ROMANIA Advisory Services Agreement on Strengthening Planning and Budgeting Capacity II (P168605) OUTPUT 5 Final report presenting the recommendations of the RAS November 2022 Project co-financed from the European Social Fund through the Operational Programme for Administrative Capacity 2014-2020 Disclaimer This report is a product of the staff of the World Bank. The findings, interpretation, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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This report has been delivered in November 2022 under the Advisory Services Agreement on Strengthening Planning and Budgeting Capacity II signed on September 2nd, 2020, between the General Secretariat of the Government and the International Bank for Reconstruction and Development. It corresponds to Output 5 under the above-mentioned agreement. TABLE OF CONTENTS LIST OF ACRONYMS ........................................................................................................... 4 Executive Summary ................................................................................................................. 5 Introduction .............................................................................................................................. 7 Section 1. Background and Methodology .............................................................................. 8 Section 2. Issues during the RAS Implementation.............................................................. 14 2.1. Positive Developments...................................................................................................... 14 2.2. Challenges ......................................................................................................................... 20 Section 3. Next Steps ............................................................................................................. 22 LIST OF ACRONYMS CoG Centre of Government EU European Union GD Government Decision GoR Government of Romania GS General Secretary GSG General Secretariat of the Government ISP Institutional Strategic Plan M&E Monitoring and Evaluation MoC Ministry of Culture MoE Ministry of Economy MoEn Ministry of Energy MET Ministry of Entrepreneurship and Tourism MoF Ministry of Finance MJ Ministry of Justice MRID Ministry of Research, Innovation and Digitization MS Ministry of Sports MTI Ministry of Transport and Infrastructure MTBF Medium-Term Budgetary Framework NRRP National Resilience and Recovery Plan POCA Administrative Capacity Operational Program PM Prime Minister PPU Public Policy Unit RAS Reimbursable Advisory Services TA Technical Assistance WB World Bank WG Working Group 4 Executive Summary This Reimbursable Advisory Services (RAS) has supported the Romanian Government to strengthen the framework for strategic planning and budgeting and take the first steps towards implementing performance-based budgeting in the public sector. The RAS has continued the work carried out by a previous technical assistance that covered 13 line-ministries, by extending the preparation of the Institutional Strategic Plans (ISPs) to another eight line ministries which did not participate in the first phase and the GSG to enhance the quality of policy planning and spending. The main counterpart in this project was the General Secretariat of the Government (GSG). With support from the Bank, the participating ministries have prepared ISPs following a common methodology under two cycles - 2021-2024 and 2022-2025, respectively. In addition, the project has helped to build capacity in the ministries and GSG to monitor the ISP update and implementation with a common IT tool expanded to all ministries and to expand the central dashboard in the GSG for reporting on the implementation of high-level ISP priorities to the eight participating ministries. One of most important achievements under this RAS has been the decision to make strategic planning mandatory to all ministries. With the approval of the methodological framework on strategic planning and budgeting, as part of Romania’s commitments under the National Resilience and Recover Plan (NRRP), the ISP has formally become part of the budgeting process. The first concrete outcomes of this decision are underway, as the ISPs, which are structured on budget programs, are to be taken into consideration for the preparation of the 2023 budget. The new planning methodology therefore places ministries on a path towards the implementation of program-based budgeting, an important step for enhancing the quality of public spending and overall improving the functioning of the central administration. Overall, the preparation of the ISPs by the ministries has helped to increase the transparency and accountability of the medium-term public policy agenda, budgets, and results. As a complex strategic planning and management tool, the ISP enables a prioritization of the policy agenda at sectoral level and connects it to the available financial resources. The inclusion of the ISP in the budgeting process is a step forward towards consolidating the performance- orientated culture in the central administration by helping ministries to put in place processes aimed at increasing the results focus of the budgeting process. By now ministries should have reasonable knowledge on how to prioritize sectoral policies, allocate budgets, identify targets, and set indicators, while the ISP M&E tool helps to monitor policy execution at both GSG and ministries levels. The trainings provided by Bank team under the RAS have improved the capacity of the technical staff in ministries and the understanding on how to use strategic planning, connect sector priorities to budget allocations and link objectives to results. At the same time, the implementation of the RAS and the preparation of the ISPs by the eight ministries has highlighted a number of challenges. The project revealed little knowledge of strategic planning across ministerial departments, and therefore did not perceive the ISP as a strategic planning and management tool that can help connect priorities to funds and improve the overall institutional/sector performance. The ISP process was, at times, quite challenging in terms of coordination at the level of ministries; setting up ministerial working groups (WG) to contribute to the ISP drafting took longer than expected, while engagement and level of commitment was sometimes limited, since staff was busy with daily duties and reluctant to 5 undertake additional tasks. This context is partly attributable to the pandemic crisis and subsequently the war in Ukraine, which coincided with the RAS implementation, which often led ministries and agencies to shift their priorities and focus more on addressing the short-term social and economic consequences of the crises. The situation was further explained by the institutional instability which characterized some ministries in project implementation due to political changes and government reshufflings. These developments led to changes in the structure of ministries and their portfolios (mergers and restructurings). For example, one ministry was split into three entities within a year. The institutional instability had an important impact on ministry staff and made the preparation of the ISPs more difficult and protracted, requiring revisions of the RAS implementation calendar. Bank counterparts in ministries changed in a number of instances, while the setting up of the WGs occurred with delays in some cases and composition changed during implementation, which in turn required adjustments in the preparation of the ISPs and more effort put into training the newcomers. The fact that strategic planning and budgeting were part of the NRRP reforms for improving public spending has helped to speed up the formal endorsement of new process through the approval of the relevant methodologies, after years of delays and attempts. This is a major step towards instilling a performance culture in the public sector. In the next period, the Government should institutionalize the new planning methodologies across the central administration. The Government should ensure that the new legal framework for planning and budgeting will be fully implemented. Without proper enforcement, there is the risk for the ISP not to be used as a planning and management tool, but rather be perceived as another public administration information document, one of many. To this end, further capacity building is required at the level of the relevant actors involved in the strategic planning and budgeting process, including line ministries, the Ministry of Finance (MoF) and the GSG. Considering the limited capacity at the level of ministries, in addition to the partial understanding of strategic planning by top decision-makers, it is important for the MoF and the GSG to continue to actively support ministries implementing these reforms in the short- and medium-term. 6 Introduction This report summarizes the results of the implementation of the Reimbursable Advisory Services (RAS) Agreement on Strengthening Planning and