Over 10 mil. RON Over 50 mil. RON. Over 100 mil. RON. Over 200 mil. RON .... RON Capital Expenditures, yet only 390 mil. RON EU ..... 11 DÄ
browski, M., 2008.
Benchmarking EU Fund Absorption in Romanian Municipalities The Main Recommendations that emerge from the present study are: Standardized Risk Assessment Charts should be realized for each type of funding line—from the application phase to the conclusion of the final evaluations of the project, as both specialized unit managers and the extended project teams have a mostly reactive approach to unexpected circumstances (e.g. delays, changes) rather than preventive. Permanent working groups between LGs’ Specialized Units should be developed as the peer-to-peer and need-based exchange of information is much more useful to the LGs’ representatives than formal presentations and dissemination events. A common information dissemination platform would be advisable to assist the efforts of the Regional Development Agencies. Further develop implementation manuals as variations in procedures, or forms of reporting create uncertainty, waste time and can even compromise projects’ completion (e.g. problems with cash-flow, not meeting the deadlines, financial corrections). 1. EU Funds Absorption in Romania In terms of absorption performance, for the funding period 2007-2013 Romania’s main weakness appears to be the administrative capacity with regards to project management. As such, despite a relatively high contracting rate, Romania ended the period with the lowest absorption levels in the region. Comparative EU Fund Absorption in Central and Eastern Europe for the 2007-2013 Period BG CZ EE HU LV LT PL RO SK SL Available budget 6.7 26.3 3.4 24.9 4.5 6.8 67.2 19.1 11.7 4.1 2007-2013 (EUR bil.) Available budget 92 2007-2013 2,496 2,592 2,529 2,298 2,320 1,768 960 2,144 1,988 7 per capita (EUR) Contractin 10 g Rate (%) 5%
103%
100%
117%
104%
99%
100%
116 %
122%
107 %
Paid grants 2007-2015 (EUR bil.)
6.4
23.3
3.2
27.7
4.4
6.7
61.6
13.9
11.3
4.3
Absoption Rate (%)
95 %
89%
95%
111%
97%
99%
92%
73 %
97%
105 %
Sursa: KPMG. 2016. EU Funds in Central and Eastern Europe, accessible at: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/06/EU-Funds-in-Central-andEastern-Europe.pdf
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The biggest share of the absorption occurred in the final years of the implementation period, or by the end of 2015. This delay in absorption reflects a delay in the implementation of the funding programmes. While the late loading pattern of absorption characterized the entire region, the rhythm of increased absorption towards the finish line was lower in Romania than in Slovakia, Hungary, or Slovenia. The latter set of countries managed to get close to (Slovakia) or surpass (Slovenia and Hungary) the 100% absorption level despite similarly low levels of absorption to Romania in earlier years. Romanian central authorities have often delayed the calls for funding requests until the second half of the 2007-2013 period. They have also tended to allocate more time for the evaluation of applications than for actual project implementation. This was due to delays in the development of the Guidelines for Applicants (Ghidul aplicantului), detailed eligibility criteria and the opening of the application calls. In addition to this, local public institutions themselves often had a low administrative capacity to manage the EU funded projects in a timely and effective manner. 2. Case Selection and Methodology The present analysis looks at benchmark cases at the local governments’ (LGs) level concerning EU funds absorption capacity. The analysis thus focuses on 12 municipalities that have been consistently showing high levels of absorption for the 2007-2013 period: Arad, Bacău, Botoșani, Brăila, Craiova, Focșani, Iași, Miercurea Ciuc, Oradea, Piatra Neamț, Slatina, Târgoviște. We chose these 12 case studies on several criteria: EU fund absorption (both total value for the period and annual values), capital expenditure from own budget (both total value for the period and annual values), per capita investment expenditures (both total value for the period and annual values) and geographical distribution (we aimed at having case studies from various development regions). Top 10 Municipalities by Level of EU Fund Absorption (by year)* 2010 ALBA IULIA PIATRA NEAMȚ BACĂU BRAILA TULCEA TARGOVIST E TÂRGU MUREȘ ARAD ORADEA GALAȚI
2011 ALBA IULIA PIATRA NEAMȚ BRĂILA DROBETA TURNU SEVERIN VASLUI TÂRGU JIU MIERCUREA CIUC TARGOVIȘTE SLATINA BOTOȘANI
2012 ALBA IULIA MIERCUREA CIUC VASLUI PIATRA NEAMȚ FOCȘANI BRAILA SLATINA CRAIOVA ARAD BACĂU
2013 TIMIȘOARA DEVA TARGOVIȘTE FOCȘANI IASI BACĂU BOTOSANI CRAIOVA ALBA IULIA BRAILA
2014 TÂRGOVIȘTE BISTRIȚA IAȘI CRAIOVA BACĂU ORADEA PITEȘTI SLATINA BRAȘOV SFÂNTU- GHEORGHE
2015 ORADEA IAȘI TULCEA PLOIEȘTI TÂRGOVIȘTE SFANTU- GHEORGHE BACĂU BISTRIȚA CRAIOVA CLUJ-NAPOCA
*we looked at absorption and expenditure values for the period 2010-2015 as it was in between these years that the bulk of the EU funding for 2007-2013 was absorbed in Romania The present study is a retrospective, qualitative analysis of what were the “drivers of success” in EU fund absorption at the LG level in Romania. As such, we do not argue that the selected case studies have been the only ones that have registered a very good absorption performance. As shown both in the table above (on annual absorption performance), and the table bellow (on period absorption performance), there are other municipalities that have not been included in the in-depth evaluation, and yet have performed equally well. The selection of LGs explored here was done for the main
