UN Capital Development Fund What, Why and How? PERFORMANCE BASED CLIMATE RESILIENCE GRANTS October 2013

Local Governments depend on grants from the Central Government Most local governments have to spend far more money than they can collect in local taxes and service fees Therefore, in most countries, local governments get a large part of their revenues in the form of GRANTS from the central government.

There are different ways to share out central government support to local government GAP-FILLING: The local government calculates its spending needs, then subtracts the amount it can collect in own-source revenues REVENUE SHARE: Local governments get a fixed percentage of tax revenues collected by the central government MATCHING GRANTS: For example, each $0.50 collected by the local government, the central government adds $1.00. $ OSR $ $ + $$

What could be the weak points with each of the methods of sharing out central government support to local governments, shown on the previous slide? Which method is most like the way central government supports local government in Cambodia?

Performance Based Grants With a Performance Based Grant, the amount of money that a local government gets depends on the result of a Performance Assessment. The idea is that local governments will try harder to improve governance and local service delivery, so that they can get more money from the Performance Based Grant. $$$$ $$

Not everybody thinks that Performance Based Grants are a good idea. What problems might be caused by a Performance Based Grant system?

Why Give Grants for Climate Change? Climate change is caused by the actions of human beings all around the world, but it has impacts on local communities and individuals. This means that local governments need to spend more to provide infrastructure and services for local communities. Rich countries around the world contribute money to help poorer countries adapt to climate change, but most of this money goes to the national level. $$

The purpose of Performance Based Climate Resilience Grants is to share some of the climate change adaptation funds to the local government level. $$PBCR$$PBCR

The PBCR Grants provided by LGCC are: Part of the global LoCAL program of UNCDF The first time that Performance Based Grants have been tried in Cambodia  If Performance Based Grants work well for climate change adaptation, they could be used for other types of finance to local governments.

What are the assessment criteria? Minimum Conditions: If the local government cannot pass on any of the minimum conditions, it cannot receive a grant. Performance Measures: The size of the grant will depend on a score calculated from a number of different criteria Each year, each local government participating in the program is assessed against two types of criteria.

Minimum Conditions Minimum Conditions are usually based on things that the law says local governments MUST do. Examples can be: Preparing a local development plan following a participatory process; Passing a budget approved by the Council; Providing certain kinds of information to the public, for example financial results, public procurement or complaints procedures.

Performance Measures There may be many different performance measures (sometimes more than 50 different measures) but they normally divide into two types: 1.General measures of good governance. Examples might be: How often the Council meets; Time taken to make payments; Budget execution (% of budget plan completed) Responsiveness to citizens’ complaints and concerns.

2.Service Delivery performance measures: how well the local government delivers services, particularly services that are directly related to the purpose of the grant. Examples: % of children attending school Number of visits to villages by health staff

Performance Assessment Performance assessment has to be Fair: the assessment team must not favour some local governments and dis-favour others, for example for political reasons. Consistent: the criteria must be applied in the same way to all local governments Accurate: the outcome of the performance assessment affects the money allocated to the local government, so it is important that the assessment is accurate.

In many countries, the performance assessment is contracted out to a private company, for example an audit firm. The private firm conducts the assessments and reports to the government agency responsible for managing the grant. This has not been tried in Cambodia yet.

What are the advantages of using a private firm to carry out performance assessment? What are the disadvantages?

International Experience UNCDF has experience with supporting Performance Based Grant systems in many developing countries. In some countries, for example Bangladesh and Solomon Islands, the system developed by UNCDF has been fully adopted by Government as the system for financing local government development expenditures. Performance Based Climate Resilience Grants are being piloted in Cambodia, Bhutan and Laos and are in preparation in Bangladesh, Solomon Islands and several African countries.

PBCR Grants in LGCC

PBCR grants are transferred through the Treasury system. Districts will transfer sub- grants to communes

Eligible Expenditures Projects must be identified through the District Climate Change Adaptation Strategy PBCR Grants can be used to fund 1/3 of the cost of infrastructure projects (2/3 must come from D/M fund, C/S fund or another source) PBCR Grants can be used to pay 100% of the cost of services for climate change adaptation PBCR grants can also be used for: Cost of engineer to design and supervise infrastructure projects Project administration costs Monitoring and evaluation costs

Allocation Rules In 2014, there will be a total of $320,000 to divide into PBCR Grants for 8 Districts. This amount will be divided into two parts: Basic Allocation Amount: $240,000 (75%) Performance Allocation Amount: $80,000 (25%)

Discussion Points: Why is the Basic Allocation calculated according to the size of the D/M Fund and C/S Fund allocations? Is there a better way to do it?

Each District that passes the Minimum Conditions test will get: A Basic Allocation based on the size of the D/M Fund and C/S Fund allocations in the District A Performance Allocation based on the District score in the Performance Assessment. $ XXX + $ XX 8 / 10

Performance Assessment There are 6 Minimum Conditions: 1.District Plan and Investment Program approved by the Council; 2.Vulnerability Reduction Analysis carried out; 3.District Climate Change Adaptation Strategy adopted; 4.Work Plan for use of the PBCR Grant prepared using a participatory process 5.Work Plan approved by the Council 6.Work Plan approved by NCDDS

There are two kinds of Performance Measures: Up to 12 points for Public Resources Management Performance Up to 11 points for Climate Change Resilience Performances Up to 2 points for accurate self-assessment. In 2013, only Takeo Districts and Municipality will be assessed for Climate Change Resilience Performance

Assessment Method NCDDS will carry out the Performance Assessment with participation from the Provincial Administration First, Districts will be asked to complete a self- assessment. This has two purposes: So that Districts can collect all the information that is needed for the assessment; and So that the Districts can fully understand how the assessment is carried out. Then, the NCDDS-led team will come to check the results of the self-assessment. If the self-assessment is accurate, the District can get one or two bonus points.

Identify: 3 strong points about the LGCC Performance Based Climate Resilience Grant system 3 points that a local government might be concerned about. Think about this from the point of view of: 1.A large, well developed District with high capacity 2.A small, remote District with challenges for capacity

UN Capital Development Fund THANK YOU Julian Abrams Implementation Adviser, LGCC