SPARC Template Developing Medium Term Sector Strategies A Guide for Main Vote Controlling Ministries and their MDAs Scriptoria Communications Final

Transcription

1 SPARC Template Developing Medium Term Sector Strategies A Guide for Main Vote Controlling Ministries and their MDAs Scriptoria Communications Final Report Report 1 September May

2 The opinions expressed in this report are those of the authors and do not necessarily represent the views of the Department for International Development

3 Contents Abbreviations and Acronyms Preface Section One: Introduction... 1 Aim of this Guide a Consistent Approach... 1 A Learning Exercise... 1 Joined up Government... 2 Section Two: Definitions... 3 Policy, Strategy, and the Results Chain... 3 What is a Sector and What is an MDA?... 5 What is Programme-Based Budgeting?... 6 Section Three: MTSS What, Why and Who... 9 What is MTSS and Why Do We Need One?... 9 Who is Responsible? What Needs to be Done to Produce a Good MTSS? Sector Plans, Operational Plans and MTSSs Section Four: The Current Situation in the State How Far Has the State Progressed with Policy? Extending MTSS on a Pilot Basis Budget Realism - A Condition for MTSS Roll Out Section Five: Try Following These Steps STAGE 1: Review and Preparation STEP 1A: Set up an MTSS Committee and Agree Terms of Reference STEP 1B: Review Existing Policy Statements STEP 1C: Gather Data, Analysis and Performance Reviews STEP 1D: Obtain Revenue Projection Information STEP 1E: Existing Contract and Budget Commitments STAGE 2: Developing Strategy STEP 2A: Commence Strategy Sessions STEP 2B: Develop Strategy for the Achievement of Outcomes STEP 2C: Activities Costs, Ceilings, and the Budget Structure STEP 2D: Policy Group Review of the Need for Changes STAGE 3: Documentation and Agreement STEP 3A: Political Approval and Understanding STEP 3B: Produce an MTSS Document... 34

4 STEP 3C: Presenting the Budget Section Six: Other Critical Considerations Monitoring Performance Public Involvement Section Seven: An outline Timeline Annex One: Glossary of Terms Annex Two: Draft Outline Terms of Reference for Sector MTSS Committee Overall Function Tasks Appointment and Responsibility Membership Annex Three: MTSS Strategy Logframe Template Annex Four: Some Pointers on Developing Sector Strategy Some Possible Preliminary Strategic Questions Build Rather than Repeat The Recurrent Vs Capital Ratio Think about other Players Relevant to the Sector Technical and Capacity Limitations Identifying both New and Current Activities Ensuring Political Relevance Annex Five: Programme Based Budgeting Annex Six: Guidance on the Completion of Annex Five Annex Seven: Justifying Priority Options Annex Eight: Outline Means of Improving Public involvement in the MTSS Process Annex Nine: Outline Table of Contents Annex Ten: Checklist for G&SI in MTSS... 75

5 Abbreviations and Acronyms CBA CEA CSO DFID ESSPIN ExCo G&SI GDP IDA IGR KPI M&E MDAs MDGs MoE MoEP MoF MoH MTEF MTSS NGOs PATHS2 PBB PFM PS PSM REPC SEEDS SHoA SMART SPARC SUBEB ToR Cost / Benefit Analysis Cost Effectiveness Analysis Civil Society Organisation Department for International Development Education Sector Support Programme in Nigeria Executive Council Gender and Social Inclusion Gross Domestic Product International Development Assistance Internally Generated Revenue Key Performance Indicators Monitoring and Evaluation Ministries, Department and Agencies Millennium Development Goals Ministry of Education Ministry of Economic Planning Ministry of Finance Ministry of Health Medium Term Expenditure Framework Medium Term Sector Strategy Non Governmental Organisations Partnerships for Transforming Health Systems II Programme Based Budgeting Public Financial Management Permanent Secretary Public Sector Management Revenue Envelopes Projection Circular State Economic Empowerment and Development Strategy State House of Assembly Specific, Measurable, Attainable, Relevant and Time-bound State Partnership for Accountability, Responsiveness and Capability State Universal Basic Education Board Terms of Reference

6 UBEC VAT Universal Basic Education Commission Value Added Tax

7 Preface This document is a generic guide, produced by State Partnership for Accountability, Responsiveness and Capability, aimed at providing support to state strategy makers. It is intended that the guide should be used at first in discussions with strategy makers, especially the relevant senior civil servants in the state, to raise their awareness of some of the principles that might guide improved strategy-making in the state especially with a view to improving the impact of state government efforts to deliver public goods, and to improve the welfare of citizens. It is envisaged that following such discussions, a team might be appointed to take hold of this generic version, and to convert it into a localised document, made specific to the circumstances and aspirations of the state concerned. Most of the text is technical and could be lifted or edited as local practitioners see fit. However, in some places specific information needs to be added. For example where illustrations of key policy goals are provided, or where illustrative information about existing plans is listed, these will obviously need to be altered to reflect the circumstances and preferences in the state concerned. Note that the current guide is the third edition. The first edition was produced in 2009 and involved discussions between State Partnership for Accountability, Responsiveness and Capability the originator of the document and Education Sector Support Programme in Nigeria, Partnership for Transforming Health Systems II and State Accountability and Voice Initiative, three other major Department for International Development programmes. This consultation was aimed at ensuring a measure of continuity in the advice provided by the different programmes. In some states this earlier edition has already been used as a basis for a localised version of the guide. The current edition incorporates some lessons and developments based upon developing state practices, especially with respect to the use of templates for converting sector strategy costs into the budget structure. Also, since the production of the original guide on making sector strategy another companion guide has been developed on making state policy. The other guide is intended for policy-makers, but it makes sense for all state staff, and indeed others who are interested and concerned, to read the two guides as companions. They are intended to be mutually supportive.

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9 Section One: Introduction The aim of a Medium Term Sector Strategy (MTSS) is to improve the connection between policy making, planning and medium-term budgeting, especially so as to facilitate better implementation of a state government s policies. In order to develop MTSSs effectively, most Ministries, Departments and Agencies (MDAs) will require technical advice and support, and it is probably the responsibility of the central economic planning MDA to provide it. This guide is intended first of all to provide that central MDA with the basic material required so that its own staff understand what is entailed. It may also then be used by the planning MDA as a basis from which to deliver its own guidance to the sector MDAs. This may be most effectively achieved if members of the planning MDA are themselves involved in converting the current generic guide into one which suits the circumstances in the state concerned. By being involved in this conversion process it is expected that the planning MDA staff will themselves internalise much of the technical content. Aim of this Guide a Consistent Approach The current document is intended as a guide to the process of extending MTSS across the state, whether this is to be done on a pilot basis (as this guide recommends) or if it is to be rolled out across the state all at once. It sets out steps to be followed by all participating line ministries and MDAs with the aim of: Ensuring an appropriate degree of consistency between the submissions from different ministries; but Allowing an appropriate degree of flexibility to reflect between-sector differences and to allow for learning and development through the process. This generic version of the guide draws upon experience in other states and upon the Federal Government guidance in developing approaches to MTSS developed in 2009, but it may also be refined in order to take account of specific circumstances and needs in each particular state where it is used. It is expected that lessons from each annual cycle of MTSS preparation (together with experiences from other states) will lead to annual refinements to and improvements in this guide. Indeed, this 2012 edition is the third version of the guide, and it builds to some extent upon lessons from the field. Above all the guide seeks to set out a series of steps that a sector ministry should take in developing its sector strategy. The steps are not intended to be exhaustive. Each ministry might choose to add additional steps to the process if they see fit. The structure of the guide is set out in the table of contents. There are also ten Annexes providing supporting templates, additional guidance on some of the steps, and an outline table of contents for an MTSS document. A Learning Exercise MTSS approaches to planning and budgeting are still relatively new. The guide recognises that building knowledge and experience in sector strategy making is as much of a learning process for the central ministries as it is expected to be for the sector ministries and MDAs. Support for this learning may also be provided by the Department for International Development (DFID) Programmes currently working in different states, especially the State 1

10 Partnership for Accountability, Responsiveness and Capability (SPARC) (through the central planning MDA), and in selected states the Education Sector Support Programme in Nigeria (ESSPIN) with the Ministry of Education (MoE), and the Partnerships for Transforming Health Systems II (PATHS2) with the Ministry of Health (MoH). Joined up Government This guide is about a part of the general area of government activity we call, making policy and strategy. But improving policy and strategy making on its own cannot be expected to deliver very much. There are other parts of government that are also critical. Especially SPARC as a programme promotes the idea that in order to make better policy and strategy making effective, it MUST be combined with improvements in: Public Financial Management (PFM); Public Service Management (PSM); and Monitoring and Evaluation (M&E). Put simply what this means is that in order for better policies and strategies to take effect they must be accompanied by: Appropriate allocations of resources within realistic ceilings of what is affordable; Cash management and accounting systems that allow money flows to be predicted, managed and accounted for; A civil service that is organised, staffed and equipped to the degree required to deliver its responsibilities, and indeed effective policies must be realistically achievable by the service currently in place; and Performance must be observed, tracked and evaluated, so that people can see whether targets are being achieved, and so that approaches can be improved where they are not. In summary, if all these conditions are in place, and if policy and strategy is improved, the end result should be better service delivery, and better delivery of public goods. THIS is the main objective, and the current guide tells just one part of the story of how to achieve it. Accordingly there are references made throughout this guide to questions of financing, to the relationship between policy and service capacity, and to the relationship with the monitoring of outcomes. 2

11 Section Two: Definitions In order for the process of doing MTSS to make sense, we need to be armed with some basic common understandings. This includes some definitions on policy, strategy and objectivesterminology, and on what is a sector, a programme, and a project or activity. Some of these definitions may vary from what people have heard before or are used to. Different sectors may have in the past used rather different terms for what are essentially the same processes. In fact there is no correct usage of what are sometimes interchangeable terms. But this section of the guide merely attempts to provide a standardised terminology with a view to achieving consistency and shared understanding across a state government. Note that Annex One to this guide constitutes a glossary of terms for quick reference. Policy, Strategy, and the Results Chain In very simple terms, Policy is about defining expected overarching Goals and Outcomes, whereas Strategy is about how we may achieve them. Generally we achieve Outcomes through Activities which combine to make Inputs and which deliver Outputs. Goals: A goal exists at the level of the parent organisation, in this case for the government as a whole or quite possibly covering the whole state. It describes a key result over a long time frame towards which all combined efforts should be aiming. An example could be, a healthy and well educated population contributing to improvements in the economy and the quality of the lives of people. Outcome: Outcomes (which have sometimes been termed objectives) are a little more specific. For example, achieving a higher proportion of secondary aged school leavers with a level of qualification required for entry to university, might be an Outcome. Similarly, fewer people suffering from disease is an Outcome, and both of these examples may be expected to contribute to the high level policy goal mentioned above. Indeed they must do so. If they do not then the question must be raised, how can we justify trying to achieve this outcome? The Outcome of more highly qualified school leavers may in turn be expected to result from a better education system, and building that system will have needed things schools, books, desks and people qualified teachers, assistants and administrators to teach the children and to run the system. Similarly, reducing disease incidence may need things, such as vaccines, needles and health centres, but the outcome of people being free from that disease will also have come from doctors, nurses and other staff who have carried out the vaccinations. Outputs: More teachers, nurses, vaccines, buildings and equipment are results that we call Outputs (but have also been referred to as Targets ). But they are not outcomes. This is an important distinction because it is possible that our strategy (which is the combination of the inputs and activities that will result in the achievement of those outputs) might not actually achieve the Outcome we expected. For example, if building schools is not accompanied by more qualified The aim of the guide here is to provide a set of standard definitions 3