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purpose as to provide us with a variation of contextual and institutional factors. Such a variation allows us to extract scalable good practices that can inform all LGs in future implementation of EU funded projects. Total EU Fund Absorption for the 2007-2013 Programming Period (by municipality and value) Over 10 mil. RON Over 50 mil. RON Over 100 mil. RON Over 200 mil. RON BAIA MARE BOTOSANI TÂRGU MUREȘ IASI BUZAU DEVA ARAD ORADEA SLOBOZIA SUCEAVA PITEȘTI CRAIOVA ALEXANDRIA VASLUI FOCȘANI TIMIȘOARA GIURGIU DROBETA TURNU BISTRITA CLUJ-NAPOCA RESITA SEVERIN GALAȚI BUCUREȘTI CALARASI TULCEA PIATRA NEAMȚ BACĂU MIERCUREA CIUC SLATINA BRĂILA SATU MARE RÂMNICU VÂLCEA BRAȘOV SFÂNTU-GHEORGHE CONSTANTA TARGOVISTE SIBIU PLOIEȘTI ZALĂU ALBA IULIA TÂRGU JIU Worst absorbers are usually characterized by: (1) political instability in LGs leadership (i.e. mayor was indicted, or various local leaders might have been under investigations), (2) poor administrative capacity mainly due to: insufficient personnel, poorly qualified personnel or no specialized unit, (3) lack of own financial resources (for co-financing) either due to ongoing investments, or high indebtedness. The methodology of investigation was mixed, with a predominantly qualitative approach based on 18 in-depth interviews with heads of specialized departments for EU project implementation and representatives from Regional Development Agencies (Agenții de Dezvoltare Regională) (ADR). We also referred to descriptive statistics to analyze the socio-economic environment, lump sum allocations as well as disaggregated sums allocated per type of project financed. 1. Evolution of Socio-economic Indicators There is no discernable association between the level of EU funds attracted in a given municipality and the dynamics of either economic growth or job creation. Economic growth was measured here in two ways. On one hand we refer to GDP values at local level1 that are calculated as a proportional share of the municipality’s GDP out of the county’s GDP (NUTS 3) by comparison to its share of employees within the county. On the other hand we also refer to firms’ revenue as an indicator of economic growth. There is no statistically significant correlation of the level of EU fund absorption at LG level by Romanian municipalities and the GDP levels (see Annex 2). When looking at both the lump sums and per capita values of EU fund absorption, we can find no discernable pattern of distribution based on the local level of development, measured as GDP per capita. It is neither the more developed, nor the lagging municipalities that 1 Original dataset compiled by Dr. George Ștefan, Economics Department, Bucharest University of
Economic Studies (ASE).
3
manage to attract more funding. For bulk sum distribution, it seems that the pattern is to concentrate more funding in the major regional municipalities (e.g. Iasi, Craiova, Cluj, Timisoara, and Bucuresti). Still, when we look EU funds per capita, we find that developed, yet smaller municipalities such as Oradea, Alba-Iulia or Targoviste have the highest concentration. This is reflected in the own capital spending patterns that we assess bellow. Institutional capacity and administrative performance seems to contribute to economic development at local level. A recent study shows that meritocratic bureaucracies have an indirect effect through the quality of regulation on entrepreneurial initiatives (Nistotskaya and Cingolani 2016). Based on our qualitative evaluation of the drivers of economic development at local level, we can see that the municipalities that were most effective in attracting EU funding, were also the ones that were able to attract other FDIs (e.g. Oradea, Alba-Iulia, Craiova) (see for the conceptual relation between administrative capacity and FDI Neshkova and Kostadinova 2012). Evolution of Economic Indicators in the Selected Municipalities (2010-2015)
Contextual factors sometimes explain the increased absorption capacity of the selected municipalities. On the effects side, a recent analysis for the 2007-2013 period on the impact EU funds have had on the member states’ economy shows that these had a positive and statistically significant impact on GDP and GDP per capita indicators, but no discernable effect on increasing long-term employment, diminishing the rate of at-riskof-poverty population or increasing the share of higher value added exports2. On the causes side, based on the in-depth interview analysis, we found that the economic environment tends to affect to an extensive degree the development and implementation of the EU projects (e.g. availability of construction workers, bankruptcy of contractors). Without making an evaluation on whether economic growth and development is a cause, an effect or both with regard to EU funding, it is important to 2 Păun, C., 2014. The Socio-economic Impact of European Funds on Eastern European Countries.
