Document of The World Bank FOR OFFICIAL USE ONLY Report No: 32574-CL IMPLEMENTATION COMPLETION REPORT (SCL-44290 TF-26457) ON A LOAN IN THE AMOUNT OF US$10.1 MILLION TO THE REPUBLIC OF CHILE FOR A MUNICIPAL DEVELOPMENT II PROJECT June 13, 2005 Poverty Reduction and Economic Management Argentina, Chile, Paraguay, Uruguay Country Managment Unit Latin America and the Caribbean This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective November 23, 2004) Currency Unit = Chilean Peso CH$ 1 = US$ 0.0016903 US$ 1 = CH$ 591.6 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CONAF - National Forestry Corporation (Corporación Nacional Forestal) FCM - Municipal Common Fund (Fondo Común Municipal) ICR - Implementation Completion Report ICT - Information and Communication Technology IGM - Military Geography Institute (Instituto Geográfico Militar) INE - National Statistics Bureau (Instituto Nacional de Estadística) GPM Municipal Budgeting System (Sistema de Gestión Presupuestaria Municipal) MIDEPLAN - Ministry of Planning and Cooperation (Ministerio de Planificación y Cooperación) PEU - Provincial Executing Unit PLADECO - Community Development Plan (Plan de Desarrollo Comunal) PROFIM-I - Municipal Development Pilot Project (Programa Piloto de Fortalecimiento Institucional Municipal) PROFIM-II - Second Municipal Development Program (Programa de Fortalecimiento Institucional Municipal) QSA - Quality Supervision Assessment QAG - Quality Assurance Group SII - Internal Revenue Services (Servicio de Impuestos Internos) SINIM - National Municipal Information System (Sistema Nacional de Información Municipal) SUBDERE - Ministry of Interior's Sub-Secretariat of Regional and Administration (Subsecretaría de Desarrollo Regional y Administrativo) SUSESO - Social Security Agency (Superintendencia de Seguridad Social) Vice President: Pamela Cox Country Director Axel van Trotsenberg Sector Manager Ronald E. Myers Task Team Leader/Task Manager: Miguel Mercado Diaz CHILE MUNICIPAL DEVELOPMENT II CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 1 4. Achievement of Objective and Outputs 6 5. Major Factors Affecting Implementation and Outcome 18 6. Sustainability 20 7. Bank and Borrower Performance 22 8. Lessons Learned 25 9. Partner Comments 26 10. Additional Information 33 Annex 1. Key Performance Indicators/Log Frame Matrix 35 Annex 2. Project Costs and Financing 40 Annex 3. Economic Costs and Benefits 41 Annex 4. Bank Inputs 42 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 45 Annex 6. Ratings of Bank and Borrower Performance 46 Annex 7. List of Supporting Documents 47 Project ID: P055480 Project Name: CL MUNIC DEVT II Team Leader: Miguel Mercado-Diaz TL Unit: LCSPS ICR Type: Core ICR Report Date: June 29, 2005 1. Project Data Name: CL MUNIC DEVT II L/C/TF Number: SCL-44290; TF-26457 Country/Department: CHILE Region: Latin America and the Caribbean Region Sector/subsector: Sub-national government administration (92%); Central government administration (8%) Theme: Municipal governance and institution building (P); Administrative and civil service reform (S); Decentralization (S); Education for all (S); Health system performance (S) KEY DATES Original Revised/Actual PCD: 05/22/1998 Effective: 07/01/1999 07/01/1999 Appraisal: 06/26/1998 MTR: 01/04/2001 Approval: 12/22/1998 Closing: 06/30/2002 12/30/2004 Borrower/Implementing Agency: MINISTRY OF FINANCE/MINISTRY OF INTERIOR - SUBDERE Other Partners: STAFF Current At Appraisal Vice President: Pamela Cox Shahid Javed Burki Country Director: Axel van Trotsenburg Myrna Alexander Sector Manager: Ronald E. Myers Geoffrey Shepherd Team Leader at ICR: Miguel Mercado Diaz Miguel Mercado Diaz ICR Primary Author: Cecilia Zanetta 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: H Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S S Project at Risk at Any Time: Yes 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The development objective of the Second Municipal Development Project (PROFIM-II) was to improve local governance and efficiency in the provision of public services by strengthening the capacity of: (i) the central government to formulate, implement and monitor decentralization policies and programs; and (ii) municipalities in areas such as municipal planning, financial and human resources management, and the management of health and education services. The specific project objectives included: (a) developing innovative methodologies and strategies in local accountability, especially in the development and implementation of management information systems and budget and asset management; (b) contributing to a permanent system of training and technical assistance to the municipalities, incorporating diverse institutional actors, including the regional governments; and (c) strengthening and improving local management, especially in terms of finances, human resources and municipal services, as well as harmonizing and equalizing local management capabilities with respect to the legal and institutional reforms being pursued by the central government. Over the past two decades, Chile's municipalities have become increasingly autonomous, assuming responsibility for a wide range of services and the management of increased financial resources. Although the military government appointed mayors and maintained strict controls over municipal hiring practices, it also set in motion the decentralization of service delivery to municipalities. With the return to democracy in 1990, the Chilean government began introducing constitutional and legal reforms to allow democratic elections and increase autonomy at the municipal level. As the relative importance of municipal governments in Chile's public sector increased, the government focused its attention on enhancing municipal efficiency and fiscal responsibility. Strengthening the role of municipal government as providers of key social services financed by the central government, including primary health and education, water subsidies and low-income family assistance was also a top government priority. The Bank has played an active role supporting Chile's decentralization efforts since the reestablishment of democratic rule. The Chile: Sub-National Government Finance study (Report No. 10583; 13 October 1992) outlined a sector strategy to support improvements in sub-national government finances, including recommendations for improving performance in the national-regional-municipal transfer system, resolving problems in financing education and health, increasing management efficiency and accountability at the sub-national level, clarifying the assignment of responsibilities and improving tax design. Subsequently, the Municipal Development Pilot Project (Programa Piloto de Fortalecimiento Institucional Municipal; PROFIM-I; Loan 3668-CH) financed a series of studies to address key policy issues as well as a portfolio of technical assistance sub-projects aimed at increasing institutional and technical capacity of 25 participating municipalities. Largely successful, the PROFIM-I created a strong demand to expand the pilot operation to include other municipalities throughout the country. Approved in 1998, the Second Municipal Development Project (Programa de Fortalecimiento Institucional Municipal; PROFIM-II) came in place to respond to such demand, constituting a third step in the Bank's efforts to support the government's policies toward gradual decentralization and the strengthening and modernization of the county's municipal governments. 3.2 Revised Objective: The loan's objectives remained unchanged during implementation. 3.3 Original Components: The project was structured in three components: i) national institutional strengthening; ii) municipal institutional strengthening; and iii) project administration and training. i) National Institutional Strengthening: This component consisted of studies and initiatives aimed at deepening the understanding of the challenges faced by Chile's municipal sector and fostering the policy dialogue between the national and municipal levels of government. These studies and initiatives also sought to generate systematic information on municipal governments to improve the central government's ability to design effective policies toward municipalities and to develop tools to assist them in fulfilling their newly assigned responsibilities. The studies conducted under this component, which followed upon the needs identified under the pilot operation, included: the implementation of a National - 2 - Municipal Information System (Sistema Nacional de Indicadores Municipales; SINIM) and a Municipal Budgeting System (Sistema de Gestión Presupuestaria Municipal; GPM); the streamlining of social programs at the municipal level; the dissemination of best practices and lessons learned; as well as a project monitoring and evaluation system. ii) Municipal Strengthening: This component consisted of a wide range of technical assistance sub-projects organized under three modules: (a) a basic module; (b) a complementary module; and (c) a flexible module. a. Basic Module: This module focused on the implementation of basic management tools essential to the transparent, efficient and effective management of municipal resources. Originally developed under PROFIM-I, the set of core tools included: i) Community Development Plan (Plan de Desarrollo Comunal; PLADECO); (ii) Municipal Strategic Plan; (iii) Organizational Development and Human Resource Management; and (iii) Municipal Management Information System. b. Complementary Module: This module offered participating municipalities the opportunity to implement a series of demand-based institutional development sub-projects according to their needs. It complemented the basic module by providing additional support in improving municipal services to those municipalities that had either completed the sub-projects of the basic module or had addressed the same issues independently by providing technical support for sub-projects identified as priorities by the municipal strategic plans. While the basic module's objective was improvement of internal processes, the main objective of this module was to complement the basic module by improving the municipality's provision of key services, and thereby improving the municipality's relations with the community. Some of the sub-projects included in this module were: (a) streamlining of business procedures; (b) improving customer service; (c) cadastre systems; (d) social development and protection of vulnerable groups; and (e) development of local economies. Municipalities were required to provide at least 15 percent co-financing for these sub-projects. c. Flexible Module: It was composed of two different lines of sub-projects: i) innovative sub-projects, and ii) municipal associations. The main objective of this module was to encourage innovation and collaborative municipal problem solving for diagnoses and resolution of common municipal management problems. Innovative sub-projects were demand-driven technical assistance for municipalities aimed at stimulating change at the municipal level by creating incentives for municipal personnel to implement their own initiatives. Likewise, association sub-projects were aimed at improving the capacities of associations of municipalities facing similar problems while achieving economies of scale in implementing improvements. iii) Project Administration Component: Financed by the central government, this component included the recurrent implementation costs at the national level, including necessary training and technical assistance for the Project Executing Unit (PEU) as well as the implementation of user surveys, self-assessments and other monitoring and evaluation tools. Twenty-five out of a total of 341 municipalities were eligible to participate in the basic module. Another 24 municipalities had already participated in the pilot operation. These municipalities were selected ex-ante by the central government based on their population, weak operational capacity as well as the level of own-source revenue, quality of services provided and their ability to invest in basic infrastructure. The municipalities meeting the selection criteria were invited to participate in the Program and asked to demonstrate their commitment toward the project through the provision of co-financing, political will--such as agreements signed by mayors and approved by municipal councils--and the support of their municipal staff. Participation in the complementary module was open to all municipalities that had already prepared a PLADECO and a strategic plan, as long as individual sub-projects fell within the priorities of the strategic plan. Seven municipal associations were selected to participate in the associative sub-component. In addition, all municipalities throughout the country could submit proposals for innovative sub-projects under the flexible module. 3.4 Revised Components: The components did not change during project implementation, but coverage was expanded in July 2003, when the Government of Chile requested a second Extension to the closing date to expand the - 3 - Program to the 100 poorest municipalities in Chile and fifteen additional municipal associations--twenty in total, including five associations that had already participated in the original Program. The objectives of the Program remained the same during the Extension--albeit focusing on 100 small, poor municipalities characterized by low technical and institutional skills as well as weak management. In addition, five additional national studies were conducted as part of the Extension, including: i) baseline and municipal management indicators for Chile's poorest 100 municipalities; ii) integration of municipal social services; iii) characteristics of Chile's municipal staff; iv) joint administration of education and health services; and v) a fair for best practices. 3.5 Quality at Entry: Quality at entry was determined to be satisfactory by the Quality Assurance Group (QAG). The specific strengths identified by the QAG panel include the project's consistency with the government's overall decentralization strategy, strong government ownership, the flexible design, and the incorporation of lessons of experience into project design. Ambiguous monitoring indicators were pointed out as a weakness, as they were not focused on outcomes but, instead, on the formulation of period reports. The assessment also noted that, while the project's development objective seemed relevant for the complex task of supporting institutional development at all the levels of governments, it might have been too broad. Likewise, it questioned the feasibility of such an undertaking in the proposed time frame, although also noting that this operation was preceded by a pilot operation and sector work done in the early 1990s. Quality at entry is also considered satisfactory as part of this Implementation Completion Report (ICR). The loan objectives were consistent with those of the Bank as articulated in the 1995 CAS as well as the government's own priorities in terms of decentralization and municipal strengthening. Drawing from the Bank's previous operational and sector work in Chile's municipal sector, the project correctly identified key actions that needed to be taken to support Chile's decentralization program and included them in this operation. In particular: The operation was fully consistent with the corresponding CAS and the government's own priorities. The CAS (Report No. 14370-CH; 9 May 1995) outlined a selective program of assistance to Chile that responded to specific requests by the government and that focused on areas in which the Bank had a strong comparative advantage. The focus of the operation--i.e., decentralization and strengthening of sub-national governments--met both criteria, as it supported the government's top priorities and is an area in which the Bank has a strong competitive advantage as a result of its extensive experience in decentralization projects worldwide. The project incorporated the know-how and lessons drawn from the pilot operation and other municipal projects worldwide. The design of the new operation incorporated the recommendations from the PROFIM-I's ICR and other municipal projects in the region and beyond. Particularly important was the development of an ongoing evaluation and monitoring system at the onset of the project, which maximized institutional learning during implementation. This ongoing institutional learning proved to be highly valuable once the government decided to expand the program to include the country's 100 poorest municipalities. Another important improvement with respect to the pilot operation was to require municipal governments to demonstrate their willingness to participate in the program by co-financing some of the sub-projects and providing agreements signed by the mayors and approved by municipal councils as proof of political will. Although these demonstrations of commitment were, in some cases, not followed up by action--as illustrated, for example, by the weak performance and eventual bankruptcy of the Municipality of Valparaiso. The municipality was not very committed to the PROFIM, ignoring most of the recommendations and agreement reached during the initial phase of the Prorgram. However, after the municipality was declared bankrupt, an action plan developed by the SUBDERE in September 2004 was agreed on to regain fiscal balance, which was based on the diagnosis performed as part of the PROFIM-II. Project design reflected a clearly delineated strategy toward municipal strengthening. The project's design had a strong focus of the strengthening of core municipal functions while, at the same time, allowed for flexibility and innovation. As shown in Table 1, the Basic Module provided the main focus of - 4 - the program by requiring all participating municipalities to implement a group of core management tools aimed at improving internal processes, a necessary condition for any subsequent improvements. The Complementary Module went a step further and supported those municipalities willing to improve processes conducive to local economic development, territorial planning and customer service. Activities in the complementary module were firmly anchored in the basic module, reinforcing the overall focus of the program on basic municipal strengthening. As discussed below, the original sequence requiring municipalities to fully complete their PLADECOs and/or strategic planning as a pre-requisite to initiate activities in the Complementary Module proved to be unnecessarily rigid and caused substantial delays in project implementation. This shortcoming in project design was corrected during the Mid-Term Project Review Finally, the Flexible Module served as an incubator, explicitly fostering innovation and experimentation, both by empowering individuals--i.e., municipal staff--and municipal associations, a concept that was being timidly tested by municipal governments. Table 1. Project Design Focus Activities Participation Flexibility Basic Module Strengthen internal municipal Supply-driven Required Little processes Complementary Module Support role of municipal Demand-drive Optional Moderate governments in relation to their Must fall within the PLADECO and/or - Local economic priorities of the strategic planning development municipality's as pre-requisites - Territory strategic plan - Citizens Flexible Module i) Municipal Associations Promote collaborative Demand-driven Open to Moderate problem solving within an indicative participating list municipal associations ii) Innovations Foster creativity and Fully Open to personnel High innovations among municipal demand-driven of all municipalities personnel The operation also proved that there is strong interest for institutional development at the local level, without having to offer `rewards' such as infrastructure investments. As in the previous operation, the focus was solely on institutional development, excluding the financing of physical investments. The demand for the Program demonstrated that there is a latent need for institutional development at the municipal level, particularly as part of the transition toward a more decentralized model. While the central government provided most of the financial resources, the municipalities contributed both with counterpart financing and intensive staff involvement, signaling their interest in institutional development. During project design, the main risk factors were taken into consideration and appropriate measures were put in place to minimize their impact. The most significant risks identified at preparation were the lack of adequate human resources at the municipal level and the PEU, and the potential lack of interest among municipalities. To ameliorate these risks, the government allocated significant human and financial resources to the PEU. Likewise, as part of their sub-project proposals, municipalities were required to indicate the municipal staff designated to work on each sub-project, as well as additional human resources that would be financed under the sub-project. In addition, as noted above, only municipalities - 5 - with a demonstrated interest were selected to participate in the program. Any non-performing municipalities could be dropped off the program during its implementation, thereby reducing the threat of delayed implementation due to municipalities that lost interest in the reforms. More continuity within the new operation would have been desirable for the municipalities that participated in the pilot operation. No specific activities were foreseen for the 24 municipalities that participated in the PROFIM-I, which could have enhanced the sustainability of the progress made by those municipalities in the context of the pilot operation. