POLICY NOTE 1 Efficiency in the Programming and Financing of Social Protection BACKGROUND To maximize the impact of social protection (SP) programs, it is critical to: (1) align the allocation of resources with national policies and strategies; (2) design programs that are able to reach their intended beneficiaries with adequate coverage and level of benefits; (3) ensure efficiency in programming and financing; and (4) ensure efficiency in the actual delivery of programs at the local level. This policy note analyses point (3), the processes of budgeting, programming, and reporting on SP budget, highlights areas where challenges remain, and proposes policy recommendations to address those (others are covered in other policy notes and in the main reporti). There are several important questions which are critical to understand and assess the efficiency of programming. These include, but may not be limited to: How SP budgets are prepared? Who are involved in the preparation process? Who determines the allocation and number of projects to be included every year? What are the sources of financing? Who monitors program performances? Besides, a well-functioning SP system also calls for the existence of an integrated financial accounting and reporting system as well as auditing mechanisms. Ideally, a dedicated authority should be in place who can play a strong role in allocating resources, coordinate among different processes and agencies, and oversee program performances. 1 The Policy Note series discusses key thematic findings and recommendations outlined in the ‘Bangladesh Social Protection Public Expenditure Review (PER)’ report. The series includes notes on the Allocative efficiency: Better Align Social Protection Resources with National Policy ; Adequacy of Coverage, Targeting and Benefits of Social Protection Programs; Efficiency in the Programming and Financing of Social Protection; and Efficiency in the delivery of Social Protection Benefits and Services to Beneficiaries. 1 Efficiency in the Programming and Financing of Social Protection POLICY NOTE PROGRAMMING Social protection in Bangladesh is characterized by a large number Table 1: Actual expenditures by largest 10 social protection of programs. Multiple agencies implement numerous interventions. programs (FY2013-14 to FY2017-18) Over the last decade, the number of interventions has grown significantly (from 77 in FY2009-10 to 125 in FY2019-20). It is partly % of social driven by interventions under the development budget which Total (BDT Program Name protection contributes to only about 20 percent of the total SP budget, but billion) spending accounts to about 60 percent of the total SP programs and projects. Besides, the largest 31 programs account for more than 90 percent 1. Pension for Retired 534.25 36.0% of actual expenditure, (and the top 10 account for 70 percent of the Government Employees and total, Table 1), while the smallest 100 programs represent only 10 Their Families percent. The plethora of interventions also represents significant 2. Honorarium for Insolvent 88.08 5.9% challenges in coordination and efficiency. In addition, while small Freedom Fighters (HIFF) projects provide opportunities to pilot innovative approaches, 3. Old Age Allowance (OAA) 77.17 5.2% many development projects are not designed to inform large scale programs. 4. Food Friendly Program (FFP) 62.16 4.2% 5. Vulnerable Group Feeding (VGF) 55.49 3.7% Progress towards consolidation, as recommended in the NSSS, 6. Vulnerable Group Development 54.86 3.7% is slow. This could include consolidation along phases of the life- (VGD) cycle, as well as the consolidations of large programs (for instance, consolidation of MoSW’s WA and MoWCA’s VGD programs into a 7. Open Market Sales (OMS) 46.93 3.2% Vulnerable Women’s Benefit, or consolidation of all public workfare 8. Primary Education Stipend 42.18 2.8% programs implemented by MoDMR and LGD into a single program). Project (PESP) 9. Employement Generation 34.63 2.3% Besides, involvement of multiple authorities in the programming Program for the Poorest (EGPP) and decision-making process of social protection programs often results in coordination challenges. For instance, the General 10. My House My Farm 34.26 2.3% Economics Division (GED) monitors, documents and evaluates Source: iBAS, Controller General of Accounts. the activities and progress on the NSSS. Based on GED’s findings, Cabinet Division (CD) tries to coordinate programs and agencies. of social protection programs, and implements the Government- On the other hand, FD allocates resources, prepares the annual list to-Person (G2P) payment scheme. BUDGETING AND FINANCING Budgeting process is long, rigid and top-down ceilings largely determine allocations (bottom-up budgeting would result in unrealistically large demands). This is followed by tri-partite The budget process has numerous steps, starting from the top, meetings are organized between FD, Planning Commission (PC) and with the updating of the Medium-Term Macroeconomic Framework line ministries and the meeting of the Cabinet Committee on Safety (MTMEF) and the estimation of the overall resource envelop; Nets. Allocations are communicated to field offices once