12 teachers, the quality and volume of graduating students might not be achieved. In monitoring and evaluation we need to check that the output is also achieving the Outcome. If it is not then we need to modify our strategy (the combination of inputs and activities). Inputs: These are what are needed to create outputs. If a road is an output, it needs the inputs of labour, planning, materials and equipment to build it. Activities: Finally, activities are the things that have to be done in order to bring inputs together to make outputs. (In some contexts these are sometimes referred to as projects.) Perhaps this may include the development of a database, building schools, recruiting staff, providing training, and procuring equipment. There are a number of other terms which people may have come across and are used to using, but in the interest of achieving a degree of simplicity we recommend that these terms are dropped from the MTSS development process. This may include terms like Aim, Objective, Target, Project and Milestone. Our definition tells us what policy-makers ought to be working towards, and that is a description of medium to long-term outcomes. Strategy makers, in order to make their work effective, need to be guided by these policy statements. They then need to work out the most effective mixture of inputs and outputs that will achieve the desired outcome result and to do that within the resource constraints they face. This discussion is summarised in Figure 1, which we call the results chain. Note that MTSS takes us as far as Outcomes. But in order to develop strategy we also need to know what the state s longer term or high level policy goals are. The results chain is also reproduced in the corporate planning guide, and in M&E guidance developed by SPARC. Figure 1: The Results Chain Medium Term Sector Strategy Long Term Strategic Plan Inputs Activities Outputs Outcomes Impacts Ongoing Ongoing Short-Term Medium-Term Long-Term Medium-Term Objectives Longer-Term Goals What is an output at one level might become an input at the next level up. For example, an output from the Education Resources Centre of a better examinations procedure could be an input to the basic education sector, contributing to more and better educated children emerging from the basic sector. Constructing related results chains like this between ministries and sub-departments constitute some of the building blocks of the planning system. 4

13 Figure 2: Connecting Results Chains Medium Term Sector Strategy Long Term Strategic Plan Inputs Activities Outputs Outcomes Impacts Ongoing Ongoing Short-Term Medium Term Medium-Term Long Long-Term Term Sector Strategy Strategic Plan Medium-Term Objectives Longer-Term Goals Inputs Activities Outputs Outcomes Impacts Ongoing Ongoing Short-Term Medium Term Medium-Term Long Long-Term Term Sector Strategy Strategic Plan Medium-Term Objectives Longer-Term Goals Inputs Activities Outputs Outcomes Impacts Ongoing Ongoing Short-Term Medium-Term Long-Term Medium-Term Objectives What is a Sector and What is an MDA? Longer-Term Goals When people talk of a sector, they probably have in mind something like education, health, the environment, or growth. Obviously, some of these look like ministries, like health and education, but others look more complicated. Which ministries is the growth sector made of, and how do we treat a ministry like science and technology which could make positive contributions to both education and growth? What about water, which could be seen to make contributions to health, growth, and the environment? This question presents quite a difficult contradiction: On the one hand we have the administrative structure of government, in which ministries and agencies are given specific accounts codes, and are clustered under vote heads (for example commonly we have a Ministry of Education with an accounts code of say 3300, with a variety of agencies and departments with sub-codes under this heading, with the State Universal Basic Education Board (SUBEB) for example say 3305). Typically in most states there is something in the region of fifty different clusters of vote heads like this, and the responsibility for managing money and people is organised according to this hierarchy. But despite this organisation there is the realisation, as described above, that the achievement of specific high level policy goals, such as a growth target, could result from contributions made by a variety of these MDAs, and that many MDAs will contribute to the achievement of a variety of goals. Does this mean that it would make sense to re-cluster MDAs and indeed parts of MDAs under these larger, goals-oriented sector definitions? This guide recommends a solution to this contradiction which is as simple as possible. While it makes sense to cluster certain MDAs under broader, sector headings which are defined according to higher level goals, it does not make sense at present to try to delimit different parts of MDAs under different sectors. In other words, it is recommended that a sector may be defined as a cluster of Reconciling the administrative structure with the structure of policy outcomes defined For the time being keep each vote head under one sector only 5

14 similar vote heads, but each discrete vote head should only be considered to be in one sector (it should not cut across sectors). In summary therefore: A Vote Head is a cluster of MDAs under main accounts code vote heading; A Sector is a cluster of Vote Heads, organised generally in such a way as to combine Vote Heads which contribute mainly to the achievement of a specific policy goal. This definition, which is illustrated in Figure 3, allows for the definition of sectors so as to allow the contributions of different MDAs to the achievement of high level policy goals to be made clear. But at the same time it avoids the confusion in management responsibility which could result by trying to apportion different parts of MDA activities across different sectors. Figure 3: Policy Goals drive Sectors and Vote Heads Goal Goal Goal Goal Sector Sector Sector Sector Sector Sector Sector Sector Sector Vote Heads Remember that THIS GUIDE is about making SECTOR STRATEGY. This means that for some sectors, according to the definition here, we might be looking at the development of strategy for a SINGLE VOTE HEAD. However, in some instances we may be looking at the development of a sector strategy that brings together MULTIPLE VOTE HEADS. What is Programme-Based Budgeting? In accordance with the structure described above, the majority of budget preparation work in most states has previously been carried out purely from the perspective of the structure of the accounts codes. As all staff in the service know, each MDA or functional head will prepare allocations under the headings of Personnel, Overheads, and Capital Expenditure. Under Personnel and Overheads, allocations are distributed under economic codes. Under capital expenditure the corresponding codes describe projects. This approach however defines expenditure in the form of INPUTS (especially as these apply to Personnel and Overheads), which means that they do not correspond to the OUTPUTS and OUTCOMES which we want to define for achieving the GOALS of our work in government. We cannot therefore say (according to the current budgetary description) that a particular input of some kind of human effort is directed towards the achievement of a particular output. This in turn means that it is hard to ensure that resources are being applied in an effective way. Defining and monitoring outputs under programmes should help to improve public accountabili ty and governance standards 6

15 This limitation also means that it is hard for people outside government the citizens to whom government is meant to be accountable to track how public money is being used. This is because it is not possible to make a connection between the budgeted pattern of inputs expenditure and the results that are observable in the form of structures, materials, services and the other things that constitute public goods. For these reasons it is important, if we want to achieve improved governance, to shift towards budgeting against outputs rather than budgeting against inputs. Earlier we defined an output as the tangible result of inputs and activities. A programme is an output or outputs that will result from a collection of inputs and activities. So for example we might define a schools building programme with inputs and activities that include personnel inputs, inputs from overheads, and capital projects or contracts, with an output of ten new schools. In other words a programme will commonly include inputs from all three of the major current divisions in the budget or accounts codes structure (personnel, overheads and capital). This requires that as we develop strategy for a sector, we must also define programmes. This is not actually a very great challenge, as developing strategy to achieve outcomes will naturally imply a series of programmes. However, it does also mean that an additional set of programme accounts codes must be developed so that inputs in the budget structure may be matched up with their contribution to particular programmes. This guide provides more guidance on using programme codes to link the sector strategy to the functional structure of the budget in Annex Six. Definition of a Programme Define programme codes in the chart of accounts 7

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17 Section Three: MTSS What, Why and Who What is MTSS and Why Do We Need One? Having defined some of the key terms sector and strategy the definition of MTSS follows. A Medium Term Sector Strategy is: A plan that describes how a particular vote head or small cluster of vote heads will deliver outputs that will contribute to cross-government outcomes. The plan must describe how this will be done in the medium-term probably three years and within the limitations of resource constraints, so that it is realistic. An MTSS is required to describe everything that a sector intends to do (inputs and activities, including all personnel, overheads and capital) over a medium term period (assume three years). This must be done in a way that clearly demonstrates how outputs will all contribute in the most effective and efficient way possible to the successful achievement of responsive, evidence-based outcome targets (policy statements). It should therefore describe programmes which show how inputs and activities are directed at the production of outputs. It must also be possible to demonstrate that this description of inputs and outputs can actually be implemented. This means at the very least that there must be reasonable expectations that enough money and capacity will be available to allow for the inputs and activities to be provided and carried out. Although the MTSS is a medium-term strategic planning document, it also forms the basis for describing a vote-head s annual budget, and the basis for the operation or work-plans of individual MDAs (and within these departments) in the sector. The MTSS is a living document that needs to be revised annually in the light of changes to the Medium Term Expenditure Framework (MTEF that is in the light of changes in estimates about the amount of money that is available), and in the light of experience revealed by annual performance reviews. It represents a rolling multi-year horizon for planning, and is integral to, and must be consistent with, the MTEF multi-year financial horizon. (See the glossary for a definition of MTEF.) By being medium-term the MTSS allows for two major additional improvements over annual planning. These are: The recurrent implications of capital investments may be recognised so for example if in one year 10 new schools are built, the costs of providing teachers and buildings maintenance in subsequent years may also be provided for; and, Capital programmes which may extend over more than one year can have their costs allocated across the years that it is expected to take for their implementation to be completed. Two diagrams below serve to illustrate the position of MTSS within the broader process of government policy making, planning and implementation. The first (Figure 4) illustrates the critical relationship with overarching policy goals and with MTSS A three year plan describing how vote heads (or a cluster of vote heads) outcomes within the confines of realistic An MTSS is a living document requiring annual revision Capital projects can be extended over multiple years 9

18 the fiscal revenue projection process. The main conditions of this part of the process are that: The fiscal projection provides a realistic estimate of the financial resources available over the period; and, Policy goals should then be used by the Executive Council (ExCo) to guide the sharing of these resources in outline envelopes across the sectors, vote-heads and MDAs. The MTSS shows how the resources in the envelope are to be used, and this then provides a basis for the annual budget. Operational plans ensure that budget resources may be used effectively to manage the activities that were planned for, and annual reviews then examine the extent to which the plans proved implementable and whether they achieved the outputs and outcomes that were expected. Lessons from these reviews are fed back into the policy and strategymaking processes. Figure 4: MTSS in the Context of Key Processes MTSS provides a basis for future budgets Over-arching Policy Direction Realistic Fiscal Projections Decisions about Medium Term Sector Envelopes Medium Term Strategies in Sectors Translation of the costed Strategy into annual budgets Cash Releases, Budget Implementation and Review Figure 5 illustrates how this sequence of interconnected processes fit together as an annual cycle. The diagram represents a year (with rough monthly dates depicted along the top). 10

19 Note also that it depicts an IDEAL SITUATION that most states will be working towards. (Perhaps Figure 5 shows what we might ideally be doing in five to ten years time.) It is essential to be aware that in order for the MTSS process to work, it must be seen as part of this broader process. For example, if we are not making realistic fiscal projections and managing our budgets within these, then the MTSSs we produce cannot work. This is because if we inflate budgets to levels that cannot be financed there can never be enough resources available to implement plans. Similarly if there are no proper policy guidelines, it will be difficult to make sensible divisions of resources between the sectors and programmes. Equally, if there is no MTSS we cannot be confident that the details about what each sector aims to do to help achieve policies have been worked out and therefore that the money allocated will be used effectively. Who is Responsible? Note that the dotted lines across Figure 5 are meant to show divisions of responsibilities, with the ExCo, Honourable Commissioners and the State House of Assembly (SHoA) at the top, central ministries including Ministry of Economic Planning (MoEP) and Ministry of Finance (MoF) in the middle, and sector line ministries and MDAs at the bottom. Being clear about these responsibilities is important. Making policy is the responsibility of our politicians those elected by the people to represent them. Civil servants are responsible for providing good information and technical advice to politicians so that they may make informed decisions about policy. Civil servants may provide advice on strategic options within the confines of resource limitations so they may say to politicians something like, during the next three years you may expect to achieve either this result, or you may expect to achieve that result, but with the resources available it is not realistic to expect to achieve them both. MTSS must be seen as part of a broader process Be clear about who is responsible for doing what when developing MTSS 11

20 Figure 5: MTSS and the Medium Term Expenditure Cycle Ideal In Figure 5 the large box under the sector heading, with plenty of words in it, shows where the work for a typical sector ministry or MDA in doing an MTSS is focussed. This guide is primarily about filling in that box. What Needs to be Done to Produce a Good MTSS? The large box in Figure 5 contains a rough list of things that need to be considered when developing an MTSS in a sector. Below is a somewhat elaborated version of this list containing thirteen things that need to be done in order to achieve a good MTSS. Note that we are talking here about ideal or good practice. Many of the conditions that would allow your MDA to complete all of these are not in place at the moment, so a critical question is, how do we start? But we cannot even answer that question until we have an idea about the things we would like to be able to do, so that is why we need to start with this list. NOTE ALSO that this list is in a roughly logical order, but it is not meant to be a list that describes steps in the process. We tackle that challenge later on in Section 5. So we have used bullet points here rather than numbers. Conduct annual performance review, including customer views based on public monitoring; Obtain or receive outline multi-year budget envelope projections via the central planning MDA, based on policy priorities and macro-economic framework projections; A list of things that need to be done 12