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The PROFIM-II has effectively supported the government's policies to continue gradual and sustained progress toward the decentralization and modernization of the Chilean State. Specifically, the municipal institutional strengthening program supported under PROFIM-II focused on developing the institutional responsiveness and aptitude needed for municipalities to manage their resources and respond to their newly assigned responsibilities, as well as the latest legislative changes being approved at the national level. At the same time, the Program provided the central government with tools to more adequately design, implement and monitor decentralization policies and programs. Some of the specific outcomes of the Program at the municipal level include: improved internal municipal processes--including planning, organization and administration capacities; increased financial autonomy; enhanced planning and administrative controls for services provided by the municipalities; better customer service; and important strides toward participatory and collaborative municipal management. The operation has had great coverage, reaching 125 municipalities and twenty two municipal associations--twenty-five municipalities and seven associations as part of the original program and an additional 100 municipalities and 20 associations as part of the Extension. Five of the twenty municipal associations that participated in the Extension had also participated in PROFIM-II. This is equivalent to 37 percent of all the municipalities in the country and the totality of municipal associations. Forty-seven percent of all municipalities in the country have benefited directly from the municipal strengthening component under the PROFIM-I and II. Many more municipalities have also benefited indirectly, through the sub-projects implemented by municipal associations--affecting close to 200 municipalities--and innovative sub-project competitions--submissions were received from 271 municipalities for the first national competition, equivalent to 80 percent of all municipalities in the country. Moreover, non-participating municipalities have also benefited from the conclusions drawn from the national studies, as well as the tools developed under the Program, such as the GPM and the SINIM. A proactive outreach program launched by the PEU to disseminate the findings of the national studies, as well as the best practices identified under the Program has been key in achieving a broader impact among those municipalities that did not participated in the Program. It is important to note, however, that during the ICR mission, municipal authorities of non-participating municipalities expressed their disappointment for not having been selected to participate in the PROFIM-I and II programs, as well as their hope to be included in future programs. It is important to stress that PROFIM has been the only program aimed at municipal strengthening in Chile. Although the Program has had substantial impact on participating municipalities, its most important legacy is perhaps the establishment of a permanent municipal strengthening program within the SUBDERE to fill the vacuum left after the closing of the operation. Undoubtedly, the experience under the PROFIM I, II and the Extension has effectively demonstrated the importance and the benefits of actively promoting institutional strengthening at the municipal level, convincing national authorities to allocate financial resources to finance municipal strengthening as an ongoing activity. a. National Component: Achievement of objectives under the national component has been highly satisfactory. Activities financed under this component have helped provide the central government with a better understanding to formulate municipal policies, allocate resources and develop tools that can effectively enhance efficiency and equity at the municipal level. It is important to note that the studies and initiatives financed under this component have acted as a catalyst, fostering the interaction among - 6 - key government agencies. The major milestones achieved under this component include: l The implementation of SINIM, which incorporates data from all 341 municipalities--as compared to only 70 percent of the 30 selected municipalities originally expected. The central government relies on the information provided by SINIM to allocate resources under the Municipal Common Fund (Fondo Común Municipal; FCM), the most sizable source of funding for Chile's municipalities. l Development of Municipal Budgetary Manual and corresponding computer software, as well as training to 87 percent of all municipalities in Chile (compared to 85 percent as originally expected), and the distribution of 500 CDs and manuals among national, regional and municipal levels of governments. l A study was conducted to assess the equity and efficiency of municipal transfers for health, education and infrastructure. The results were presented in a workshop held in March 2003 with the attendance of authorities representing the various levels of government, the Ministries of Health, Education and Infrastructure, as well as the Bank. An inter-ministerial coordinating committee (`mesa de trabajo') has been instituted and a plan of action has been agreed between the Ministers of Health and Education. Progress done so far by the Ministry of Education exceeds original targets and expectations. l Several other studies were conducted, focusing on the characteristics of municipal personnel, the feasibility of the joint provision of health and education by multiple municipalities, the integration of social services and programs at the municipal level, building a baseline reflecting management and other performance indicators corresponding to the 100 poorest municipalities, as well as an ex-post evaluation of the Program's achievement. l Outstanding dissemination and cross-fertilization efforts on the part of the central government through websites, training, seminars, best practices fairs, publications and conferences b. Municipal Component: Achievement of objectives under the municipal component has been satisfactory. There have been 270 sub-projects implemented under the original Program, focusing on the development and implementation of modern management and planning tools, the training of local officials and municipal staff, the incorporation of ICT (Information and Communication Technology) to improve communication internally and with citizens, as well as improved customer service. As is the case with this type of institutional development projects, the time needed to assess the full impact of the Program exceeds its implementation spans. In other words, the full impact of the newly adopted tools and stronger technical and institutional capacity will be more evident in the medium and long terms. For example, it would be important to conduct a systematic comparison of the performance of participating municipalities vis-à-vis non-participating ones using SINIM indicators as additional time series become available. (Currently, the SINIM data series go up to 2002, when the majority of the sub-projects were still being implemented or just being completed). However, there are already indications that the Program has substantially improved public sector management at the municipal level, including the following: l All twenty-five participating municipalities have up-to-date PLADECOs approved by city councils as required by law, compared to only two at the beginning of the Program. The impact of the PLADECOs and as planning tools guiding municipal investment decisions is already evident. Participating municipalities have developed over 540 sub-projects reflecting the priorities defined in the PLADECOs and strategic plans in areas such as infrastructure, health and education, community facilities, social programs and road infrastructure. These sub-projects, which have undergone strict technical, economical and financial evaluation, have been submitted for funding to various national agencies. Twenty-two participating municipalities have incorporated these sub-projects into their own budgets, signaling their importance. l The planning process of the PLADECOs was highly participatory, with more 500 events being held with the participation of elected officials, municipal staff and over 47,000 residents, equivalent to 1.24 percent of the overall population of participating municipalities. In addition, 40,000 residents were surveyed as part of the diagnosis stage. l A total of 1,550 municipal staff was trained during the first phase of PROFIM-II, reaching 80 percent of the professional and technical staff of participating municipalities. Some of the - 7 - areas covered included strategic planning, ICT applications, organizational development and customer service. l The Program has also served as catalyst to increase awareness of the importance of ongoing training. This is reflected by the increase in own-source financial resources being allocated to training among participating municipalities, which reflects a ten-fold increase relative to the national median between 1999 and 2001. l A third of all participating municipalities have reassigned personnel according to the newly developed human resources plans. In addition, 40 percent of the participating municipalities now have in place recruitment plans designed to meet their human resources needs. Likewise, a fourth of all participating municipalities have created or strengthened their human resources departments. l Financial performance has improved in 57 percent of the municipalities that implemented financial strengthening plans, with an increase in own-source revenues ranging from 4 to 36 percent. In addition, these municipalities have integrated their financial planning, incorporating municipal health and education departments under the overall municipal umbrella, thus rendering for a more comprehensive vision of municipal finances. l Customer service has improved significantly among participating municipalities. For example, the average time to obtain a driver's license has been reduced from ten days to less than five days in the 25 municipalities that participated in PROFIM-II. In 64 percent of these municipalities, a driver's license can be obtained in only two days. l Three competitions for innovative municipal sub-projects were held between 2000 and 2004. Response has exceeded all expectations, particularly among poorest municipalities, which showed participation rates significantly higher than their wealthier peers. l The tools developed under PROFIM-I and II are being used to establish the municipalities that have been recently created by law--Hualpén and Alto Bío Bío in the Bío Bío Region, Alto Hospicio in the Tarapacá Region and Cholchol in the La Araucanía region. l c. Extension Phase: The achievement of objectives under the Extension is considered to be highly satisfactory. The 719 sub-projects that were implemented as part of the Extension are already showing an impact on strengthening municipal capacity in key areas, including planning, budgeting, human resource planning and customer service, as well as service provisions among the 100 poorest municipalities in the country. While the full impact cannot be yet measured, as the majority of the sub-projects have been completed only recently, preliminary results can be summarized as follows: l Improved administration of municipal resources, budgeting and payroll in particular. For example, 40 municipalities now process their payroll automatically, with the consequent positive impacts in terms of time savings (showing time savings of up to 18 days) and increased accuracy. l Enhanced internal management as a result of ICT improvements. As a result of the Extension phase, there is now one computer for every two municipal employees, compared to a ration 1:3 for the country as a whole. This ratio was defined as ideal by participating municipalities. On average, nine out of each ten municipalities have effectively incorporated technology into their day-to-day operations, compared to only two municipalities before the Extension phase of the program was implemented. l The incorporation of ICT has also served to improve customer service For example, the volume of inbound communications has increase by 40 percent as a result of more efficient phone systems and the availability of e-mail and websites. As a result, residents can often spare trips to the municipality, a significant saving in terms of time and money, particularly in low-density municipalities. For example, for each 1,000 trips that are avoided, estimated annual savings can reach US$18,000 or its equivalent to 375 days of work in low-density municipalities (SUBDERE, 2004). l Another positive externality arising from improved communication technology is the reduction in response time in the case of emergencies, as reported by participating municipalities. Just to cite one example, the phone/fax that has been installed in Posta Esquela, Campiña, has allowed communication between the health post in this remote community and the regional hospital. l There is also an improvement in the provision of social programs and subsidies being - 8 - administered by municipalities in terms of both time savings and lower operative costs, as reported by national and regional levels of governments. In addition, municipalities are more effective in procuring subsidies for their residents, as shown by a 20 percent increase among participating municipalities over the past year. l There has been a substantial increase in technical capacity as the result of, among other actions, the training of 2,119 municipal personnel--equivalent to 79 percent of total personnel in the 100 municipalities--in areas that had been identified as relevant by the municipalities themselves. Thirty-three percent of the municipalities now include training as part of their annual budget--none of them did before the Program--signaling the success of the training program. l There is now a better coordination of efforts and investments, focusing on well-defined priorities, as a result of planning efforts in the areas of community development, local economic development and tourism development. l More and better citizen participation can be anticipated from the strengthening of neighborhood and local organizations as well as the training of local leaders. In addition, 1,583 municipal staff was especially trained in participatory methodologies. On average, four out of each five participating municipalities currently undertake participatory processes, compared to only one municipality before the Program. l There has been an overwhelming recognition on the part of the public of the improvements resulting from improvements in technology, training and work practices, as illustrated by the feedback provided by residents through letters, phone calls as well as entries in the official customer satisfaction/complaints registries (`libros de parte') being kept by 28 municipalities. 