Budgeting Capacity II (P168605) (ISP II) and draws lessons regarding the progress and challenges confronting the modernization of the strategic planning framework and the introduction of performance-based budgeting in the Romanian central administration. The project has been implemented by the General Secretariat of the Government (GSG) with support from the World Bank (WB), with the scope of helping the Government of Romania (GoR) to continue strengthening the planning and policy monitoring processes in the Center of Government (CoG), Ministry of Finance (MoF) and line ministries as to enhance efficiency of public spending. The RAS was co-financed from the European Social Fund through the 2014- 2020 Administrative Capacity Operational Program (POCA). The RAS has continued the work on strengthening planning and policy monitoring carried out under the Planning and Budgeting Capacity (P156889) RAS (ISP I), implemented between 2016 and 2019, which helped to prepare 13 Institutional Strategic Plans (ISPs) for 13 line ministries. ISP II RAS has extended the ISPs to another eight line ministries and the GSG to increase the quality of public policy spending, link policy planning with the performance budgeting process and improve coordination and transparency of ministerial activities. The project has also helped the GSG and MoF to improve coordination of public policies and spending in the CoG and lay the ground for a systematic approach to priority-setting, planning, and budgeting. The RAS has focused on three main items: a) to expand the ISP process to all ministries – by developing eight ISPs for the ministries which did not participate in ISP I and revising them after the first year; b) to build capacity in the GoR to monitor ISP updates and implementation with a common IT tool expanded to all ministries; and c) to expand the central dashboard in the GSG for reporting on the implementation of high-level ISP priorities to the eight participating ministries. The RAS was aligned to the Strategy for the Consolidation of the Public Administration 2014- 2020 aimed at enhancing performance-based management in the public administration by strengthening the design and implementation of the ISPs and introducing program-based budgeting and was part of a larger technical assistance package under which the WB provided support to the GoR’s on broader reforms to improve public administration in line with the Strategy. 1 The report is structured in three sections. Section 1 provides background on the RAS context and the methodological framework; Section 2 highlights the issues arising during implementation; and Section 3 makes recommendations for the next steps. 1 Public Investment Management RAS which helped with the development of a methodology for MoF to prioritize public investments; the PM’ Delivery Units RAS introducing the performance framework for selected short-term policy and tracking mechanisms for results; the Strategy Unit RAS helping the GSG to introduce a systematic approach to preparing and tracking high level strategic documents and ensuring policy coordination and harmonization; the Regulatory Impact Assessment RAS assisting with the development of methodologies and building capacity for ex-ante impact assessment of policies; and the RAS on Developing a Unitary Human Resources (HR) Management System in the public administration to update the legal and regulatory framework for the HR function. 7 Section 1. Background and Methodology  Background Romania launched its first efforts to update its strategic planning and performance budgeting system in 2006, by implementing a government-wide strategic planning process 2 . Although all ministries drafted strategic plans the foreseen links to program budgeting and decision-making did not materialize. The process provided guidance on the management component of the strategic planning, which later was followed by additional directions in 2009. A step forward took place in 2014 when a pilot ISP was drafted by the Ministry of Agriculture and Rural Development, with support from the Bank, which linked policy priorities to budgetary programs under the medium-term budget framework (MTBF) constraints and associated funds and developed an IT tool for monitoring the plan. This ISP and the IT tool were used in 2015 for developing an improved methodology of strategic planning to connect policies with budgets, under a Bank grant, Harmonizing Strategic Planning & Budgetary Programming in Romania. Finally, the first complex effort to support strategic planning and budgeting took place between 2016 and 2019 under the Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting RAS/ ISP I financed through POCA 2014-2020, under which the Bank helped drafting 13 ISPs for 13 line ministries. The current ISP II RAS has extended the strategic planning process to another eight line ministries and the GSG. Under this RAS, the Bank has helped with the ISP preparation for the Ministry of Economy; Ministry of Energy; Ministry of Entrepreneurship and Tourism; Ministry of Transportation and Infrastructure; Ministry of Culture; Ministry of Research, Innovation and Digitalization; Ministry of Sports; and Ministry of Justice. The Ministry of Foreign Affairs was originally included in the project and benefited from the first iteration of the plan (2021-2024); however, in the second year of project implementation it was replaced by the Ministry of Justice, which benefited from one ISP iteration. Working groups (WGs) were set up in the respective ministries with guidance from the Bank team, while the IT application and a dashboard for monitoring implementation, developed under the previous RAS, was extended to the eight line ministries, thus ensuring that the methodological framework and the IT tool are now consistently applied by all ministries. This RAS has extended the Bank support on strategic planning and budgeting in a context where more and more countries become interested in performance-based budgeting, shifting the focus from the management of inputs to a process based on results and achievement of policy objectives. Romania has a classical model budget 3, which is different than the ISP approach that is structured into budget programs connected to the annual central budget and the MTBF, thus aligning policy priorities to financial resources and monitoring the results (output, outcomes). 2 GD 1807/2006 and GD 158/2008 were the legal bases for developing the strategic planning system and its linkages with the program budgeting system. 3 It is performance budget of presentational performance, with some elements of performance-informed budget. 8  Methodology The RAS has provided support to Romania’s strategic priority of strengthening the culture of performance measurement and the efficient use of resources in the public administration. The RAS was aligned to the WBG Country Partnership Strategy for Romania for the period 2019-2023, which focused on the priority of Building Institutions Fit for a Prosperous and Inclusive Romania. The CPF identified the functioning of the institutions and the quality of governance as key factors limiting Romania’s ability to make sustainable progress towards reducing poverty and promoting shared prosperity, highlighting the need to address the institutional challenges and weaknesses. The ISP outlines the sector-level strategic objectives, programs, measures/initiatives, and activities during a four-year planning process carried out by a ministry (see Figure 1). Funds are allocated based on the available financial resources, according to the annual budget assigned to the ministry and the MTBF, to implement the objectives, programs, measures/initiatives and achieve the expected results. All subordinated institutions under the authority or in coordination of the ministry involved in the respective policy sector should be part of the ISP process. The ISP should be drafted by the ISP team in a line ministry and should point to specific actions and desired results in the medium run to attain its vision and strategic objectives, by bringing together the sector/policy agenda, medium-term budgetary resources available, and a monitoring framework for implementation. 