21 Review state and national/international policies and decide upon necessary changes to sector outcome policy targets; Develop baseline information and conduct operational research, and draw upon this information in the development of strategy options involve the public in this stage; Develop strategies that meet the sector s key priorities; Check that they involve collaboration with other partners, such as federal and local governments, and the private sector (more generally civil society) and check for potential regulatory and legislative changes as key elements of strategy; Check for cross-sector implications of strategy options for example the implications of water sector strategy for the achievement of health outcomes; Develop programme descriptions of inputs and activities, including all standing requirements such as personnel, administration, supporting overheads, and outstanding (existing) contract commitments; Compile outline capital and recurrent cost projections for the entire sector strategy and programmes, and iterate to achieve projections that fit the multi-year budget envelope projections; Examine the technical feasibility of proposed strategy options and revise if necessary; Examine organisational capacity requirements necessary to implement programmes, and iterate proposals until they are reduced to a level that can be implemented with current capacity; Use the resulting costed description of programmes (things and people) as a basis for the annual budget submission; Establish a monitoring framework that involves both internal (government) and external (public) involvement, to check that as it s implemented the strategy manages to achieve the envisaged outputs. In Section Five we provide some guidance about how to approach these tasks in structured and sequenced process. Sector Plans, Operational Plans and MTSSs The sections above underscore the importance of locating the MTSS within the context of other state government planning, implementation and monitoring processes. But what should its relationship be with other documents? For example, some sectors might have already developed their own Sector Development Plan. Do they need to abandon these in favour of an MTSS, or does the development plan also have a role? Development plans are generally longer term than the three years we expect to be covered by an MTSS. They are statements of policy and strategy which explain how longer term service improvement outcomes are to be achieved. But while they may contain some general costing of initiatives they do not generally attempt to demonstrate complete financial viability of the proposals. They often contain accepted funding gaps, for example, which it is hoped may be filled from A Sector Development Plan may not be the same thing as an MTSS 13

22 as yet un-determined sources. Their strength is that they provide a strong context for more detailed medium-term planning. By contrast it is expected that the MTSSs will be completely costed. They should set out definite projects and programmes for implementation over three years, and the sources of finance and capacity to implement them should be specified. There is no room for any substantial funding gap in an MTSS. It is reasonable to be quite confident about the revenue ceilings within which these plans must be made over a three year period, whereas beyond this the task of forecasting becomes increasingly hazardous. However, an MTSS is not an annual budget, and need not be specified to the same level of detail as a budget. Nor does it need to go to the level of detail contained in an operational plan. An operational plan is normally a one year plan which identifies particular activities under an annual budget, and specifically sets out departmental responsibilities for carrying out the work. It may also be broken down into quarters, and could also provide a basis for cash-flow projections. It is a predictable flow of cash against such a plan that is amongst other things required in order effectively to implement the annual budget. However, an operational plan for one year can provide a considerable amount of information about what is entailed in implementing certain kinds of projects or programmes, and this can be very useful in helping to compile the details of the MTSS. Below is a diagram that sets out the likely relationship between these different documents. The hierarchy is not intended to depict a perfect objective, but it does show the relationship between different documents at different levels. The critical thing is that they should all relate to each-other. There is no point in having (for example) a budget which includes a completely different set of provisions that bear no apparent relation to what is contained in the MTSS. A guiding principle therefore is that each of the documents should speak to eachother. That is to say that there should be few inconsistencies between them an MTSS should be guided by the development plan, and a cash-flow projection should show how an operational plan can be affected. Annual operational plans contain information which will be helpful in compiling the MTSS Planning and budget documents at different levels should relate to each other 14

23 Figure 6: Different Plans Should Talk to Each Other Long and Medium Term Policy Documents 20:2020 and State Development Plan Outlines overall State Policy Outcomes Loosely costed if possible to demonstrate general realism Sector Development Plan 5 to 10 years Links policy to strategy, generally costed but may include funding gaps MTSS 3 years No funding gaps Consistent with the Sector Plan, all activities costed within projected ceilings Annual Budget Based on the first year of the most recent rolling MTSS Annual Operational & Depart l Work Plans Defines responsibilities for implementation in relation to the budget Departmental Cash Flow Projections Quarterly projections of cash requirements against all planned activities 15

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25 Section Four: The Current Situation in the State This is a generic guide, so it is not possible to say very much about the situation in each state. What is clear however is that this can vary widely, and it will make a considerable difference to the way in which the guide can be used. For example: Lagos and Jigawa States are about as different from each other economically and socially as it is possible to get; The capacity of the state civil service in some states is much greater than in others; Some states have made more progress than others towards stronger management, for example in fiscal projecting and in affordable budgeting; Some states have made more progress towards developing overall policy direction than others. The conditions in each state will make a difference to the way in which this guide might be adapted. Two ways in which these differences may be modified are provided here. How Far Has the State Progressed with Policy? In order to make good strategy, it is necessary to have good policy direction. Most states have agendas which are set at the level of political leadership, but it must be said that many of these do not constitute what might be called outcomedriven policy statement. As this strategy guide is localised therefore, a review of the current state of policy and strategy making needs to be carried out. What policy documents (such as a State Development Plan) are there in the state? What sector or ministry strategy documents or sector plans are in place? How do these documents match up to the standards of content and process that are contained in this guide, and in the guide for policy makers? If the policy documents in the state are poor against these standards, and the processes used to develop them are weak (for example if there is little reference to resource availability, little public consultation, and little targeting towards public requirements such as poverty reduction, wealth creation and G&SI 1 ) then the degree to which effective MTSSs can be developed will be limited. This should not mean that the task of developing MTSSs should not be attempted. Indeed if the quality of strategy-making is raised, this can have a 1 Gender and Social Inclusion Differences between states warrant different approaches to MTSS The relevance of an MTSS is reduced in the absence of a State Development Plan But there may still be some value in developing a limited number of sector MTSSs even if there is no State Plan 17

26 positive influence or at least create some pressure for improvements over policy-making. Where sector plans already exist, there may already be statements of government Policy as this pertains to the sector in question. These statements should be used to guide further strategy making. Where such statements do not already exist, and where there is no overall state policy document, it may be necessary at the start of the strategy exercise within the sector to make suggestions as to what these Policy Outcomes ought to be. It is probably sensible however, where no good standard state policy document exists, to keep the amount of effort devoted to the task of developing sector strategies in proportion. In summary, the principle that good policy is required to drive the development of strategy should not be forgotten. Extending MTSS on a Pilot Basis One way of managing the development of MTSSs, especially in an environment where there is limited policy guidance, is to commence and progress the exercise on a pilot basis. It is advisable to pilot the exercise in this way for a number of reasons: There is a great deal to be learned through the process of MTSS development, and mistakes will inevitably be made it is therefore sensible to role the process out across government only once these lessons have been learned; There are many technical and human challenges to implementing this new approach, including adoption of different kinds of work practice we believe it is sensible to experiment with these in a small number of sectors at first. If they are successful and lead to an improvement in implementation that can be illustrated, then other sectors, ministries and MDAs may be more willing to pick up the approach themselves; The capacity of the economic planning ministry to provide support is probably limited and needs to be built. While the education and health sectors may receive support from ESSPIN and PATHS2 in some states, or other sectors other support from other programmes and donors, the economic planning ministry will be responsible alone for supporting the others. One or two sectors are probably all that the economic planning ministry can hope to support in the first year. If this goes well then extending the approach to other sectors can be considered in subsequent years. However, it might not be right for the economic planning ministry to tell other ministries that they may not make efforts at sector strategy making on their own initiative. On the basis of the current guide, and quite possibly through consultations with MDAs in the pilot sectors to see what they are doing, other MDAs can be encouraged to draw upon the guide when making preparations for their budget submission for next year. But it must be made clear that it is beyond the capacity of the economic planning ministry to provide technical support and advice for this process in the current year beyond the sectors chosen as pilots. 18 Learn Lessons by piloting the MTSS approach Piloting MTSSs is also appropriate given limited capacities in most Central Planning Ministries Budget realism and some measure of cash flow management and release are pre-conditions for successful MTSS implementation

27 Budget Realism - A Condition for MTSS Roll Out Finally, it is reiterated that for MTSS to work, the state must be adopting a good degree of budget realism, and ideally improved cash forecasting and releasing as well. This is because unless the money contained in a sector plan is also reflected in the budget, and in the money actually released to the implementing MDAs, then it is unlikely that implementation can reflect what is in the plan. 19

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29 Section Five: Try Following These Steps In Section Three we provided a list of thirteen basic things that need to be done in order to develop a reasonable MTSS. However, this list did not aim to set out a series of steps in a process that will help people to organise and plan the work that needs to be done. This section outlines TWELVE STEPS to be followed in developing an MTSS, and guides you through each step. Figure 7 below provides a diagrammatic illustration of the various steps. Staff in state government should be encouraged to consider these sections as a guide. The steps are not a directed requirement. There are 12 steps in the process, and we have divided them into three stages. These are depicted in Figure 7. The three stages are: STAGE 1: Review and Preparation; STAGE 2: Strategy Development; STAGE 3: Documentation and Agreement. The remainder of this section is organised under these three stages and the steps involved. One core requirement from the outset is that an effort is made to cost all of the proposed activities in the sector, including all personnel costs and overheads, and that this must be done within or close to projected resource availability ceilings. Therefore STEPS 2B, 2C and 2D ARE CRITICAL. NOTE ALSO that the table in Figure 7 could be taken to imply that a wide range of people in the sector are responsible for doing everything. THIS IS NOT THE CASE. Some specific tasks, such as 2C, are quite specialised. There will be specific individuals in the sector who will have the required knowledge and experience to perform these tasks well, and they need not involve everybody. (In the case of task 2C, this may be carried out by existing budget officers from the relevant MDAs.) However, try to involve a variety of different people at different stages. While some tasks are highly specialised, you need also to think about involvement of a variety of people, both within and outside your MDA. For example from within it, try to involve people with different perspectives and backgrounds especially those who may help to bring to the table views about the needs of different disadvantaged groups those who are for example socially, physically, religiously and gender disadvantaged or excluded. 1: Review and Preparation 2: Strategy Development 3: Documentation and agreement Try to involve people from different backgrounds and disadvantag ed groups in the making of strategy 21

30 Figure 7: Steps in the MTSS Process STEP TASK STAGE 1: Review and Preparation 1A Set up MTSS Committee Agree Terms of Reference for the Committee 1B 1C Identify and Review Existing Policy Statements, including sector and general, both state level, Federal and International. Agree sector policy position and establish draft three year outputs involve the HC at this stage Gather existing data and information that can be used on development of policy into strategy, including performance reviews involve the public here 1D Receive or compile Information about Three Year Revenue Flows (expenditure ceilings) including both within state sources and others 1E Describe existing contract and other budget commitments that are payable or you expect to be paid during the forthcoming years 2A STAGE 2: Develop Strategy Run a Strategy Session (or series of sessions) - Review & Agree Policy Outcomes Based on Stage 1 2B 2C Taking account of existing commitments, develop strategies (inputs and outputs) for the achievement of Outcomes Determine costs of activities and projects (including overheads) Review projected three year costs of personnel 2D Make decisions about changes to the levels of activities and projects, and their phasing of input, so that expenditure ceilings are complied with in the spread-sheet include public consultation and perhaps a public forum STAGE 3: Documentation and Agreement 3A Discuss and agree the resulting sector strategy with the HC Make alterations as options where possible/desirable 3B Write MTSS document according to Table of Contents provided in the Annex 3C Use the spread sheet to compile budget submission (following receipt of call budget circular) and use presentation based on MTSS document to defend it 22

31 STAGE 1: Review and Preparation STEP 1A: Set up an MTSS Committee and Agree Terms of Reference The first step for each sector is to set up or modify an MTSS Committee, charged with responsibility for developing the sector strategy. It may be tempting to involve a wide variety of stakeholders from within the MDA, and possibly including representatives from civil society. This would ensure wide involvement and could lead to greater ownership for the resulting MTSS document. However, developing strategy is the task of relatively senior officers. If too many people are included it is possible there will be too many vested interests to protect. We therefore recommend that the committee be kept quite small (maybe ten), but ensure that the key directors are well represented, and that the required skills to carry out the work are provided for. Remember, as noted above, that it is not expected that this committee will do all the work itself. Some tasks, such as costing activities and fitting them to the budget structure, are very specialised, and there are specific officers in each MDA who have the required knowledge and skills to perform these tasks. Outline draft Terms of References (ToRs) for the committee are provided in Annex Two to this guide. STEP 1B: Review Existing Policy Statements As part of the exercise to develop sector strategies we do not necessarily recommend that any additional effort should be placed at this stage on developing policy, especially if existing policy guidelines, including high level goals, are already well developed. In any case it is really the task of political leaders to determine policy. (See the guide for policy makers.) However, there may be a dilemma here if there are few existing policy directives with relevance to the sector. In this case some work could be necessary first to develop this longterm outcome-defined direction. Although policy should be agreed at a state level through the ExCo, if there is no state-wide agreed policy for a sector, an initial step could be, as in the bullet points below, to develop some preliminary ideas within the sector or MDA. These may then need to be sold to the ExCo, if possible, through the Honourable Commissioner. With respect to existing policy documentation, we suggest the following might be available and could be worth looking at: The 2020 Vision for the state; His Excellency s point agenda; The State Development Plan; The latest State Economic Empowerment and Development Strategy (SEEDS) document; and The Sector Plan and any national policy document for relevant sectors. Members of the MTSS committee could ensure (prior to strategy development meetings) that the relevant documents are available, and that they are familiar with the direction described in them. The committee should confer with the Honourable Commissioner at this stage of the process in order to ensure that there are no recent changes in policy direction being considered by the government, and that the committee understands of the policy direction for the sector is properly grasped. STEP 1C: Gather Data, Analysis and Performance Reviews This task will present very different challenges for each sector and each state, so it is not very useful to be prescriptive in this area. Keep the committee small, but with a variety of membership Refer to existing policy documents Confer with the HC 23