4.2 Outputs by components: The specific outcomes corresponding to the individual components are the following: a. National Component: A total of ten studies and initiatives were conducted under this component. Only one study--i.e., streamlining of social services--was not financed under the Program as originally programmed in the PAD. Instead, the study was financed by the Ministry of Finance (Ministerio de Hacienda), with PEU staff being part of the technical committee (`mesa técnica') designated to work on the study. The actual outcomes for this component have exceeded expectations (see Annex 1.b). National Municipal Information System (SINIM): Achieved. While a preliminary conceptual design of the SINIM was initiated under PROFIM-I, the system underwent a major overhaul of its conceptual framework in the early stages of the implementation of the PROFIM-II. The SINIM was developed in a participatory manner, actively involving the main institutional actors in Chile's municipal sector--such as the Chilean Association of Municipalities and the Ministries of Health and Education--an approach that was key to ensuring the sustainability of the system. Currently, several entities collaborate to produce the municipal information contained under the SIMIM, including the Ministries of Health and Education, the National Audit Office (Contraloría General de la República), and other entities such as MIDEPLAN, SUSESO, INE, CONAF, SII, IGM, and the Universidad de Chile. Having overcome considerable resistance from some of the main stakeholders (mainly from municipalities), SINIM is now a publicly available comprehensive system of information that traces municipal performance over time in a systematic and comparable manner. SINIM features over 150 indicators covering a wide array of aspects of municipal characteristics, including municipal management (revenues, expenditures and human resources), education (coverage, performance, financing, and human resources), health (coverage, financing, and human resources), territorial aspects (characteristics, infrastructure, basic services, and planning instruments), social and community aspects (labor, social networks, investment, and poverty), and municipal characteristics (geographic, administrative and socio and demographic aspects). The system covers the totality of municipal governments--all 341 municipalities--with a time series now available for the 1999-2002 period. It can be accessed online at the SUBDERE's website ( http://www.sinim.cl). The site, which has been visited by over 142,000 users, receives close to 15,000 users per month. SINIM serves the needs of a wide variety of users, including agencies from the central government, regional governments, municipalities themselves, universities, think-tanks, non-government organizations, citizens, and news media. The SINIM is a powerful tool to promote good governance - 9 - among Chile's municipalities, as it effectively enhances transparency and accountability at the municipal level, and induces greater efficiency in public management. Over 70 percent of municipal staff agrees that the SINIM contributes to improve municipal management. According to surveys conducted as part of the program's ex-post evaluation study. There were 70 responses out of 115 surveys sent, equivalent to a 61 percent response. Based on its participatory development process, decentralized data collection, comprehensive content and the innovative ways in which it is being disseminated among government officials and the citizenry in general, the SINIM can be characterized as a `best practice' to be disseminated in other countries in the region and beyond. Municipal Budgetary System (Sistema de Gestión Presupuestaria Municipal; GPM): Achieved. The PROFIM-I financed the development of the Budgeting Management Manual (Manual de Planificacion Presupuestaria Municipal, June 1996). Under the PROFIM-II, this manual was updated and improved, and the supporting GPM computer software was developed to help municipalities improve their budgetary process. Training on the budget municipal manual was provided to administrative staff in 289 municipalities during 2002 and 2003. Users can download the latest version of the GPM from PROFIM's website (http://www.sinim.cl/GPM/default.asp), as well as access an online training module and an electronic discussion forum. According to a user survey conducted in early 2004, not many municipalities had incorporated the GPM in their routines. The lack of wider insertion at the municipal level is somewhat puzzling, as users also gave the system high marks in terms of the usefulness to perform key budgetary functions. Users consistently rated the GPM 5.1 or higher on a scale 1 to 7 (1 being low and 7 being high) in terms of the system's usefulness to perform various budgetary functions (SUBDERE, 2003, Fortalecimiento Municipal en Chile: Análisis y Evaluación ­ 1999-2003). Although the factors hindering the institutionalization of the GPM are not clear, more continuity in the training and dissemination efforts were clearly needed and, perhaps, a more user-friendly design of the software. Assessment of Equity and Efficiency of Municipal Transfers: Achieved. A study was conducted to assess the equity and efficiency of municipal transfers for health, education and infrastructure. The study relied on a wide variety of secondary sources as well as data generated through field work, interviews, focus groups and workshops in a sample of municipalities in three representative regions of the country--Atacama, Metropolitana and Los Lagos--as well as one more region--Región de Aysén--given its peculiarities in terms of infrastructure. The findings from the study indicate that transfers to municipalities are generally equitable--with some exceptions by region and size of municipalities--although far from efficient. In addition, the study points to weaknesses in municipal management, particularly in the administrations of human resources, as one of the most serious bottlenecks hindering improved performance in education and primary health care despite increased spending. Likewise, the study identified important shortcomings in the selection, financing an evaluation of municipal infrastructure projects, including the lack of an adequate system of information (banco de proyectos) at the regional level, insufficient technical assistance to municipalities in project preparation and evaluation, lack of coordination among various levels of government, and weak management and planning skills at the municipal and regional levels of government. These findings, as well as the recommendations set forward by the study are of central importance to enhance the formulation of municipal policies by the central government. The Ministry of Education has been highly proactive in incorporating the findings and recommendations to improve the allocation of resources at the municipal level, efforts that are being closely followed by the Ministry of Health. Unfortunately, less progress has been made in terms of improving the efficiency of transfers for municipal infrastructure. Family, Community and Municipal Strengthening with a Focus on Gender: Achieved. An initiative focusing on family, community and municipal strengthening initiative with a focus on gender was financed under the project with a US$200,000 Japanese grant (Grant TF026457). The experience was highly satisfactory as a result of the strong institutional support it received and the substantial impact it has had on the three pilot municipalities--i.e., Talcahuano, San Bernardo, and Punta Arenas. It acted as a catalyst for the first collaboration of key government and non-government entities, including the Fundación de la Familia, Servicio Nacional de Menores, Servicio Nacional de la Mujer, Asociacion Chilena de Municipalidades, FOSIS, and the Ministries of Education and Health and their beneficiaries. As a result of this collaboration, family services have been modified to make them more client-oriented - 10 - and responsive to the needs of beneficiaries. The activity has also enriched the capacity of service providers to attend the needs and demands of individual family members. The approach of the project, which focused on mapping community resources, fostering local empowering and developing technical capacity at the municipal and local level instead of the traditional emphasis on short-term problem solving, has contributed to breaking the culture of `asistencialismo' in the three pilot communities. Capable teams are now in place to continue this initiative and the collaborative efforts between the municipality and the community. These teams have also helped replicate the experience in other communities. Ex-Post Program Evaluation: Achieved. An external consultant firm was hired to assess the Program's achievements. The consultant firm conducted an exhaustive analysis of the information that had been collected by the PEU during project implementation and complemented it with a battery of evaluation tools to capture the full impact of the Program, including surveys, focus groups, personal interviews, and workshops. Representatives from the 25 participating municipalities and the seven municipal associations participated in the evaluation. A group of relevant practices was also selected as part of this evaluation, which can be accessed at the PROFIM's website ( http://www.subdere.cl/profim/ex-post/expost_inicio.htm). Characteristics of Chile's Municipal Personnel: Achieved. A study was conducted as part of the program's Extension focusing on municipal human resources. Based on over 1000 surveys to municipal personnel, personal interviews with municipal administrators, and focus groups representing the various stratums of municipal personnel, the study provides a profile of municipal personnel--i.e., gender, age, level of education, salary, years of experience--by type of municipality--i.e., rural versus urban, and small versus large. Such profile indicates that there are significant differences, particularly between poorer, rural municipalities and wealthier, urban ones, with the former ones being characterized by having younger, less experienced staff with lower remuneration. The study also shows that municipal staff tends to be overwhelmed by the many tasks it has to perform, many of which are national programs being implemented at the municipal level. As a result, municipal staff has many more responsibilities and requirements at a time than the ones reflected in the municipal organizational structure. These findings are particularly relevant given the recent changes to the Ley Orgánica Municipal and the Chilean Constitution that have devolved responsibility for human resource management to the municipal governments. Feasibility of Joint Administration of Municipal Health and Education Services: Achieved. A study was conducted as part of the Program's Extension to explore the legal, administrative and economic feasibility of the joint administration of municipal health and education services. The study focused on whether existing institutional arrangements--i.e., municipal associations and corporations--would yield significant advantages, such as economies of scale, enhanced quality of services, improved territorial coverage and stronger negotiating power, if used by two or more municipalities to jointly administrator their health and education services. The study performed statistical analysis of SINIM data, such as per capita costs, performance indicators and other variables, to characterize health and education services according to various municipal characteristics, such as size, population density, and socio-economic status. It complemented the statistical findings with extensive filed work to identify successful experiences in joint administration as well as the views of municipal authorities on the topic. The findings of the study indicate that, although there is some potential for small municipalities to capitalize on economies of scale, there are not widely available opportunities--nor receptivity on the part of municipal authorities--to drastically improve efficiency, accessibility and quality of health and education services through joint administration. The study also identified a number of well-defined situations in which municipalities can benefit from associating with others, such as for the bulk purchase of medications as well as health and education supplies and the hiring of health and education specialists, such as psychologists, dentists and special-ed teachers. Integration of Social Services and Programs at the Municipal Level: Achieved. An initiative was implemented as part of the Program's Extension to foster the integration of social programs and services at the municipal level. The specific objective was to integrate the myriad of social programs and services that cascade from higher levels of governments to the municipalities in a fractured, uncoordinated - 11 - manner in four pilot municipalities. To capitalize on the human and institutional resources generated as part of the gender study, three of the four pilot municipalities selected to participate in this initiative were the same as in the other study--i.e., San Bernardo, Talcahuano and Punta Arenas--to which was added the municipality of Puente Alto. Tools were developed to shift the focus away from individual programs to beneficiaries, increasingly centering on the needs of individuals, families and neighborhoods to determine what combination of benefits would better serve their needs. As a result of this initiative, participating municipalities have reorganized their social areas, with their staff now being trained in all social programs--as opposed to just focusing on a particular one. The results from this initiative were present at the Mayors' Summer School (Escuela de Verano de Alcaldes) held at La Serena on January 2005, and each mayor was provided with a toolbox containing the instruments that had been developed as part of the pilot experience. The four pilot municipalities have agreed to serve as mentors to other municipalities interested in exploring this approach toward the integration of social programs at the municipal level. Baseline of 100 Poorest Municipalities: Achieved. A study was conducted as part of the Program's Extension to construct a baseline to reflect the managerial and institutional capacity of the country's 100 poorest municipalities. This study was a key input in the design of the Program's Extension, as it provided an in-depth diagnosis of the strengths and weaknesses in this type of municipalities. In particular, the study focused on six areas of interest: internal management; human resources; financial management and budgeting; services to the community--i.e., health and education; community participation; and local economic development. Based on primary and secondary sources, information collected on over 40 variables, which were then used to construct performance indexes measuring the performance on individual municipalities in each of the six areas of interest. Each index was then analyzed for the entire universe--i.e., the 100 municipalities--to provide a diagnosis of the main challenges facing municipalities and the tools that could help them overcome them. This baseline was used to design the modules that were financed during the Extension of the Program and to measure progress over time. Good Municipal Practices Fair: Achieved. A fair to disseminate good municipal practices (País Municipal ­ Buenas Prácticas) was held in Santiago on May 27-28, 2004. A total of 148 submissions were received at the SUBDERE's website from 104 municipalities and 4 municipal associations, of which 65 good practices were selected to be presented at the fair. The selection criteria included: level of impact, participatory approach, sustainability, and replicability. Twenty-two good practices were presented and discussed as part of six thematic panels focusing on: local management and e-government; urban areas and their territory; health and quality of life; education as a municipal challenge; local economic development; and social commitment at the municipal level. The remaining 45 practices were presented as part of a poster exhibit. Attendance was high and included some of Chile's highest authorities, such as the country's Vice President, the Minister of Economy, the Under-Secretaries of Heath and Regional Development and other national, regional, provincial and municipal authorities and staff, as well as representatives from the Chilean Association of Municipalities and the Bank. A publication documenting the best practices presented at the event was also produced for further dissemination. b. Municipal Component: The sub-projects implemented under the basic and complementary modules have effectively improved the planning, administrative and financial management capacity as well as the organizational structure of participating municipalities. They have also contributed to improving customer service and increasing community participation. In addition, the sub-projects under the flexible module have effectively supported associativism and fostered innovation at the municipal level. Five of the seven outcomes identified in the PAD (B.1,B.2,B.5,B.6,B.7) have been achieved, with the actual level of achievement generally surpassing expected targets (Annex 1.b). The remaining two outcomes were only partially achieved (B.3,B.4), as fewer municipalities than anticipated undertook sub-projects to strength their human resource management and the streamlining of social services (Annex 1.b). The specific outcomes for each component are summarized as follows: i) Basic Module: A total of 114 sub-projects were implemented under the Basic Module in areas that - 12 - had been identified under PROFIM-I as high priority for sound municipal management. Specifically, municipalities engaged in strategic planning and updated or developed their PLADECOs as required by law. In addition, municipalities undertook sub-projects to improve their organizational development, human resource management, financial management, as well as incorporating information and communication technologies (ICT) into their day-to-day operations. Some municipalities also worked on improving the provision of education and health services. It is important to note that municipalities implemented these sub-projects simultaneously, thus tackling the most significant challenges they faced in a comprehensive manner with full technical and financial support from the Program. Strategic Planning: Twenty-four of the 25 municipalities engaged in strategic planning as part of the program. As a result, 22 municipalities have set in place inter-departmental working teams--including health and education--to implement the actions identified in the strategic plans. Likewise, 22 municipalities have incorporated control and monitoring functions to complement their planning functions. Seventeen municipalities have already completed the implementation of their strategic plans. Community Planning - PLADECOs: Currently, all participating municipalities have up-to-date PLADECOs validated by their city councils as mandated by law, as 23 of the 25 municipalities have updated or developed their PLADECOs under the basic module. The planning process was widely publicized to promote community participation. Input from the community was sought through surveys, suggestion boxes, personal interviews with key stakeholders, community meetings, and focus groups. On average, there were over 20 events involving over 1,900 residents in each community. Twenty-one municipalities have already completed the implementation of their PLADECOs. In addition, 548 technically and economically sound sub-projects have been formulated as a result of the PLADECOs and applications for funding have been submitted to various government programs. Twenty-two municipalities have incorporated these sub-projects into their own budgets, which signals their importance. Organizational Development: Nineteen municipalities undertook sub-projects aimed at improving human resource planning and organizational development. Some of the outcomes in this area include: 14 municipalities conducted an assessment of their municipal human resources capacity; seven municipalities implemented a municipal human resource action plan; nine municipalities had human resources units either installed or strengthened under the program; and 15 