International Review of Social Research, 4(1).
4
see if the absorption levels are linked to exogenous factors, and we find no supporting evidence of this. Previous research shows that up to 84% of EU per capita GDP, EU cohesion funding allocations per capita are positively correlated with the level of income (i.e. wealthier regions).3 As such, EU allocations have not necessarily managed to fund differentiated interventions to target lagging regions, as there were very broad categories of eligible regions for cohesion funding. This means that in general within a given ceiling of economic development, regions or LGs that are able to spend more (judged on the general wealth in the region), can attract more EU funding. Essentially the Dunford and Perrons (2012) paper suggests that within the eligible ceilings, it is still the wealthier regions that attracted more funding allocations. This is counterintuitive if we think of the co-funding and institutional capacity requirements, but it is also interesting given the design of these sources of revenue to achieve convergence between LDRs and MDRs. Most of the Romanian Municipalities have a relatively proportional capital expenditure and EU funding allocations in between 2010-2015. This follows the broader aid absorption capacity observed across the EU regions, and is congruent with the principle of co-funding structural projects: the bigger LGs own budget, the bigger the willingness to invest in partially funded EU projects. The Central Government (i.e. European Funds Ministry) has been constantly trying to ensure that small or poor municipalities do not get left behind (although many did). On one hand, it was because they had no other feasible capital sources such as FDI. On the other hand, it is a politically-driven calculus to fuel funding in smaller municipalities which thus become dependent on CG political patrons and can be more easily mobilized at elections. „Magnet Cities” World Bank data on how surrounding smaller LGs overspent some municipalities in Romania is a good proxy for which ones fell behind either for structural reasons (e.g. poor areas, demographic decrease) or due to the poor administrative capacity of the LG. An important benchmark is that of the group of municipalities that managed to use significantly more EU funds than their own budget. Such examples are Iasi, Oradea, Craiova, Timisoara, Cluj-Napoca or Bacau. From a strictly budgetary point of view, these municipalities managed to optimize their financial resources, and engage a higher volume of outside funding. This can be achieved both through economies of scale (i.e. engaging in more projects) or by focusing on the type of projects that required a lesser co-financing from the LG. 3 Dunford, M. and Perrons, D., 2012. Regional inequality in the EU: how to finance greater
cohesion. European Planning Studies, 20(6), pp.895-922.
5
EU Funding vs. Capital Expenditures in Romanian Municipalities (2010-2015) (in RON)
*the scatterplot excludes the capital city of Bucharest because is skews the sample with a total 7.4 bil. RON Capital Expenditures, yet only 390 mil. RON EU Funding. The Central Government (i.e. European Funds Ministry) has been constantly trying to ensure that small or poor municipalities do not get left behind (although many did). On one hand, it was because they had no other feasible capital sources such as FDI. On the other hand, it is a politically-driven calculus to fuel funding in smaller municipalities which thus become dependent on CG political patrons and can be more easily mobilized at elections. „Magnet Cities” World Bank data on how surrounding smaller LGs overspent some municipalities in Romania is a good proxy for which ones fell behind either for structural reasons (e.g. poor areas, demographic decrease) or due to the poor administrative capacity of the LG. An important benchmark is that of the group of municipalities that managed to use significantly more EU funds than their own budget. Such examples are Iasi, Oradea, Craiova, Timisoara, Cluj-Napoca or Bacau. From a strictly budgetary point of view, these municipalities managed to optimize their financial resources, and engage a higher volume of outside funding. This can be achieved both through economies of scale (i.e. engaging in more projects) or by focusing on the type of projects that required a lesser co-financing from the LG. In contrast, in other cases significantly more money is spent from the municipalities’ own budgets than EU funding. There might be two possible explanations for such cases. Firstly, the municipality might have had an intensive investment strategy, which means that it engaged in its own projects apart from those
6
eligible for structural funding. In this case, there is the risk of overstretching the budget, as well as that of not correlating investment projects with broader regional and national development strategies. Most problematic cases in this regard are the roads and utilities investments that usually follow an integrated plan when they are funded through Regional Operational Programme, as opposed to national budgetary allocations.4 Secondly, the municipality might be missing out on external funding opportunities due to low institutional capacity towards attracting funding and implementing projects. The most frequent manifestations of such low capacity are: poor or untimely preparation of applications, lack of information regarding funding opportunities and poor project management resulting in financial corrections on accepted projects. In all of the interviews done with the European Projects specialized units in LGs, nobody complained that their local priorities were not eligible for European funding. The eligibility criteria was pretty generous towards the end of the period, because of the low absorption rate. Representatives of the Ministry for European Funding repeatedly explained publicly how they reshuffled available funding between major domains for intervention (DMI) to make sure the funds were put to use in the 2007-2013 period. 