9 Figure 1 - Government of Romania's Strategic Planning Architecture NATIONAL RECOVERY GOVERNMENT PROGRAM Medium/ Long Term AND RESILIENCE PLAN COUNTRY-SPECIFIC RECOMMENDATIONS NATIONAL REFORM OTHER HIGH-LEVEL PROGRAM STRATEGIES PARTNERSHIP AGREEMENT CONVERGENCE STRATEGIC/ CAPABILITY PROGRAM REVIEWS FISCAL-BUDGETARY POLICY & PUBLIC INVESTMENT Medium Term STRATEGY PRIORITIES PROGRAM BUDGET INSTITUTIONAL STRATEGIC REQUESTS PLANS ANNUAL STATE BUDGET ANNUAL GOVERNMENT WORK PLAN Annual BUDGET EXECUTION, IN-YEAR INSTITUTIONAL OPERATIONAL CHANGES PLANS POLICIES, LAWS, DECISIONS, PROJECTS Policy Problem Implementation INTERNAL PROBLEM- IMPLEMENTATION & RESULTS DELIVERY REVIEWS SOLVING Implementation Structural Minor Problem MONITORING, Problem Problem REPORTING, DIAGNOSIS The ISP architecture has a planning hierarchy based on a logical diagram (Figure 2), with a few cascade-type levels. Generally, the vision and mandate apply at the ministry level programs at general directorates/directorates, while measures at operational units. The diagram is based on a planning chain - where inputs (resources) produce immediate results/immediate results indicators (outputs), output indicators (immediate results) generate results (outcomes) 10 and outcomes generate impact at beneficiaries. The activities helping to achieve immediate results are measured by efficacy and process indicators. A strategic objective is a coherent statement on policy impact that should help achieve the ministry’s vision and which could be feasibly reached during the ISP-cycle. A program is a set of measures pursuing the fulfillment of strategic objectives based on performance indicators, by identifying the results to be reached based on budget allocation, whereas measures are carried out through actions/projects at the ministry level. Figure 2. Institutional Strategic Planning Hierarchy Planning Implementation Logical Structure Long-term strategic documents Sector na�onal and inter-sector Vision ISP Logical Model Logical Structure na�onal strategies Mandate Government program Strategic reviews/func�onal analyses IMPACT / IMPACT INDICATORS Strategic Objec�ves Ins�tu�onal Strategic Plan Opera�onalizing Strategic Objec�ves through corresponding Programs and R ESULTS (O UTCOMES) / OUTCOME INDICATORS Measuresthat are implemented by Programs MTFB resources IMMEDIATE RESULT /OTPUTS / OUTPUT INDICATORS , Measures EFFICIENCY INDICATORS Projects /Ac�vi�es PRODUCTS/ PROCESSES PRODUCT/PROCESS INDICATORS The Ministry’ s Annual Ac�vity Plan EFFICIENCY INDICATORS (opera�onal) Based on budget alloca�ons for implemen�ng the ac�vi�es Resources / Budget INPUTS Source: ISP Methodology GD 427/ 2022 The RAS was structured on four components: • Under Component 1, the ISP methodological framework used by ISP I RAS was extended to eight line ministries 4 and the GSG. The Bank helped with the mapping of the ISP content and processes in eight ministries by applying the ISP architecture, defining (or improving) the indicators, reviewing the financial and budgetary mechanisms, identifying vehicles to implement the ISP, developing M&E processes and reporting routines, as well as supporting the debates and ISP presentations. Two revisions (2021-2024 and 2022-2025, respectively) of all eight ISPs were performed with Bank support, while ministries’ staff received support to build capacity for developing, implementing, and monitoring policies. 4 Eight line ministries took part in the ISP II RAS. During implementation, the Government underwent several reorganizations; some participating ministries were divided, reorganized or merged, and the changes were reflected accordingly in the ISPs. While the number of secondary beneficiaries (ministries) remained the same throughout the project-cycle, adjustments were made to the participating institutions. The Ministry of Foreign Affairs was removed from the list as it considered that a large share of its policies would not fit the strategic planning process, and was replaced with the Ministry of Justice which showed strong interest to be part of the RAS. As of now, all ministries in Romania have been covered by the ISP process, except for three – the Ministry of Foreign Affairs (for the reasons explained above), the Ministry of Defense, as it deals with sensitive issues and classified information, and the Ministry for European Investments and Projects (MIPE). 11 • Under Component 2, the ISP IT monitoring tool was rolled out to the eight line ministries and GSG. It delivered the access ID and password for the administrators of system; provided training on using the application for the system administrators; prepared the user manual and tested the scripts for further users. Technical support was also given to ministries to introduce the ISPs into the IT monitoring tool, in parallel with training on how to use and maintain the application. All eight selected line ministries can now use the IT tool for M&E of the ISP. • Under Component 3, the central dashboard was expanded to the eight line ministries and the GSG. The dashboard allows an automatized and simplified reporting from the ministries to the GSG on their ISPs, enabling them to assess the progress and the non- performing areas, with processes for corrective actions. The dashboard allows the prime minister and the GSG to request updates and explanations from the ministries on policy implementation. The tool was populated with the eight ISP-level objectives, providing support to ministries and GSG in this process. The Bank also helped the GSG to review the functions and update the central dashboard with the ISP objectives after the first year, allowing for viewing, reviewing, and analyzing the progress against indicators measuring the ministries’ objectives, in addition to making comparison. • Under Component 4, the Bank helped build capacities of the relevant staff in GSG and eight ministries, through extensive coaching and on-the-job training on the ISP methodology and process, the M&E framework, and reporting tools. The Bank delivered specialized trainings to 45 staff from the ministries and 10 staff from GSG. Details on the trainings are available in the bi-annual RAS progress reports prepared by the Bank on the implementation of the RAS. The main beneficiary of the RAS was the GSG, particularly the staff from the Policy and Priorities Coordination Department, the main repositories of knowledge and know-how the ISP process, while the secondary beneficiaries were the eight line ministries, especially the specialized departments involved in executing the planning process. The RAS covered 15 policy domains from eight ministries and the GSG. Table 1. Ministries and Policy Domains covered by the RAS Ministry Policy Sector Ministry of Sports • Sports Ministry of Justice • Justice Ministry of Culture • Culture Ministry of Energy • Energy Ministry of Entrepreneurship and • Tourism Tourism • Entrepreneurship, SMEs and Business Environment • Foreign Investments • Foreign Trade Ministry of Economy • Economy, Industrial Policies, and Competitivity • Consumer Protection • Non-Energetic Mineral Resources and Sustainable Development Ministry of Transport and Infrastructure • Transport and Infrastructure Ministry of Research, Innovation and • Communications and Information Society Digitalization • Digitization of Public Sector, E-governance Services and Interoperability • Research and Innovation General Secretariat of Government Synthesis Ministry - Activity Organization and Representation Total: 9 institutions (8 ministries + Total: 15 Policy Sectors GSG) 12 The RAS preparation started in 2019, the RAS agreement was signed on September 2, 2020, and the project will close in December 2022. The initial duration was planned for 21 months. Due to several external factors, the project implementation was extended by another six months, with a total of 27 months. In addition to the COVID-19 pandemic restrictions that disrupted activities worldwide, including in Romania, the main challenges were the government reorganizations/reshufflings leading to multiple institutional changes – splitting and merging of ministries, and changes of ministers and key decision-makers in ministries. In this context, to reduce the impact of these changes on implementation, the project was focused on policy domains (Table 1) rather than institutions. The project was designed for two annual iterations (improvement cycles). In the first iteration, the ISPs were developed for the eight originally selected ministries, and the information was introduced in the IT tool and replicated in the central dashboard. The second iteration reflected the institutional changes and the policy adjustments occurring in the meantime. The ISPs were reviewed and incorporated feedback from the ministries and the GSG, while the Bank tried to gradually reduce its engagement efforts by making the working groups in the ministries to become more involved in the process. With the approval of the strategic planning methodology in March 2022 (Government Decision GD 427/2022), the preparation of the ISP has become part of the budget formulation process (see below). All the committed outputs and activities of the RAS have been delivered as agreed with the client, the GSG. The RAS has met the intermediate outcome (see table 2 below) to help improve the capacity of the GSG to provide guidance on developing the ISPs. The GSG is well-equipped with the knowledge to provide technical guidance to all line ministries on the ISP preparation and monitoring. The GSG and ministries’ staff are familiar with the methodological framework and know how to use and manage the ISP IT tool, so by now they should be able to monitor the plans without any further assistance. Since the ISP and budgeting methodologies have already been approved, the RAS has helped to set the first steps in the new strategic planning and budgeting process, although it is expected that, in practice, the traditional budgeting process will go in parallel with program-based budgeting until the latter would become full-fledged. Table 2. RAS Outputs Intermediate Outcome Indicator Outputs Improved capacity in Number of new strategic plans (ISP) • 9 ISPs applying the sectoral strategic GSG to provide guidance developed with guidance of the dedicated planning methodology on developing staff in the GSG that complies with the pre- • 8 updated ISPs in the second year of institutional strategic conditions and minimum standards for the project plans strategic plans 5 and are monitored by using • 1 extended dashboard for ISP M&E IT tools at GSG level • Training courses for ministerial staff Source: RAS Concept Note 5 Developed with support of the Strengthening Planning and Budgeting Capacity and Supporting the Introduction of Performance Budgeting (P156889) - SIPOCA 28 and IDF Grant for Monitoring and Evaluation for Policy Making (TF098645) (see report Harmonizing Strategic Planning and Budgetary Programming in Romania). 