municipalities updated their organizational structure, created job descriptions for municipal personnel, streamlined administrative procedures and developed a manual for routine tasks. These activities had a clear impact on the human resources strategies of these municipalities, including: an overall improvement in human resource management; 11 municipalities developed training plans; eight municipalities reassigned personnel according to their new plans; and ten municipalities developed recruitment plans. Likewise, the organization structure of these municipalities was also altered, including the creation of 16 new units (such as tourism, local economic development, and even human resources) and 20 coordinating committees. Information and Communication Technology (ICT): Twenty-one municipalities implemented sub-projects aimed at improving their information and communication technology, including new computing equipment and software, telephone systems, intra-nets that include electronic mail systems, data security systems, and website developments. These municipalities now have networks that provide them with online access to municipal information and enhanced internal and external communications, which, in turn, have translated in time savings and improved quality in the provision of services. For example, obtaining a driver's license in participating municipalities now takes less than five days, compared to an average of ten days at the beginning of the program. Financial Management: Fourteen municipalities implemented sub-projects to enhance their financial management. Outcomes in this area include: five municipalities implemented plans to reduce current expenditures; nine municipalities implemented plans to improve collection of overdue municipal taxes and fees; inspection units were established in four municipalities; and five municipalities developed and adopted a set of financial performance indicators. As a result of these actions, eight of these municipalities exhibited a significant improvement in their financial performance, with own-source - 13 - revenues increasing 4 to 36 percent. In addition, these municipalities have integrated their financial planning, incorporating municipal health and education departments under the overall municipal umbrella, thus fostering a more comprehensive vision of municipal finances. Rationalization of Municipal Health and Education Services: Thirteen municipalities undertook sub-projects aimed at the rationalization of resources in health and education. Table 2. Portfolio of Municipal Sub-Projects in Twenty-Five Participating Municipalities under PROFIM-I Type of Sub-Projects Number Basic Module 114 Strategic planning (Planes estratégicos municipales) 24 Community development plans (PLADECO) 23 ICT sub-projects (derived from the planes informáticos) 21 Organizational development 19 Financial and tax administration 14 Service provision (health and education) 13 Complementary Module 41 Communications 25 Territorial planning 6 Local economic development 4 Social areas 3 Training 3 ii) Complementary Module: A total of 41 sub-projects were implemented in 20 municipalities under the complementary module. Although more diverse in nature than those in the basic module, as each municipality identified its own needs, these sub-projects can be grouped in the following categories: communications, such as development of communicational strategies, acquisition of audiovisual equipment and updated telecommunication technology, and web-page development (25 sub-projects); territorial planning and master plans (6 sub-projects); local economic development plans (4 sub-projects); sub-projects in the social areas, mainly health and education (3 sub-projects); and training of municipal staff (3 sub-projects). iii) Flexible Module: The sub-projects implemented under this component fall into two categories: associativism and innovations. Associativism: Based on a list of sub-project guidelines that was sent to participating municipal associations, each association elaborated proposals for sub-projects based on the specific needs and common problems facing their municipalities. Among the rich variety of sub-projects that were financed are: strategic planning at the micro-region level, with a focus on territorial planning, economic development and tourism; associative budgeting; institutional strengthening, such as the constitution of joint technical teams, the development of project banks attending the infrastructure, health and education needs of the micro-regions, training programs and purchase of communication and computing equipment; and economic development initiatives, such as fairs showcasing the products of local artisans and the development of a corporate image and marketing strategy for small producers within the micro-region. As it was consistently reported by the staff of municipal associations and municipal authorities during interviews conducted as part of the ICR mission, the Program has not only provided them with much needed financial resources, but also with the incentive to work together in the identification, formulation and implementation stages. Innovations: Between 2000 and 2004, there were four competitions for innovative municipal sub-projects (see Table 3) open to all municipalities in the country--not just those participating in the Program. At a minimum, innovative sub-projects had to include a creative approach to municipal management, present - 14 - a solution to a relevant municipal problem, and be replicable. The sub-project proposals were pre-evaluated by PEU and the final selection was made by a Special Committee with representatives of the business community, regional governments, the Association of Chilean Municipalities, and the Association of Municipal Employees. The first competition, held in 2000, was a pilot experience in the Aysén Region. The experience was highly successful, effectively demonstrating not just the feasibility but also the potential of the concept. It was followed by a national competition in 2001-2002 that received proposal from 80 percent of the municipalities (271 municipalities) representing the thirteen regions. A total of 825 innovative sub-projects were submitted, of which 57 were selected. Two-thirds of all sub-projects focused on improving quality of service, 18 percent on citizen development, and the remaining sub-projects were a mix of the other two categories. A third competition, this time co-sponsored by seven regional governments, was held in 2003-2004. Overall, 1,119 sub-projects have been submitted by 2,347 municipal staff from all over the country. There were 87 sub-projects selected, which were given financing for their implementation. In addition, winning municipal staff was rewarded with internships and study tours to other municipalities both in Chile and abroad, which proved to be highly valued among the recipients. Those who submitted proposals but were not selected had a merit mention permanently recorded in their personnel file (foja de personal). The experience was clearly a success, not only because of the warm reception it had among municipal staff but also because of its particularly high impact among small municipalities. It is worth noting that 48 percent of the municipal staff of the poorest municipalities in the country submitted proposals, compared to only 1 percent of the staff of the wealthiest ones. Among the key factors contributing to the success of this sub-component were the inspiring vision and personal commitment of individuals within the PEU staff, strong support from top-level authorities within the SUBDERE and the collaboration of regional governments. This experience should be considered a best practice and widely disseminated among other countries in the region. Table 3. Competitions for Innovative Municipal Sub-Projects 2000 2000-2001 2003-2003 Competition Competition of 1st National Competition Competition of Municipal Municipal Innovation of Municipal Innovation Innovation (Concurso de (Primer Concurso (Concurso de Innovación Innovación Municipal) Nacional de Innovación Municipal) Municipal) Participating regions Aysén Region 13 regions Antofagasta, Atacama, Coquimbo, Los Lagos, Metropolitana, O'Higgings, Bio-Bio Number of municipal staff 185 staff members 1,677 staff members 485 staff members Number of sub-projects 64 sub-projects 825 sub-projects 230 sub-projects submitted Number of staff that 19 staff members 188 staff members 50 staff members received internships (` pasantías') Number of Municipalities 10 municipalities 83 municipalities 26 municipalities that participated in internships Number of implemented 10 sub-projects 71 sub-projects 6 sub-projects under sub-projects implementation c. Extension Phase: A total of 704 sub-projects were implemented during the Extension phase of the program in the 100 poorest municipalities in the country and 19 municipal associations, which constitutes a remarkable logistic achievement on the part of the PEU, regional governments and participating municipalities. Except for the adoption of GPM, which is lower than anticipated, actual outcomes have surpassed expected targets, as shown in Annex 1.b. - 15 - The sub-projects implemented as part of the Extension phase of the Program can be summarized as follows: l Fifty-eight municipalities have implemented sub-projects aimed at improving the administration of municipal resources, budgeting and payroll in particular, including the implementation of municipal budgeting and accounting software. l ICT sub-projects were implemented in 116 of the 119 participating municipalities and municipal associations. l Training of 2,119 municipal personnel--equivalent to 79 percent of total personnel in the 100 municipalities--in areas that had been identified as relevant by the municipalities themselves. l Thirty-five municipalities have undertaken sub-projects to improve the information on social needs, incorporate financial planning and administration of municipal health and education services into the overall municipal structure, integrate social programs at the municipal level and strengthen technical and institutional skills in the social areas. l Fifty-one municipalities developed their PLADECOs as required by law, with ample public input, and 13 additional municipalities have developed local development plans, tourism plans and other community development sub-projects. l Sixty-six municipalities have also developed local economic plans or implemented sub-projects aimed at fostering local economic development, including 20 fairs featuring local producers and artisans. l Fifty-seven municipalities have implemented sub-projects aimed at strengthening neighborhood and local organizations as well as training of local leaders. In addition, 1,583 municipal staff was especially trained in participatory methodologies. Table 4. Portfolio of Municipal Sub-Projects Implemented as Part of the Program Extension Description Municipalities Sub-Projects Community Development 116 581 Enhancement and modernization of communication processes 116 234 Modernization of municipal management and services (health and 86 101 education) Strengthening of municipal human resources 100 153 Improved service provision (including health and education) 30 35 Strengthening of citizen participation 50 58 Economic and Territorial Development 105 123 Community Development Plans (PLADECOs) 35 36 Strengthening of the role of the municipality as a catalyst of local 51 57 development Strategic Planning for Economic Development Plan 14 14 Inter-municipalities sub-projects (associations only) 10 16 Total 119 704 4.3 Net Present Value/Economic rate of return: N/A 4.4 Financial rate of return: N/A 4.5 Institutional development impact: The Program's institutional development impact has been high, with the institutional learning that has resulted from the Program undoubtedly being as valuable as the individual sub-project outcomes. As it was consistently reported by all institutional actors interviewed during the preparation for the ICR--local - 16 - officials, municipal staff, municipal associations, representatives of regional governments and national authorities--the Program has helped enhance the understanding of the complexities of the municipal sector by the national and regional authorities. This enhanced understanding of the municipal sector is not just within the SUBDERE, but also reached other entities of the central government, such as the Ministries of Finance, Health and Education, which have partnered with the SUBDERE for the implementation of specific components or studies within the Program. The institutional learning has been generated both through formal studies and initiatives as well as more informal interactions, such as seminars, field visits, workshops, participation in technical committees, and individual meetings. In addition, it is important to note that the Program has acted as a catalyst, fostering the interaction among key government agencies, as illustrated by the ongoing inter-agency collaboration resulting from the study on the equity of municipal transfers as well as the SINIM. The Program has also contributed toward a more fluid communication between municipalities and higher levels of government and, through the associative sub-projects, among municipalities themselves. As noted by many municipal authorities, their relationship with the SUBDERE has changed substantially over the life of PROFIM-I and II. From being perceived as a remote and distant entity of the central government, the SUBDERE is now considered by municipal authorities and staff as an important partner in the decentralization process, an ally in the central government that understands the challenges they face and that has demonstrated a sincere disposition to help them overcome these challenges. The Program has also acted as a catalyst for learning by doing, significantly enhancing technical and institutional capacity among participating municipalities. Specifically, hands-on learning has been an important outcome of the Program in participating municipalities, which benefited not only for the implementation and execution of individual sub-projects but also from their direct participation in their definition and design. The 540 sub-projects that have been generated and submitted for funding to various government programs clearly reflect this improved technical capacity of municipal governments. As it was repeatedly expressed by municipal staff during the ICR mission, municipalities also benefited greatly from the personalized technical assistance they received from the PEU. This deserves particular recognition, as it resulted from the strong personal commitment of the PEU staff, who successfully overcame the difficulties posed by the large geographical distances and time constrains to create close working relationships with all participating municipalities and associations. In addition, substantial levels of community involvement--including citizens, private and public actors--was generated as a result of the Program, as it played an important role in the selection of the municipal sub-projects as well as in planning and evaluation of municipal services. Finally, the Program served to strengthen municipal associations, as members had to work collaboratively in the definition, formulation and implementation of the various sub-projects. Among the many tools developed under the Program, the National System of Municipal Information (SINIM) has a particularly high institutional development impact. First, it provides valuable data on local conditions, which are, in turn, key inputs for better decision making at the municipal, regional and national levels of government. As mentioned above, a survey among municipal staff indicates that the SINIM is an important input in key government activities, such as resource allocation, negotiations with higher levels of government and prioritization of municipal programs. Survey conducted as part of the Program's ex-post evaluation. Second, it provides citizens with information on the performance of their municipal government in a manner that it is easy to understand and that can be compared over time and relatively to other municipalities. In this way, the SINIM provides voters with important information on the performance of local municipal authorities, empowering them to use their vote to either reward or penalize them for their performance. For example, the SINIM received ample dissemination among the media during the 2004 municipal elections, together with the newly developed Municipal Report for the 2004 Elections (Reporte Comunal para las Elecciones 2004), which summarizes the main SINIM indicators for each municipality and contrasted them with the national average, together with the electoral information for the past decade in an user-friendly format. In summary, the SINIM can effectively build a link between performance and accountability at the local level, a necessary precondition for the materialization of the potential benefits of decentralization. As noted by Zanetta (2005), the theoretical benefits of decentralization depend on a number of pre-conditions, which are not always in place. For example, better performance and responsiveness on the part of local officials from the fear of being voted out of their posts depends on the community being informed on the performance - 17 - of local officials, so they can vote accordingly. The SINIM provides exactly this type of information. Other tools developed under the Program, such as the Municipal Budgeting System (GPM), methodologies to consolidate social programs and services at the municipal level and mapping of community resources, as well as the extensive training programs have also contributed significantly to institutional strengthening. It is important to note that the proactive attitude toward dissemination on the part of the SUBDERE has been key in maximizing the institutional development impact of the program, not only among various levels of government and non-participating municipalities but in other countries in the region as well. In 1997, the Chilean Government co-sponsored a conference on municipal strengthening, which was attended by representatives of various countries in the region. PEU staff has attended several international conferences, as well as a workshop recently held in Argentina to share their rich experiences on municipal strengthening. They have also welcome representatives from the Argentinean government and generously shared some of their most successful experiences, including the SINIM, the Program's monitoring system and local economic development initiatives. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The interplay of several factors, both within and outside the government's control, has contributed to a favorable environment for the implementation of the PROFIM-II and its Extension. Political and macroeconomic stability: A stable political and macroeconomic environment has been a positive factor in the implementation of the program. Chile is a politically stable country with sound macroeconomic policies. 