TSI TSI support is required, but its qualityhas so far been mixed and ownershipfrom the ZP problematic in manyplaces.7. Staffing The allowed use of 5 % in the BRGFguidelines for functionaries is notclear for the States and it has not beenproperly utilized.Establish a fixed planning calendarwhich ensures that plans arefinalized prior to the start of the FY(start the planning process in Julyprior to the FY).Provide easy planning guidelines foreach tier of PRI/ULBs covering themain issues regarding the perspectiveand annual plans.Ensure that sectors are introduced toand start using the PlanPlus system.Continue training in the use of thesystem.Re-design the overall CB strategy toensure that CB is focusing more ondemand-driven modalities; combinedwith incentives to use the supporteffective; linked to performanceassessments and regular impactreviews.Ensure that a significant part ofCB support is delivered through adiscretional CB grant to the ZP toensure that they can obtain/procureCB support adjusted to local needs.Elaborate tools for CB needsassessments and performanceassessments of PRIs/ULBs.Ensure regular assessments ofperformance, including impactassessments of the CB support.Convergence should to be deepened.CB coordinators should be put inplace at the State level.Explore the use of the model ofoutsourcing CB supply.Provide training to CB serviceproviders to strengthen their delivery(combined with M&E/performanceassessment system).TSI should be contracted by the ZP,based on a selection from a long-listof pre-qualified service providers.Improve guidelines on the useof the 5% of funds for staffingimprovements, and make it moreflexibility how these funds can beapplied.Main ResponsibleBodyStates and PRIs/ULBsCentralGovernmentCentralGovernment andStatesCentralGovernmentCentralGovernment andStatesCentralGovernment andStatesStatesStates (NodalInstitutions)StatesStatesCentralGovernment70First Independent Review of the Backward Regions Grant Fund — Synthesis Report


No Issue Major Finding Major Recommendations8. ULBs ULBs have been left out of most CBactivities under BRGF.IV. MONITORING AND EVALUATION1. Baseline There is no baseline for theperformance of the PRIs/ULBs andfor the status in areas relevant for theobjectives.Ensure that ULBs are adequatelycovered in all CB activities.Establish a baseline for the PRI/ULBperformance and capacity withindicators and benchmarks.Establish baseline for components ofBRGF, to enable progress monitoringof objective achievements.2. CB assessments CB Assessments not conducted. Carry out regular impact assessmentsof CB support.3. Utilization Certificates The practical use of the requiredUtilization Certificates (UCs) is unclear.Clarify the links between the regularreporting, the UCs, the social auditand the financial audit.4. Reviews Lack of reviews of the BRGF. Institute a system of regular (annual)reviews of the operations of the BRGF.5. Social Audit Social audit is not conducted in mostplaces.Support to establishment of robustsystems of social audits, facilitated byCB support and facilitators.6. Capacity for M&E The capacity for M&E is low at all tiers. M&E trained people should be locatedat the State, District and IP levels aspart of the general strengthening ofthe program management.7. Sharing ofinformation and bestpracticesLack of sharing of good practices andpeer reviewsV. PROGRAM MANAGEMENT (PM)1. Staffing levels Limited especially at the IP and GPlevels2. BRGF Central LevelPM capacity3. BRGF PM capacity atState level4. BRGF PM capacity atthe district levelNeed to strengthen the staffingcapacity at the central levelNeed to strengthen PM capacity at theState level.Need to strengthen PM capacity at thedistrict level.Improve the sharing of goodpractices, through IT, visits, exchangeof information, peer review modalitiesetc.Clarify and elaborate on the use of atleast 5% of the development grant forfunctionaries.Strengthen the central PM in terms ofstaff and resources (4–5 extra staff),including:- M&E- Fiscal analyst- Intergovernmental fiscal transferspecialist- CB specialistSupport the state PM with M&E, PFM,CB and communication staff.Allow that a certain % of the grantscan be used on investment servicingcosts for the PRIs/ULBs (planning,design M&E).Support establishment of dedicatedunits at the district level fordevelopment planning, includingBRGF organization.Main ResponsibleBodyCentralGovernment andStatesCentralgovernment- general guidelineand StatesCentral and States.StatesCentralGovernmentCentralGovernment andStatesStatesStates as part ofthe CB supportAll tiersCentralGovernmentCentralGovernmentCentralGovernmentCentralGovernment andStatesConclusions – Findings and Recommendations 71