3. Institutional Capacity and Benchmark Practices The performance of LGs is driven by both institutional capacity—defined as functioning procedures and institutional flows, as well as agency—defined as leadership capacity and organizational cohesion. We will elaborate on the first here, and the latter in the following section. With regards to institutional capacity, based on the first round of interviews with representatives from Specialized Units5 in LGs we have identified three criteria that might enhance an LGs capacity in the implementation of EU funded projects: Ø benefiting from technical assistance for early needs identification, Ø employing external consultants for swift project implementation, Ø short distance to authority or an efficient chain of command for better time management. The in-depth qualitative interviews have confirmed the utility of two (i.e. Technical Assistance and short distance to decision-maker) out of these three components in practice. Technical Assistance packages, especially with regards to a Local Development Strategy or Development Roadmaps are essential to the quality of applications, and the clarity of subsequent implementation phases. When a thorough needassessment is conducted before applying for funding, the EU funded projects fit much better within the overall institutional activities. 4 Harmonization of selection criteria for enhanced coordination and prioritization of EU and
state-funded projects : component one - final report, 2015, Working Paper, World Bank; Identificarea unor modele de selecție pentru Programul Operațional Regional 2014-2020, 2014, Regio World Bank Report [in Romanian] 5 We consider here a Specialized Unit to be either a department or a section in the local City Hall that is in charge of attracting EU funds and implement eligible projects.
7
The substantial delays at LG level in the implementation of the EU funded projects was driven by a poor standardization of procedures—from the application phase to the final evaluation. The interview data confirms our expectations with regards to the learning effects the first cycle of funding had for the employees of the Specialized Units at LG level. Still, Romania and LGs foot the cost of missed opportunities due to lack of clarity for local beneficiaries on what they could do with EU funds, and how should they manage their projects so as to avoid financial exposure, delays on the part of private contractors or lack of skilled personnel. The support of Intermediary Organizations (i.e. Regional Development Agencies) —while invaluable to many LGs in Romania, is limited by their own extensive monitorization and evaluation prerogatives. Key Aspects of Organizational Performance in EU Funded Projects Chain of Command – Technical Municipality External Consultants Direct Subordination Assistance to the Decision-Maker
Standard TA
Additional TA
Programming and Technical
Project Management
Directly under the Mayor
Fast-tracked access to decision-maker
Arad
✔
✔
✔
Oradea
✔
✔
✔
✔
Craiova
✔
✔
✔
✔
✔
✔
Slatina
✔
✔
✔
✔
✔
Târgoviște
✔
✔
✔
✔
Focșani
✔
n.a
n.a
✔
✔
Brăila
✔
n.a.
n.a.
Bacău
✔
✔
✔
✔
Piatra Neamț
✔
✔
✔
✔
Botoșani
✔
✔
✔
✔
Iași
✔
✔
✔
✔
✔
Miercurea Ciuc
✔
✔
✔
* difference between (a) the budgeted staff in the specialized department of the Local Government, and (b) the World Bank Recommendation of optimal staffing (i.e. 1 project manager per 10 mil. € project allocation). Source: Technical Assistance information was gathered from the 2007-2013 POAT funding, and in-depth interviews with LG and ADR representatives on additional TA programmes accessed by each LG (e.g. World Bank, PHARE); External Consultants information was gathered from in-depth interviews with LG and ADR representatives, and for LGs that had none, limited or not satisfactory project management external
8
consultants it is not marked in the table; Chain of Command information was gathered from the LGs organizational charts and from in-depth interviews with LG and ADR representatives. Technical Assistance projects have developed Guides for Project Managers6, but most of these appeared towards the end of the 2007-2013 funding period and are mainly designed to inform the current period. These guidelines are also generally developed at CG level, gathering together all the necessary information, but do not equip LG personnel with operational, synthetic recommendations. Our interviews revealed a much higher value of the experience-based input provided through practice exchange workshops amongst LGs, rather than from formal training and information dissemination. The municipalities that were identified as Growth Poles for Romania had for example regular meetings of the representatives of their Specialized Units. Organizational chart architecture is telling of the priority an LG gives to attracting and implementing EU funded projects. The shorter the power distance is to the decision-maker (i.e. mayor or city manager) the swiftly documents are signed and procedures resolved. That is not to say that specialized departments can not perform well if they are subordinated to a deputy mayor, but the core issue is to spend as little time as possible collecting all the necessary signatures and approvals. External consultants are frequently employed for all project phases. Some projects limit the eligible costs with external consultants at 2% of the project value, but wherever it is possible, the LGs prefer to resort to such options. The exceptions are driven by two simultaneous conditions: the lack of qualified suppliers of consultancy services in the local area, and the strong expertize and continuity of the staff7 in the institutional project management unit. External consultants were extremely useful in the planning phase, which overlaps with technical assistance packages, and on the technical side of the project implementation (e.g. lead engineers). In terms of outsourcing project management, the Romanian municipalities had a much poorer experience with external consultants on average. The main reason for this is the limited access external consultants can have on internal circuit procedures (e.g. signatures, validations, documentation) which means that the internal teams are involved anyway in the management process. Within the scope of the selected case studies, positive experiences with external consultants for project management are reported only in Slatina and Craiova. Outside the scope of the selected case studies, benchmark examples include Cluj or Ploiesti, as well as Sibiu which engaged in a strategic project implementation partnership with GtZ. Operational Programme Technical Assistance (OP - TA) made available in 20072013 ERDF funding for the strengthening of the administrative capacity in Romania. From the three priority axis available in Romania, the Regional Development Agencies (ADR) engaged exclusively the first two axes. Especially relevant in the preparation of funding applications has been the development of Integrated 6 See for example the “Manual for Experts in the Implementation of Structural Funds” (Manual