13 Section 2. Issues during the RAS Implementation After years of attempts to put in place a performance-oriented culture to public governance in Romania the first concrete steps regarding strategic planning and budgeting have been made with support with this RAS and the ISP I RAS. Expanding strategic planning and the preparation of ISPs to another eight line ministries is a steppingstone in the introduction of the performance-orientated budgeting process. As the methodologies on strategic planning and program-based budgeting have been approved during the implementation of this RAS, the ISPs are set to directly influence the overall budgeting process in the central administration, starting with 2023. In fact, during the drafting of this report, the central budget for year 2023 is under preparation, and the MoF has asked ministries to use their ISPs for defining their budgets. This is the first action towards a budget execution based on budget programs to be piloted by three ministries in 2024, as per Romania’s commitments under the National Recovery and Resilience Plan (NRRP - see below). In terms of achievements, there have been several positive developments and challenges during the implementation of the RAS, which are highlighted below. 2.1. Positive Developments ISPs mandatory for all ministries: Perhaps the main success achieved under this RAS is to institutionalize the ISP by making strategic planning/ISPs mandatory for all ministries. The methodologies on strategic planning and program-based budgeting were approved in March 2022. GD 427/2022, initiated by the GSG, enforces the strategic planning concepts by integrating the public policy, budget, and implementation & monitoring components, while GD 467/2022, initiated by the MoF, introduces budget programs and performance-based monitoring for all ministries starting with 2024. Practically, all ministries should have by now a good understanding on how to implement strategic planning and budgeting and link budgets to results and performance. This legislation is a significant step towards improving overall public spending quality in Romania. GD 427/2022 focuses on drawing up, monitoring, reviewing, and reporting on the ISPs using an approach that integrates public policy, budgeting and implementation & monitoring components. The responsibility on strategic planning is divided among ministries and the GSG. While the development, implementation, monitoring, reporting and revision of the ISPs stay with line ministries and the GSG, the overall coordination of the process is with the GSG. The ISPs should be developed under the coordination of the public policy units (PPUs, or their equivalent) of the ministries with the participation of all relevant departments in a ministry. The budget component should consider the financial limits under Law 500/2002 on public finances, in correlation with the Medium-Term Fiscal-Budgetary Strategy and the annual budget. Ministries and the GSG should introduce information into the ISP IT application and update the data for the monitoring process. 14 Box 1. GD 427/2022 on strategic planning Strategic planning helps the government to set strategic objectives and public priorities in line with the long-term budgetary framework, based on the Medium-Term Fiscal Budgetary Strategy, with an overall goal to improve performance in the central administration. The process aims to develop key institutional structures, increase responsibilities in institutions, departments/units and at individual level, enhance transparency and communication between management, staff, and relevant stakeholders, while setting priorities for an efficient allocation of human and financial resources. Strategic planning relies on the principles of transparency and evidence-based substantiation. Citizens can see if the allocations of public funds are aligned with objectives and whether money is spent to achieve targets and results. Ministries should reach specific results within a certain period and ensure that funds are given according to achievable objectives, while decisions should be linked to predictable allocation of funds and the MTBF. Priorities can be adjusted in case of economic and social changes or depending on the availability of funds. GD 467/2022 outlines the methodology for the budget programs and performance-based monitoring of budgets for all credit authorizing holders (ministries). It provides directions on how to design program budgets, content, method of developing results /or efficiency indicators, and monitoring to improve the quality of public policies by ministries, by transposing strategies into medium-term strategic plans in correlation with the MTBF. The MoF is responsible for the monitoring process. In line with the NRRP, in 2024 three ministries should execute their budgets based on budget programs. Box 2. GD 467/2022 on program-based budgeting Program-based budgeting shows the correlation between funds and results and is attached as an annex to the ministry’s budget, which is approved through the annual budget law. Budget programs should reflect the commitment and budget appropriations approved by the credit authorizing officers. A budget program can be designed by sectors – when financing an activity that falls within functional budget classifications (paragraph, subchapter) - or can be multisectoral - when covering an activity subject of two or more budget classification paragraphs or chapters, or when involving couple of ministries. A strategic objective can be achieved by one or more budget programs which can split by subprograms. A program can implement one or more measures, while subprograms or measures are divided according to the functional budget classification. Budget programs rely on four types of indicators: a) result indicators (quantifying the effect of public policy changes and results and their economic, social, fiscal changes), b) output indicators (assessing the results of measures/ specific services provided for which the minister was solely responsible), c) process indicators (assessing measures executed to achieve objectives and associated costs), and d) efficiency indicators (measurable factors showing the link between results obtained and resources allocated, like unit cost of a service provided). Budget program execution should be monitored by bi-annual and annual reporting, while ministers should prepare annual performance reports and present objectives, expected and achieved results, indicators, and associated costs, in addition to an analysis on the evolution of programs, with explanations, conclusions, and measures towards achieving strategic objectives. 15 Strategic planning in the NRRP: The fact that strategic planning and budgeting are included in the NRRP 6, as part of the Romanian Government’s commitment towards the EU to improve public spending, was perhaps crucial for approving the ISP legislation. Strategic planning and budget execution based on budget programs are in the NRRP part of Component #14 Good Governance, Reform #1 - Enhancing predictability and efficiency of decision-making processes by strengthening the capacity for policy coordination and impact analysis at the level of the government and coordinating ministries, as well as by strengthening the tools to increase the quality of public consultations at all levels of the administration. This comprehensive reform aims to develop and operationalize a new strategic management and strategic planning system in all ministries (and GSG), whereas strategies and strategic plans drafted by ministries are aligned with the strategic planning methodology and uploaded into the ISP tool. ISPs are extended to all ministries, and they design their budgets based on budget programs. The reform has three relevant milestones /targets – the ISP methodology was to be approved by Q1 2022, ministries were to develop ISPs and upload them into the ISP monitoring platform by Q2 2023, and at least three ministries shall execute their budgets according to budget-programs in 2024 (details in the Box below). Additional four measures are included in Reform #3 on improving budgetary programs, under Component 8 Tax and Pensions Reforms. 