No Issue Major Finding Major Recommendations5. HR unit at districtlevelFOLLOW-UP STUDIESThere has been no support to theestablishment of human resourcemanagement capacity at district level.1 Allocation Formulas Present allocation system is notsufficiently targeting the backwardregions2 Size of the grants The size of the grant seems small,but there is need for a more detailedstudy to assess the actual amountsrequired/desired.3 Performance criteria The system has not performancecriteria and incentives forimprovements.4 CB framework CB needs up-dating and clarification.It needs to move towards a combinedsupply and demand driven model.BRGF GUIDELINES1. BRGF guidelines Need to clarify and update theguidelinesSupport establishment of a HR unitat the district level, which can handleinstitutional improvements anddemand-driven CB approaches.Launch a detailed study of the mostoptimal allocation criteria and formulafor allocation across districts and forallocations within districts. A review ofthe BRGF allocation formulas shouldencompass:- new criteria for backwardness- exploring options such as BPL,SC/ST, people living in slum areas,illiteracy rates, child mortality rates,composition of employment, etc.- final formula for the allocationacross districtsProvide guidance to the States aboutinter-district allocationsStudy to arrive at a better, (but stillrough) estimate of the future size ofthe development grants and reviewvarious options for increasing fundsfrom GoI, DPs and other sources.Study to review experiences ofperformance-based grants.Outline options for the States to applyin future allocations.Refine the BRGF guidelines andup-date the framework, focusing onprinciples, strategy and less on details.Up-date the guidelines and addressthe issues raised in sections 6.2 and6.3.Main ResponsibleBodyStatesCentralGovernment incooperation withthe StatesCentralGovernment (MoPRand PlanningCommission).CentralGovernment incooperation withStates.CentralGovernment withsupport from theStatesCentralGovernment72First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Addendum from the BRGF Division ofMoPRThe Study has underscored the multiple objectives thatthe BRGF is expected to achieve, such as (a) Bringingabout integrated decentralized planning at village, block,municipal and district levels, (b) strengthening the GramSabhas in the rural areas and area Sabhas in the urban areas,(c) strengthening the panchayats and the municipalities byway of augmenting their staff and infrastructure, (d) assigninga pivotal role to the panchayats and the municipalities inadministration of developmental schemes and programs,and (e) removing the backwardness of the 250 districtsidentified to be backward. Each of these is a daunting task byitself. Therefore, to achieve all these together through BRGF,with rather frugal resources available under the Scheme, isindeed a tall order.While BRGF has crystallized constitution of the DistrictPlanning Committees (DPCs) in almost all the States, thisachievement has remained largely notional, as the DPCs arehandling, as a national achievement, only the BRGF Plans.It is no gainsay that the DPCs need to be strengthenedprofessionally. However, lack of technical manpower hasnot been cited by any line Ministry or State as the reason fornot routing the sectoral plans through these committees.The Study has highlighted the need to redefine the role ofthe DPCs and the State High Powered Committees (HPCs)as facilitators rather than controllers, of the Scheme, whichwould effectively strengthen the role of the local bodies inthe administration of the Scheme.The Study has brought to fore the role of Technical SupportInstitutions (TSIs) in program planning. The success of theTSIs in performing their expected role has been quite unevenacross the States and Districts. In the existing scenario, whereno Centrally Sponsored Scheme (CSS) assigns a pivotal roleto the DPC, leaving these Constitutional Bodies to handleonly the BRGF, the success of TSIs in producing the DistrictPlans of reasonable substance even in a significant numberof districts can be termed as a commendable performance.The Study highlights the popularity of Anganwadis withthe people. My own tour in the villages across the countryhas given the same impression without any exception.These are actually crèches for the rural areas and are veryunderstandably popular with the people. Unfortunately,the Integrated Child Development Service (ICDS), which isthe main CSS that has introduced the Anganwadis, does notprovide for buildings for these Centers. MoPR has alreadysounded the Ministry of Women & Child Development onthe issue.A separate study has indicated significant intra-districtvariations in terms of indicators of development such asaccessibility, electrification, availability of schools, drinkingwater, healthcare, employment etc. One can, therefore, arguethat the distribution of funds among the local bodies withina district should be related to the level of development (orlack of it). In practice, States allocate funds among the localbodies in the ratio of population only. However, if the fundsavailable for each local body remain just about Rs 3 to 4 lakha year, it might not be worthwhile attempting to fine tune itby linking the share of each local body with the level of itsbackwardness.The core issue for BRGF is to bring about a convergenceof all the schemes and programs by way of simultaneousdeclaration of the resource envelopes. That would throwup the requirement of funds for bridging the gaps in localinfrastructure etc. in each village in an authentic way andmake the BRGF serve its purpose truly.The most important discovery of the Study is that the localbodies are capable of administering development programsefficiently and effectively, notwithstanding the lack oftechnical personnel with them. This single finding shouldgive the policy planners the confidence to assign greaterresponsibilities to these institutions.Sudhir KrishnaNew DelhiAdditional Secretary, MoPR &14 th December, 2009National Project Director, BRGFConclusions – Findings and Recommendations 73


1ANNeXQuestionnaire for the Field-MissionNot all questions are relevant for all respondents on allgovernance tiers. The most relevant tier is in bracket afterthe question. District – GP means for districts, IntermediatePanchayat/Block and Gram Panchayat.Questions in bold were identified as core questions byMoPR.1. Basic Information (all tiers) Name of State:…………………….(state) Name of District……………….. …(district) Name of Intermediate Panchayat…………. (IP) Name of Gram Panchayat………………….. (GP) Population size……………….(all)2. General views on the BRGF (all tiers)Do you find that the objectives of the BRGF are beingfulfilled? - Objectives broken down in:1. Bridge critical gaps in local infrastructure and otherdevelopment requirements that are not beingadequately met through existing inflows.2. Strengthen, to this end Panchayat and Municipalitylevel governance with more appropriate capacitybuilding, to facilitate participatory planning,decision making, implementation and monitoring,to reflect local felt needs.3. Provide professional support to local bodies forplanning, implementation and monitoring theirplans.4. Improve the performance and delivery of criticalfunctions assigned to Panchayats, and counterpossible efficiency and equity losses on account ofinadequate local capacity. Why/Why not? (all)...........................................What are the strengths and weaknesses of theBRGF? (all).....................Challenges in implementation? (all)..........................Issues which can easily be improved (quick wins)?(all)............................Issues, which will require more efforts or longertime perspective? (all).........Views on the BRGF guidelines (clarity,comprehensiveness, etc.)? (all)..............................Views on the planning guidelines? (all)...........................Views on the M&E system? (all)............................3. Program Management Views on the BRGF program management?(all)....... e.g.– Funding systems – are they efficient andpredictable?– Information provided to stakeholders?– Guidance and support?– Operations of transfer schemes?– M&E and follow-up?– Initiatives taken to address identifiedproblems? What is the capacity of program management?(Central, State and District levels) Gaps? (central and State) Capacity of the institutions for capacity building? Gaps How does the PM link with other units? Horizontally?And vertically? (Central and State)………………….(Central, State, District) What can be done to improve capacity of theProgram Management?...(all)Annex1: Questionnaire for the Field-Mission 75