32 There is a section in the recommended structure of an MTSS report (see the Annex Nine) which describes the current situation in the sector, and the committee needs to satisfy itself that it has sufficient information available both to be able to write this section, and to underpin basic elements of sector strategy. An early and quick assessment of the current data position may need to be carried out by the committee, and a decision made as to whether it is possible to plug any of the gaps in knowledge during the strategy making process. A very significant body of information will be provided by a performance review of the previous year or years of strategy implementation if this has been carried out. Especially, what has been the impact of previous activities? What has been successful and what has not been successful? Monitoring systems that will collect information necessary for conducting such performance reviews are not routine, but are being developed and improved. If no reviews are currently being undertaken, the committee will have to proceed without them. A critical aspect of data collection and analysis is the compilation of questions used to drive this process. The questions asked will make a vast difference to the results obtained, and this in turn will alter the strategy developed. A prominent and important example is the need to ask questions about the socially disadvantaged, including handicapped people. It is also highly desirable to disaggregate data between men and women to see where one sex or the other may be disadvantaged. Without collecting data of this sort it will be impossible to see and understand the nature of these differences, and as a result policy and strategy development will be ignorant of the need to resolve them. STEP 1D: Obtain Revenue Projection Information The core revenue flows to the sector will be from the state government. However, other sources also need to be recorded and realistic ceilings for them described. It is not advisable in making a sector strategy as a basis for budget submission to compile a list of intended programmes and activities without being realistically confident that funds for the work will be forthcoming. An MTSS should not include references to a funding gap with resources to be sought from uncertain sources. It is alright to include this in a sector plan, but not in an MTSS. If the central ministry cannot provide a timely budget envelope projection, it is prudent for the sector to work on its own best estimate of the allocation. This could be based on the levels of funding actually received over the past two or three years. Some state governments are improving their ability to provide accurate fiscal revenue projections. On the basis of this, central planning ministries may expect to be in a position to issue outline expenditure envelopes to sectors for the next three year period by the end of April. If they can do this it should be in the form of a Revenue Envelopes Projection Circular (REPC) or similar. Collect relevant information and evidence about the sector Make sure you disaggregate data by socially disadvantaged groups, and between men and women Find out how much money is REALLY available A revenue projection circular or similar should be issued in April 24

33 These ceilings or envelopes should comprise three elements: An overall discretionary expenditure ceiling for the sector and the MDAs within it; Indicative personnel costs (to be deducted from the discretionary ceiling); and, A consequent balance remaining to cover overheads and discretionary capital expenditure 2 Note that decisions about how these ceilings are calculated should have been determined by two factors: The total (conservative) estimate of the total amount of discretionary revenue available; and, A decision by the ExCo based upon policy statements as to the proportions of this fund to be spent in each sector (or upon each policy outcome). It is recognised in this guide that in many states these conditions do not always apply, and in some states neither of them do. It is work on improving policy-making, and on better public financial management (especially in the area of budget cycle management) that is intended to deliver these results. On top of discretionary finance, the sector might have access to specific loans and grants. For example this could include the Federal Universal Basic Education Commission (UBEC) fund for education; the Conditional Grants Scheme (Millennium Development Goals (MDG) grants fund for any sector); or International Development Assistance (IDA) loan projects. In addition there may be a case for showing an amount of contribution for joint projects with Local government. Try to ensure that estimates of revenue from these resources are not overestimated. For example it is common to assume that large sums are available from the UBEC fund for education, but SUBEB record of drawing down all these funds in one year is not as good as it might be in many states. In order to draw down all the money the organisation s capacity to implement projects and account for expenditure will need to be verified. Finally there may be other sources of revenue which are explicitly tied to specific planned activities, and indeed may involve cash which is not delivered to the government itself but are spent by other agencies. Examples include development partner programmes which make contributions in the form of training, and sometimes material inputs such as drugs and buildings construction. It makes sense to include these in the MTSS, though they may not necessarily appear in the state Budget. Figure 8 below demonstrates the kind of basic calculation the sector needs to undertake in order to build a strategy that it can afford. The numbers in this Figure are purely illustrative. Discretion ary finance is general state funds over which the sector can make free expenditur Specific loans and grants are normally tied to particular project types Don t overestimate revenue sources 2 Discretionary capital refers to sources of revenue for capital purposes which could be spent on anything. Non-discretionary funds sources are tied to specific lines of expenditure. So for example money provided to Education by the UBEC fund are tied to specific expenditure items. 25

34 Figure 8: Structure of the Budget Ceilings for an MDA Note: The figures in this chart are purely illustrative. A: Initial general revenue ceiling 5,000,000,00 B1: Current personnel cost commitment B2: Less Planned Retirements etc. 2,000,000, ,000,000 B3: Plus additional staff from strategy plan 190,000,000 B4: Total Personnel Cost 2,040,000,000 2,040,000,00 C: Balance Remaining D1: Current overhead costs 870,000,000 2,960,000,00 D2: Less those operationally not necessary 225,000,000 D3: Plus extras determined by strategy 552,000,000 D4: Total overhead cost 1,197,000,00 1,197,000,00 E: Balance Remaining 1,763,000,00 F1: Less, Existing Capital Commitments 1,133,000,00 G: Balance Remaining for New Capital 640,000,000 H: New capital projects proposed 620,000,000 I: Balance Remaining (should approach 0, not negative) 20,000, 000 J: Non-Discretionary Finance Available 2,350,000,00 26

35 The Figure starts with a total discretionary ceiling, and progressively subtracts the existing commitments to personnel, overheads and existing capital projects. This will leave a balance of discretionary resources available for strategic decision making. The Figure also illustrates inclusion of allocations for new personnel, overheads and capital expenditures, but within the overall ceiling. If sector planners follow the structure of this Figure to guide the financial aspects of strategic planning, it will help to ensure that all activities and programmes will be affordable. The numbers in the box above are purely illustrative STEP 1E: Existing Contract and Budget Commitments In practice most MDAs are saddled with a high degree of non-variable cost commitments. For example there are large salaries bills which could be reduced over a number of years most legitimately through what is termed natural wastage (mostly planned for retirements) but which for much of the three year MTSS planning period are unlikely to change very much. Also, many MDAs in some states will have a large number of incomplete contracts on their books, and many of these require allocations to be made for their completion. One of the advantages of medium term planning is that provisions can be made for these things over a number of years. Therefore it is no longer necessary to show the entire cost of a large project in one annual budget. Instead an appropriate proportion of its cost can be shown in a sequence of years. Each ministry and most MDAs have existing commitments to make payments on incomplete capital contracts. Unless you have good reason to believe that some of these contracts will not be completed, their annual costs over the three years of the MTSS need to be taken into account. Although personnel costs are theoretically variable, altering (at least reducing) the numbers of personnel employed is politically sensitive and a very long term exercise. In effect most MDAs are committed to making medium term payments for existing personnel, though some measure of reduction could be contemplated for natural wastage. 3 Finally there are certain overheads allocations which ought to be retained at least at their current level. These will be mainly those that provide for recurrent office operating, travel, utilities, maintenance and financial costs. Note that all the costs referred to here are being regarded as existing commitments things which will draw resources from the discretionary total available regardless of the strategies you develop in the medium term. As planners go into the process of strategic planning, they will need to list these commitments, both variable and capital, and be aware of their costs and the reduced amount of money therefore available (within the ceiling provided) to spend on new programmes. The responsibility for compiling this information may best lie with budget officers in the relevant MDAs who should be expected to have this information to hand. List and deduct outstandin g contract commitme nts Show the cost of outstanding capital commitments Estimate personnel costs commitments 3 The term natural wastage refers to planned and expected retirements, plus resignations, pus (sadly) deaths in service. Retirements are predictable by age and length of service. Estimates of the others can be obtained by tracking and averaging their incidence over previous years. To make these estimates, reasonable data records are required. Other reductions might be predicated on an exercise that is planned to identify and remove from the payroll so called ghost workers. 27

36 STAGE 2: Developing Strategy STEP 2A: Commence Strategy Sessions Once the preparation work is complete, the committee will be in a position to convene a preliminary strategy session involving a range of stakeholders and technical officers to commence the task of developing or revising sector strategy. Especially if the sector is doing this work for the first time, there will be quite a lot of work to do. Indeed, even in a five day strategy session, it will still not be possible to complete the work necessary. It will only serve to start the process of developing strategy. To get to the end of the work described in this guide will probably take an average MTSS committee about three to four months, depending upon the concentration of effort applied to the exercise. Of course if a sector already has a first year MTSS it will take less work to revise it. However, an annual exercise to revise and up-date the MTSS is required, every year. Having held an initial sector-wide strategy session, one option is then to split into a series of different sessions, ideally split along programme lines. For example if you can divide your sector into (say) six sub-programmes (education is an obvious case in point with basic, secondary, tertiary and so on) you may prefer to hold a one day introductory session involving a large number of people, and then break into a series of subgroups to allow concentrated work, before re-convening a joint session (say after two or three months). There may be no hard rules for choosing the participants in the sessions. Most certainly the directors from each department in a ministry must attend, plus probably the directors or chairmen of each MDA under the ministry. There may be some benefit in inviting other officers who have specialist technical knowledge. It may also be agreed to invite members from local representative nongovernmental organisations (NGOs) or other public (non-government) bodies, such as professional and business associations or women s groups. This is not a requirement but it could help with making the strategies more responsive to public priorities and implementable later on. It s also good governance practice to involve trusted members of society in the exercise, especially as it should help them to understand the challenges of decision making within budgetary constraints. It might be wise not to make the group excessively large. It is normally easier to get work done in smaller groups than in larger ones where communication and understanding becomes more difficult. Of course the Permanent Secretary(s) (PS(s)) should be encouraged to attend as many of the sessions as possible. The deliberations will comprise thinking about issues at the heart of the sector Ministry(s) responsibilities. In addition, if the Honourable Commissioner attends some parts of the session or sessions then he/she will be better placed to understand the reasons, both technical and financial, for adopting certain strategies for the achievement of policy outcomes. This ought to be important when it comes to arguing the case defending the budget in the ExCo. Relevant members of the SHoA might be invited to attend for the same reason. An exercise to review, improve and up-date the MTSS is required every year Involve people from Civil Society Don t make the strategy meeting too large Try to get the HCs involved 28

37 By presenting the results of preliminary calculations of the ceilings supplied, with the costs of recurrent and capital commitments subtracted, attendees at the session will know at the outset how much money there is available to plan with. This is critical to making the exercise realistic. Obviously the approach to the commencement of such a session or sessions is up to the sector managers concerned, but here are a couple of hints: First, apportion the main responsibility for developing and running the sessions to the planning department or departments in the relevant MDAs. Developing strategies to meet policy outcome expectations is obviously their key responsibility within the organisation; Commence with a presentation of the key information gathered under stage 1. STEP 2B: Develop Strategy for the Achievement of Outcomes Annex Three provides a template which we may call a logframe. This is intended to help sector planners to commence and record the task developing strategy defining outputs, programmes and activities (or projects). Figure 9 provides an extract from this template. The main template is in Excel and should be available on request from SPARC, or from the Central Planning Agency in the state. It is not a requirement that planners use precisely the structure of the template provided here in Annex Three. Sector planners may wish to modify it for your own sector. However, whatever table or template is used it ought to do the following things: Describe policy outcomes and medium terms outputs; Describe activities for achieving outputs over 3 years; Cost each of the activities; and, Show the source of funds. The first task is to determine the programmes that will populate your sector. The logframe sheet may then be divided into main sections, one for each programme. Probably each sector needs to limit itself to about six to eight key programmes. Look at the template provided in Annex Three which illustrates how convert programme costs into the budget structure. This task will become very complex if there are too many small programmes. Each Programme must be expected to deliver a result which will contribute to the achievement of sector policy (outcome) targets. These programme objectives will probably form what are called Key Performance Indicators (KPIs), against which sector performance is to be evaluated later. (Refer to the SPARC M&E guide for more guidance on how to define these.) Later steps (described below) provide some advice on an approach to costing, and then also a means of transferring these costs into the structure of the existing budget codes. The logframe sheet is then structured as follows: At the head of each section are spaces to record the policy outcome and the medium term output expected in this sub-sector planners WILL HAVE TO WORK THESE OUT; Beneath this is a section to record a sub-output or (or sub-outputs) or a more immediate component output you need to work these out too; Determine which programmes will characterise your sector Sector planners need to work out what to put in each of the boxes in 29