6 The NRRP is part of the EU support provided to Member states to mitigate the social and economic impact of the COVID-19 pandemic through the Recovery and Resilience Facility, which was set up in this respect. The Facility allows the EC to raise funds for members to implement reforms and investments linked to EU priorities and address challenges from the EC country-specific recommendations. During 2021-2026, €723.8 billion in loans and grants are available to EU countries to advance some of the priorities that have been dragging for a while, like climate change or digitization, achieve EU goals (e.g., climate neutrality by 2050), while spurring growth in the process. Under the NRRP, Romania has been allocated around EUR 29 billion (half grants and half loans), on the condition of achieving 507 tagets and milestones (215 reforms and 292 investments). 16 Box 3. Strategic Planning and budget program in the NRRP Milestone #401 – Approving legislation enforcing measures to improve public policy and planning and administrative simplification. A GD laying down the procedures for strategic planning and budgetary programing, linking policy priorities to budget formulation was to be approved by Q1 2022. Ministry budget programs will follow the recommendations on spending reviews (as per Tax and Pensions reform under Component 8 of the NRRP) and in line with the methodology developed by the MoF. This milestone was achieved with the approval of GD 427/2022 on strategic planning in March 2022. Milestone #402 - Operationalization of a new strategic management and strategic planning system at ministries. By Q2 2023, all ministries shall develop strategies and strategic plans based on the strategic planning methodology and be uploaded into the ISP monitoring platform managed by the GSG. Target #403 - By Q2 2025 at least 3 ministries shall implement budget programs and perform the budget execution by budget programs, using the ISP methodology, with support from the GSG and MoF. This is complementing the program budget planning with the existing program-based execution of the ministry’s budget, in line with the recommendations on spending review from the Tax and pension reforms. Milestone #200 – Entry into force of the legislation on the methodology for drawing up, monitoring, and reporting of the budgetary programs. This milestone has been achieved with the approval of GD 467/2022 on budgetary programs in March 2022. Milestone #201 – Completing the spending reviews in health and education sectors. This milestone, which should be achieved by Q2 2023, involves a Memorandum in the Government presenting the given spending review, setting up a thematic working group with representatives from the Ministry of Health and the Ministry of Education, and data collection, finalizing and presenting the analyses. Milestone #202 – Adopting a multi-annual strategy and calendar for a systematic expenditure review across all sectors. By Q4 2023 the Ministry of Finance shall draft the Memorandum setting out areas/programs/actions to be subject of future expenditure reviews, the timetable for implementation, responsible institutions and setting up of the respective working groups. Milestone #203 – Including the recommendations and measures on spending reviews in health and education sectors in the 2024 draft budgetary law. This milestone should be achieved by Q4 2023. Milestone #204 - Entry into force of the law for tasking the Fiscal Council with a regular impact assessment of spending reviews and the preparation of an implementation report. By Q2 2024, the Fiscal Council should be given the legal powers to issue an opinion on the expenditure analysis starting with the 2024 budget and followed by a reporting on an annual basis. Enhancing transparency and accountability: The preparation of ISPs by ministries has helped to increase transparency over institutional roles, policy commitments and policy agenda. To this end, it has enhanced the transparency and accountability of the strategic priorities in connection with the funds and results committed to by the eight line ministries participating in the project. The plan outlines in a transparent manner information on programs, the associated financial resources and the expected results (outputs/outcomes). As a key development in this respect, the 2023 budget formulation of the ministries takes into consideration the ISPs. Management tool: The ISP is a management tool that can help ministry leadership understand priorities, monitor progress as to overall ensure better coordination within a sector/institution. It provides a big picture on the strategic objectives, results, and performance indicators that the ministry should achieve through the allocated financial resources, including by subordinated/coordinated agencies, allowing top management to easily implement and monitor 17 specific policies. The ISP is a useful tool to provide an overview on how programs from different institutions covering one sector come together under a common strategic objective. For example, the Ministry of Transportation and Infrastructure ISP covers the programs/projects by the National Road Company through the ministry’s budget. Although the ISP methodology has become mandatory for all ministries, at the end of the day it is up to the top leadership to make the most use of this valuable tool. Extending the ISP IT tool: ISP IT tool was expanded to the eight line ministries to prioritize and monitor sector policies within the annual budget and the MTBF. Ministries were trained on how to use the tool, while designated administrators have uploaded the eight ISPs data in the application and received the user manual. Building capacity: Overall, the RAS has helped the participating ministries to build capacity by setting up coherent planning mechanisms, exchanging best practices, and receiving customized training on the ISP process and IT monitoring tool to enhance performance management in the public sector. During trainings, ministry staff learned how to assess the links between results, policies, and resources. Also, they picked on how to set priorities and objectives, design programs, or allocate financial resources aligned with the MTBF, monitoring of outputs, outcomes, and unit costs, in addition to identify performance indicators and collect performance data. Overall, 45 staff/technical experts from eight WGs were trained by the Bank experts during several workshops and sessions on performance planning and budgeting, including on the ISP methodology (drafting and implementation) and the IT monitoring application. It is expected that the IT tool to be regularly used for data collection and M&E and assessing results. Supporting a culture of performance in central administration: Bringing about a performance culture into the public sector is a long-term process that can be quite challenging in countries without strong public institutions and with limited capacity. At the same time, connecting funds to results can help manage ministries and better link sector priorities to budget appropriations. Making strategic planning mandatory to all ministries set a solid ground for executing strategic management and planning along with program-based budgeting, which puts Romania a step closer on the road of a performant central administration. To this end, the RAS contributed to: (i) Changing the organizational culture at ministry level: The project tried to inculcate staff ministry to change their attitude towards a performance-based culture. A key factor was the WG, which gathered staff from different policy departments and the budget unit. Although in some ministries the ISP draft was almost entirely integrated by the Bank team, with limited inputs from ministries, Bank experts made efforts to involve technical staff in the process and place more responsibility on them, whenever possible. As of now, WG members should be reasonably familiar with performance frameworks and many back such changes. (ii) Learning from peers: The trainings enabled WGs members to exchange views, learn from each other and increase their roles in the ISP process. While the ISP preparation is a teamwork that requires commitment from members, it can also be an opportunity for ministry staff to learn more about their institutions, departments, public policies, strategies, indicators, etc. (iii) Sector overview: The RAS continued to strengthen the framework to connect performance to budgets and set a methodology aligning budgets to national and sector policy priorities. With the Bank training, by now relevant staff from ministries should 18 have a good understanding of prioritized sectoral strategic goals, available funds (including EU funds), potential appropriations, and performance data. (iv) Connecting policy agenda to budgeting: As ISPs are just starting to be used in drafting the ministry’s budget and outlining financial needs for year 2023 this is a clear sign of the important role the strategic plan can play in linking priorities to funds.  