Expert Implementare Fonduri Structurale), funded through OP TA 2007-2013, project SMIS No 48159. Accessible here: http://www.anfp.gov.ro/R/Doc/2015/Proiecte/InstruireAplicata/26.11/Manual%20Modul%20 1%20-%20Expert%20accesare%20fonduri.pdf 7 Whenever the personnel in the Specialized Department has had continuity in EU project implementation, interviewees reffer to as „the team” suggesting a high significance of the good interpersonal relationships that exist in such departments.
9
Development Plans - Plan Integrat de Dezvoltare (PID) for the Romanian Growth Poles (GP): Timișoara, Cluj-Napoca, Iași, Craiova, Constanța, Brașov, Ploiești, București8. Within Axis 1 all the applicants developed either their regional PID, or additional developmental strategies (e.g. Smart Specialisation Strategy - ADR NE, ADR Vest). The Regional Developmental Agency West (ADR Vest) stands out in developing more strategic studies than the other development regions, by looking additionally at the Quality of Life in the Region9, and the Metropolitan Area of Timișoara and Arad10. These brought a significant advantage to the targeted municipalities in developing their need analysis and EU project applications on various funding lines. The overall allocation for this axis was 48.63% of the total TA ERDF funding for Romania, and the Regional Developmental Agencies only used under 7% of it—totaling 5.7 mil. €. Technical Assistance Programme 2007-2013 in Romania, allocated ERDF funding National Public Total Public EU Investment Priority Axis Contribution (in Contribution (in €) €) (in €) 1. Support to the implementation of Structural Instruments and coordination of programmes (e.g. PID and other Strategic Planning Documents) 2. Further development and support for the functioning of the Single Management Information System (SMIS) 3. Dissemination of information and promotion of Structural Instruments Total
82,792,695
20,698,174
103,490,869
53,390,279
13,347,570
66,737,849
34,054,816 170,237,790
8,513,704 42,559,448
42,568,520 212,797,238
Source: Operational Programme TECHNICAL ASSISSTANCE 2007-2013, Final Version 2007, http://www.fonduristructurale.ro/Document_Files//asistentatehnica/00000031/62t63_PO_Asistenta_tehnica _final_EN.pdf , last accessed on 02.04.2017
8 Iași and Craiova are the only GPs included in the present analysis.
9 „Cresterea impactului utilizarii Fondurilor Strcutrale asupra calitatii vietii locuitorilor din
Regiunea Vest” [in Romanian], accessible here: http://www.adrvest.ro/attach_files/Raport%20privind%20calitatea%20vietii%20in%20Regiun ea%20Vest.pdf , last accessed on 02.04.2017 10 “Studiu de potential privind dezvoltarea axei Timisoara-Arad centrii de polarizare ai dezvoltării în Regiunea Vest” [in Romanian], accessible here: http://www.adrvest.ro/attach_files/StudiuTMAR-FINAL.pdf, last accessed on 02.04.2017
10
A much smaller funding TA allocation came through applications on priority axis 2 for Regional Developmental Agencies (ADRs), and these were exclusively targeted at developing the online application platform (i.e. SMIS). These activities benefited from 31% of the total TA allocations for Romania, and the ADRs used these funds in a marginal measure, suggesting they already had the technological capacity to support the functioning of the Single Management Information System (SMIS). ADR Centre and ADR Sud Muntenia applied for funding in order to acquire necessary equipment, while ADR South East applied with the purpose of developing its IT infrastructure necessary to support the functioning of SMIS. Total ERDF Funding per Developmental Regions, 2007-2013 (€)
Source: http://www.poat.ro/poat_36.html?proiecte_%C5%9Fi_beneficiari_2007-2013, last accessed on 02.04.2017 The most discernable effect of the EU fund absorption process is the strengthening of the administrative capacity of LGs. Previous research on other CEE countries also attested in this regard the role of EU Funding as a driver of institutional reform or administrative consolidation11. Still, many other studies are more cautious with regards to the actual accomplishments, seeing administrative capacity as still being faulty in new member states, as well as having a limited ability to develop their own strategies, coherent public policies and monitorization mechanisms in the absence of EU conditionalities12. 11 Dąbrowski, M., 2008. Structural funds as a driver for institutional change in Poland. Europe-
Asia Studies, 60(2), pp.227-248.; 12 Verheijen, T., 2007. Administrative capacity in the new EU member states: the limits of innovation? (Vol. 115). World Bank Publications; The World Bank, 2010, Functional Review of the Center of Government Sector, World Bank Publications; European Commission, 2012, Position of
11
The present study reflects a more optimistic picture with regards to administrative consolidation, as challenged as they might have been at the beginning of the 2007-2013 funding period, most of the high performing LGs testify to substantial learning effects. As such, the benefits of EU high absorption levels are not confined to finalized projects, as they also include developing an institutional culture of complying with structured procedures and elaborating strategic planning. We also find evidence of learning effects with regards to organizational structuring, as adaptive patterns emerge in more ambitious LGs that aim to increase further their absorption capacity over the next period (e.g. Iasi Municipality has recently designed a new organizational chart for its specialized unit with dedicated subsections for each of the main targeted programmes or funding lines). 4. Staffing Approaches and the Availability of Human Resources With regards to agency, at LG level, the quality of the human resources (HR) is the key ingredient in ensuring administrative and absorption capacity. The two essential HR components for LG performance are: •