4. Funding and Funding Flows (finance unit)4.1 Development Grants – Fiscal Issues Amounts and Flow of Funds: Amounts received for development grants fromthe BRGF? (all)Are the funds predictable?.....(all)What are the channels for flow of funds?.... (specific)(all)Did you spend the funds within the time-frameprovided? (all)……….2007/082008/092009/10Budget amount Rs.CroreSanctioned/approved amountRs CroreReleasedamountRs CroreUtilized amountRs CroreComments, e.g.delaysAllocation system and criteria for distributionacross the States? (Central Level)Allocation system between urban and rurallocal government?Allocation system and criteria for distributionbetween districts? (state)Vertical allocation shares between districts,intermediate Panchayats and Gram Panchayats?(state and districts)Allocation criteria applied in the horizontalallocation between districts? (States)How do you define backwardness?Allocation criteria within the districts? (Horizontallyacross the Gram Panchayats)? (districts)Do you think the allocation system is reasonableand fair? (all)If not, what should be changed (all)?When did your authority receive information onthe allocation for the coming FY? (all)……………..and how?.......(e.g. use of web-site)Are the fund allocations timely from GoI to theStates? And from state to PRIs/ULBs?Which date(s) did you receive the funds for FY2007/08……. And FY 2008/09?........ (by district)–––––States to the districts?..... (districts)State to the ULBs?..... (ULB)State to the blocks (block)To the Gram Panchayats? (GPs)To others?Level of unspent development funds?.... FY2007/08?..........and FY 2008/09 - status(all)What are the reasons for unspent funds by the endof the FY? (all)Menu for the use of the BRGF––––What investments are allowable/works assigned for the defined tiers ofgovernment (district, intermediate, GP)?Where was the funds actually allocated/spentExtent of discretion given to the LGsHave you spent the 5 % allowed forpanchayats functionaries?.....What is the extent of alignment with other transfermechanisms?Any conditions for access to the funds?..................who sets these?........4.2 Capacity Building Support – Fiscal Issues (Mostlyfor the State Level)Please fill in the following: (state)What is the distribution of CB support across(districts, intermediate Panchayats, GPs, NGOs/CBOs, etc.)? (state)Do you think the distribution system reasonableand fair? (all)Who is in charge of the spending of funds for CBsupport? (all)Did you receive the funds on time? ……..whenfor 2007/08?.........for 2008/09?........76First Independent Review of the Backward Regions Grant Fund — Synthesis Report


2007/082008/092009/10Budget amountRs. CroreSanctioned/approved amountRs CroreReleased amountRs CroreUtilized amountRs. CroreComments, e.g.delaysWhat are the allowed areas of spending?What is the level of unspent funds?.....................and why?.....................5. Functioning of the Capacity DevelopmentSupport and Performance (all tiers)5.1 CB support What do you understand by capacitydevelopment? (only training or?....) General views and level of satisfaction with the CBsupport component of the BRGF?.....(districts – GPlevel) How does the State plan and organize CB supportto the PRIs? (State) What is the strategy for capacity building? (alltiers) Mean existence of the national/state framework fordelivery of CB? (State) Existing of capacity needs assessment? (all tiers)– How was the capacity needs assessmentconducted (who is coordinating, who isconsulted, what methods are used, what arethe sources of information etc…)?– What is the quality of the capacity needsassessment report?– Any linkages of the capacity needsassessment and the capacity building plan? Existence of a capacity building plan?.... at whichlevel?..... (all tiers)– The quality the capacity building plan? (alltiers) Existence of a nodal institution within capacitydevelopment?....How is CD support coordinated? (all)….How do you ensure synergies between variousCD activities?...(all) At what level should the CD support becoordinated…… and managed?.......(all)Any HR departments at district level? (district)..... atother levels of government ?... (all tiers)– If yes, how is it constituted and does it havethe required staff, resources, clout?– What are the functions and how are theyexecuted?Who have been the main target groups for CBsupport? (all tiers)– Political leaders? Staff? private sector?community members? Etc… and whatimplications does this have?Supply side – who is delivering the training andother CB support to local authorities? (all tiers)– Local resource teams?– Private firms?– TSI/NGOs?– Academic institutions/research institutions?– Higher level local governments?What methods/approaches have been used forcapacity building (all tiers)– Short-term performance improvementcourses––––On-job training, mentoring, understudies etc.Career developmentPeer support?.....Staffing support?.....(use of 5 % fromdevelopment grant)?....––––Support PRI infrastructure and equipment?Systems and procedure support?Exposure and exchange visitsSatellite training?........ could it beexpanded?....––E-government and IT connections?......Etc…Was the capacity development supportdelivered within the provided time-frame?Experiences on the support from the StateInstitutions of Rural Development? (all tiers)What is the general performance of the technicalsupport institutions to deliver CB services? (i)Annex1: Questionnaire for the Field-Mission 77