5.2 Factors generally subject to government control: Continuous political support for the decentralization program: The Chilean government is firmly committed to decentralization policies. These policies reflect a profound shift in the conceptualization of the state, from the centralized, highly normative model of the 1980s toward a more participatory and decentralized model, anchored in democratic principles. The overall decentralization and modernization strategy has remained unchanged over the past decade, with PROFIM-I and II being the cornerstone of the government's strategy at the municipal level. This continuity has had a significant impact in the implementation of the Program, resulting, among other things, in the stability of the PEU staff, many of who were parts of the original team. Timely intervention: The implementation of the Program has been very timely, as it has gone hand-in-hand with profound modifications in the role of municipalities within Chile's public sector. As a result of the increasing resources and responsibilities that have been assigned to them, Chile's municipal governments now play a central role in the provision of social services. In particular, municipal public education accounts for 57 and 49 percent of the country's enrollment in basic and intermediate education, respectively. Municipal education is even more important among the poor, accounting for 68 percent of the education of the poorest quintile. Likewise, 80 percent of the overall population gets health care in municipal health centers. To match the newly assigned responsibilities, a larger mass of funds is now being transferred to the municipal level. The Common Municipal Fund (FCM), Chile's largest source of municipal financing, has increased 3.8 times in real terms since its inception in 1982 and 2.6 times since 1990. Including municipal budgets as well as transfers from the central government for municipal health, education and infrastructure, municipal spending represents 14.2 percent of the country's public expenditures (SUBDERE, 2000). Therefore, the implementation of a program such as PROFIM focusing on strengthening municipalities' ability to manage their resources and provide better services to the community has been highly opportune, as it has helped minimize the risk of weak local capacity hindering the success of the overall decentralization process. Strong political support for the Program: The Program's implementation has benefited from the unwavering support of Chile's top political authorities, who, with their presence, have also contributed to give great visibility to events being sponsored by the Program. For example, the Minister of the Interior--now Secretary General of the Organization of American States--José Miguel Insulza attended - 18 - the opening of the Municipal Best Practices Fair held in 2004 as well as the opening of the new office of the Program. The Program has also benefited from a close working relationship with the Head of the SUBDERE, who has exhibited a strong political leadership among regional and municipal authorities, as well as an intimate operational knowledge of the Program, its achievements and challenges. Structural barriers to municipal strengthening still to be removed: While the PROFIM-I and the PROFIM-II have contributed significantly to municipal strengthening, the systematic modernization of Chile's municipal sector is still pending. There are still significant structural barriers that need to be removed. Some of the challenges still pending include: the need to improve the highly fragmented capital transfer system; complete the implementation of the reform of Article 110 of Chile's Constitution to effectively transfer responsibility for human resources planning from the central government back to municipalities; improve fiscal autonomy of municipal governments by approving legislation still pending in Congress (Rentas II); and integrate the myriad of social programs and services that are formulated by various central government agencies and have a fragmented implementation at the municipal level. The studies that have been conducted under the national component provide a good road map for some of these reforms, as they provide a thorough diagnosis and a wide set of recommendations. 5.3 Factors generally subject to implementing agency control: Poor implementation start: The Program was off to a poor start, with significant delays in the implementation of both the national and municipal components. In addition, there was a shortage of counterpart financing as well as delays in the construction of baseline indicators. As a result, the Program was ranked as Unsatisfactory during the Mid-Term Review that was conducted in February 2001. The government reacted decisively and implemented a number of corrective actions, including changing management of the PEU, ensuring a stronger articulation of the Program with the country's decentralization policies, providing stronger institutional and political support to the Program, and ensuring the acceleration of Program implementation, with a particular emphasis on monitoring and impact indicators. The Program was successfully turned around in a relatively short period of time, and was once again ranked Satisfactory in September 2001. Excessively rigid sequencing of municipal strengthening activities: As originally conceived, the Basic Module was too rigid in terms of the staging of individual actions. In particular, municipalities were required to complete their PLADECOs and/or strategic plans before being able to proceed with the identification and design of sub-projects to be implemented under Complementary Model. The rationale was that projects in the Complementary Module had to address areas that had been identified as priorities as part of the strategic planning process. This rigidity was one of the factors contributing to the initial delays in implementation, causing some frustration among participating municipalities. This shortcoming was addressed during the Mid-Term Review, and municipalities were allowed to begin work in the Complementary Module once the community's priorities had been identified, regardless of whether the planning process was fully completed. Proactive attitude of the PEU: Once the initial shortcomings in project management were overcome, the Project Executing Unit (PEU) exhibited a highly proactive attitude, not only ensuring adequate project implementation but also fully capitalizing on its two main competitive advantages: economies of scale and cross-fertilization. The PEU effectively capitalized on economies of scale by centrally developing ICT and management tools as well as training components that could benefit multiple municipal governments. Likewise, through publications, workshops, competitions, fairs, internships and a well-developed website, the PEU was very proactive in promoting cross-fertilization among municipalities from all regions of the country. While all national-level PEUs share the same competitive advantages, in the case of sub-national programs, only a few take full advantage of them. In this regard, the positive experience of the PROFIM-II should be widely disseminated, so that the Bank, in turn, can also capitalize on its own competitive advantage to promote cross-fertilization across operations, countries and regions of the world. Effective allocation of human resources within the PEU: The PEU adopted a clever human resources strategy, assigning each consultant responsibility for overseeing the implementation of the municipal - 19 - component in municipalities in one or two regions (a more hands-on assignment that kept them in touch with the day-to-day challenges of project implementation and the realities of the municipal sector) as well as one of the national studies (a more theoretical assignment that required the conceptualization of complex issues, an understanding of the legal and institutional constraints, and the interaction with other actors at the national level). In their role as advisors to the participating municipalities in one region, consultants did frequent site visits and developed close working relations with elected officials and municipal staff. The dual assignment was central in achieving a delicate balance between practice and theory, eventually giving birth to a sound team of reflective practitioners. Strong emphasis on participatory approaches: The PEU relied heavily on participatory approaches, actively inviting key stakeholders, such as the Chilean Association of Municipalities, the Ministry of Health, and the Ministry of Education, to appoint representatives to technical committees overseeing the implementation of the national studies and initiatives. Although often more complex and time consuming, this strategy was useful in deepening the understanding of complex, multi-disciplinary issues as well as building ownership and facilitating cooperation across multiple government agencies. Strong emphasis on institutional learning: From the onset of the PROFIM-II, there has been a strong emphasis placed on the development of methodological tools and instruments that could be replicated in other municipalities, as well as documenting the implementation process and measuring outcomes and impact. For example, the selection of relevant municipal practices, based on clearly defined criteria of replicability, benchmarking, relevance and sustainability offers a good illustration of the ability of the PEU to develop sound methodological frameworks to support practice. Incorporation of regional governments into the Program: The advantage of involving regional governments (GOREs) more closely in the implementation of the Program first became evident in the planning and implementation of the competitions for innovative municipal sub-projects. Their participation became more important during the Extension phase of the Program, with the GOREs being responsible for determining sub-project eligibility and providing technical assistance to the 100 participating municipalities. The success of the Extension hinged on the role of the GOREs, as it would have been logistically impossible for the PEU to coordinate and supervise such an ambitious undertaking with out their support. The GOREs will continue to play a key role in future stages of the now permanent PROFIM, being also given responsibility for deciding, in conjunction with the municipalities, the regional priorities for municipal strengthening. 5.4 Costs and financing: The total cost of the Program was US$23.1 million as originally estimated (see Annex 2.a). Overall, the cost of the original phase of the PROFIM-II--including both the national and municipal components--was lower than anticipated at appraisal, amounting to US$16.9 million compared to US$20 million. The remaining US$3.1 million were subsequently used to finance the Extension Phase, in which the program was extended to Chile's 100 poorest municipalities Bank financing amounted to US$9.88 million, as US$220,000 was cancelled due to misprocurement (see Annex 2.b). Overall, the Government's counterpart has been substantial, amounting to US$13.22 million, or 56.2 percent of the total Program cost, of which US$10.22 and US$3 million were financed by the national government and municipalities, respectively. 6. Sustainability 6.1 Rationale for sustainability rating: The sustainability of the achievements of the PROFIM-II is deemed highly likely, as the actions supported under the Program constitute an integral part of the government's decentralization agenda. The Government of Chile continues to be highly responsive to the increasing demands from municipalities for assistance in municipal strengthening. This need has been recognized and supported at the highest levels, and continues to be a priority, as illustrated by the permanent institutionalization of the program within the Chilean public sector (see section on Transition Arrangement to Regular Operations). - 20 - Progress made under the various studies and initiatives implemented under the national component is likely to be sustained over time. Specifically: l The sustainability of the SINIM is highly likely, as it has been developed in a participatory manner, involving the key stakeholders, including the Chilean Association of Municipalities and the Ministers of Health and Education. Although highly laborious, the participatory approach served to identify--and eventually resolve--the many conflicts, sensitivities and resistances underlying the implementation of such an information system. More than 140,000 users have visited the SININ website and it is currently being used by various central government agencies to support decision making, including the allocation of resources under the FCM. l According to an ICT survey conducted as part of SINIM, 58 municipalities have reported using the GPM--equivalent to 16 percent of all municipalities in the country. The sustainability of this tool is unclear, as there is no ongoing training being provided to municipalities. It is expected that the new financial administration system currently being developed by the SUBDERE in conjunction with Hacienda will soon replace the GPM. This tool, however, is far more ambitious than its predecessor, as it would require municipalities to post their financial information online and have it accessible to Hacienda and the SUBDERE. Substantial resistance can be anticipated on the part of municipalities, as it would allow the close scrutiny of their financial situation by the central government. Rather than relying on voluntary adoption on the part of municipalities--as it was the case with the GPM--the central government might have to implement a more forceful strategy to achieve the wide-spread adoption of this tool, such as offering powerful incentives and/or penalties. l The diagnosis and recommendations from the other national studies have also been widely disseminated and there is ongoing progress in the implementation of many recommendations. As mentioned above, the participatory approach adopted by the PEU in the development of these studies has helped develop ownership among other institutional actors, particularly the Ministries of Health and Education. The changes introduced by PROFIM-II and the Extension at the municipal level are also likely to be sustainable over time. Indeed, some of these changes, such as incorporation of technology to routine procedures and communications, modifications to organizational structure and voluntary incorporation of training to municipal budgets as an ongoing activity, even appear to be `irreversible' as they have altered the municipal culture. The cultural change in participating municipalities is clearly illustrated by their readiness to adopt other management tools not implemented under the program. For example, 49 out of the 50 municipalities that have adopted Chile Compra (Chile's new web-based procurement system) have participated in the Program. - 21 - Table 5. Sustainability of Activities under the Municipal Component as Reported by Municipal Officials Will continue with the activity (%) PROFIM Activity Small Larger Municipalities Municipalities Updating of PLADECO 62.3 78.6 Formulation of strategic sub-projects 75.0 85.0 Monitoring and control 66.1 78.8 Wide community participation 37.7 54.3 Organizational restructuring 65.5 80.6 Ongoing training 62.5 90.0 Team work 61.8 92.7 Ongoing collaboration among various municipal department 67.9 87.5 When asked whether they will continue to implement the activities supported under the Program, the majority of municipal officials interviewed (the sample size was 70 officials at the National and Municipal levels, of which 40 were municipal officials), as part of the ex-post evaluation responded affirmatively, particularly among larger municipalities (see Table 5). Citizen participation is the activity that seems to be relatively less sustainable, as only 38 and 54 percent of the small and large municipalities, respectively, will reportedly continue with this activity. In terms of the flexible component, six regional governments have already appropriated the concept of the innovation competitions. As mentioned earlier, the proactive attitude on the part of the PEU has been a key factor in ensuring a wide dissemination of successful experiences. To this effect, the program's own website ( http://www.subdere.cl) with its online project bank featuring relevant municipal practices, constitutes a valuable resource for decision makers at the various levels of government, as well as researchers and practitioners focusing on the municipal sector--not only Chile but worldwide--and citizens in general. 6.2 Transition arrangement to regular operations: The PROFIM has been incorporated as a permanent division of the Under-Secretary of Regional Development (SUBDERE). It has been assigned a budget of US$500,000 for 2005, in addition to another US$500,000 to cover operation costs as well as the financial resources required to maintain a staff of 20 professionals. During 2005, PROFIM will continue to focus supporting municipalities in the formulation of the PLADECOs, the development and dissemination of newly developed management tools--such as the single-services stop (Ventanilla Unica de Trámites), Chile Compras and a municipal financial administration system--and the implementation of an ambitious training program. The physical location of the Program has also been changed, with the new location reflecting the importance being given to this newly created government program. In contrast with its previous location--an older building on the `wrong side of the Alameda,' at the periphery of Chile's government center--the PROFIM is now housed is a modern skyscraper located right in the center of power. Located on Morandé Street, the new building sits in front of the Plaza de la Constitución, a few feet from the Palacio de la Modena and across the Secretaría de Hacienda. During ICR interviews, Chilean authorities emphasized their commitment toward incorporating municipal strengthening as an ongoing government activity, one which is given utmost importance as part of the process of modernization and decentralization that is being carried out in Chile. The decision to give PROFIM a permanent status within Chile's public sector has received strong support not only from national authorities, but also from regional, provincial and municipal governments as well as the Chilean Association of Municipalities. As noted repeatedly by the many mayors (alcaldes) contacted during the ICR mission, the modern office building and new location reflects that PROFIM has - 22 - become an intrinsic element of the government's modernization strategy. 