38 Beneath this are spaces to enter measurable targets against this sub-output for the three years of the MTSS; and then, There are three columns in which to describe activities that are expected to lead to the achievement of the objective. It should be kept in mind that there are two kinds of things to think about here. First there are new activities or things that need to be done perhaps training courses, new buildings or additional staff; Then there are the regular things that are being done anyway such as employment of existing staff and maintenance of existing assets which are necessary to keep things happening. (Step 1E looked at what should be included here.) Figure 9: MTSS Strategy Log Frame Sector and Programme 1.0: e.g. Education, Secondary Education Policy Outcome: e.g. By 2020, sixty percent of secondary school aged children in the state are equipped with the skills that allow them to obtain gainful employment and learn through higher levels of education. Medium-Term Output: (Must contain a SMART 4 target): e.g. Thirty percent of secondary age children, regardless of gender, faith, social background and special needs, complete secondary school by 2014, with at least 33 percent of these obtaining sufficient results to allow them to proceed to tertiary education. Sub-Output 1.1: e.g. Adequate numbers of qualified teachers needed to achieve the medium term output are employed to provide education of good quality in public schools. Target 2013: e.g. Number of qualified teachers employed increases by 5 percent each year Activities 2011 Activities 2012 Activities 2013 e.g. Employ existing teachers Add salaries of new teachers taken on at start of 2011 etc. Employ existing teachers, including those taken on in 2011 Add salaries of new teachers taken on at start of 2012 Employ existing teachers, including those taken on in 2012 Add salaries of new teachers taken on at start of 2013 Cost Yr 1 In 000 Naira Cost Yr 2 In 000 Naira Cost Yr 3 In 000 Naira 641, , ,150 32,250 34,400 35,690 MTSS Activity Code MDA Responsible for Management Min of Education Min of Education 4 Specific, Measurable, Attainable, Relevant and Time-bound 30

39 The next three columns (columns 4, 5 and 6) are provided to allow entry of costs for the activities or things items that are listed. Some further advice on this part of the exercise is provided under Step 2C below. Finally on the right of the worksheet are two further columns. In the first you may record a specific activity code. The suggestion is that this can simply be an index with a sub-sector number, the sub-output number, and the activity number. (This is illustrated in the template.); The last column must be filled showing which MDA is responsible for managing the recorded activity. Presented in this way it looks as if the task of making strategy is simply a matter of filling in a logframe sheet. In fact it is through this process that the thinking and analysis has to be done. It is not enough to fill in parts of this template on the assumption that the activities listed will lead to the achievement of outputs and then targets. Instead it is necessary to introduce analysis, to bring experience to bear, and to draw on the knowledge of experts. In Annex Four we provide some further guidance and pointers on how to go about developing strategy options. Advice is included there on: How to build rather than just repeat; Approaching capital versus recurrent rations constructively; Thinking about the contributions of other players relevant to the sector; Taking account of technical and capacity limitations; Identifying both new and current activities; and, Ensuring political relevance of strategies developed. STEP 2C: Activities Costs, Ceilings, and the Budget Structure Step 2B has focussed on making strategy. That is, it involves the task of filling in the logframe template from the excel spread-sheet in Annex Three, identifying outcomes, outputs and activities defined for a series of programmes across the sector. There are now three critical tasks: The first is to develop costs estimates for the activities that are planned; The second is to work out how to transfer the costs so developed into the structure of the budget submission and; Thirdly, it is ESSENTIAL to ensure that the total costs of planned activities in each MDA do not exceed the resource envelope ceilings you have been given. The work involved here seems quite complex to some staff, but it is quite well understood by most budget officers, and they should be charged with responsibility for conducting this work. Annex Five provides a template designed to assist in the task of allocating both programme and economic codes to costed activities from the strategic logframe. Some guidance as to how to go about completing this template is then provided in the adjoining Annex Six. Planning officers need to be generally familiar with the tasks and challenges in this part of the exercise, but the detailed work in Analysis and evidence is key to achieving a strategy that will deliver the outputs and targets defined Things to think about when making strategy Three critical tasks Use the templates depicted in annex 5 to convert programme costs into the budget structure 31

40 completing Annex Five (based on guidance in Annex Six) is for budget officers to tackle. The task of costing can seem especially challenging. How can estimate costs be provided for a capital structure, the price of a computer system, the amount required for a training course, or the allocation needed to provide for maintenance and operation costs? In the past these things have guesstimated very largely on the basis of previous years allocations an approach known as incremental budgeting. It is beyond this document to provide guidance on how to estimate the costs of this and a wider variety of items. However, there is a series of excel templates available through SPARC (and PATHS2) that are designed to assist in this task. Furthermore these templates are designed to work together with the excel template that is presented in Annex Five. As unit costs are entered in these spreadsheets, the totals are automatically calculated and transferred into the Annex Five spreadsheet. In this way as costs are built up, it is possible to observe the escalating total cost of the proposed programmes. If (as is usually the case) the budget ceiling is exceeded, then it is possible to carry out iterations removing some programmes or programme elements or moving them to later years until the ceiling is complied with. There is also a training module available to assist budget officers in the use of these templates. The costing sheets are available on request. However, they are quite complicated. It is not necessarily recommended by this guide therefore that they should be used. Indeed there is a potential risk that too much detail will be included, and too much time and effort invested in this exercise. If some of the conditions mentioned above such as the need for realistic budgets and for cash forecasting and release systems are not met, then time spent working out the details of costs to a level of any great detail may be wasted. In summary, the use of the template depicted in Annex Five is essential if the costs of programmes (however estimated) are to be converted into the structure of the budget. If a particular sector or MDA wishes to go into further detail in the task of item costing, then the other, more complex, spreadsheets can be made available as an option. There are additional spreadsheets available on request to assist in the task of costing STEP 2D: Policy Group Review of the Need for Changes In compiling total costs calculations in the templates in Annexes Three and Five, it may well be found that budget ceilings have been exceeded, either in specific MDAs or quite likely across the sector as whole. SUBMITTING AN MTSS THAT CONTAINS COSTS SUBSTANTIALLY ABOVE THE CEILINGS PROVIDED IS NOT PERMITTED. Note, however, the following general qualification to this statement: In principle it is essential to keep plans realistic, and therefore within the confines of the ceilings provided. If the ceiling provided by the central Ministry responsible is realistic, and it is respected by political leaders in approving the budget, and a predictable (cash-flow based) system of releases against these planned allocations is put in place, then it makes sense for both the MTSS and the Budget to be made within the confines of the ceilings. Only by adopting an approach like this, which integrates strategies within a realistic Medium Term Expenditure Framework, can government expect to deliver on the plans it makes. It therefore makes sense to work towards this end in making financially realistic strategic proposals for the sector. 32 The cost of an MTSS SHOULD NOT exceed the ceilings provided Some limited additions (not more than 10 percent) could be included above the ceiling in order that an argument for more allocation could be made

41 However, it is also true that in making an MTSS, sector representatives have the opportunity to make a strong case to political leaders for the allocation of additional resources (though in order to keep the budget affordable, this will imply shifting resources away from another sector). Therefore, an MTSS might reasonably include some limited additional allocations above a ceiling in support of such an argument. It seems unreasonable though to suppose that such an addition should exceed 10 percent above the ceiling provided for the sector. If after costing it is fond that plans exceed the provisions in the ceilings or envelopes issued by the central planning ministry, it will therefore be necessary to: Re-schedule some items to following years; and/or, Alter the strategy, dropping some proposed activities or actions altogether. Inevitably in this process there will be options. Some of these options will entail making concessions to desired achievements in terms of quality, others in quantity of service provided, and perhaps some others in terms of their impact upon different parts of society (the wealthy or the poor, women or the disadvantaged, for example). Similarly some options will have major cost reducing implications, while others may have disproportionate negative impacts on results. It should be recognised that it is not actually the task of civil servants (therefore the members of the MTSS committee) to make decisions about which options should be chosen. This is a political responsibility. Ideally politicians will make decisions that respond to the needs of as a wide a range of their constituents as possible, though political pressures do not always encourage this result. In order to encourage this process however it could be well worthwhile holding some sort of public forum for consultation over these options at this stage. (See Annex Eight for more details about means of achieving public involvement.) It is essential therefore that at this stage the Honourable Commissioner, and possibly the relevant SHoA committee chair, be involved again. A way of approaching this could be to develop a small policy group for the sector, which would have high level representation. Such a group might include the PS, the Honourable Commissioner, any relevant special advisor, perhaps the Director of Planning from the relevant MDAs, the chairperson of the relevant sub-committee of the SHoA, and perhaps two or three prominent representatives from civil society. Various options for reducing or rescheduling the strategic contents may be considered by this group. The Honourable Commissioner s understanding of the options and commitment to the choice made, backed up by other members of the policy group, could be critical in justifying its presentation to the ExCo and the Legislature, and ultimately also to ensuring that cash is released to support implementation. But it IS the responsibility of civil servants to make informed recommendations to politicians about which are the best choices. Some brief guidance on how the strategic MTSS Committee and the policy group might go about considering and evaluating options, including financial and economic justifications, is presented in Annex Seven. If a sector is granted more money, it has to be deducted from somewhere else It is the responsibility of politicians to choose between the strategic options though they should also consult the public It is the responsibility of civil servants to make informed recommendations to politicians about the options 33

42 STAGE 3: Documentation and Agreement STEP 3A: Political Approval and Understanding If the Honourable Commissioner has attended some of the strategy session, or taken part in the policy group meetings, then he/she may already be in understanding and agreement about the contents of the draft strategy. In this case there may be little need for further discussion. However, if there is any doubt about this level of involvement, it will be advisable at this stage to conduct a formal and possibly extensive discussion over the contents. It will be essential for the future prospects of the implementation of the strategy to ensure that it is consistent with the expectations of the political class and that the Honourable Commissioner is in a position to present both the budget and its justification (the MTSS) to the ExCo. STEP 3B: Produce an MTSS Document The MTSS document need not be all that long. After all it will be reviewed and revised in a year s time, so not every detail needs to be covered. The critical purpose of the document must be to: Describe the process followed; Explain the connection between objectives (policy) and the activities that are planned to deliver them; Place the plan in the context of resource (especially financial) constraints; and Inform the public about sector strategies and about the basis for strategic decisions. In order to assist in this exercise, we recommend an outline table of contents as provided in Annex Nine to this guide. Note that this outline is not a requirement. The outline is provided in the form of supporting advice. Sector ministries and their MTSS Committees responsible for producing these documents are free to make some alterations to the structure and recommended content. However, inclusion of the completed logframe presented in Annex Three (or similar) should be a requirement. STEP 3C: Presenting the Budget The MTSS is intended to ensure that when a Ministry makes its budget submission, the contents: Construct a clear link between policy and intended programmes and activities; and, That these are presented within realistic resource constraints, so that their implementation is a real prospect. In outlining detailed objectives and activities, the MTSS also presents a means of monitoring performance (see below). The MTSS should be complete by early to mid-august. (See the timeline outlined below.) Following this the MoF should issue the Call Budget Circular. This should have been considered and approved by the ExCo. During deliberations over the 34 Obtain the HCs involvement and commitment if not already achieved A document outline is provided in annex 9 An MTSS should be complete before the end of August