approved. followed by the inter-sectoral allocation of resources (indicative Such long process often makes it hard to propose innovations or budget ceilings for line ministries). Within social protection agencies, reallocations. budget preparation draws from inputs from departments, but 2 POLICY NOTE Existence of dual budgeting system weakens Scope for enhanced role of the Cabinet strategic alignment and creates inefficiencies Committee in budget allocation Despite the move towards integrated budgeting, a dual system The first time a line ministry is able to present and justify its still prevails in Bangladesh, with separate processes for operating demands for resources is at the tri-partite meeting with the FD and and development budgets. The dual budgeting approach entails PC. While some adjustments in ceilings may emerge in favor of the different preparation processes and timelines and separate line ministries from the tri-partite meetings, for major safety nets, responsible agencies. A few elements complicate the process: The the final, binding resource allocation decisions materialize from the Annual Development Programme (ADP) is developed on an annual Cabinet Committee on the Overall Supervision of Social Protection basis, and projects can be added outside the budget cycle, while the formed in 2014. The Committee is mandated to review the annual Medium-term Budgetary Framework (MTBF) has three-year cycles performance and make decisions on the budget allocation of 15 (figure 1). The multiplicity of processes also puts heavy demands on programs (including only 7 of the largest) covering only 40 percent the line ministries. Multiple requirements can sometimes result in of the total revised budget in FY2018-19 (excluding Government inconsistencies and weaken the link between budgets and policies. pensions). Other large, important programs are not included in the Committee’s purview, limiting its impact. Clearance from Clearance from FD ERD if the project on the salaries of includes foreign civil servants to financing be deployed to the project Department/ Line ministry Department/line line ministry’s approves TPP/ ministry conceives planning Wing DPP followed by project develops TPP/ inter-ministerial DPP meeting Following Project TPP/DPP is sent to The Programming Evaluation Committee the relevant Sector Division of meeting, TPP is sent Division of the the Planning for Minister’s Planning Commission approval (line Commission for prepares the ministry or Planning, appraisal (the process ADP for the new depending on may entail several financial year. threshold)/DPP is sent rounds of revisions to for ECNEC approval. the TPP/DPP (see note) Figure 1: Development project approval process affecting development budget preparation. 3 Efficiency in the Programming and Financing of Social Protection POLICY NOTE UTILIZATION, REPORTING AND AUDITING Budget utilization rate for social protection for not only programming, but also for analysis and monitoring has been improving in recent years of SP expenditures. However, while central units use iBAS++ for budgeting and reporting, some local-level officials are yet to start There is some heterogeneity, with larger programs having on using the system. For major programs, iBAS only records the first average higher utilization rates (almost 100 percent every year), steps in a longer chain of transfers. While the use of the operating due to their regularity. Other programs have more variable budget budget by design requires claiming expenses as reimbursements, utilization, particularly those focused on disaster response and transfers are in practice recorded as expenses without waiting for food transfers, and require a dedicated financing strategy. However, reconciliation with actual expenditure data. For instance, for EGPP, the development budget has historically been overprogrammed: funds are transferred from the treasury to the ministry and then As projects are approved throughout the year irrespective of to upazila-level mother accounts. Funds are then transferred to resources available, allocations to older projects may be reduced union child accounts following selection of sub-projects, before and reallocated to newly approved projects that take time to get transfers to beneficiary accounts (using lists verified by the Project started. Delays often result from challenges in the formulation Implementation Officers based on attendance records). For some of project costs as part of the Technical-assistance Project Pro- other programs, for instance, for OAA, WA and DA, the use of iBAS is forma (TPP) and Development Project Pro-forma (DPP), and even more limited. rigidity comes from the complexity of the process of subsequently adjusting TPP/DPPs. The audit of social protection programs is limited, which curtails opportunities for Scope for improvements in financial reporting improvements High utilization of SP budget every year (discussed above) may So far, the scope of audits focuses mostly on entity level transactions indicate weaknesses in financial reporting, limited use of iBAS and do not delve into program expenditures and processes. Projects and/or capacity constraints at the local level. A fund flow analysis