Leadership (i.e. Specialized Section Leader or City Manager) which possesses both experience or knowledge of absorption mechanisms, as well as a proactive engagement to stay ahead of the changing “rules of the game” and build a specialized team.
•
Large enough project management teams (i.e. 1 project manager per 10 mil. EUR allocated)13 The lack of experience with large investment projects, as well as the bureaucratic specificities of managing EU funded projects means that a project manager should not oversee too many projects at the same time, especially if these are complex, large investment projects that can expose the LG to serious financial risks in case of irregularities.
Staffing strategies vary extensively across municipalities. There is variation in the form of employment for EU funded projects: civil servants, contractual personnel, external consultants (employed within the contracted company); there is also variation with regards to the number of employees within the specialized project management units within the Local Governments. In general, LGs with smaller management teams have had a lower absorption rate across Romanian municipalities. Romanian LGs have four options of staffing the project management units: strategic partnerships, external consultants, internal teams, and co-opting contractual personnel.14 Each of these options has its own set of advantages and disadvantage which we will elaborate further bellow. the Commission Services on the Development of the Partnership Agreement and Programmes in Romania for the Period 2014-2020, Damian, R. (2017) Cum depășim „absorbția zero”? Performanța de Dezvoltare a Fondurilor Europene în perspectivă comparativă. SAR Annual Report [in Romanian] 13 World Bank benchmark recommendation—‘rule of thumb’ developed on the basis of the type of Romanian EU funded projects at LG level, given the list of projects implemented by each municipality assessed in this study. 14 The synthesis of these project management options for LGs, as well as the main advantages and disadvantages of each option were previously elaborated by Marcel Ionescu-Heroiu in the 2016
12
Strategic partnerships and external consultants are dependent upon budgetary capacity and eligibility of such costs. Wherever possible, LGs try to employ them, but for smaller municipalities they are not always effective options as strategic partners or external consultants are not always available and the expertise of local suppliers might be limited or their activities overstretched by multiple consultancy contracts. In both larger and smaller municipalities, the main disadvantage of such options is the fact that there are usually no learning effects, and the institutions’ capacity to manage future investment projects is not enhanced. Internal teams present the main advantage of developing institutional learning effects, and better controlling all phases of the project. According the Law 490/200415 supplementary remunerations for personnel involved in EU funded projects can be granted up to 62.5% of the base salary. The majority of the Specialized Departments Heads that we interviewed for this study also refer to the continuity and sustainability of the projects, as working with internal teams diminishes the risk of people leaving in the middle of the project or after it has been completed. The main disadvantages in using internal teams is the absence of essential expertise for most of the investment projects such as urban planners or engineers. Due to relatively low salaries in the local public administration even more common areas of expertise such as economists or legal experts can became scarce in smaller LGs where the experts move to the private sector. Another disadvantage is that often the poor institutional capacity and long distance to authority or dense decision-making circuits might compromise project completion or can lead to financial corrections. Using contractual personal has proven to be an effective solution for the period 2007-2013 for certain municipalities (e.g. Alba-Iulia). Transferring personnel from other positions or using contractual personnel in project management units has been a back-up option during the austerity freeze on employment in the public sector in 20082010. However, it also presents specific advantages: more flexible and usually higher salaries, forming a team of experts based on the project specificities, and not only on the availability of existent staff, and attracting higher skilled experts that might work on other projects as well16. The disadvantage to using such a staffing solution is that the employee might not have a sense of security for his job similar to that of a civil servant and the pay increases are limited to the capacity to be involved in multiple projects at once. There are three categories of personnel density that we can be identified in Romanian LGs: overstaffed, averaged staffed, and understaffed. Overstaffing can affect the institution on the cost-efficiency side, it has the advantage of deploying all the necessary human resources to the contracted projects; understaffing can impede significantly project implementation and monitorization. Understaffing is not characteristic of the Romanian public administration system as a whole. Most of the small communes are overstaffed, given the legislative provisions on population ceilling staffing. As previous studies have suggested, a greater consolidation of the institutional capacity of these smaller LGs would serve cost presentation titled “Unități de Implementare Proiecte: Propuneri pentru un mai bun management al investiților publice la nivel local” [in Romanian] 15 Which is currently ammended by the Governmental Decision 595/2009 16 According to the Labour Code, an employee can have another contract for 4h per day in addition to the work programme of 8h per day, and in the case of contractual personnel the employer for the additional work hours can be the city hall or another private employer, thus increasing the potential sources of income of this category of project management staff.