43 contents of the circular it is possible that the Honourable Commissioners may have presented arguments based upon the MTSS (so long as s/he was fully involved this is possible). For this and other reasons the budget ceilings issued with the circular might be slightly different from those issued at the end of April. Other reasons include fluctuations in the oil price, an expansion in the economy leading to improved estimates of Value Added Tax (VAT) revenue, and perhaps an improved record or strategy for collecting Internally Generated Revenue (IGR). There may also have been other developments, such as an agreement to increase wages, which would have a significant impact on budget projections. If the budget ceilings have altered, it will be necessary to alter the plan of expenditure included in the table filled in from Annex Five. However, making these changes should now be relatively easy. If there is more money available than originally expected, some activities from year 2 may be brought forward into year 1. If the amount of money available is less than expected, some activities may need to be dropped from year 1 to year 2. Once again, as described in the options section above, the Honourable Commissioner should be involved in making decisions about which items to drop or bring forward. Following these refinements, the MTSS document (modified as necessary), including Annex Three, becomes the basis for the Ministry s (and its associated MDAs) budget submission. The arguments set out in the MTSS document become the arguments which the Ministry and its MDAs may use at budget defence. Involvement of the Honourable Commissioner at critical points should help to ensure his/her support at ExCo in making these presentations. Make adjustment s on the basis of ceilings changes in the call budget circular The MTSS then provides the basis of the budget submission 35

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45 Section Six: Other Critical Considerations Monitoring Performance Monitoring and Evaluation (M&E) is a critical element of the policy, budgeting and implementation cycle. Annual and other periodic reviews against policy and strategic targets comprise critical elements of control, and provide for learning and improvements in future plans and implementation. M&E may not be the responsibility of the MTSS committee. Corporate planning will have identified the units in each ministry that are responsible for M&E. However, an MTSS document should set out at least basic principles describing how performance will be monitored. The details of this approach to monitoring are not the subject of the current guide. However, it is worth recording that the process of defining outputs in the logframe template in Annex Three, presents a very much better basis for monitoring performance and progress than the previous approach of simply describing inputs. Also, recording lines of expenditure allocation against programme codes, and incorporating these new codes in the chart of accounts for expenditure tracking and purposes, allows the state to monitor expenditure against the achievement of outputs. This change represents something of a revolution in the way in which government business can be managed. It will also make a big potential difference to the public accountability of government. If expenditure is only made against inputs, it is impossible for citizens to track whether government is doing what it says it intends to do. But if expenditure is planned by outputs, and information about expenditure is made public, it is possible for people to hold government to account. As stated above, this brief section is quite inadequate in its coverage of M&E, but it is not the subject of this guide. Public Involvement Public involvement is a critical part of building both accountability and responsiveness of a growing democracy. However, there are all sorts of different ways of developing levels of public involvement. There are parts of the annual cycle process (see Figure 5) in which public involvement is probably best developed at first. These include the process of performance review, where representative organisations should be given a chance to see whether the government has achieved what it said it would do. It should be a positive incentive to work effectively on improving performance if staff and leaders are aware that the public will be involved in this evaluation. We have also in this guide suggested means of including members of civil society in the strategy sessions, and possibly in the MTSS committee and the policy group. It may be worth noting a couple of critical things about this involvement: Defining programme outputs, and then tracking expenditure against corresponding programme codes, allows for much better performance monitoring Public involvement is critical to building accountability and responsiveness 37

46 First, civil society members need to be informed about the limitations on strategic plans, such as those outlined in this guide. For example they need to be made aware of financial and capacity constraints. This should help to keep recommendations and expectations from the community realistic; Second, public participants may be expected to furnish information about strategies that work (and others that don t) and about contributions to service delivery that may be made by various non-government groups; and, Third, it will be well worth keeping in mind the fact that various groups represent various different interests simply seeking involvement from a selection of Civil Society Organisation (CSO) representatives will not necessarily yield an agreed public position on which strategies should be adopted. Some further guidance on how to improve public involvement is included in Annex Eight to this guide 38

47 Section Seven: An outline Timeline The majority of the work described above needs to be conducted during a four month period each year, from the beginning of April to the end of July. However, as made clear in Figure 5, the MTSS work fits within an annual cycle. Therefore for completeness, the chart below outlines a suggested plan of work covering the entire year. Figure 10: Suggested Timeline Task/Step Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Conduct Annual Reviews Collect data and information Review national policy guidance Refine State Policy Outcomes Receive Expenditure Envelopes Develop sector strategies & cost Review strategy within ceilings Prepare MTSS Document Receive Call Budget Circular Refine MTSS and compile budget Defend Budget using MTSS Make Operational Plan 39

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49 Annex One: Glossary of Terms Activity Activity Base Costing Call Budget Circular Economic Code Fiscal Projection Functional or Administrative Code High Level Goal Input MDA Ministry MTEF MTSS Activities are the things that have to be done in order to bring inputs together to make outputs. (In some contexts these are sometimes referred to as projects.) Perhaps this may include the development of a database, building schools, recruiting staff, providing training, and procuring equipment. An approach to costing that goes back to basic unit costs as opposed to the use of increments on previous years allocations. Circular sent out by the central planning or budget Ministry each year, ideally around August, giving guidance on the annual budget process, and providing MDA budget ceilings based upon fiscal projections and policy direction. The code in the budget and chart of accounts referring to a separate type of expenditure by input. This is a projection over a defined medium term period of the expected financial resources that will be available to a government unit (state government for example). It will normally be based upon assumptions and estimates of key fiscal elements, including (in Nigeria s case) the assumed oil price and volume, the level of taxation, the level of inflation, and projections of Gross Domestic Product (GDP). The code in the budget and chart of accounts referring to a separate expenditure centre or location. A goal exists at the level of the parent organisation, in this case for the government as a whole or quite possibly covering the whole state. It describes a key result over a long time frame towards which all combined efforts should be aiming. These are what are needed to create outputs. If a road is an output, it needs the inputs of labour, planning, materials and equipment to build it. Ministry, Department or Agency, is a collective term covering Ministries, non-ministerial agencies, and the Departments within them. Each will normally have a separate budget vote functional code. A Ministry is a particular type of vote head cost centre, with its own organisational identity, and headed by a Commissioner. It may be distinguished from other non-ministerial agencies. A Medium Term Expenditure Framework describes the outline division of planned expenditures over a medium term, all within the confines of projected known financial resource constraints. A strategy for a sector that should allow it to deliver outputs that will contribute to cross-government outcomes, and it describes this strategy in the medium-term probably three years and within the limitations of resource constraints so that it is realistic. 41

50 Outcome Output PBB Policy Programme Results Chain Sector Strategy Vote Head An outcome is a result that contributes to the achievement of a goal. It must contain reference to a measure of improvement in some aspect of business related to the goals of government. For example, fewer people suffering from diseases is an outcome. An output is something tangible and measurable that results from inputs and activities. Examples include more clinics, drugs and qualified medical staff in place and operating. They are expected to result in achievement of a stated outcome. Programme Based Budgeting entails collecting budget allocations under programme headings for the purpose of managing and tracking expenditure as it relates to outputs as opposed simply to inputs. A policy describes expected outcomes and long term goals. In some instances a policy statement might also include key elements of the strategy for achieving outcomes. A programme is a defined collection of inputs and activities, resulting in one or more outputs. It will normally include inputs under all of the three major budget groupings personnel, overheads and capital. The Results Chain describes the relationship between inputs, activities, outputs, outcomes and goals. A sector describes a discrete area of government business under which key outcomes are defined, normally at the Vote Head Ministry level, but it may include the work and outputs of more than one vote head category. So for example, education outcomes might be contributed to by Ministries of Education, Science and Technology, and perhaps even Water affairs. A strategy is a statement about how policy outcomes and goals are to be achieved. Ministries and Agencies that are designated a main budget code number under which other MDAs are listed. 42

51 Annex Two: Draft Outline Terms of Reference for Sector MTSS Committee Please note that this brief outline is intended as a guide only. The expectation is that with experience each ministry or MDA will be able to make improvements. Overall Function The MTSS Committee for the Sector is responsible for leading the Ministry and its MDAs through the process of developing annual MTSS. The Committee will be held responsible for the production of the MTSS document (see Annex Nine to the MTSS guide) and of the Annexes to this document including the complete MTSS logframe template (see Annex Three to the MTSS guide). Tasks The process will include the following tasks (refer to Figure 7 in the guide): Identify, collect and assimilate all relevant, existing policy and strategy documents; Ensure that a process is followed for agreeing, with the involvement of the Honourable Commissioner and Relevant Committee members of the State House of Assembly, medium and long-term outcomes, and sub-outputs, for the sector (this entails completion of the first part of the strategic log-frame, which is spreadsheet 1 in Annex Five to the guide); Ensure that all relevant data and information, including any performance reviews, about the sector is gathered together and is available to sector strategy makers; Compile all information about projected revenue flows over the coming three years, especially call budget circular ceilings, including non-discretionary loans and grants, and external sources or financial and other support; Compile all information about existing capital contract commitments, and indications of incremental commitments to personnel and overheads costs over the coming three years; Arrange and facilitate a three-day strategy session during which policy outcomes and sub-outputs should be reviewed, and the process of identifying key new strategic activities within the projected financial constraints should be started; Following the strategy session, facilitate and manage the process of completing activities costing, and the iterative process of choosing which activities should be implemented in which year, given the resource constraints faced, and so as to achieve the defined outcomes and outputs, and connection medium-term implications between (for example) capital investments and recurrent implications (this process may take two months or more, especially in the first year); 43

52 Ensure that the integrity of the decisions made are checked with relevant interests both in and outside the Ministry (or MDA) and especially with the Honourable Commissioner; On the basis of the information collected and the decisions made, draft the MTSS document following the outline provided in Annex Four to the guide; Check that the MTSS is used as a basis for compiling the annual budget submission. Appointment and Responsibility The Committee will be appointed by, and will be answerable to, the Permanent Secretary. Membership Normally the membership will be drawn from within the relevant Ministry and MDAs. However, the PS may decide to include members from outside the Ministry (for example civil society representatives of relevant organisations outside government). In order to make the committee functional, it is recommended that the membership should not exceed

53 Annex Three: MTSS Strategy Logframe Template Sector and Sub-Sector 1.0: e.g. Education, Secondary Education Policy Outcome: e.g. By 2020, sixty percent of secondary school agd children in the state are equipped with the skills that allow them to obtain gainful employment and learn through higher levels of education. Medium-Term Output : (Must contain a SMART target): e.g. Thirty percent of secondary age children, regardless of gender, faith, social background and special needs, complete secondary school by 2014, with at least 33 percent of these obtaining sufficient results to allow them to proceed to tertiary education. Sub-Output 1.1: e.g. Adequate numbers of qualified teachers needed to achieve the medium term output are employed to provide education of good quality in public Schools.Programme Code 001 Target 2013: e.g. Number of qualified teachers employed increases by 5 percent each year Activites 2011 Activities 2012 Activities 2013 Cost 2011 Cost 2012 Costs 2013 Employ existing Employ existing 641,500, ,750, ,150,000 teachers, including teachers, including those taken on in 2011 those taken on in 2012 e.g. Employ existing teachers Add salaries of new teachers taken on at start of 2011 etc. Add salaries of new teachers taken on at start of 2012 Add salaries of new teachers taken on at start of 2013 MTSS Activity Code MDA Responsible for Management Min of Education 32,250,000 34,400,000 35,690, Min of Education Sub-Output 1.2: Programme code 002.Etc. Target 2013: Activites 2011 Activities 2012 Activities 2013 Cost 2011 Cost 2012 Costs 2013 MTSS Activity Code etc MDA Responsible for Management Sector and Sub-Sector 2.0: Programme Code 002 Policy Outcome: Medium-Term Output: Sub-Output 2.1: Target 2013: Activites 2011 Activities 2012 Activities 2013 Cost 2011 Cost 2012 Costs 2013 MTSS Activity Code etc MDA Responsible for Management Sub-Output 2.2: Target 2013: Activites 2011 Activities 2012 Activities 2013 Cost 2011 Cost 2012 Costs 2013 MTSS Activity Code etc MDA Responsible for Management 45