timely….ii) relevant?.....iii) level quality…… (high…medium….low…..)? (all tiers)Any documentation of this?......(all tiers)Experiences with other parts of the supply side/CBservice delivery side (satisfaction, challenges, etc.)?(all tiers)– Pool of resource persons? …. Experiencesfrom this?....Has Intermediate Panchayat/Blok level extensionand resource center been set up? ….. what hasbeen the experiences?.... (state, district and IP)Has the CB support been implemented inaccordance with plans/targets?... deviations?.......reasons?....(all tiers)How many have benefited last FY?.... and who?.....(all tiers)How is the progress in CB monitored? (all tiers)– (Explore the different levels i.e. pre-activitylevel, activity level, output level, outcomelevel and impact level)Main areas of spending on CB?Level of unspent funding within CB support?................2007/08?..... 2008/09)????? (all tiers)Areas which should have been covered by the CBsupport (uncovered gaps)?... (all tiers)What are the bottlenecks and reasons for lack ofuse of funds?... why? (all tiers)What should be done to address these? (all tiers)5.2 Capacity and Performance of LGs (district – GPlevel) Has the general capacity of your authority (as acorporate body) increased? ……….(district –GPlevel) In which areas?..................documented evidence?....(district – GP level) Why/why not?............. (district – GP level) Strengthened the capacity of electedrepresentatives? (district – GP level)Of the officials? (district – GP level)Has the CB support enhanced the level of effectivecommunity participation?.... (district – GP level) Has it led to more participation of the Gram Sabhaand Ward members?.... (GP level)Has it affected the operations of the Panchayats?(GP level)Has it led to improved accountability? (district – GPlevel)Additional need for CB support?..... whichareas?....(district – GP level)Challenges in performance of the local authorities,e.g.? (district – GP level)––––CapacityIncentivesOrganizational and structural issues (e.g.bureaucracy)Equipment and facilities?6. Planning Issues (Planning Unit – all tiers)6.1 Participation and process Who are involved in the drawing up of the 5 yearsperspective plan?...and in the annual plan?..........(alltiers) Any support from the TSIs? …… (note the varying participation modalities/(methodologies used) at the different stages ofthe planning cycle) (all)– Dissemination of the planning process andindicative planning figures––Situation analysisNeeds identification and strategy formulation(linkages between critical gaps identifiedin the envisaging work-shop and the use ofthe BRGF)?–––Compiling the planDiscussion and approval of the planHave the priorities of the lower tiers ofgovernment been reflected in the finalplan?...– Follow-up on the plan How are they involved?.....(all tiers) How participatory is the planning process– level of just attendance versus genuine activeparticipation?...... means of consultations?...... (alltiers) What is the role/activity level of the women in thisprocess? ……..(all tiers) Level of involvement of Scheduled Tribes/Scheduled Castes? (all tiers) Why is the level high or low? (all tiers)……78First Independent Review of the Backward Regions Grant Fund — Synthesis Report


Of other vulnerable groups? (all tiers)..................How are their interests reflected and ensured? (alltiers).....How are the Gram Sabha and ward Sabhainvolved? (all tiers, mostly the lower).....How is it organized?(all tiers, mostly thelower).................Do you adhere with the time-plan set in theguidelines?..... (p.50)… (all).Level of effectiveness of the Gram Sabha as aparticipatory forum for planning and accountability?………………i) very effective… ii) moderate…iii)not effective…… (districts and lower tiers)….– Why?.....Do you use any facilitators? (districts and lowertiers)…How do you consult across the tiers of government(district –IP, Gram Panchayats)? (these three tiers)Who takes the final planning decisions on the plan?(these three tiers)What are the challenges and reasons for gaps inthe planning process, level of participation andinvolvement of stakeholders? (these three tiers)....What can be done to address these?..... (all tiers)6.2 Technical tools How are your authority supported technically in theplanning process from other authorities? (districts,IP, GPs) Which data is available for the planning? (all tiers) Do you have elaborate date-bases?..... which?.... (alltiers) Existence of various tools (GIS, etc.)? (all tiers) IT up-loading of plans? (all tiers) How practical and easy is it to use PLANPLUS?....(all tiers). How are plan consolidated vertically with othertiers of governance? (all tiers)...... How is the bottom-up planning process harmonizedwith the top-down processes? (all tiers) Linkage between the local government wideplanning and sector planning (all tiers) Project appraisal processes ? (all tiers)–––Issues of planning for operation andmaintenance? (all tiers)What is the division of planningresponsibilities? (all tiers)What are the main technical challenges? (alltiers)6.3 Content of the plan Which guidelines are applied in the elaboration ofplans? (all tiers) Are there any links between vision, goal, targets,and activities? (all tiers) Are the sector departments’ activities included inthe plan? (all tiers) How do you ensure synergies between thevarious supporting schemes? (all) Are activities of other tiers of governance included/informed in the plan? (all tiers) Are the activities of other external initiatives, NGOs,CSOs etc. reflected? (all tiers) What are the links between five year and annualplans? (all tiers) Links between the annual plan and budgets? (alltiers) Coverage of cross-cutting issues in the plan? (alltiers) Coverage of poverty issues? (all tiers) Environmental and socio-economic impact? (alltiers) How is gender mainstreaming ensured? (all tiers) Coverage of revenue forecast and potential? (alltiers)6.4 Implementation performance What is the level of plan implementation – annualplan versus actual performance in terms of numberof projects? ….. volume of investments? (district– GP level)..... Reasons for deficiencies? (District – GP level) How are the plans monitored? (District – GP level) Any inspection of sites/investments? (District –GPlevel) Views on investment menu and focus on SC and ST(Annex 4 in guidelines)? (District – GP level)Annex1: Questionnaire for the Field-Mission 79