receiving international development assistance are audited by the carried out for the PER revealed that budget utilization for EGPP Foreign-aided Project Audit Directorate (FAPAD), but their limited is reported to be almost full. However, in practice, since payments scale constrains the application of the Directorate’s good practices. are conditional upon daily attendance at work, there can be Besides, Office of the Comptroller & Auditor General (OCAG)’s some under spending. For instance, across a small sample of recently established Directorate of Social Safety Net Audit covers upazilas, during the second half of FY2017-18, 3.1 percent of wage seven ministries. The Directorate is carrying out the first financial allocations, 8.7 percent of non-wage allocations and 31.4 percent audit of the MoSW’s cash transfer programs. Deeper audits would of labor leader allocations were not utilized. help enhance fiduciary management, as well as efficiency of Furthermore, as discussed in the first policy brief on policy alignment processes, resulting in greater impacts. and categorization/classification that the use of iBAS is critical THE WORLD BANK 4 POLICY NOTE RECOMMENDATIONS • While improving the design of large programs for maximum impact, progressively consolidate or terminate small projects to reduce fragmentation. In addition to improving large programs that can have systemic and sustainable impacts, the government could consolidate some programs, potentially around their functions or target population. For instance, consolidation efforts could merge programs for vulnerable women, or programs focused on early childhood support, or public works programs. In terms of development projects, the government should only finance those that test new approaches (e.g. labor market projects) and evaluate them before deciding on potential scale-up. All other small development projects, which don’t contribute to the innovation agenda, should be progressively terminated. To operationalize this recommendation, rules and guidance will be needed on: (1) how to amalgamate various processes; (2) how to redistribute responsibilities for consolidated programs; and (3) how to consolidate programs financed from development and operating budgets. • Strengthen social protection coordination mechanisms and the link between policy and resources allocation. The Cabinet Committee on Social Protection should play a more important role in linking allocations to policy priorities – both by broadening its coverage and by deepening its consideration of data on impacts, coverage and adequacy to make evidence-based budget allocation. To broaden its coverage, the Committee should review all core programs, financed from both operating and development budgets, analyze programs’ alignment with core policies and objectives using core policy-relevant typologies. The Committee can also consider meeting earlier in the financial year, to make more effective contributions to the budgeting process of social protection. • Simplify and harmonize the budget process. This could involve bringing the development and operating budget processes more in line, rationalization of the reporting requirements by central level ministries (e.g. FD, CD, PC), and reducing the number of back and forth on budget preparation. Simplifying and flexibilizing the TPP/DPP preparation and revision processes would boost implementation of development budget-funded projects. • Strengthen financial reporting and auditing to improve implementation and program management. At the local level, capacity needs to be developed to use central reporting systems (including iBAS) and effectively report actual expenses (using bank reconciliation statements). This would also allow for more informed program management at the local level. Financial audit of social protection programs can help increase transparency of expenditures and processes and contribute to efficiency. Directorate of Social Safety Net Audit’s practice of conducting financial audit for MoSW should also be emulated for other agencies’ programs. In addition, performance audit by the Directorate can bring a holistic view of program performance. i World Bank, 2021. “Bangladesh Social Protection Public Expenditure Review (PER)”. World Bank Group, Social Protection & Jobs, Dhaka, Bangladesh. ii World Bank, 2020. “Social Protection Fund Flow Analysis”. Dhaka, World Bank. iii Administered by the UNO and Project Implementation Officer. vi Administered by the Upazila Social Service Officer and the Upazila Nirbahi Officer (UNO) or equivalent urban area officials where applicable. v Ministries include MoSW, MoCWA, MoDMR, MoFd, MoLE, MoLWA, and MoYS. Allowances for the Financially Insolvent Disabled 5 Efficiency in the Programming and Financing of Social Protection POLICY NOTE World Bank Office Dhaka World Bank, 2021. “Bangladesh This Policy Note has been prepared Plot- E-32, Agargaon, Sher-e-Bangla Nagar Social Protection Public by Mostafa Amir Sabbih and Aline Coudouel, Social Protection & Jobs Dhaka-1207, Bangladesh Expenditure Review (PER)”. World Global Practice, World Bank Tel: 880-2-5566-7777, Fax: 880-2-5566-7778 Bank Group, Dhaka, Bangladesh. www.worldbank.org/bangladesh © World Bank 6