Specific strengths regarding the ISP drafting process • PPU engagement: In ministries where PPUs were set up and active, these units took the lead from the ministry’s side on the ISP and coordinated well with WGs, acting as the technical secretariat for the group. Some PPUs were the single focal point of contact for the WB team and facilitated all process-cycle (e.g., coordinating, reviewing). The Ministry of Culture (MoC) is a good example where the process benefitted from significant support from the PPU, right from the project get-go. In addition to undertaking the responsibility of setting up the WG / sub-WGs by internal administrative acts at project inception, the PPU facilitated and mediated the drafting and updating of the ISP and played an active role in ensuring communication with the WG. Moreover, at times it contributed to the drafting of the plan or provided timely inputs. • Previous experience with strategic planning: Ministries/ staff that were previously exposed to strategic planning and are familiar with strategic planning concepts and monitoring process had a far better understanding of the process. Some of the MoC staff worked on the 2009-2013 ministry’s strategic plan, and they were motivated to bring their experience to the ISP work. • Understanding strategic planning: After grasping the importance of the ISP process and that this should be a team effort, ministries have become aware that they needed help with strategic planning and began engaging closely with the Bank team. Drafting the ISP has become a more fluent process once ministries have gotten actively involved in the project and provided written comments by different departments (as it was the case of the Ministry of Energy and the Ministry of Entrepreneurship and Tourism). • Follow-up training: The follow-up training in September 2022 helped ministries to clarify ISP-related issues. Bringing altogether ministry staff, the WB team assisted them to better understand the strategic planning process and allowed for reviewing and readjusting key aspects, like strategic objectives or measures. • WGs officially set up: WGs were set up by minister’s order, notes from the ministry’s general secretary (GS), or just a simple note of assignment. The process worked better where WGs were set up by top management/GS, while the ISP was streamlined whenever WGs members was involved in the drafting the plan. • Support from ministry staff: There were ministries that indicated strong interest for the project at the staff level right from the project get-go. This shows that if relevant staff is committed to the ISP process this might substitute, to some extent, the lack of endorsement from top management, at least during the ISP drafting phase. • Communication between GSG and ministries: As the GSG acted as liaison between the Bank and ministries, the support from the center of the government helped get ministries onboard. As usually staff had to receive the green light from their managers before getting involved in the project, the communication from the GSG gave a push to the leadership to speed up the process internally. However, inter-institutional communication proved to be difficult at times (see below - Challenges). 19 2.2. Challenges Major challenges in the domestic and international arena occurred during the RAS cycle, with significant impact on project activities. The COVID-19 pandemic, which broke out in early 2020 and went on for its main part until the first half of 2022, and the war in Ukraine have triggered serious social and economic challenges, shaped the public agenda, and shifted priorities for the leadership. In addition, political events influenced the RAS implementation, as Romania went through a few government reshufflings that caused institutional adjustments, with direct effect on the ISP drafting process. Even the RAS preparation calendar was impacted by the changes in the structure of the ministries and their portfolios. Institutional adjustments led to fluctuations in sector areas, as some ministries split or merged, so policy areas and portfolios moved around. COVID-19: The COVID-19 pandemic was on the top of public agenda over the past couple of years. Like many countries worldwide, the Romanian Government channeled its efforts to address the social and economic consequences of the health crisis and dealt with unpredictable expenditures and shifts in the use of funds. As the GoR focused on responding to those affected by the pandemic and incurred important losses, including households and private sector companies, the priorities of the long term reform agenda became less important. In addition, the pandemic restrictions imposed made it difficult to carry out some of the project activities as planned and adjustments were required. The first training sessions in late 2020 and early 2021 were thus organized online and experienced technical issues, as some ministry staff connected from home and did not have access to adequate internet/logistics. Political changes: Important political changes took place throughout the project cycle. Between 2019 and 2022, Romania had three elections (local, parliamentary, and presidential) and four prime ministers (PM)/cabinets, while the political power structure shifted three times – from one-party minority government to a multi-party coalition, and then to a three-party coalition that brought together the two largest parties and a two-thirds majority in the Parliament. In 2019, the government did not survive a no confidence motion, which led to the appointment of a new PM/cabinet. The 2020 elections brought to power a three-party coalition that lasted a little over a year, and by the end of 2021 a new coalition came into power. Fluctuations in the political environment, in addition to the external challenges, affected the focus of the decision-makers for systemic reforms. Institutional instability: The political changes triggered institutional instability and adjustments in the structure of ministries and their portfolios during the RAS implementation. Due to institutional restructuring and mergers, the number of ministries fluctuated, from 20 down to 16, and then back to 20. These variations were driven sometimes by political rationale to accommodate political changes. For example, at project inception, several policy sectors were grouped under the Ministry of Economy, Entrepreneurship, Energy and Tourism. After less than one year, the institution split into the Ministry of Economy, Entrepreneurship and Tourism and the Ministry of Energy, respectively. A year later, the Ministry of Economy, Entrepreneurship and Tourism split further into two entities - the Ministry of Economy and the Ministry of Entrepreneurship and Tourism, respectively. Similarly, the Ministry of Youth and Sports, which was part of the first ISP iteration, was split into the stand-alone Ministry of Sports, while the Youth sector was incorporated into the newly created Ministry of Family, Youth and Equal Opportunities; however, Youth was dropped during the second ISP cycle as keeping the domain under the new institutional arrangement was no longer feasible. 20 Institutional bottlenecks: The changes in the structure of ministries led to institutional bottlenecks and even dysfunctionalities, with policy domains moving around from one entity to another. For example, at the end of 2020, after the Ministry of Economy, Energy, Entrepreneurship and Tourism split into two - Ministry of Economy, Entrepreneurship and Tourism and Ministry of Energy –, it took over four months to seal the separation and approve the GDs on the functioning of the new institutions. Consequently, on a number of occasions, the Bank struggled to figure out who the counterparts would be since most staff was confused about their institutional affiliation. At the same time, even when merging two entities (e.g., Ministry of Research with the Digitalization Authority into the Ministry of Research, Innovation and Digitalization), this did not necessarily mean that the integration was done at both sector and staff level, as in fact, they continued to operate separately. Ministry restructurings complicated the ISP process, from both organizational and human resources perspectives. As Bank’s counterparts changed frequently in certain instances, the setting up of the WGs was delayed sometimes for months. In a number of cases, those dealing with the first ISP cycle were no longer there at the time of the second iteration, and new members were appointed and trained by the Bank team. Inadequate ministry staff structure: It was envisaged that PPUs would be the ISP driving force from the ministries’ side. However, not all ministries had PPUs, or in some cases such units were established late in the project implementation. For example, the Ministry of Entrepreneurship and Tourism did not have a PPU until mid-2022; by fall, the PPU staff still had no access to adequate logistics and were yet to be incorporated into the ministry’s activity. In other cases, for example the Ministry of Economy, the PPUs were understaffed, with only 2-3 people that had several duties. The lack of a functioning PPU