6.5 Capacity Capacity of the planning unit? Tick: (strong……moderate …… weak…..) (District – GP level)Technical roles in planning? (District – GP)Approved positions?......(District –GP) Number of staff in planning?....... regularpositions…… casual positions….. (District – GPlevel)Number of vacancies?... (District – GP level)Organization of the staff?....- organizational chart?....(District – GP level) Level of staff turn-over (over the past 2 years)?(District – GP level) Key qualifications of staff (level of education andexperiences)?.... (District- GP level) Any pending re-organization?.. …………….plansto do so?................ (District –GP level) Any strong incentives of the staff to perform?...............Why/why not?..... (District – GP level) How the other departments are involved and howdo they support the planning unit in planning?(district –GP level) Overall challenges and issues on capacity?..... (alltiers) What should be done to mitigated these challenges?(all tiers)7. PFM Issues (Finance Unit in each Authority– particularly GP level)Variances between budget and actual/outturns inpercentage: (district – GP level) Are the books of your cash books up-to-date?........................ (district – GP level) Are other books and ledgers up to date?Are bank reconciliations regularly done and up-todate?.........(district-GP level)Are final accounts/financial statements producedon time?.... (district – GP level)Size of the arrears (unpaid bills, delays in payment,etc.) ?..... (district – GP level)Who signs the invoices? (District – GP level)Reporting systems?...............i) Financial………….ii)Physical progress…..? (District – GP level)Who do you report to?.... frequency?......timeliness?.... (district – GP level)Record robust keeping systems? (district – GP level)Internal control procedures? (district – GP level)Internal audit? (district –GP level)–––Numbers of internal auditors?How are they facilitatedDo they produce reports?.... to who ?....... arethey reacted upon ?,Status of last external audit report? (district – GPlevel)Follow-up/scrutiny of audit results? (district – GPlevel)Capacity in PFM i) staff……. ii ) qualifications……(district – GP level)Suggestions for improvements? (district- GP level)8. Procurement (district - GP level, butCapacity at State level) Examples of procurement last Fiscal Year? (all tiers) Who does the procurement? (all tiers) What is the composition of the procurement board/committee? (all tiers) Which system of procurement is applied – opentender, restricted, sole sourcing etc.? (all tiers)Expenditures Budget 2006/07 Actual 2006/07 Difference %Total expendituresBudget 2007/08 Actual 2007/08 Difference (%)Total ExpenditureRevenues Budget 2006/07 Actual 2006/07 Difference (%)Total revenuesBudget 2007/08 Actual 2007/08 Difference (%)Total revenues80First Independent Review of the Backward Regions Grant Fund — Synthesis Report


List of contractors? (all tiers)How are announcements of tenders done? (alltiers)Publicity in the tender process? I) of the tenders?...II) rewards?... (all tiers)Capacity in procurement: i) staff withinprocurement…..ii) qualifications?..... (all tiers)Any procurement planning?.....how? (all)Linkage of the procurement plans to thedevelopment plans and budgets? (all)Suggestions for improvements? (all)9. Governance Issues (all tiers, particularlyGP level) Any publication of: i) budgets?…… ii) accounts/financial statements?……..iii) audit reports?……..projects conducted?…… (all tiers) Signposts for project implementation? (district– GP level) Social audit?...........who?..............how?................frequency?..............(district – GP level) Reporting: Who does the authority report to?.......(district –GP level) Other means to ensure accountability?.....(District– GP level) Cases of community action arising from reportedinformation? Main challenges? (district-GP level) Suggestions for improvement (district – GP level)10. Quality of Service Delivery (district – GPlevel, particularly at the GP level) Number and level of Investments conducted fromthe funding derived from the BRGF? (district –GPlevel)Benefits of these investments?.... who?...... number?....... (district – GP level)Evidence of changes in coverage of infrastructureover the past 2–3 years?...... why/why not?.................(district – GP level)Evidence of changes in the coverage of services(education, health, etc.)?..................... why/whynot?...... (district – GP level)Challenges and bottlenecks in servicedelivery?............ quantitative?..... qualitative? ..........(district – GP level)Evidence of changes in the quality of service issuese.g. if the schools are constructed, has the qualityof teaching improved? Are the teachers in place?Any documentation of outputs ?...... Outcomes?..…. (district – GP level)Any community management and inspectionstructures? (district – GP level)Suggestions for improvement (district – GP level)11. Monitoring and Evaluation (all tiers) Systems for M&E in place?..... which? …..i) fordevelopment investments…..ii) for CB support?......(all tiers) Views on the PlanPlus?... (all tiers) Who do you report to?... (all tiers) How do you perceive the M&E formats for theBRGF? (very useful…… moderate …. Not useful…..(all tiers) How is the information applied? (all tiers)– Consolidation?– Use to adjust future initiatives?– Used to address remedies? Main challenges and bottlenecks?.. (all) Suggestions for improvements? (all)Annex1: Questionnaire for the Field-Mission 81