7. Bank and Borrower Performance Bank 7.1 Lending: The performance of the Bank's team in assisting the Borrower in identifying, preparing and appraising the operation has been highly satisfactory. Based on the substantial knowledge resulting from previous municipal sector work in the country as well as the pilot operation, the Bank team adequately identified key areas of intervention, both at the national and municipal levels. The project design effectively incorporated the lessons learned during the pilot operation. By combining a few well-defined eligibility criteria with a high level of project flexibility, the Program's design effectively balanced the need to focus on key areas of intervention while maximizing its attractiveness among participating municipalities. 7.2 Supervision: A Quality of Supervision Assessment (QSA) was conducted in August 2004, resulting in an overall rating of satisfactory in all aspects of project supervision, expect for Realism of Project Performance, which was rated as highly satisfactory. The QSA panel recognized the good quality work of the supervision team in supporting the active transformation of a previously centralized system to a decentralized and participatory model, with strengthening of local capacities, systems and processes. In addition, it was noted that the supervision team paid close attention to both local and national levels as well as the integration of the project into the government's ongoing modernization strategy to ultimately improve service delivery. The QSA panel considered that actions of the supervision team had been both appropriate and adequate, such as to declare the project at risk during the Mid-Term Review, putting pressure on the Borrower to take corrective actions. The Bank has developed a close working relationship with top government officials as well as with the PEU staff, maintaining the channels of communication open both at the policy and at operational levels. The project's Mid-Term Review was key in turning the project around, as the main factors contributing to the Program's poor initial performance were successfully identified and addressed. Early on during project implementation, the supervision team put special emphasis on monitoring and measuring the Program's progress and impact, developing a more robust system of indicators and requesting detailed action plans, particularly in the context of each project extension. Field visits to municipalities have been another key factor in ensuring the effective supervision of the program. While progress reports and discussions with national officials are important inputs, field visits to municipalities have helped develop first-hand knowledge of the implementation progress and to understand the difficulties faced by municipalities. It is also important to note that, despite the small size of the loan--US$10.1 million--relative to other municipal programs in the region, supervision demanded significant resources--both financial and time resources--given the large number of activities been implemented under the Program and their geographical dispersion. 7.3 Overall Bank performance: The Bank's performance has been satisfactory, as it has played an important role in supporting the government's decentralization and modernization strategy at the municipal level for over a decade. It did so by financing sector work in the early 1990s that provided much needed knowledge on municipal finances. Learning was then followed by action, as the Bank financed the Pilot Municipal Operation--PROFIM-I--to test a municipal strengthening strategy among a group of selected municipalities. The PROFIM-II, in turn, capitalized on the lessons learned as part of the pilot experience and replicated the program among a second group of municipalities and, as part of the Extension granted in 2003, among a much larger universe of 100 municipalities. Although not explicitly designed as such, Chile's municipal program shares many of the characteristics of programmatic lending, effectively combining sector work with a carefully crafted sequence of lending operations that helped maximize learning while minimizing risk. Thus, the success of PROFIM-II reflects not only the achievements of this particular operation but also the cumulative accomplishments of the overall sector strategy. - 23 - Borrower 7.4 Preparation: The government's performance during preparation was highly satisfactory. The preparation of the loan was left in the hands of top-notch professional staff within the SUBDERE, which, in turn, was responsible for coordinating actions with other areas within the government and the municipalities. Throughout the project preparation, top officials and government staff worked closely with the Bank's project team, contributing its high motivation and sound technical proficiency to the process. 7.5 Government implementation performance: The government's performance has been satisfactory maintaining a steady course in the implementation of the country's overall decentralization and modernization strategy. The overall decentralization and modernization strategy has remained unchanged over the past decade, with PROFIM-I and II being the cornerstone of the government's strategy at the municipal level. Particularly from the Mid-Term Review onward, the government has exhibited full, unwavering support for the Program as well as an intimate knowledge of its ongoing progress. 7.6 Implementing Agency: The performance of the PEU and the SUBDERE as the government's counterpart for the operation has been satisfactory. The PEU has effectively performed the many responsibilities that were assigned to it, including assisting municipalities in the formulation and implementation of the sub-projects, reviewing and approving individual municipal institutional development sub-projects, implementing the national institutional strengthening program, monitoring of all project elements, preparing periodic progress reports for the government and the Bank, coordinating efforts with other government agencies, and identifying and disseminating the most successful practices to all municipalities. Undoubtedly, the excellence of the technical team, constituted by a multidisciplinary group of top-notch professionals, has been a key factor determining the success of the operation. With years of experience in the municipal sector, they understood the problems and idiosyncrasies of the municipalities and had a deep respect for municipal autonomy. Its excellent performance in providing technical support to the different municipalities has been a key factor in the success of the PROFIM-II. After ten years of uninterrupted municipal work, the PEU has become a pole of reform and cross-fertilization among Chile's municipalities. It has become a routine stop for municipal officials visiting Santiago, thus developing both formal and informal networks of municipal actors across political affiliations. Despite these challenges posed by the country's vast physical distances, the PEU staff has successfully developed close working relationships with municipal staff from all regions of the country. The smooth implementation of the PROFIM-II illustrates the importance of using top professionals in project management. A highlight for the Program is the one-of-its-kind project monitoring system that was developed as part of the Extension. The system provides a description of all the sub-projects in the portfolio by topic, region and municipalities. As it is web-based, it can be accessed online and is open to the general public ( http://www.subdere.gov.cl/profim/Extension/default.php). Authorized users, including the SUBDERE, regional governments, participating municipalities, as well as the Bank team can access additional information, such as bidding documents, progress reports and a highly sophisticated database that can be accessed through a search engine that allows the sorting of sub-projects by multiple characteristics--i.e., amount, type of sub-project, location, implementation schedule, progress, and disbursements. Municipalities are responsible for uploading their own information, which is then verified by the SUBDERE. Other government agencies, as well as project execution units in other countries are considering adopting such system. This project monitoring system helps ensure transparency, efficient communication, and improved supervision; thus, it should be disseminated in other countries in the region and beyond. - 24 - There were some problems, however, during implementation in terms of procurement. In 2003, the ranking of the project's procurement administration was downgraded to Unsatisfactory, as Bank guidelines were not always followed and there were some instances of incomplete documentation corresponding to the procurement processes conducted by the central unit and the municipalities. As a result of an investigation by its Institutional Integrity Office, the Bank declared misprocurement in the case of the procurement of one of the national studies. The study was the Assessment of Equity and Efficiency of Municipal Transfer. It should be noted that the quality of the study was not in question, only its procurement procedures, as Bank procedures were not fully followed. In addition, the project's internal audit, performed by the Ministry of the Interior, revealed that ten cases (in the municipalities of Ancud, La Serena, Quillota, and Pucon during 2001-2002) had been procured under the shopping method, when they should have been procured through four national competitive biddings. Thereafter, the Bank performed its own procurement review and declared misprocurement in two of the sub-projects. Overall, a total of US$220,000 were cancelled from the loan proceeds. From November 2002 onward, the PEU strengthened its procurement function through a number of actions, including staff changes, creation of a procurement unit, and implementing a team-work environment. 7.7 Overall Borrower performance: The overall performance of the Borrower is rated satisfactory for the reasons outlined above. However, it is important to point out that overall borrower's performance from the Mid-Term Review onward has been outstanding, as the factors threatening the success of the Program were successfully addressed and project implementation took renewed momentum. As a result, the Program not only achieved its original objectives but also was also expanded to reach Chile's 100 poorest municipalities, illustrating the significant commitment of the PEU and the SUBDERE's authorities toward the Program. In addition, the performance of participating municipalities has also been satisfactory. They actively participated in the preparation of the initial diagnostic studies and were directly responsible for the preparation and implementation of their individual sub-projects. Moreover, the contribution of municipal resources to the Program has been substantial, not only in terms of counterpart financing but also in terms of the time and energy of the municipal counterparts. 8. Lessons Learned There are several lessons that can be learned from this operation: l Municipal strengthening projects can effectively support national decentralization strategies. As Chilean authorities realized early on, political will at the national level is not sufficient to ensure the successful implementation of decentralization strategies. They need to go hand-in-hand with a technical assistance program designed to help municipalities assume their newly assigned responsibilities. By working directly with municipalities, the central government has had the opportunity to develop a better understanding of the challenges that need to be overcome for the process of decentralization to succeed. Similarly, by participating in the project, municipalities have developed a stronger awareness of the potential benefits from modernization. l Commitment from municipal authorities and personnel is important for the success of municipal strengthening projects. Municipalities have to play an important role in the design of municipal strengthening projects to foster their sense of ownership and maximize capacity building, even when the lack of adequate technical capacity may pose initial barriers to project implementation. To ensure municipal commitment, municipalities should compete for financing, participate in the development of projects, and partially co-finance them. l Technical assistance projects can only complement--as opposed to replace--adequate policy incentives. Although considerable improvements in fiscal responsibility and increased efficiency can be introduced successfully in individual municipalities through technical assistance projects, an adequate system of incentives should be built into the overall transfer system and current legislation to induce full-scale - 25 - reform. In this way, the PROFIM-II has adequately responded to this challenge by complementing the implementation of a portfolio of municipal projects with the financing of national studies aimed at developing a better understanding of the policy barriers hindering the full-scale modernization of Chile's municipal sector. l The systematic development of work processes, tools, and instruments can help the full-scale replication of successful municipal practices. The PROFIM-II provides a good illustration of how municipal strengthening programs can implement a large portfolio of individual projects while, at the same time, develop sound methodological processes aimed at facilitating the future replicability of successful experiences. In this way, the PEU staff can be characterized as `reflective practitioners,' as they combine practice with systematic reflection on how to structure individual interventions, their impact, and lessons learned to, in turn, improve future interventions. The dual role of PEU staff as both advisors to individual municipalities and supervisors for the implementation of a national study has contributed to achieving the balance between practice and reflection. l Successful approaches to institutional development should be documented and disseminated through seminars and an easily accessible and regularly updated database. The experience of PROFIM-II should be considered as a best practice in terms of its dissemination strategy. It is important to note that substantial efforts went into documenting and disseminating successful experiences in individual municipalities. Thus, dissemination has to be considered as an important activity at the onset of a program, and treated as such in terms of inputs, outputs, timetables, and impact. l There is highly valuable, yet untapped innovation among municipal personnel. Municipal personnel bring knowledge of the day-to-day operation of the municipalities and are able to translate new concepts and ideas into procedures and ordinances that are likely to be sustained in the long run. Through the competitions for innovative sub-projects, the PROFIM-II has creatively tapped into these resources, while at the same time infusing a surge of enthusiasm and motivation among municipal personnel. l Participatory processes can help develop ownership among key stakeholders and foster cooperation among various government agencies. The success of the national studies implemented under the Program hinged, to a large extent, on their strong sound technical counterparts, which included representatives from key project stakeholders. In this way, the Ministries of Health and Education, the Chilean Association of Municipalities and other important institutional actors not only contributed their expertise to these studies but also learned much about the day-to-day challenges facing municipalities. l Easily accessible and transparent information systems on municipal performance, such as the SINIM, can help voters effectively monitor the performance of local governments and enhance accountability. Although it is often assumed that the proximity of local politicians to their constituencies automatically translates in greater political accountability--in other words, if politicians do not do a good job, their constituencies can vote them out of office--this is not always the case, often as a result of the lack of adequate information. Thus, systems of information on municipal performance that can be easily accessed and understood by citizens can enhance the political accountability of local officials. l Field visits to municipalities are necessary for the effective supervision of municipal projects. Progress reports and discussions with national officials are not sufficient for the effective supervision of municipal projects. Field visits to municipalities are necessary to develop first-hand knowledge of implementation progress and to understand the difficulties faced by sub-borrowers. Moreover, it is important to note that the resources needed for adequate supervision are not necessarily related to the amount of the loan, as illustrated by the case of the PROFIM-II, a relatively small loan with high supervision requirements. 9. Partner Comments (a) Borrower/implementing agency: A summary translation of the comments provided by SUBDERE is presented below. The original - 26 - statement follows immediately afterwards. The PROFIM (including I, II and the Extension Phase) has been a key instrument in supporting Chile's process of decentralization and public sector modernization, helping municipal governments fulfill their role as agents of local development and providers of social services. The achievements of the PROFIM have been highly significant and can be grouped in three areas. First, the PROFIM has fostered the integration of public policies affecting municipal governments, creating synergies among the actions being promoted by multiple agencies at all levels of government. In particular, the PROFIM has helped integrate health, education and infrastructure services and programs at the municipal level, based on the diagnosis and recommendations of national studies assessing the equity and efficiency of municipal transfers, the potential savings arising from the joint administration of health and education, as well as the integration of social programs at the municipal level. By providing valuable information on the typical profile of municipal staff for different types of municipalities, the PROFIM has also supported ongoing modifications to Article 110 of the Constitution aiming at the modernization and professionalization of municipal human resources The System of Municipal Indicators (SINIM) developed as part of the Program also constitutes an important outcome, as it provides a powerful institutional tool geared toward enhancing transparency and accountability at the municipal level. Second, the PROFIM has contributed substantially to improve municipal management by supporting the adoption of modern information and communication technologies in the day-to-day functioning of participating municipalities, strengthening municipal planning functions, and supporting the further development of municipal associations. Third, the PROFIM has yielded valuable know-how in program administration, both in terms of the development of new administrative tools as well as greater institutional understanding. In particular, the Program has helped transform the limited perceptions that the various actors--national government, regional governments, municipalities, consultant firms--had with respect to each other, fostering a deeper understanding of the challenges and limitations they each face as well as their accomplishments. BORROWER'S UNTRANSLATED COMMENTS PROVIDED BY SUBDERE: ANÁLISIS UEP RESULTADOS EJECUCION PROGRAMA DE FORTALECIMIENTO INSTITUCIONAL MUNICIPAL (II FASE Y EXTENSIÓN) I.