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55 Annex Four: Some Pointers on Developing Sector Strategy This Annex is provided as a supporting accompaniment to Step 2B filling in the log-frame sheet. Some Possible Preliminary Strategic Questions Filling in the outputs and activities entries in the logframe worksheet constitutes the main task of the first strategy session, (though it is not expected even that this part of the exercise will be completed during that session). Probably you will want to do the work in groups (perhaps focussing on a programme or sub-sector each) and then have them make presentations back to the entire group. Filling in the entries is not just guess-work. There will be a need for considerable technical input, based on knowledge of the sector and what is required in the medium to long term in order to achieve the desired results. The remaining headings in this Annex are intended to help in thinking about these things. Remember though that this step, while forming the core of the strategic exercise, is one that you may not get right in the first year. In fact you may not get it right even in the fifth year of trying. Strategy making is a constant (or at least annual) process of continuous improvement, so it s worth keeping expectations small to begin with. Try answering the following questions: In order to meet the policy outcomes, and medium term outputs, you have been set or have agreed, what quantity of infrastructure and recurrent annual resources do you need to aim for (for example numbers of schools classrooms, books and qualified teachers)? How does this compare with the current level of infrastructure and resources that are available? Therefore what kinds of improvements need to be made between now and the target date, and what kind of annual improvements implications does this have? In order to meet the policy outcomes that have been agreed, what quality improvements need to be made (for example the standards of nursing practice or the level of community knowledge about ill-health causes)? How are such improvements to be achieved (perhaps through training or awareness raising and publicity exercises)? How can some of these challenges be over-come by regulatory changes (for example will changes to regulations governing the way in which prices at markets are set raise the level of profit for farmers, would these regulations be enforceable, and what would be the impact on incentives to expand production)? Naturally these questions are just a start, and technical knowledge of your own sector will lead you to ask and answer many more questions that follow on from the answers to these. 47

56 Build Rather than Repeat Over a period of three years, you could do exactly the same activities each year and achieve something. You just keep repeating what you have done before so it is not a matter of thinking over the three year period but just three consecutive years of the same. However, if you build in year two on what you did in year one and then build in year three on what you did in years one and two, the results can alter dramatically. A good example can be seen in economic empowerment. If there is a programme that empowers 10,000 people a year then, in three years, it will empower 30,000 if it just does the same thing each year. However, if it targets the candidates for empowerment better, they may then go on to empower more people themselves. This second generation of empowerment builds on the first set of empowered people. It is also possible that some of the second generation also go on to empower more people a third generation through their own empowerment. If each empowered person goes on to empower another five, the numbers can then (theoretically) be dramatic: Year 1 10,000; Year 2 another 10, ,000 (2 nd gen.); Year 3 another 10, ,000 (2 nd gen.) + 250,000 (3 rd gen.); Total 380,000. That is exponential rather than arithmetic growth. What changes in the basic activity is the selection of candidates and the follow-up after the empowerment. It is an illustration of impact assessment, as well as contextual analysis. The choice of candidate may depend on the person but also on the community in which the person lives and the skills the person takes back to the community. It is wishful thinking to hope for growth quite as dramatic as this but this is an illustration of the idea of challenging yourself to find ways of adding value to your basic activity, so that you can build on each year s results, rather than just repeat them. The Recurrent Vs Capital Ratio It is commonly argued in Nigeria that an expansion in the capital vs. recurrent ratio is a good thing. But there are at last 2 critical things to remember and consider. First, outcomes are the result of people s actions, not just of things. We need to give as much thought to what kinds of people we use, and how we apply their skills, as we do to capital projects. Secondly, investments in capital projects almost always have implications for the employment of more people. We cannot build schools one year without allowing for more teachers the next. Therefore, an expansion in capital expenditure now, implies an expansion in recurrent expenditure soon. One of the greatest benefits from medium-term planning is that we can allow for these kinds of changes. Try building these emphases on recurrent and personnel costs into the MTSS table as you fill in the planned activities. Think about other Players Relevant to the Sector A classic example is the inter-relationship between sectors is to be found in Health and Water. Provision of clean water is a critical input to improved health outcomes. It would be advisable for the participants in the Health Strategy Session to have made consultations with 48

57 the Ministry of Water Resources, or even to invite one or two senior members of the Ministry to attend the Health Strategy Session. Similarly there will be implications for strategy development in the things that other actors are doing. For example, in education, there are significant private sector operators, and local government provides very substantial inputs into the provision of basic education. The federal government provides teacher training and supervision inputs which we might not want to duplicate. In most sectors, you will have the following players: Federal, state and Local government; The wider Public Sector, with parastatals often dominating; The Voluntary Sector, with CSOs and NGOs; The Private Sector, with business organisations, trade organisations and, of course, individual businesses, including small and medium enterprises; The Faith Sector, with churches, mosques and religious schools; Traditional Rulers; and Development partners organisations. You may be in a position (and progressively over the years it is advisable to work towards this objective) to see how you can move from direct delivery to organising delivery through others. This can involve improved regulation and monitoring of their activities, as well as making regulatory changes that can improve the environment for their operation. How you manage the relationship with the Private Sector will be linked to how you see the role of markets in your strategy design. Although this aspect of medium term strategy making is different in kind to designing your own systemic intervention because it is about organisation how you decide to collaborate with these other players will be a critical part of your design. Note that having made decisions about these relationships, you can still enter separate lines for the activities of other players in the logframe sheet, and provide them with an MTSS activity code and destination administrative unit. We explain below where to transfer these into the other worksheets. Technical and Capacity Limitations STEP 2C in the guide focuses on the financial viability and justification of your proposals. But there are also technical and capacity limitations to be taken into account. Sometimes it is tempting to load activities plans with a very large number of detailed inputs. This can commonly emerge from a strategy session in which different groups are trying to include items of particular interest to them, and this is a particular challenge in a sector like Education where there are a large number of MDAs. Yet does your sector really have the human and organisational capacity to implement all of these measures? Take a look at any formal or informal performance reviews you have and see whether all the planned activities in previous plans (for example in the SEEDS plans) were actually implemented? There is little point in taking up scarce financial resources in activities that are difficult to implement, if they could be spent as effectively on things which are relatively easy to implement. 49

58 Similarly, there can be technical constraints on the implementation of some projects which make them impractical. For example, it may be desirable systemically to computerise all the primary schools across the state, but lack of electricity, lack of security, and the lack of a clean (dust free) environment make this objective technically risky. Getting modern information and learning systems to our rural population requires some careful, technical thought, not a rushed, unworkable solution. Identifying both New and Current Activities In STEP 1E the guide advises the Committee to produce estimates of non-variable costs, including existing capital commitments in current contracts, likely standing costs to pay for salaries of permanent staff, and some standard overheads costs. Most of these costs will not change much from one year to the next, but it is necessary at this stage in the strategy session to review them. As we have said, the purpose of our strategic exercise is to begin connecting policy with the things that actually need to be done in order to achieve the results we seek. In essence, what infrastructure needs to be built, what infrastructure needs to be renovated, what equipment and vehicles are needed, how many staff do we have and do we need more (or fewer) in particular areas, what can we do to raise their skills in required fields, what improved management systems are required, and what supplies like drugs and books might we need to provide for? There can be a temptation when commencing this kind of exercise to think only of those things which we need to ADD to what we currently do. However, because the objective is to cost our planned activities within realistic financial ceilings, it is not enough to identify activities items that are new. We must also include those standard items of activity and expenditure that are necessary to operate the department and keep existing services running. So for example we need to include standard items such as: The costs of regular full time staff; Costs of maintaining and renovating office structures (including office additions and expansions where these are strategically justified); Costs of maintaining service delivery structures; Costs of operating and maintaining existing vehicles (including replacement of the routine existing vehicle stock); Costs of office operating and supplies (stationary, utilities); Costs of travel and communications; and, Even those things which might seem peripheral to providing the service, but which we know will attract expenditure (not just financial costs but also traditional gifts and others). All these items also need to be included in the log-frame template (Annex Three). As mentioned above, we already have calculated some overall costs for these standard items, but thinking about them strategically and over the medium term we might now be in a position to alter some of these amounts. For example, if we aim in year 1 to build some new clinics, then in years 2 and 3 the overheads allocations for buildings maintenance need to be increased. Also we may need to increase the allocations for drugs in these years, and obviously the allocations for the numbers of qualified doctors and nurses to be employed. Whereas under STEP 1E you may 50

59 only have included additional costs on staffing to cover inflation, you may now need to make increases for additional staff employment. Similarly some overheads allocations may need to be increased to cover maintenance commitments, fuel and operating costs (if new vehicles are to be bought) and so on. We suggest that in order to cover all these non-variable and variable overheads and staffing costs, you need to consider the following for each programme or sub-sector: Existing roll-over permanent staffing costs; The costs of new staff to be employed; Existing roll-over costs of overheads, including maintenance, utilities, financial costs and others; New overheads costs required to cover new investments; and, Existing capital contract commitments. Allocating each of these lines an MTSS activities code in the appropriate column will help you to complete the template in Annex Three later on. Ensuring Political Relevance Finally there needs to be good communication between the Committee and, through the PS, the Honourable Commissioner, so as to ensure especially that large capital items which may be at the forefront of the government s mind are not left out. A focus for example on the delivery of primary or local health care as a means of achieving health improvement targets might not lead to the establishment of large hospitals as critical elements of strategy. But the likelihood is that the government may place an emphasis on these kinds of projects anyway. There is no point in leaving these out of your MTSS, because we know that these will actually figure as major items of expenditure. 51

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71 Annex Six: Guidance on the Completion of Annex Five This Annex is provided in support of Step 2C. It provides guidance on how to tackle the following two tasks: The first is to develop costs estimates for the activities that are planned; and The second is to work out how to transfer the costs into the structure of the budget submission (if you don t do this then the budget your sector submits cannot reflect the strategy you developed, so all your hard work will be wasted). While performing these tasks it is necessary to ensure that the total costs of planned activities in each MDA do not exceed the resource envelope ceilings you have been given. In this Annex we look at each of these interconnected tasks in turn. Making Activities Costs Estimates What is required is an approach to costing that breaks with the tradition of incremental budgeting. In the past it has been normal practice simply to take last year s planned allocations and add an incremental percentage. In many ways the inputs structure of the economic budget codes encourages this approach. But in planning programmes and the things we need to do in order to deliver outputs, we need to describe programme activities and then cost these separately. Estimates at this stage do not need to be VERY precise, because in the end the degree of error resulting from price fluctuations is likely to be as much as the error resulting from a degree of rounding. In order to assist in the strategy session exercise it will have been helpful if the Committee can already have collected basic standard costing information relating to programmes, activities and economic classifications, for example about the cost of a day of training, the cost of certain standard building units based on contracts that have been let, the cost of purchasing and running a vehicle etc. Another technique that has proved to be very effective is to use information from current or previous years operational plans. These, of necessity, will have worked down activities costs to quite a low (detailed) level. You can draw on this information to build up a picture of general activities costs in your new or revised MTSS. This information should be entered into the cost columns in the logframe sheet. Building up a picture of all the activities costs and keeping it within the ceilings can be quite a complex exercise. The key at this stage is to be able to start to compile more realistic and meaningful budget and costing information. The process will be incremental and will depend on the level of resources you have available to prepare such budgets. But the budget officers in each MDA should find this work relatively easy, and their involvement at this stage becomes critical. In order to assist in the process of costing activities, there is a separate set of templates available for this purpose. They provide different spreadsheets for calculating personnel, 63

72 overheads (including maintenance) and projects costings within each programme. The templates then connect into the spreadsheets provided as annex five in this guide. These costing templates are quite complex, so it is not suggested in this guide that using them should be essential. However, if there is someone in the MDA with appropriate expertise, and who is keen to tackle this task, then it may be worth trying to use them. Certainly the result should be a much more accountable and transparent process of costs calculations. These templates are available from SPARC on request, and some training could be offered in their use. Adding Programme Budget Codes In the costs totals you have entered in the logframe sheet you will have defined costs definitions under activities and PROGRAMME headings (each output or sub-output section of the logframe will constitute a programme) into MDAs. Provisionally at least you will have made decisions about which MDA is to cover a particular cost by entering the relevant MDA in the right hand column of the logframe. Figure A demonstrates the relationship in the budget classification structure between functions, programmes, activities and economic classifications. However, the task of converting programme costs over to MDA allocations is rather more complex than the logframe in Annex Three allows. There are two aspects to this complexity. First, you should have made a reasonable effort by now to ensure that the TOTAL COSTS of your strategy for each year fall within (or very nearly within) the ceilings issued earlier for each of the three years. However, in making arbitrary allocations to MDAs in the Log Frame sheet, we are ignoring the fact that MDAs will have been given their own ceiling. You may well find that after completing Annex Three according to the guidelines above, you may achieve a TOTAL expenditure that falls within the ceiling, but expenditure plans for some MDAs will exceed their individual ceilings while others will be below the allocations that have been made for them. The long-run solution to this might be to eliminate the MDA ceilings from the call circular and allow these to be determined by the strategy exercise. However, this has various organisational implications which we comment on below and therefore for the time being we are not contemplating dropping the separate MDAs ceilings from the CBC. The second complexity that the budget is actually divided into numerous personnel and overheads (economic) codes in the case of overheads there may be more than 150 of them. (See Section 2 of this guide where the differences between the codes are described or defined.) The Programme Based Budgeting excel templates in Annex Five are intended to help you overcome both of these problems. The sheets in Annex Five are structured as follows. The template includes three sets of worksheets. The main set comprise a template for each different sub-vote-head in the sector, showing three sheets for each head, one for each of the three years of the MTSS. The costs in each sheet are divided along the top into the different programmes defined for the sector. In this case there are 12 different programmes defined, and these are reflected in ever spreadsheet for each of the (in this case) sub-vote heads or MDAs. Down the left of each spreadsheet the functional codes are listed. Therefore, costs are distributed by 64