Annex 2: MoPR Release of Funds under RSVY and BRGFStateNo. ofBRGFDistrictsTotalEntitlementGoI MoPR Release of Funds under RSVY and BRGF as on 15/05/2009RSVY BRGF Development GrantTotal releases since 2003–04,balance & utilization (to date)Release Balance UtilizationEntitlement11 th plan2007 -08 2008 -09Release Balance UtilizationEntitlementEntitlementRelease BalanceANDHRA PRADESH 13 450 443 8 332 1,676 335 303 32 0 335 250 85ARUNACHALPRADESH1 45 38 8 15 72 14 0 14 0 14 11 3ASSAM 11 225 225 0 153 786 157 61 96 0 157 53 104BIHAR 36 945 923 23 661 3,015 603 542 61 0 603 422 181CHHATTISGARH 13 360 360 0 310 1,177 235 226 9 0 235 192 43GUJARAT 6 135 128 8 81 507 101 1 101 0 101 0 101HARYANA 2 45 45 0 45 142 28 26 3 0 28 22 6HIMACHALPRADESH2 90 90 0 62 143 29 26 3 0 29 22 7JAMMU ANDKASHMIR3 135 113 23 81 229 46 0 46 0 46 41 5JHARKHAND 21 720 720 0 537 1,613 323 2 320 0 323 290 32KARNATAKA 5 180 180 0 141 516 103 85 18 0 103 0 103KERALA 2 90 83 8 56 162 32 21 11 0 32 0 32MADHYA PRADESH 24 450 450 0 450 2,142 428 381 48 0 428 300 128MAHARASHTRA 12 405 398 8 289 1,268 254 1 252 0 254 0 254MANIPUR 3 45 45 0 40 195 39 35 4 0 39 10 29MEGHALAYA 3 45 45 0 23 185 37 0 37 0 37 34 3MIZORAM 2 45 45 0 38 115 23 19 4 0 23 0 23NAGALAND 3 45 45 0 45 185 37 32 5 0 37 30 7ORISSA 19 225 225 0 185 1,528 306 265 41 0 306 228 78PUNJAB 1 45 45 0 35 78 16 0 16 0 16 0 16RAJASTHAN 12 135 135 0 98 1,255 251 302 -51 0 251 184 67SIKKIM 1 45 45 0 36 65 13 0 13 0 13 12 1TAMIL NADU 6 225 225 0 180 540 108 1 107 0 108 97 11TRIPURA 1 45 45 0 37 61 12 0 12 0 12 11 1UTTAR PRADESH 34 945 893 53 644 3,010 602 3 599 0 602 542 60UTTARAKHAND 3 135 135 0 96 209 42 0 42 0 42 0 42WEST BENGAL 11 360 360 0 221 1,225 245 188 57 0 245 143 102NABARD - 9 8 2 0 0TOTAL 250 6,624 6,488 137 4,889 22,100 4,420 2,522 1,898 0 4,420 2,894 1,526* NOTE: Releases under RSVY are also made out of BRGF development Grant **Of Rs 4670 crore in 07–08, Rs 250 crore comprised capacity building componemt.Rs 4670 crore was reduced toRs 3600 crore at RE stage. Hence the state wise entitlement for 2007–2008 is only notional.82First Independent Review of the Backward Regions Grant Fund — Synthesis Report


50Annex 3: Note on Various Methods of Expenditure Needs CalculationsThe costing of core 50 local authority services and fiscal gap analysis can be done in a number of ways, see the table below:Table 1: Various ways to measure the overall or incremental size of the Local Governments’ Expenditure NeedsMethod Advantages Disadvantages When is it most useful1) Rough division of thetotal public revenueand expenditures acrosstiers of governanceusing international dataand crude “commonsense” estimates or fixedpercentage of GDP orPublic Revenues2) Review of the existingcosts of all servicesand other functionsprior to decentralizationat various tiers ofgovernanceThis method reviews thecosts of all services at alltiers of governance.Quick resultsTransparentAffordable results as the methoddivides the available funds acrossthe tiers of governanceProvides a base- line for futurecalculations when tasks aretransferred; adjustments are thenmade at the marginIt is easier to get reliableinformation on costs of servicesprior than after decentralizationhas just taken place.It avoids the issue of unclearmandatory functions, as it dealswith the existing division inpracticeUseful for planning andbudgeting purposesNot related to the actual costs oflocal service delivery/expenditureneedsDoes not ensure that the fundingcovers the mandatory functions(will often lead to many unfundedmandates)Cannot be used for planningand budgeting purposes andefficiency initiativesMay be static and graduallywithout relations to the actualdivision of functions if notupdated over timeIt is hard to link the results directlyto the grant system, as it is notbased on the legal framework, butprevailing practice.As a standalone exercise, it doesnot provide an answer of thecosts of a decentralized system,required grants etc., as this systemhas not been defined.Costs may not be the same whenfunctions are transferred to the LGlevels.When there is very limited dataon expenditure assignments,standards and unit costs.When quick reforms are pursued,as the method may be preferredto other existing and morerandom, arbitrary and nontransparent principlesIn cases where the futureassignment of tasks is likely tochange, but where it is hard topredict the outcomeIn case where there has been nocosting of actual servicesIn case where there is time for thiskind of exercise, which requiressignificant input and timeRequirements and issues to beconsideredA crude guess has to be madeon finances that accords with thedivision of tasks across the tiers ofgovernanceShould the local share be linked tothe public revenues (and which)or GDP?Requires data on budget andaccounts, on service standards oncosting etc.This is a first step which maylater be supplemented with areview of cost in cases where theassignments are changed and/orwhere assignments are clarifiedUseful to estimate realistic andaffordable standardsThis section draws greatly from similar experiences in other countries, particularly from the work of the consultants for the reform process in Yemen (Jesper Steffensen with Gabe Ferazzi) and East Timor.Annex 3: Note on Various Methods of Expenditure Needs Calculations 83