- ESTRUCTURA DEL ANALISIS 1. El PROFIM y su aporte al proceso de descentralización chileno 2. El PROFIM y su aporte a la gestión municipal 3. El PROFIM y su aporte a la labor de la Subsecretaría de Desarrollo Regional y Administrativo (SUBDERE) 4. Desafíos pendientes del proceso de Fortalecimiento Municipal. II.- DESARROLLO DEL ANALISIS 1. El PROFIM y su Aporte al Proceso de Descentralización Chileno 1.1 Contexto A medida que se avanzó y profundizó el proceso de descentralización en Chile, se hizo más evidente la necesaria modernización de la gestión del Estado, a objeto de potenciar los recursos públicos (humanos y financieros), facilitar prácticas de trabajo y diseñar instrumentos que acompañen y refuercen los efectos deseados del proceso. Estos se circunscriben al cumplimiento de los principios orientadores del proceso de descentralización, es decir: ampliar y mejorar los espacios democráticos y de - 27 - gobernabilidad; desarrollar una gestión más eficaz y eficiente y de mejor calidad; propiciar una mayor equidad espacial y social. En el ámbito local esto cobró aún mayor sentido, entiendo que las municipalidades son las entidades públicas más cercanas a los problemas y oportunidades de desarrollo de sus habitantes y al hecho que en el último tiempo -producto de su fortalecimiento democrático- se les viene traspasando mayores competencias en materias de gestión local. Por ende, la concertación de acciones orientadas a superar las limitaciones organizacionales, administrativas, culturales (entre otras) que pudiesen afectar a las municipalidades en el ejercicio de sus funciones, era algo urgente de resolver. El gobierno democrático, comprendiendo que la sola voluntad política de descentralizar, no era suficiente y considerando los avances y logros de la primera fase piloto del Programa de Fortalecimiento Municipal, iniciativa desarrollada por el Ministerios del Interior, a través de la Subsecretaría de Desarrollo Regional, y amparada en un contrato de préstamo con el Banco Mundial, decidió la continuidad del programa. Por lo tanto, el Programa de Fortalecimiento Institucional Municipal, se expresa desde el año 1994 al 2004 (fase I piloto, fase II y fase extensión), como un conjunto de acciones articuladas, orientadas a apoyar a las municipalidades en el ejercicio de su rol como agentes articuladotes del desarrollo local y prestadores de servicios sociales. 1.2. Incidencia del Programa en la Concertación de Políticas Públicas En su fase II el programa incentivó el desarrollo de acciones de integración temática con Educación Y Salud, que se reforzaron en la extensión. Esto incentivado en la prioridad del gobierno democrático de fortalecer ambas gestiones basadas en los principios descentralizadores de una mayor equidad social y de una gestión pública más eficaz y eficiente y de mejor calidad. Es así que como resultado de las propuestas arrojadas a través del estudio de "Equidad de las transferencias de recursos en Educación, Salud e Infraestructura" se convocó a una mesa de trabajo interministerial que desde el año 2003 continúa operando, ese mismo año se incorporó la Asociación Chilena de Municipalidades quién presentó los resultados del estudio a todos los jefes de educación municipal. En esta mesa se estudió la subvención diferenciada en educación lo que fue materia de ley y la exploración de la administración conjunta de los servicios de Educación y Salud, asimismo se crea la Alianza por la Calidad de la Educación Municipalizada cuyo protocolo es firmado por SUBDERE-MINEDUC y ACHM. En la extensión del Programa se concluyó con el estudio de administración conjunta cuyos resultados se presentaron al Ministro de educación y al sector salud. Ambas carteras están revisando las propuestas arrojadas por el estudio, dentro de ellas y complementadas con la experiencia de Plan de Educación asociativos, se está explorando apoyar a las asociaciones municipales en pro de mejorar la calidad de educación municipal dándole un mayor protagonismo a los municipios (la práctica es que el sector bajaba a los establecimientos educacionales municipales sin incorporar mayormente al municipio), como también en la elaboración de un catastro de buenas prácticas asociativas en educación y salud para difundir y replicar. Bajo los principios antes identificados, cobra importancia la iniciativa piloto de Fortalecimiento Familiar, Vecinal y Municipal iniciada en la fase II del Programa y complementada en la extensión de la misma a través del estudio nacional de "integración de servicios sociales", en el que participaron como contraparte las diversas instituciones centrales relacionadas con el tema social (educación, Salud, Mideplan, Programa Chile Solidario, Programa Seguridad Ciudadana del Ministerio del Interior, etc.) que permitió la obtención de un modelo sistémico que aumenta la eficiencia y efectividad de las áreas de desarrollo comunitario, salud y educación municipal para impactar positivamente en los resultados de bienestar de los habitantes, más la obtención de una caja de herramientas técnicas para su aplicación. Dentro de los impactos posteriores del estudio y afianzados en el 2005 es la articulación con Mideplan, específicamente con el Programa Chile solidario (el principal instrumento del gobierno en materia de - 28 - mejoramiento de equidad social en materia de eliminar la extrema pobreza), para conjuntamente capacitar y dotar a los municipios de las herramientas metodológicas que permitan una mejor articulación de acciones del nivel local en materia de desarrollo social. Esta batería de herramientas esta siendo editada por la Subdere para su uso en las acciones actuales de fortalecimiento municipal desarrollada por la división de municipalidades de esta institución. Gran contribución al proceso de descentralización es la modernizacíon del aparato público, resultando vital el fortalecimiento de sus recursos humanos. En este ámbito y a nivel local, el Programa desde sus diferentes fases ha aportado en su desarrollo y profesionalización más que ninguna otra iniciativa gubernamental, efecto que se ha potenciado con el Estudio Nacional "Caracterización del Funcionario Municipal", que entregó una descripción del perfil actual del funcionario municipal a nivel nacional y por tipología de municipio y una metodología para la elaboración de políticas de recursos humanos en función de las tipologías. Información de este estudio fue utilizada por la propia Subsecretaria en conferencia de prensa del día nacional del funcionario municipal, difundiendo sus resultados. Además, con motivo del estudio en el Congreso Nacional del Reglamento del artículo 110 de la Constitución Política (vinculado con la modernización y profesionalización de los municipios) los productos del estudio han reforzado esta iniciativa y documentado a los diferentes actores relacionados (Asociación Chilena de municipalidades, Asociación de Funcionarios Municipales). Otro importante esfuerzo que ha sido recogido en una política de gobierno, es el equipamiento en tecnologías de información a los municipios que se conoce como "gobierno digital". Un ejemplo, es que hoy en día el uso del software de contabilidad municipal vía plataforma Web, es una iniciativa compartida entre la SUBDERE, DIPRES y la Contraloría General de la República Por último, en relación a mejorar los espacios democráticos y de gobernabilidad (otro principio de la política de descentralización) el Programa ha aportado una gran herramienta de transparencia de la gestión municipal, llamada SINIM, sistema de indicadores de gestión que anualmente, refleja el desempeño del municipio, aportando información de apoyo a la gestión y la toma de decisiones de todos los actores relacionados con la acción municipal. Información que es utilizada por diferentes organismos del Estado e instituciones académicas y de investigación como insumo para su propia gestión o estudio. 2. El PROFIM y su Aporte a la Gestión Municipal La gestión municipal definida como un conjunto de acciones articuladas que favorecen la administración municipal y el crecimiento comunal se encontraba al momento de iniciar el programa con debilidades que este enfrentó desde la perspectiva de la modernización. Esto implicó incorporar a la gestión de los municipios involucrados tres componentes centrales: Introducción de la Tecnologías de Información y Comunicación, Incorporar metodologías de planificación y ampliar el radio de análisis al aspecto territorial, dando paso al Asociativismo. El aporte en el primer aspecto significó la dotación de equipamientos y sistemas para mejorar la calidad de los servicios, la comunicación interna y externa y la automatización de procesos municipales. Se incorpora por tanto la tecnología a los municipios generando efectos modernizadores que colocan a estos a la zaga de los esfuerzos realizados en el Estado o el mundo privado. Hoy, los municipios reconocen este aporte como una señal de crecimiento y desarrollo municipal con el correlato de una mejor toma de decisiones, mayor agilidad en la respuesta a la comunidad y otros organismos públicos y privados. En el segundo aspecto la introducción de la planificación municipal y comunal incorpora herramientas de gestión que ordena y transparenta procesos y focaliza objetivos de desarrollo. La planificación estratégica como metodología aporta a la formulación de planes comunales así como a planes específicos municipales: recursos humanos, finanzas, etc. Estos aportes implicaron generar una marca del programa, indicando a nivel nacional por demostración - 29 - o imitación una nueva forma de hacer municipio más apegado a los objetivos que a las funcionalidades legales y burocráticas. Surge entonces un nuevo municipio que impulsado por el Programa se difunde como una idea de desarrollo organizacional más allá de la cobertura natural del programa. Este aporte se fue institucionalizando en modificaciones de la Ley municipal, incorporando la planificación comunal como obligación legal y sujeta a fiscalización y evaluación. Incorporar acciones de capacitación a los funcionarios municipales significó cubrir un déficit a nivel municipal. No existía programa gubernamental que cubra estas necesidades, la mayoría de los municipios no cuentan con recursos financieros para enfrentar esta tarea. Capacitar a funcionarios municipales en las materias que le son propias implicó un aporte directo al crecimiento del capital humano de las municipalidades. Junto a ello significó provocar al ambiente académico a incorporar materias, asignaturas y carreras relacionadas con el mundo municipal fomentando el mejoramiento del recurso humano existente y preparando nuevas generaciones de funcionarios. En el ámbito financiero los esfuerzos se centran en el análisis de los ingresos y su aumento y en la racionalización de los gastos. Esta área recibió dos impulsos. Uno desde el Programa a los municipios seleccionados, que involucró levantar planes de incrementos de los ingresos, parciales o totales y en segundo, esfuerzos de la Subdere para aumentar los ingresos municipales a través de las modificaciones legales que mejoraran el rendimiento del Fondo Común Municipal y de la tributación a favor de los municipios. No obstante que esta área aún es débil en la gestión municipal, más se debe por factores extraeconómicos que por las acciones técnicas recomendadas por el Programa. Con todo, el PROFIM aporta en un estilo que señala la rigurosidad en las finanzas y de la participación de los agentes internos y externos en la elaboración de los presupuestos. Junto a lo anterior los municipios y el municipalismo se abre a los territorios combinando la acción del municipio, como unidad, con la acción asociada. El programa aporta en el fortalecimiento de las asociaciones municipales. Inicialmente incorpora a siete asociaciones para finalizar apoyando a diecinueve. Hoy la tarea de fortalecimiento se relaciona con 35 asociaciones. Sin duda aquí el aporte es trascendental a integrar la variable territorial a la gestión municipal, dándole contenidos a estas organizaciones que son las instancias emergentes en la realidad municipal y que actúan como multiplicador de la acción del Programa. 3. Aporte al Gerenciamiento de Programas La práctica realizada en la ejecución del Programa también aporta a los métodos, estructura y relación con el beneficiario de un programa. Este aprendizaje ha sido una resultante de las diversas fases de ejecución del Profim, en la primera existía una presunción de lo que eran los municipios sus debilidades y fortalezas, percepción que se acentuaba de manera más peyorativa en las empresas consultoras. El trabajo desarrollado permitió un acercamiento entre las diversas prácticas y lenguajes (privado público) pero sobre todo al conocimiento de la complejidad de la burocracia municipal y a su valoración como ente administrador. Para el Programa significó tener un diagnóstico más elaborado y funcional vinculado a las diferentes problemáticas del quehacer municipal y la necesidad de dotarla de instrumentos, conocimientos (o actualización del mismo) técnicas y condiciones para facilitar su labor ante el desafío de posecionarlos como el actor principal en materia de desarrollo local. Paralelamente el PROFIM tuvo que dotarse al interior de la unidad ejecutora, de un equipo técnico multidisciplinario en tanto ser soporte de las variadas áreas de gestión municipal y aprender a ser contraparte de un Contrato de Préstamo con el Banco Mundial y toda su propia burocracia administrativa. Lamentablemente este esfuerzo se centró mucho al interior del la UEP, sin ligarse lo suficiente con el resto de la Subsecretaría, lo que sembró la percepción de un equipo aislado de las labores habituales de esta institución acentuado por la poca difusión del Programa, pese a la buena evaluación del mismo por el propio Congreso Nacional. Aún así el Programa inició un estilo de relación con las municipalidades, más cercana, empática pero también proactiva respecto a las debilidades de la gestión municipal. - 30 - Este aislamiento del PROFIM tuvo una época crítica que se acompañó de un débil liderazgo de la autoridad institucional y a cambios consecutivos de dirección del Programa. Sin embargo, esto sirvió para aunar esfuerzos al interior del equipo para revertir el proceso, en este sentido la dirección inició un proceso de comunicación de las diversas acciones realizadas por el Programa tanto al interior de la subsecretaría como a otras reparticiones, un elemento facilitador de este proceso fue la incorporación a las contrapartes técnicas de los estudios nacionales de otros profesionales de la institución como de aquellas otras instancias centrales relacionadas con la temática. Pero un paso más significativo en este aspecto fue el aumento de su cobertura, es decir la extensión, pasar de un programa de 25 municipalidades por fase a uno de 100 y que además fueran de las comunas más pobres, lo situó dentro de la atención de los actores vinculados al proceso de descentralización y desarrollo. A lo que se sumo un especial interés de la actual Subsecretaria en potenciar los impactos del Programa y su relación con el Banco Mundial. El reconocimiento de la necesidad de un liderazgo político institucional de la administración del PROFIM, también se traspasa a las municipalidades, en tanto en aquellas municipalidades donde el Alcalde y/o su cuerpo directivo no lideraban el proceso de cambio a raíz del gestionar del Programa, los impactos eran relativos. La dirección entendiendo que parte de este poco apego pudiese ser la escasa flexibilidad de elección de la cartera de proyectos por parte de los propios municipios, en la fase extensión y sin descuidar la consecución de los objetivos del Programa, entregó mayor protagonismo municipal en la definición de los proyectos, como también mayor responsabilidad y compromiso con la labor administrativa que la acompaña. En este sentido, en el seguimiento y monitoreo del proceso de licitación, ejecución y pago de los proyectos, las unidades técnicas municipales tuvieron un mayor rol y conocimiento a través de un sistema en línea que reflejaba todo el proceso, acción acompañada de una capacitación permanente de los procesos y normativas del Banco, contando en este punto con la colaboración del mismo. En todo este nuevo camino, un gran acompañante y aliado fueron los Gobiernos Regionales. Entendiendo que un trabajo con 100 municipios no puede ser llevado sólo del nivel central, más la necesidad que los Gores se comprometieran con el fortalecimiento municipal y todas las ventajas de esta relación, llevaron al PROFIM a pedir su colaboración, la que en general permitió un mayor acercamiento entre municipios y Gores, como a posesionar dentro de éstos últimos al equipo institucional relacionado con la temática. No podemos dejar de mencionar que en esta fase también hubo una mejor relación con el Banco Mundial, de colaboración y confianza más que principalmente de supervisión y control. Sin duda, las visitas no misión por parte del equipo representante, permitieron una mayor acercamiento de los avances que el programa sostenía y facilitaron las correcciones en momentos oportunos. Un trabajo en equipo hacia un norte común el lograr el cumplimiento de los objetivos del PROFIM. 