13
efficiency purposes, and would allow for personnel expenses to be reallocated in project management units that usually impact the communities of the Urban Functional Areas too. Staffing Balance in Specialized Departments of the Romanian LGs* Understaffed** Municipalities Arad (-15) Ploiești (-17) Brașov (-20) Cluj-Napoca (-30)
Averaged** Staffed Municipalities Satu Mare (+7), Piatra Neamț (+7) Bacău (+5), Slobozia (+5) Craiova (+4), Drobeta-Turnu Severin (+4) Constanța (+2), Zalău (+2) Târgu Mureș (+1)
Overstaffed** Municipalities Iași (+14) Călărași (+21) Giurgiu (+19) Brăila (+14), Bistrița (+14) Vaslui (+13) Alba Iulia (+10)
Sibiu, Râmnicu-Vâlcea, Botoșani, Reșița, Sfântu Gheroghe Timișoara (-1), Galați (-1), Oradea (-1), Pitești (-1), Deva (1) Slatina (-2), Târgu Jiu (-2), Focșani (-3), Miercurea Ciuc (3), Alexandria (-3) Buzău (-4), Suceava (-4) Târgoviște (-5) Baia Mare (-6). * the personnel levels presented in this table are only indicative of general practices, as the actual number of persons employed in a specialized unit of the city hall varies substantially over time, based on project completion or on contextual variation (e.g. fixed term transfers, persons leaving for better paid employment) ** judged by difference of more than 10 persons (given that the personnel numbers may also be fluctuating) between the budgeted staff in the specialized department of the Local Government, and the World Bank Recommendation of optimal staffing (i.e. 1 project manager per 10 mil. € project allocation). 2. Lessons Learned and Bottom-Up Recommendations
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Good Practices: - Regular meetings amongst the representatives of the Growth Poles – experts cited more the gains from informal information exchanges than formal ones. The explanation for this is that the dissemination or training sessions organized by the MFE or ADR were presentation-driven (i.e. institutional representatives presented new developments or good practices), while the informal exchanges were information-driven (i.e. calling an institutional counterpart in another municipality to ask how they dealt with specific problem). -
ADR providing standardized forms for reimbursement requests, methodology of implementation etc. à expanding their support competences would be a advisable given their performance so far17.
-
Forming the personnel on sight – while technical expertise is usually necessary for project management (especially in investment projects within POR), having a loyal, functional team in place is even more important. One of the main strengths or challenges signaled by local experts was the presence or absence of such a mutually-instructive and cooperating organization.
-
Early need assessment (before the launching of the applicants’ guides)
-
Technically trained personnel partially or fully allocated to oversee the investment projects (e.g. Craiova) (where the technical expertise lacked in the city hall, delays were registered – e.g. Oradea, Piatra Neamț, Botoșani)
Need-based Recommendations: - Standardized terms of reference for tenders on extrern consultancy for project management („caiet de sarcini”), as many LGs feel there was not enough value added of such contracted services. -
Time-management training for civil servants and contractual personnel involved in the projects. Almost all municipalities registered significant delays both in the application and in the implementation phases.
-
Standardized risk assessment charts. No risk assessment seems to be proficiently realised at the begining of a project, as most of the usual risks (e.g. contracting delays, cashflow) leave the implementation teams in prolonged blockages which in turn create new problems to be dealt with.
-
Permanent working groups between municipality specialised representatives (i.e. EU project department heads or even project managers) (e.g. AMR as a platform for dialogue, beyond the formal institutional dissemination)
-
Implementation manuals are generally mentioned as being extremly useful by authorities so a higher attention to a common methodology should be developed at the onset of each funding line (e.g. POCA18 2007-2013 provided a best practice in this regard, while ADR NE provided a bottom-up methodology in step-by-step guides for how to complete reimbursement requests etc.)