73 functional head across the 12 programmes. Once the costing information has been filled in for these fields, the conversion of the programme costs to the structure of the budget has been complete. In each case there is a field at the top for entering the ceilings provided in the envelopes circular which should have been issued in April. The main summary spreadsheet picks up all the costs from the 6 MDAs for the first year of the MTSS, and therefore provides totals for the sector against the structure of the budget for the coming year. The third set of sheets present prioritisations for the costed programmes, so that when the call budget circular is issued it is a relatively simple task to leave out (or add) different elements until the new ceiling is complied with. 65

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75 Annex Seven: Justifying Priority Options Most strategies have winners and losers. You would ideally need to use impact assessment to identify the winners and losers as well as you can. But you then have to justify your decision to the losers. That is normally done by trying to balance the overall gains and losses of the strategy options. At its simplest, you calculate the costs of the strategy and also put costs on the benefits and see which number is bigger. Are the benefits greater than the costs? Analysing the costs and the benefits is known as Cost / Benefit Analysis or CBA. Simple CBA is very tempting. One number is larger than another. What s difficult about that? The trouble is calculating the numbers. That is often so difficult that prejudices creep in that ensure whether intentionally or not that the numbers come out the way you want, which defeats the purpose. It can be difficult enough working out the actual costs but it is often much more difficult putting a cost on the benefits. Benefits are very often values rather than prices. But it is also tempting to reject CBA as a technique just because it isn t as accurate as it looks. It is a useful discipline to ask the questions, whether or not the technique will give you the answer. For example, in assessing the costs, you should be identifying the costs borne anywhere down the chain of events, not just what it costs you. The costs that government pass on to businesses and then to consumers are usually far greater than the cost of the government process that did it. And it may be that some strategies just aren t worth it, even if they are affordable and possible. Suppose you propose building a new centre for small businesses. There are three designs, at 10 million, 20 million and 30 Million Naira. You have a budget of 50 million Naira. The community it would serve is unlikely to generate more than 25 Million Naira over five years. On a Cost / Benefit Analysis (CBA), the 30 million option is not justifiable, although affordable. There may be better ways of using the money to benefit the community. But a CBA also shows that both the 20 million and 10 million options are justifiable. Comparing them is known as Cost Effectiveness Analysis or CEA, where two options are each justifiable and affordable but one is better value for money. So, costing is not just about affordability although that is the most fundamental issue. If you cannot afford the costs, you do not have the option. In summary you may not have sufficient information in this first year to do any proper CBA. But it is a reasonable principle to help you start. Think about the relative costs and benefits of the various activities your session has recommended. In some cases it may become pretty obvious that there are particular activities that can be dropped or postponed to save money that will actually cause relatively little damage to the achievement of results. A useful technique may be to divide up your the MTSS Committee, or even the strategy session participants, into groups. Present them all with the same exercise to cut out or reschedule activities so as to bring costs within the ceiling. See what similarities and differences you get from the different groups in their decision-making, and in their presentations back to the main group ensure that they present their justifications for the choices they have made. You may, with any luck, find that you are moving towards a consensus on which are the expenditure priorities. 67

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77 Annex Eight: Outline Means of Improving Public involvement in the MTSS Process Ways of involving the public and civil society in the MTSS process Stage 1 of the MTSS Process Representatives of civil society are members of the MTSS Committee and have an agreed role, set out in the Committee s ToRs Civil society can present any data it holds on public development priorities to the MTSS Committee Civil society organisations or academia can be contracted to undertake surveys or other forms of data collection at the community level to better understand development priorities State debates are held to understand public development priorities to be addressed in the MTSS Civil society organisations are invited to monitor the delivery of certain aspects of the MTSS, to inform the performance review Representatives of the public can be interviewed in surveys to find out their views on past government performance in delivering MTSS and on development priorities for the next MTSS Stage 2 of the MTSS Process Representatives of civil society participate in the strategy sessions The draft MTSS is presented to civil society and other members of the public at a public consultation meeting and options for further prioritisation discussed Stage 3 of the MTSS Process The State government officially launches the MTSS and budget, with media involvement, to inform the public of the government s development priorities The agreed MTSS is made available to the public by posting it on the government s website 69

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79 Annex Nine: Outline Table of Contents This Annex sets out no more than a guide to the table of contents you may use if you wish. This outline is not set in stone and you may choose to vary from this if you wish. However, we know that many of you may find this guidance useful. Forward Table of Contents Acknowledgements Abbreviations Annexes Chapter One: Chapter Two: Introduction 1.1 Aims and Objectives of the Document A brief section explaining where the MTSS fits amongst the planning documents for the state and the Sector. Refer to Figure 7 in this MTSS guide. 1.2 Summary of the Process used Describe how was the MTSS developed, and who was involved. Were there any weaknesses in the process which you aim to strengthen next year? 1.3 Summary of Conclusions Use this section to present a short, and snappy summary of the key strategic directions outlined in the MTSS, and refer briefly how it was decided that these were the priorities (the evaluation and selection process used) given the budgetary constraints that the sector faces. 1.4 Outline of the Structure of the Document Describe the sequence of chapters, and briefly explain the logic of its layout. The Sector and Policy in the State 2.1 A Brief Introduction to the state Concentrate here on issues that are of particular relevance to your sector. Population and its distribution is probably a critical factor to most sectors. Also current distribution and levels of demand for the service you provide in different parts of the state. Possibly talk here about potential growth in demand. 2.2 The current situation in the sector Use this section as a situation analysis, describing essentially the level and quality of the service provided. Include relevant information from research and data/statistics surveys, and possibly also performance reviews. What are the key challenges faced by the sector. Include data Annexes as required. (We suggest you place most of the data in Annexes rather than making this section exhaustively long.) 71

80 2.3 Sector Policy Describe here the Main Policy thrusts and outcomes in your sector. This may require reference to the State Development Plan, but possibly including more detail and refinements. You may also wish or need to refer to National Policy guidelines in your sector. Chapter Three: The Development of Sector Strategy 3.1 Outline Major Strategic Challenges Describe here the main challenges raised and considered during the strategy session. 3.2 Resource Constraints Describe the revenue projections provided for the sector, including both discretionary and non-discretionary sources. What existing commitments are there, both recurrent and capital? What is left over to use for discretionary planning? What other resource constraints exist for example the capacity of the sector to implement? 3.3 Contributions from our Partners Describe here what is known about the likely activities of partners in the sector. This could include donor and NGO projects, local and federal government, but include here also the private and possibly religious or other sectors. This could include formal understandings of shared responsibilities between government and the private sector in a Public Private Partnership (PPP) agreement. 3.4 Programme Connections between Sector MDAs Describe here what elements of programmes cut across sector MDAs, including how your programmes contribute to the achievement of broader policy objectives, and possibly how programmes in some other MDAs also contribute to the achievement of policies which a large part of your own programmes are intended to achieve. 3.5 Outline of Key Strategies Describe here the main strategies and core activities contained in the strategic plan. Refer to the completed strategic template. (This is worksheet 1 in Annex Three in the guide attach the completed version as an Annex to your MTSS document.) Explain especially the MEDIUM TERM characteristics of the strategy. How, for example, do capital activities in years one and two, have implications for recurrent activities in years two and three. Provide examples of ways in which the strategy builds momentum and growth (not just a sum of its parts) and how the strategy aims to purchase people or processes, not just things. 3.6 Justification Describe the justification for the strategies chosen. For example, describe the selection process and criteria used cost effectiveness, expected benefits and impact. In particular outline how each programme or core activity is expected to contribute to one or another key policy thrust or outcome. What choices were made during the iteration when the costed programmes were found to be above the ceiling? 72

81 3.7 Results Framework Refer to the targets in the completed Annex Three. This is what the strategy is expected to achieve, and will be used for monitoring and evaluation later. 3.8 Responsibilities and Operational Plan Make a reference to the organisational responsibilities for implementing the strategic plan. You do not have to provide an operational plan in this MTSS document. But you may use this sub-section to identify this need and comment on the ways in which this has already been thought about in your planning. Chapter Four: Three Year Expenditure Projections Chapter Five: 4.1 The process used to make Expenditure Projections Describe some of the key rule of thumb costing assumptions made in working out the costs of the plan. 4.2 Outline Expenditure Projections Describe the main features of the Annex. Without repeating what is in sections 3.5 and 3.6, emphasise changes in the balance between capital and recurrent expenditure, and how projections support a medium-term progression in expenditure patterns that support the selected strategies. Monitoring and Evaluation 5.1 Identifying Sources of Data against the Results Framework What data will it be possible to collect in order to measure progress towards the targets in the results framework? Refer to sub-section 3.7. If it is not possible to identify data to use in these measurements, you may be obliged to revisit your targets. 5.2 Conducting Annual Sector Review What form will the annual review take? When will it be performed and what process will it involve? How will the results be used in making revisions to this MTSS next year? 5.3 Organisational Arrangements Describe outline responsibilities for monitoring work. Who will collect data, and who will perform the analysis? 73

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83 Annex Ten: Checklist for G&SI in MTSS Situational Analysis Yes No 1. Policy Context Social indicators Do the documents have data on key indicators of women s and men s status? literacy rates (by sex) primary enrolment (by sex) secondary completion (by sex) life expectancy (by sex) birth rates infant mortality rates (by sex) maternal mortality rates population by age, sex and location (urban/rural) Employment rates by sex 2. Policy Context Legal Does the Policy/MTSS document reference and align with national and global instruments for promoting gender equality and social inclusion? (For example, National Gender Policy, CEDAW, Child Rights Act, AU Protocol on Women s Rights, MDGs, etc) Does it align with state-specific commitments (laws and policies) that promote gender equality and social inclusion? Participation and Decision Making Yes No 3. Policy Context decision-makers What percentage of elected officials are women/men? What percentage of women/men are in high level government positions? What percentage of high government officials are members of disadvantaged groups (such as physically challenged, minorities and non-indigenes)? What institutional mechanisms have been created to advocate for women/men and/or protect their rights? Are there active CSOs, women s movement/ NGOs working on women s/human rights? Were vulnerable groups involved in the policy formulation process? 75

84 4. Policy Justification Is the gender dimension highlighted in background information to the intervention? Does the analysis include how the issues relate to men, women and socially excluded groups? Does the justification include convincing arguments for gender equality and social inclusion? 5. Policy Goals and Objectives Does the goal of the proposed intervention reflect the needs of both men and women? Does the goal flow logically from the issues raised by the content analysis? Does the goal seek to correct gender imbalances through addressing practical needs of men and women? Does the goal seek to transform the institutions (social and other) that perpetuate gender inequality and social exclusion? 6. Activities Do planned activities and interventions involve both and women? Were there any additional activities to ensure that a gender and social inclusion perspective is made explicit (e.g. training in gender issues, additional research, etc.)? 7. Indicators Does the policy document have indicators to measure progress towards the fulfilment of each objective? Do these indicators measure the gender aspects of each objective? Are indicators gender disaggregated? Are targets set to guarantee a sufficient level of gender balance in activities (e.g. quotas for male and female participation)? 8. Policy Implementation Who are implementing the Policy intervention? Have they received gender mainstreaming training, so that a gender perspective can be sustained throughout implementation? Are women, men and vulnerable groups participating in implementation? 9. Monitoring and Evaluation: Does the monitoring and evaluation strategy include a gender and social inclusion perspective? Does it examine both substantive (content) and administrative (process) aspects of the intervention? 9. Risks: Was the greater context of gender roles and relations within society considered as a potential risk (i.e. stereotypes or structural barriers that may prevent full participation of one or the other gender or group)? Was the potential negative impact of the intervention considered (e.g. potential increased burden on women or social isolation of men or other vulnerable groups?) 10. Budget: Were financial inputs gender-proofed to ensure that both men and women will benefit from the planned intervention? Was the need to provide gender sensitivity training or to engage short-term gender experts factored in to the budget? 76

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