Method Advantages Disadvantages When is it most useful Requirements and issues to beconsidered3) Review the costs ofthe Local Governments’mandatory functionsas they are supposedto be or expected to beafter final decisions aboutdecentralization andassignment of functionshave been made – realcosting of all servicesby use of a bottom-upapproach studying costsof services4) Review of “localized”selected local servicesas they are delivered inpractice (real expenditureneeds)Only the facilities up tothe main service deliverylevel of government areincluded in the costsand only core basicservices which will bedecentralized, by use ofcombination of existingexpenditure and actualneeds5) Calculation of costswhen tasks are going tobe transferred case bycase, i.e. a partial methodModel 6: Reviewthe existing costs ofLMs’ service deliverywithin the areas, whichare going to be thedecentralized functions(selective based onhistorical data)May provide information of usefor determining the future sizeof the grants to LGs (fiscal gapanalysis)Useful for planning andbudgeting purposesProvides a base line for futurecalculations when tasks aretransferred, adjustments at themargin can be madeIt is easier to get reliableinformation on costs ofservices prior than just afterdecentralization has taken placeIt partly solve the problem ofunclear mandatory functions, as itdeals with the existing division inpractices and the costing does notdepend on the assignmentUseful for planning andbudgeting purposesUseful to estimate realistic andaffordable standardsMore simple and with less inputFaster than some of the othermodels.It is quick and cost cautious.The allocation will be within thenational available resources.Hard to predict the outcome ofthe future assignmentsThe costing cannot contribute tothe dialogue, and assumptionsmay not be fulfilledVery labor intensive and timeconsuming.It is hard to link the results directlyto the grant system, as it is notbased on the legal framework, butthe prevailing practice.If it is a stand -alone exercise, itdoes not provide the answersabout the costs of a decentralizedsystem, required grants etc., asthis system has not been defined.It requires significant input andsurveys.It is a very demanding method,which is very labor intensiveLimited to review of the costof the new tasks, assuming theexisting system is in balancebetween expenditure needs andrevenuesRequires very good informationon the existing costsIt may not be very detailed interms of reviewing the variousexpenditure needs a the localor the cost implications ofdecentralizationIn systems where the finaldecisions on decentralization andmajor standards have been madeand when fundamental reformsare on the agendaIn cases where the futureassignment of tasks is likely tochange, but where it is hard topredict the outcomeIn cases where there have been nocosting of actual servicesIt is a good starting point for thefull scale costing mentioned inMethod 2 or 3.In mature systems when theoverall system of expenditure andrevenues are largely in balanceWhen specific isolated tasksare transfers across tiers ofgovernanceOften used to adjust the size ofthe grant pool up and downwardsWhen there is very limitedinformation on unit costs, andshortage of time to do moreelaborated cost-calculationsClarify mandatory functions withno ambiguityClarify service standards (is oftenvery demanding)Make a realistic phasingRequires data on budget andaccounts, on service standards oncosting etc.This is a first step which has tobe supplemented with a reviewof cost in cases where theassignment is changed and/orwhere assignments are clarified.The steps will be:1) clarify functions2) clarify standards3) Unit costing4) Review potential revenues5) Review fiscal gap.Review historical costs of theprevious form of service provisionor similar tasksNeed to be based on an overallmethod, e.g. for calculation of unitcosts to avoid various arbitraryadjustments.Review a breakdown of the LMsbudgets in various cost centers.The LMs may try to underestimatethe expenditures used onfunctions to be decentralized.84First Independent Review of the Backward Regions Grant Fund — Synthesis Report


The first method in the above table (Model 1) simply reviewsthe costs of similar functions in other countries, the relativeshare of the local authorities’ functions vis-à-vis the centralgovernment functions against the total available publicbudget and the relative share of local authority budget, andthen tries to fix the appropriate size of the local authorities’budget and the intergovernmental fiscal transfers. Thisis obviously a very crude model, which will probablynot provide very much information about the requiredresources to achieve the MDGs and service delivery targetsat the central and local levels. 51Where sufficient time is available prior to contemplateddecentralization, it is possible to cost the services as they arebeing delivered, using historically stable and reliable costs 52(Model 2). This approach would be bottom-up, employingactual costs in existing institutional arrangements. Ideally, thecosting of services should be done prior to decentralization,and be a guide in the realignment of financial relations.If done in this way, the post-decentralization financingthen is premised on pre-decentralization data andassumptions about the desired institutional arrangements.These assumptions can be tested after the main wave ofdecentralization has occurred and refinements made in thegrants or revenue assignment.While the costs prior to decentralization should be relativelyeasy to compile, the effort is considerable nonetheless,particularly if all services and other functions to experiencedecentralization are to be included. Unfortunately,countries usually prepare poorly in most decentralizationefforts; decentralization is often a political response thatwhen it break, it proceeds under time pressure, even if theimplementation turns out to be partial or halting. Oncedecentralization is underway, it is not realistic to freezeinstitutional arrangements for the purpose of costing,and as decentralization proceeds it becomes increasinglydifficult to reconstruct the costing prior to decentralization’schanges.In the case where good costing does not exist and changesare already underway or imminent, a different bottom-upapproach could be used provided there is consensus aboutthe desired functional assignments and service standards,51 However this method has been used in various countries, where the governmentgrants have been fixed to a rough share of the total public revenue, e.g. incountries like Ghana and the Philippines, without detailed calculations of therelative expenditure needs of central and local governments.52 This is possible in principle; where leakages have been endemic there may beresistance to making all costs explicit.etc. (Model 3). It is worth fleshing out this possibility assome countries could well decide to undertake such anapproach, keeping in mind that it has already enteredthe decentralization stream (even if it is yet not even midstream).This approach would require considerable effort,and in an idealized fashion would follow the steps indicatedbelow:1. Review all areas or demarcate the core service (sector)areas to be reviewed, e.g. the sectors, which havemost direct implications for the achievement of theMDGs, such as Health, Agriculture, Roads and Water2. Demarcate the services/activities within these areas,3. Clarify the future division of tasks and responsibilitiesacross the various tiers of governance (centralgovernment, governorates and districts) and servicesto be delivered and financed by other stakeholders,e.g. the private sector. The analysis would be based onthe expected outcome of the ongoing dialogue ondecentralization of tasks and responsibilities to localauthorities. Each sub-function, e.g. administration,governance functions, construction of buildings/facilities, maintenance and operational costs wouldbe divided across the tiers of governments accordingto the expected future assignment of tasks,4. Review the minimum standards related to thesefunctions and sub-functions.5. Cost these services in a situation with full compliancewith the fixed standards - and apportion the costs tothe central government, governorate, district andother service providers (e.g. the private sector, users),using a combination of data and information fromselected sample districts, governorates and centrallyavailable information.6. Review savings from various efficiency measures,like changing the balance between capital andmaintenance/operational inputs – making betteruse of the assets, organizational changes, etc.,7. Extrapolate the costs from a sample of localgovernments to the entire country and determinethe graduated pursuit of these in order to achievethe MDGs by 2015.8. Review the funding system and available amountof funds for local service delivery (own LG revenues,other local sources and grants) both in terms of sectorspecific revenues such as user fees and charges andgeneral untied funding,Annex 3: Note on Various Methods of Expenditure Needs Calculations 85