17 LG representatives explain the role of the ADR as more than a guide, and more of a “direction
setter” (“ne-au ghidonat” in Romanian) 18 Operational Programme Administrative Capacity 2007-2013
15
Identified Challenges: -
Legislative ambiuguity or contradictions – LG personnel has problems in clearly interpreting the (frequently changing) provisions and procedures (see point above above enhanced ADRs’ role in implementation)
-
Long delays in the application phase (due to programming delays) leaves narrow implementation deadlines. CG is aware of this problem, but the current financing period does not seem to harness better sequencing on the phases of investment projects.
-
Poor performance-correlation of civil servants’ remuneration. Most of the city-halls have maxed out on the 62.5%, and prefer to use civil servants (most cases investigated here rely on internal teams). Furthermore, the EU funded projects do not only comprise civil servants from the specialized unit (i.e. Direction or Service), but also involve personnel from other units (e.g. technical, judicial) so that the reliance on internal cooperation and functional internal procedures is further increased. A subset of challenges emerges in this situation: o
Cant’t teach a dog new tricks dilemma. Some have opted for younger teams, formed on site (e.g. Oradea) which meant that the bonus from the base salary did not provide a competitive remuneration.
o
Spread the wealth dilemma. Some municipalities have opted to include more numerous teams on the EU funded projects so that the work load of any single person should not be overbearing; the downside of this policy is that the scaling of the supplementary income was much lower, based on the number of projects in which the person was involved.
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Annex 1. Funding per Technical Assistance Programme in each Development Region in Romania Brief Project Description
Region ADR Centru
Priority Axis
DMI
EF (RON)
EF (EUR)
Cofunding (RON)
Cofunding (EUR)
Total eligible value (RON)
Total eligible value (EUR)
Total project value (RON)
Total project value (EUR)
2
2.4
48,300.48
10,733.44
12,075.12
2,683.36
60,375.60
13,416.80
74,865.75
16,636.83
SMIS PID (Brasov)
1
1.1
2,376,962.10
528,213.80
594,240.52
132,053.45
2,971,202.62
660,267.25
3,140,191.58
697,820.35
ADR NE
SSI
1
1.1
63,872.40
14,193.87
11,271.60
2,504.80
75,144.00
16,698.67
75,144.00
16,698.67
PID (Iași)
1
1.1
2,197,221.99
488,271.55
549,305.50
122,067.89
2,746,527.49
610,339.44
2,908,383.08
646,307.35
ADR NV
PID (Cluj)
1
1.1
1,559,453.54
346545.2311
389,863.38
86636.30667
1,949,316.92
433,181.54
2,086,060.14
463,568.92
ADR SE
SMIS PID (Constanta)
2
2.4
74,506.00
16,556.89
18,626.50
4,139.22
93,132.50
20,696.11
115,484.31
25,663.18
1
1.1
3,088,623.43
686,360.76
772,155.85
171,590.19
3,860,779.28
857,950.95
4,301,920.13
955,982.25
SMIS PID (Ploiesti) PID (Craiova) PID (Timișoara) Calitatea Vietii in Regiune TimisoaraArad
2
2.4
43,200.00
9,600.00
10,800.00
2,400.00
54,000.00
12,000.00
66,960.00
14,880.00
1
1.1
3,132,934.31
696,207.62
783,233.58
174,051.91
3,916,167.89
870,259.53
4,203,940.42
934,208.98
1
1.1
2,386,124.53
530,249.90
596,531.13
132,562.47
2,982,655.66
662,812.37
3,421,599.28
760,355.40
1
1.1
1,426,135.38
316,918.97
356,533.85
79,229.74
1,782,669.23
396,148.72
1,877,995.77
417,332.39
1
1.1
159,951.05
35,544.68
28,226.65
6,272.59
188,177.70
41,817.27
188,177.70
41,817.27
1
1.1
144,049.16
32,010.92
25,420.44
5,648.99
169,469.60
37,659.91
169,469.60
37,659.91
SSI
1
1.1
2,795,638.27
621,252.95
493,347.93
109,632.87
3,288,986.20
730,885.82
3,288,986.20
730,885.82
ADR SMuntenia ADR SV ADR Vest
Source: http://www.poat.ro/poat_36.html?proiecte_%C5%9Fi_beneficiari_2007-2013, last accessed on 02.04.2017
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Annex 2. Wealth and EU funds distribution in Romanian Municipalities Source: World Bank dataset on EU funds aborbed by LGs and GDP per capita dataset compiled by Dr. George Ștefan, Economics Department, Bucharest University of Economic Studies (ASE).
18
Source: World Bank dataset on EU funds aborbed by LGs and GDP per capita dataset compiled by Dr. George Ștefan, Economics Department, Bucharest University of Economic Studies (ASE).
19