put additional burden on the sector groups. In understaffed ministries or without PPUs, the ISP drafting process required one-on-one engagement with each relevant department. The internal communication was quite slow, and staff /technical experts were too busy with their daily duties to find sufficient time for the ISP. Poor inter-institutional communications: Communication between the GSG and ministries was in some cases slow. Sometimes ministries took considerable time to respond to GSG’s requests, so the GSG had to send reminders or use other channels to receive an answer. While at leadership level communication was this way quite challenging, it went reasonably well at technical level once counterparts were established. Individual networking: In parallel with the facilitation of communication between ministries and the Bank by the GSG, the Bank team had to network at individual level at ministries to raise awareness on the ISP process and mobilize staff to contribute. This happened for various reasons. First, not all WGs were set up based on genuine internal administrative acts to be followed through; in some cases, the ministry nominated people in response to the GSG’s request to set up a WG, but no one had informed the staff in this respect. Second, ministry staff was busy with daily duties and had limited appetite to undertake additional tasks. Finally, there were some inconsistency between WGs members and those attending trainings; sometimes, the staff sent by the ministry to Bank workshops was different than those nominated to the WGs, hence, the Bank had to train both WG members and those working on the ISP, but not part of the WG. Setting targets and indicators: Setting targets and indicators turned out to be an issue. Often, ministry staff involved in the ISP process did not take responsibility to set up indicators/targets 21 fearing potential negative consequences; they would refer the matter to their supervisor, who sometimes would dodge the matter. ISP institutionalization: There was limited leadership and ownership for the strategic planning process at times. Out of eight ISPs prepared with the Bank support under this RAS, one was officially endorsed – Ministry of Culture’s ISP, by order of minister. Often ministers do not stay long in office (sometime less than a year) so they would rather focus on short-term priorities than medium-term agendas. In one place, the ISP was a political process, endorsed to some extent by top management, but not by high-administrative level (GS). At the same time, even when ministers’ advisers were part of the WGs, the ISP process still did not have sufficient track top bottom. Limited involvement from the MoF: Although it was expected to play a more important role in the ISP process, along the GSG, the MoF’s involvement was limited. The MoF drafted and promoted the program-based budgeting methodology (GD 467/2022). As of now, the GSG and MoF are engaged in strategic planning and budgeting and have clear and complementary responsibilities (see the previous section). As the MoF understood the role of strategic planning for the budgetary process based on budget-programs to be piloted by three ministries by 2025, as per the NRRP, the MoF has asked ministries to draft their 2023 budgets based on the ISPs. Delays in budget approval: Finally, delays in the budget approval affected the drafting of the budgetary component of the ISP. For years, the preparation of the annual state budget fell behind the legal calendar and so often the budget was approved after the beginning of the next year. This process has improved recently, as the budget for 2022 was approved at the end of 2021. Section 3. Next Steps In the next period, the Romanian Government should focus on integrating strategic planning with the budget preparation and link the monitoring of results to the budget execution. This requires solid capacity building at the level of relevant institutions involved in the process, including the GSG, MoF and line ministries. To ensure that strategic planning/ ISP preparation was not a one-off exercise and that the process would be rigorously carried out by ministries, it is important that the new methodology of program-based budgeting is implemented in its spirit. Although strategic planning and program-based budgeting have become mandatory with the approval of the relevant methodologies (GD 427/2022 and GD 467/2022), the mere fact that the legislation is there does not guarantee its actual implementation. Given the limited capacity at the level of the ministries, in addition to limited understanding or interest regarding strategic planning at top decision-making, the MoF and the GSG should continue to actively support ministries on strategic planning and budgeting in the short- and medium-term. The ISP and program-based budgeting methodology should be promoted and explained to the line ministries, both to relevant staff and leadership, so they can better grasp the benefits of the new philosophy and understand how they are interconnected. Building capacity for ISP operationalization: Building capacity in the central administration is crucial in the next period, hence the GoR/GSG/MoF should further improve strategic planning and budgeting, especially regarding intra- and inter-ministerial horizontal 22 coordination. Currently, the strategic management capacity and performance across line ministries and the ISP phases (drafting, reviewing etc.) are limited. To this end, the Bank has responded to the Romanian Government’s need to further develop its capacity towards improving public sector spending and the functioning of the central administration. A new RAS is under preparation, through which the Bank is set to support the MoF, GSG and ministries (including PPUs and budget units) to develop capacity for strategic management, planning and budgeting, issues that are linked to the budget programing to be introduced gradually by the MoF. The next phase of the Bank’s technical support should help the GSG to apply its functions pertaining to strategic management, results orientation of the planning and budgeting processes, M&E, as well as support ministries to improve their planning and resource allocations to lay the ground for the introducion of program budgets and performance-based budgeting. The Bank will support with the implementation of several key aspects under Component 14 of the NRRP on Good Governance, including the operationalization of a new strategic management and planning system in line ministries; the development of strategies and strategic plans in selected ministries using enhanced methodologies (GD 427/2022 and GD 467/2022) and aligned with international best practices and upload them into the ISP monitoring platform by mid-2023; and piloting program budgeting in at least three ministries in 2024, to be extended to all line ministries in 2025. It should also support GSG/ ministries to provide guidance on the drafting of ISPs and program-based budgeting process, connect high-level strategies and ISP objectives, monitor ISP implementation by using the ISP M&E tool, and strengthen the central dashboard at the GSG for reporting on high-level and ISP priorities by ministries. Program-based budgeting: In parallel with the implementation of the strategic management and planning framework, the focus will be on introducing performance-based budgeting in the central administration. In the next period the MoF is embarking on gradually introducing a planning and budgetary framework pertaining to budget programs and will work with the ministries to endorse multi-annual performance-based budgeting. This falls under the MoF’s responsibilities regarding the program-based budgeting reform, as part of the Tax and Pensions Reforms Component 8 of the NRRP (Reform 3 – milestones 200-204). The reform is about developing the legal and methodological procedures for the steady introduction of a new budgeting framework based on international best practices in connection to program and performance-based budgeting. It is aimed at ensuring multi-annual budgetary planning, increasing prioritization of public investments, introducing spending reviews linked to the budgetary cycle and including the findings in the process of budget preparation. This would enhance the budgetary programming mechanism, simplify the spending process, improve budget program monitoring and reporting, which would overall increase transparency in the budgeting process. The first milestone (#200) was already met with the approval of the budget program methodology (GD 467/2022). Other milestones target the completion of a spending review in the education and health sectors and the approval of a multi-annual strategy calendar for a systematic review across all sectors; reflecting the recommendations of the spending review in health and education into the draft budget law; and tasking the Fiscal Council with an impact assessment on spending reviews and an implementation report. The spending review would be employed through a Government Memorandum of Understanding, which will detail de plan for conducting the exercise. The 2024 draft budget law should consider the proposals from the health and education review and starting with the 2024 budget the Fiscal Council should have a say on the analysis and prepare an annual report on the matter. 