9. Review the relationship between the availablefunding and the required sources to comply with theMDGs in a phased manner.This Model 4 may be combined with features of model 5 ifspecific costing needs arise, such as the need to cost newstructures at the LG level (both administrative and politicalstructures).To the greatest extent possible, the standards used andthe graduated achievement of the MDGs should rely onthe work conducted (if any) on the national costing of theMDGs achievement. As well, expertise gained in conductingthe national level exercise should be employed in the LGcosting exercise.The above bottom-up approach would then be contrastedwith the national level costing where this exists tounderstand the how the perspectives are complementaryand useful for different purposes.The bottom-up approach of Model 3 is not possible inthe short term in many countries, in view of the ongoingdialogue on the actual pace of devolution in many placesand Model 4 is sometimes pursued as a more realistic start.The costing exercise would have to be delayed to allow theconsensus on functional assignment to emerge. This wouldalso mean that the costing would not be able to contributeto the dialogue on functional assignment.It is worth noting that where costing of local services hasbeen attempted in developing countries in the context ofdecentralization, this has tended to be done following keyinstitutional changes (as in Indonesia and Uganda). Whilesome fuzziness on functions and financing can be foundeven after the decentralization dust has settled, these areonly a minor hindrance to costing exercises.The timing of the anticipated service costing should comein the early stages of decentralization. If the services costedare those that are most critical to the Local Authoritiesin relation to particularly the MDGs, then the task neednot be daunting and can be completed in a reasonableamount of time, although it requires time and efforts andsome reasonable accounting systems. The results couldprovide a firmer base for more methodical and faster paceddecentralization and services, and adjustments of thefindings can be made along the process of decisions onchanges of functional assignments.It is often most feasible to use of the existing institutionalarrangements as the point of departure for the financialanalysis and a subsequent adjustment of these calculationswhen final decisions have been taken on the futurefunctional assignments and organizational arrangements(Model 4).The following step-wise approach should then be followed:1. Demarcate the core service (sector) areas to bereviewed.2. Demarcate the core services/activities within theseareas,3. Review the existing costs of these services – analysisof budgets and accounts – data from various tiers ofgovernance.4. Review the minimum standards related to thesefunctions and sub-functions (if available).5. Cost these services in a situation with full compliancewith the fixed standards - and apportion the coststo the central government, LGs and other serviceproviders (e.g. the private sector, users), using acombination of data and information from selectedsample LGs;6. Review savings from various efficiency measures,like changing the balance between capital andmaintenance/operational inputs – making betteruse of the assets, organizational changes, etc.,7. Extrapolate the costs from a sample of LGs to theentire country, and determine the graduated pursuitof these in order to achieve the national targets, theMDGs by 2015 or other reasonable targets. Thesetargets should be set in close dialogue with thecentral and local authorities.8. Review the funding system and available amount offunds for local service delivery (taxes, revenues, otherlocal sources and grants) both in terms of sectorspecific revenues such as user fees and charges andgeneral un-tied funding,9. Review the relationship between the availablefunding and the required sources to comply with thetargets in a phased manner.The results of the analysis should provide a good overview of:1. existing costs of the core services and division ofthese costs across the tiers of governance,2. possible efficiency savings if the input mix is adjustedto maximize capital and recurrence costs in relationto desired standards of service,86First Independent Review of the Backward Regions Grant Fund — Synthesis Report


3.4.The additional costs of improving the service levelto address local or national goals (e.g. MDGs);the improvement scenarios to be determined inconsultation with the LGs involved and relevantnational ministries,Financial implications of possible changes inassignment of functions across the tiers ofgovernance; scenarios to be drawn from deliberationsof government ministries.Model 5 is a subset of model 4, but does only look at thefew incremental tasks over the time. Both models 4 and 4requires some knowledge about functions, unit costs, anddata for breakdown of expenditures and service standards.Model 6 is the most straightforward model and is oftenused when the time is limited, and or data is not availableon existing standards, unit costs, variations in these or if thefunds are greatly less than the expected standards needs.It is method, which can be carried out in the short term,whereas other models are being prepared for the mediumto longer terms. It will have to review1.Existing costs of service provision within areas to bedecentralizeda. Costs within existing institutions (line ministries)b. Costs broken down on districtsc. Type of costs (direct, indirect recurrent, capitalcosts)2.3.4.Existing revenues within these areas (if any)a. Fees and charges,b. Other revenuesFiscal implications of change in service provision (ifpossible to measure)a. Efficiency gainsb. Extra costs or no changesWays and means to compensatea. Grant system (types of grants, flow of funds etc.)b. Other funding channelsMethod 6 is the most feasible for most functions in manycountries. The reasons for this are: Time for costing is limited; Data on unit costs are very limited; Service standards are not available in most areas, norare they related to available funding It can be combined with more detailed costingduring the roll-out of the decentralized serviceprovision modalities; The other models may not be affordable.However in the area of costing of new basic functions, suchas general administration and functioning of the assemblies,there is often a need for a full costing, including needs basedoverview, unit costing etc. of all core functions.Annex 3: Note on Various Methods of Expenditure Needs Calculations 87

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