23 Integrating ISPs in budget preparation: It is important to effectively integrate the ISP drafting into the annual budget preparation process. 2022 is the first year in which referencing is made to the ISP in connection to a ministry’s budget, as MoF has asked ministries to consider the strategic planning information for the preparation of the ministry annual budget for 2023. By this, the ISP budget component becomes part of the budget submission programs of the ministry budget, while the strategic plan is attached as an annex to the budget. Although it is expected that the existing classical budgeting model and the new program-based budgeting would run in parallel for a few years, under a hybrid process, it is important to undertake steps towards strengthening the ISP drafting process to make sure that the plan is fully used for the budgeting process. Strengthening the planning function: The strategic planning function should be strengthened at the ministry level, and customized for each institution depending on structure, staffing etc. This has already been done at a number of institutions, such as the Ministry of Justice, but there is more to be done across the central administration. It is important to raise awareness of top managers on the need for strategic planning and make them become more interested in planning and program budgeting. Ministry leadership and general secretaries (GSs) should play an active role in strategic planning and implementation/ISP. Senior management, department managers, especially from budget/financial units, should understand what the specific issues at technical departments level are and seek appropriate solutions. To this end, trainings on PSI drafting, implementation and monitoring for high-ranking public officials/GS could be help bring senior management onboard. ISP coordination: It is necessary to ensure clarity on the leadership issue regarding the ISP process. Often, in the project it was not clear who would oversee the ISP and be responsible for the drafting process. There is a need for a stable, sustainable structure to coordinate the ISP process in each ministry. Strategic planning requires a solid commitment of relevant management and operational staff of the ministry, in addition to support from GSG experts. The strategic planning methodology (GD 427/2022) provides clear guidance on the institutional framework of the ISP. The ISP process should be supervised by a technical group/secretariat (Strategic Planning Coordination Committee) which should be placed under the ministry’s GS. Each ministry should ensure that the setting up of the ISP process is done appropriately. Placing the ISP under the GS would give more stability to the strategic planning process. Since GSs are the highest-ranking public servants, likely they stay in office for a longer period than ministers or deputy ministers, who are political appointees and usually have short spells in office. It would be useful if the role of the GSs in the ISP process could be somehow included in their job description. At the same time, the ministry may consider nominating a program manager for the budget program to allow for a proper steering of the exercise and enhance accountability for performance. In addition to the methodology, which is rather explicit, a guide on how to draft and implement the ISP could be useful and could bring flexibility in implementation by operating adjustments according to specific needs. The M&E process: To make the ISPs fully operational, a M&E and reporting process should be put in place in ministries around the ISP IT monitoring tool. This could be coordinated by the PPU, provided that the ministry is equipped with a working unit, or maybe set up small group in this respect. The monitoring and reporting process can be used by top management to keep track of the ISP commitments and actions and help to understand what the monitoring 24 needs are to assess results against commitments. Each ministry may consider putting together a small group comprising staff from technical departments/budget unit, subordinated agencies etc., to be responsible for introducing the data into the system. The M&E process could pinpoint to unfulfilled targets, alert the ministry leadership on issues, ask for explanations and, importantly, identify adequate actions to address challenges. Ministries should make sure that they submit the annual/bi-annual reports to the GSG, while the GSG should provide guidance on drafting an improvement action plan, in case the targets were missed. Increasing the role of the PPUs in the ISP process: As is indicated in the strategic planning methodology, PPUs should play a central role in the strategic planning process/ISP. In some ministries, the PPUs have mobilized the WG and drove the ISP preparation process; however, in others they were hardly involved as these units were understaffed or not even set up. Active PPUs acted as focal points and facilitated the communication among ministry departments and coordinated between the ministry/WG and the Bank team. The capacity and role of PPUs should be strengthened by increasing the number of staff/public managers and making sure they are integrated in the ministry’s activity. In institutions without PPUs, ministries may consider setting up dedicated strategic planning units to guide the ISP development process. Teamwork: The ISP preparation and update is a team effort that requires active and committed support from the ministry. The ministry should be involved in the development of the ISP through relevant technical/policy departments and the budget unit. It is important to have the budget unit engaged in the ISP process (drafting, reviewing etc.) to transition successfully from a traditional budget programing to a full-fledged program-based budgeting. Collaboration is necessary at all levels - horizontally and vertically, and ministry departments should engage and work together. Communication: With guidance from the GSG, ministries should develop and streamline communication on the ISP preparation and monitoring. A communication routine would not only improve engagement within departments involved in strategic planning, but also help boost the ISP ownership in the ministry. For example, ministries could set up a calendar for WG/ISP meetings, once every three months or so (3-4 times/ year). At the same time, the GSG should consider organizing regular meetings with the ministry’s GS/managers at all levels (management and execution) that are involved in the ISP process, in addition to sessions to staff on overcoming frequently encountered issues based on best practices. The GSG and the ISP implementation: The GSG should take on its role of monitoring the ministries on the implementation of the ISPs. The Center of the Government should make sure that the ministry leadership is aware that the ISP is a planning/management tool that must be put into practice, and not be perceived as just an administrative document, one of many. Capacity building and training sessions to both management to emphasize the importance to use ISP is key in applying strategic management across the central administration. Training on the ISP IT tool: In the next period, ministries will need support to integrate the ISP into the ISP IT platform and upload the data into the tool. However, periodic data update could experience delays given the understaffing of some ministries. More training for the technical staff is necessary on strategic planning and on how to use the platform, to identify appropriate ways to interconnect the ISP IT platform with other platforms within ministries to ensure transparency and to use project indicators, programs, and data reported in the platforms to increase efficiency. At the same time, trainings should provide practical examples on drafting budget sheets based on the new planning and budgeting methodology. 25 Protocol between MoF and GSG: The MoF and GSG should work together for implementing the strategic planning and budgeting reforms. The agenda committed in the NRRP provides the backbone of these reforms and the NRRP represents a window of opportunity to address these longstanding challenges of the public administration. The MoF leads the reform on improving the budgetary planning mechanism and the introduction of performance-based budgeting. The GSG coordinates the operationalization of the strategic management and strategic planning system in order to create the conditions for the implementation and execution of program-based budgeting. A protocol between the GSG and the MoF could help to better coordinate these complementary reforms and provide support to ministries along the process. 26 Competence makes a difference! Project selected under the Administrative Capacity Operational Program, co-financed by European Union from the European Social Fund