4. Desafíos Pendientes del Proceso de Fortalecimiento Municipal. El Contrato de préstamo con el Banco Mundial término el año 2004, pasando la tarea de Fortalecimiento Local a la División de Municipalidades a través de recursos propios, aunque esta situación logra institucionalizar este accionar, la disminución de recursos obliga a disminuir impactos más integrales. El Programa en su fase extensión ha incorporado la participación de los Gobiernos Regionales, en su administración, seguimiento y control, lo que ha permitido compartir aprendizajes y coordinar esfuerzos en materia de fortalecimiento local. Esta acción debe complementarse con iniciativas coordinadas y financiadas, incluyendo la voz de los propios municipios para avanzar y sostener el proceso. Un instrumento interesante puede ser la materialización de los Convenios de Programación locales entre Gobiernos Regionales, Servicios Públicos y municipalidades, que se encuentra para su aprobación en el Congreso Nacional como parte a modificaciones a la Ley Orgánica de Gobiernos regionales. Sin embargo, este proceso requiere de contrapartes regionales abocadas, preparadas e institucionalizadas en el tema local, lo que no en todos los casos se constató de acuerdo a la experiencia de la extensión - 31 - del Programa, en algunos Gobiernos Regionales el tema municipal pasa más por acciones de inversión que por abordar el tema de la gestión local en su integridad y esto también de debe a la poca flexibilidad de los instrumentos con que cuenta. En este sentido, la Subsecretaría debe cobrar un papel importante para avanzar en el proceso de descentralización incluyendo una mirada más osada en el tema de descentralización fiscal. Sobre este último punto, es poco lo que Chile a avanzado en materia de descentralización fiscal, más ha sido en tema de descentralización del gasto. Los diferentes estudios al respecto, más las demandas de las propias municipalidades apuntan a la necesidad de flexibilizar mecanismos de recaudación a nivel local, la mirada en contra es el peligroso nivel de endeudamiento que algunos municipios están teniendo por mal manejo administrativo. Esto sin duda, es un tema en el que se debe dirigir y equilibrar, ¿cómo aumentar la descentralización fiscal local, sin el peligro que los municipios quiebren?, obviamente el tema de procedimientos y transparencia de la gestión financiera y contable debe seguir siendo un tema de interés para el Estado y para esta institución, en la que no puede estar ajena los organismos contralores. La iniciativa del artículo 110, en materia de control y transparencia puede dar un gran respaldo, pero como ya lo hemos visto está debe ser acompañada de acciones articuladas de acompañamiento técnico para su real inserción. En otro ámbito, una línea de organización local, que está abriendo espacios de participación y desarrollo, lo constituyen las asociaciones municipales, el PROFIM ha aportado con acciones de asistencia técnica que orientan y dan mayor validez a su rol y gestión pero pensamos que mayor sustentabilidad de su gestionar requiere de modificaciones legales que les permita un flexibilidad en su administración. Este año, el departamento de fortalecimiento municipal ha continuado con la asistencia y capacitación a las asociaciones, potenciada con la articulación con diversas instancias públicas interesadas en el tema y que se han acercado por la legitimidad y experiencia demostrada por el Programa , pero su accionar se ve limitada por tema de recursos. Por último, lo demostrado anteriormente, hablan de la existencia de importantes logros y avances en el proceso de creación de condiciones para que las municipalidades puedan hacer frente a las nuevas tareas y desafíos en el ámbito del desarrollo local. Sin embargo, la tarea deja mucho de estar cumplida, especialmente ante los constantes y nuevos retos que el proceso de descentralización y modernización del Estado se encuentra pro reformas legales y constitucionales. En este sentido, debemos seguir dando pasos en materia de: transparencia de la gestión local; de mayor apertura a la participación ciudadana; de propiciar mejores prácticas en materia de gestión financiera; de perfeccionamiento del personal municipal; de dotación de instrumentos tecnológicos que faciliten el actuar comunal; de afianzamiento del rol de las asociaciones municipales, de articulación con los Gobiernos Regionales en temas de fortalecimiento municipal tanto en aspectos de inversión como de gestión; y de integración de los servicios sociales y mejoramiento de la calidad de los mismos. Pasos que para un mayor impacto deben ser continuos y sostenidos a través del tiempo. (b) Cofinanciers: N.A. (c) Other partners (NGOs/private sector): N.A. 10. Additional Information The individuals interviewed in the course of the preparation of this report include: Central Government Municipal Governments (Mayors) Adriana Delpiano Puelma Juan Carlos Castillo Boilet Samuel Garrido Ruiz Municipality of Monte Patria Víctor Hugo Miranda Núñez Leonel Cepeda Altamirano Claudia Jara Jara staff of Municipality of Freirina Marcelo Catoni Contreras Mario Margoni Gastón Collao Tapia staff of Municipality of Pto. Natales - 32 - Sergio Contreras Figueroa Juan Morano Cornejo Alicia Díaz Nilo staff of the Municipality of Pta. Arenas Jaime Herrera Durán Jorge Romero Pedreros Municipal Associations (Mayors) Gloria Torres Ávila Asoc. de Municipios Rurales de Norte Chico Jorge Ordenes Gonzalez, Andacollo Efrain Alegria Barraza, La Higuera Lorenzo Torres Medina, Paihuano Gloria Torres Espejo, Vicuña Luis Lemus Aracena, Illapel Nathan Trigo Gonzalez, Canela Carlos Salinas Altamirano, Los Vilos Gerardo Rojas Escudero, Salamanca Hector Contador Perez, Combarbala Juan Carlos Castillo Boilet, Monte Patria Blas Araya Rivera, Punitaqui Lidia Zapata Pasten, Rio Hurtado Dario Vergara Asoc. Municipal Regional de Magallanes Juan Morano Cornejo, Punta Arenas Ricardo Ritter Rodríguez, Laguna Blanca Tatiana Vasquez Barrientos, Rio Verde Carlos Mandriaza Muñoz, San Gregorio Jose Soto Passek, Cabo de Hornos Sylvia Vera Perez, Porvenir Ricardo Olea Celsi, Primavera Alfonso Simunovic Ojeda, Timaukel Mario Margoni Gadler, Natales Fernando Paredes Mansilla, Torres del Paine Asoc. Regional de Municipios de Atacama Marcos Lopez Rivera, Copiapo Brunilda Gonzalez Anjel, Caldera Yhanss Delgado Quevedo, Tierra Amarilla Hector Volta Rojas, Chañaral Isaías Zavala Torres, Diego de Almagro Juan Santana Alvarez, Vallenar Carmen Bou Bou, Alto del Carmen Leonel Cepeda Altamirano, Freirína Juan Sabando Santibañez, Huasco Regional Governments (GORE) Authorities and staff of the GORE of Other Organizations the Magallanes Region Juan Carlos Hernández Attended meeting with representatives Asociación Chilena de Muncipalidades from the GOREs of ten regions - 33 - Annex 1. Key Performance Indicators/Log Frame Matrix Objective Expected Outcome Actual Outcome Original PROFIM-II Phase A. At the National Level A.1 Improve data on Implementation of SINIM in Achieved: The totality of municipal finances 70% of (30) selected Chile's 341 municipalities is municipalities included in the SINIM, which features data on 150 variables for 1999 onward. By March 2001, proposal developed to extend the SINIM to all municipalities A.2 Implementation of an 85% of all municipalities Achieved: Training on the uniform budgeting system receive training in the Budget Municipal Budget Manual and Manual by March 2001 software (GPM) was provided to administrative staff in 289 municipalities during 2002 and 2003, equivalent to 85% of all municipalities in the country 58 municipalities have reported using the GPM, equivalent to 16% of all municipalities in the country A.3 Improvement in the 25% decrease in processing Information not available provision of social services time for social service application in at least 25 municipalities A.4 Dissemination of best Period activities and Achieved: Highly successful practices and lessons learned publications developed and dissemination of best practices from PROFIM-I and other presented in accordance with and lessons learned through similar projects dissemination plan numerous publications, PROFIM satisfactory to the Bank website, and fairs of best practices A.5 Proposals for resource By March 2001, proposal Achieved: The central allocation based on efficiency developed and presented to government relies on the indicators from SINIM and the Presidency information provided by SINIM social and equity criteria to allocate resources under the Municipal Common Fund, the most sizable source of funding for Chile's municipalities B. At the Municipal Level B.1 Improvements in By September 2000, 70% of Achieved: Twenty three municipal planning participating municipalities to municipalities completed or present realistic PLADECOs updated their PLADECOs and Strategic Plans under the Program, equivalent to 92% of participating municipalities All 25 participating municipalities now have up-to-date PLADECOs - 34 - Annex 1. Log Frame Matrix and Performance and Monitoring Benchmarks (cont.) Objective Expected Outcome Actual Outcome Original PROFIM-II Phase B. At the Municipal Level (cont.) By project end, 70% of Achieved: Twenty-one participating municipalities to municipalities have completed have implemented these the implementation of their plans, based on available PLADECOs, equivalent to 84% funds of participating municipalities B.2 Improvements in financial Increase in own-source Achieved: 75% of participating planning revenues in 70% of the municipalities have increased participating municipalities their own-source revenues between 2000 and 2002. The average annual increase in own-source revenues in all participating municipalities was roughly 3% Increase in operational surplus Not achieved: Only 3% of in 75% of the participating participating municipalities municipalities exhibit an increase in their operational surplus between 2000 and 2002. It is important to note, however, that all but one of the participating municipalities had an operational surplus--as opposed to a deficit--in 2002. B.3 Improvements in human By September 2000, 70% of Partially achieved: 14 resources management participating municipalities to municipalities developed a have identifies requirements human resources strengthening to strength human resources program, equivalent to 56% of participating municipalities By June 2002, 70% of Partially achieved: 7 participating municipalities to municipalities have implemented have implemented a human a human resources resources action plan in strengthening action plan, accordance with the program equivalent to 28% of participating municipalities B.4 Improvements in health Design for streamlining social Partially achieved: 13 and education management services in 70% of municipalities have developed provision participating municipalities plans to rationalize health and prepared and sub-projects education services, equivalent to goals established by 52% of participating September 2000 municipalities Streamlining goals reached by Partially achieved: 11 June 2002 municipalities have achieved their goals, equivalent to 44% of participating municipalities - 35 - Annex 1. Log Frame Matrix and Performance and Monitoring Benchmarks (cont.) Objective Expected Outcome Actual Outcome Original PROFIM-II Phase B. At the Municipal Level (cont.) B.5 Introduction of 85% of the participating Achieved: 23 municipalities participatory dimension in municipalities have developed developed their PLADECOs municipal planning PLADECOs with public using extensive public consultation participation, equivalent to 92% of participating municipalities. On average, there were over 20 events involving over 1,900 residents in each community B.6 Implementation of By June 2002, 70% of the Achieved: 20 municipalities complementary sub-projects as municipalities participating in completed sub-projects under identified in the municipal the Complementary Module the Complementary Module, strategic plans completed sub-projects equivalent to 80% of implementation participating municipalities B.7 Encouragement of Outcomes for sub-projects Achieved: outcomes for innovation and joint municipal under the Flexible Module sub-projects under the Flexible problem solving measured by ex-post Module were measured as part evaluations of the Program's ex-post evaluation. In particular, the experience with innovative sub-projects was thoroughly documented Extension Phase C.1 Support modernization of By Program end, 70% of Achieved: 97% of the internal processes and participating municipalities participating municipalities (97) enhance communication have incorporated ICT into their have incorporated ICT into their processes with community daily routine day-to-day operation, significantly improving internal processes and communication with their residents By Program end, 50% of Achieved: 54% of the participating municipalities that participating municipalities (54) provide ICT training to municipal have trained their staff in the use staff of ICT. As a result, 66% of their staff is proficient in the use of ICT tools C.2 Improve the administration By Program end, 70% of Achieved: 85% of the of human resources at the participating municipalities that participating municipalities (85) municipal level provide training to municipal have trained their staff in the staff on municipal management area of municipal management C.3 Improve administrative By Program end, 70% of Achieved: 80% of the procedures through participating municipalities with participating municipalities (80) streamlining and ICT support rationalized and/or automatic have streamlined administrative administrative procedures procedures and incorporated ICT to support them - 36 - Annex 1. Log Frame Matrix and Performance and Monitoring Benchmarks (cont.) Objective Expected Outcome Actual Outcome Extension Phase (cont.) C.4 Strengthen the link By Program end, 60% of Achieved: 80% of the between the municipality and participating municipalities that participating municipalities (80) the citizenry undertake participatory and have engaged the public in community strengthening various participatory processes sub-projects, including the training of community leaders C.5 Strength the role of By Program end, 100% of Achieved: 100% of participating municipalities as promoters of participating municipalities with municipalities (100) have local development local development plans identified the local development goals and are orienting the development strategies accordingly C.6 Enhance financial planningBy Program end, 50% of Not achieved: Only 9% of the and administration participating municipalities participating municipalities (9) utilize the GPM reportedly use the GPM By Program end, 50% of Achieved: 50%of the participating municipalities that participating municipalities have improve their accounting improved financial management, obtaining both greater transparency and efficiency in the management of municipal resources - 37 - Annex 2. Project Costs and Financing Appraisal Estimate Actual Costs Project Component Total Local Foreign Total (US$M) (US$M) (US$M) (US$M) Original Profim-Phase A. National Component 1.8 0.1 0.1 0.2 B. Municipal Component 18.2 8.6 8.1 16.7 i. Basic Module 6.9 3.5 10.4 ii. Complementary Module 1.5 4.4 5.9 iii. Flexible Module 0.0 a. Associativism 0.2 0.2 0.4 b. Innovations 0.0 0.0 0.0 Extension Phase A. National Studies 0.1 0.2 0.3 B. Municipal Strengthening 1.4 1.4 2.8 i. Equipment 0.3 0.9 1.2 ii. Consulting 1.1 0.5 1.6 D. Project Administration and Training 3.0 3.0 0.0 3.0 E. Front-End Fee 0.1 0.0 0.1 0.1 Total Project Costs 23.1 13.2 9.9 23.1 Annex 2.b: Project Financing Local Costs Foreign Costs Total Costs Financing Source (US$M) (US$M) (US$M) % IBRD 9.88 9.88 42.8 National Government 10.22 10.22 43.2 Municipalities 3.00 3.00 13.0 Total 13.22 9.88 23.10 100.0 - 38 - Annex 3. Economic Costs and Benefits N.A - 39 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 1/98 3 TASK MANAGER (1); MUNICIPAL FINANCE SPECIALIST (1); SECTOR LEADER (1) Appraisal/Negotiation 3/1998 3 TASK MANAGER (1); MUNICIPAL FINANCE SPECIALIST (1); SECTOR LEADER (1) 5/1998 4 TASK MANAGER (1); MUNICIPAL FINANCE SPECIALIST (1); SECTOR LEADER (1); SR. URBAN SPECIALIST 6/1998 3 TASK MANAGER (1); MUNICIPAL FINANCE SPECIALIST (1);SR. URBAN SPECIALIST (1) Supervision 10/1999 1 TASK MANAGER (1) S S 01/2000 4 TASK MANAGER (1); S S PROCUREMENT SPECIALIST (1); URBAN DEV. SPECIALIST GENDER SPECIALIST (1) 02/2000 1 TASK MANAGER (1) S S 05/2000 1 TASK MANAGER (1) S S 07/2000 1 TASK MANAGER (1); S S 01/2001 4 TASK MANAGER (1); SR. U U ECONOMIST (1); MUNICIPAL DEV. SPECIALIST (1); OPERATIONS CONSULTANT (1) 04/2001 4 TASK MANAGER (1); SR. S S ECONOMIST (1); MUNICIPAL DEV. SPECIALIST (1); OPERATIONS CONSULTANT (1) 9/2001 4 TASK MANAGER (1); SR. S S ECONOMIST (1); MUNICIPAL DEV. SPECIALIST (1); OPERATIONS CONSULTANT (1) 02/2002 2 TASK MANAGER (1); S S OPERATIONS CONSULTANT - 40 - (1); 03/2002 8 TASK MANAGER (1); S S GENDER SPECIALISTS (2); PROCUREMENT SPECIALISTS (3); MUNICIPAL DEV. SPECIALIST (1); OPERATIONS CONSULTANT (1) 06/2002 5 TASK MANAGER (1); S S PROCUREMENT SPECIALISTS (2); MUNICIPAL DEV. SPECIALIST (1); OPERATIONS CONSULTANT (1) 11/02 4 TASK MANAGER (1); S S PROCUREMENT SPECIALIST (1); MUNICIPAL DEV. SPECIALIST (1); OPERATIONS CONSULTANT (1) 03/03 5 TASK MANAGER (1); S S PROCUREMENT SPECIALIST (2); FINANCIAL MANAGEMENT SPECIALIST (1); OPERATIONS CONSULTANT (1) 08/03 5 TASK MANAGER (1); S S PROCUREMENT SPECIALISTS (1); MUNICIPAL DEV. SPECIALIST (1); FINANCIAL MANAGEMENT SPECIALST (1); OPERATIONS CONSULTANT (1) 01/04 4 TASK MANAGER (1); S S PROCUREMENT SPECIALISTS (1); FINANCIAL MANAGEMENT SPECIALST (1); OPERATIONS CONSULTANT (1) 05/2004 1 TASK MANAGER S S 08/2004 3 TASK MANAGER (1); S S MUNICIPAL DEV. SPECIALIST (1); OPERATIONS CONSULTANT (1) ICR 02/28/2005 2 TASK MANAGER (1); S S CONSULTANT (1) - 41 - (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation 23.50 53.80 Appraisal/Negotiation 23.73 44.3 Supervision 105.3 97.7 ICR 8.5 22.6 Total 161.23 218.4 - 42 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 43 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 44 - Annex 7. List of Supporting Documents Avila, T. (2002), Innovación y Burocracia: Innovación de la Gestiópn Local Pública, Julio 2002, Santiago de Chile. Estudios y Consultorías Focus (2004), Estudio Diagnóstico y Análisis de Factibilidad de la Administración Municipal Conjunta de los Servicios de Educación y Salud en la Municipalidades Chilenas, November 2004, Santiago de Chile. Grupo Proceso (2004), Exploración Integración Programas y Servicios Sociales Municipales, April 2004, Santiago de Chile. Petquinta (2004), Estudio de Investigación de Caracterización del Funcionario Municipal, Santiago de Chile. SINIM (2005), http://www.sinim.cl/. Subsecretaría de Desarrollo Regional y Administrativo (2005), Adiós a Zenteno, Solosubdere.nosotr@s.gob.cl Newsletter, January 2005, Santiago de Chile. Subsecretaría de Desarrollo Regional y Administrativo (2004), Innovación desde el Funacionario Municipal, December 2004, Santiago de Chile. Subsecretaría de Desarrollo Regional y Administrativo (2004), País Municipal: Buenas Prácticas, September 2004, Santiago de Chile. Subsecretaría de Desarrollo Regional y Administrativo (2003), Programa de Fortalecimiento Institucional Municipal - Fase II, Fortalecimiento Municipal En Chile: Análisis y Evalución (1999 ­ 2003), December 2003, Santiago de Chile. Subsecretaría de Desarrollo Regional y Administrativo (2003), Resumen Ejecutivo, Segundo Proyecto de Desarrollo Municipal de Chile ­ Extensión 2003-2004, June 2003, Santiago de Chile. Subsecretaría de Desarrollo Regional y Administrativo (2002), Plan de Acción, Proyecto de Fortalecimiento Familiar, Vecinal y Municipal con Enfoque de Género, September 2002, Santiago de Chile. Subsecretaría de Desarrollo Regional y Administrativo (2002), Informe de Avance: Línea Experimental Innovativa, Santiago de Chile. Subsecretaría de Desarrollo Regional y Administrativo (1999), Sistema Nacional de Indicadores Municipales (SINIM), Octubre 1999, Santiago de Chile. SUR Profesionales Consultores (2003), Línea Base para los 100 Municipios con Menores Recursos de País: Estudio Diagnóstico, December 2003, Santiago de Chile. Universidad Alberto Hurtado (2003), Equidad y Eficiencia en la Transferencia para Educación, Salud e Infraestructura a los Municipios, Santiago de Chile. Universidad Diego Portales (2002), Caracterización del Funcionario Municipal Participante en el 1er Concurso de Innovación en gestión Municipal, Enero 2002, Santiago de Chile. World Bank (1998-2004), Supervision Missions' Aide Memoirs, Chile's Second Municipal Development Project, 1st and 2nd Semester, FY 2005, 2004, 2003, 2002, 2001, 2000, 1999, 1998; Santiago de Chile. World Bank (2004), Quality of Supervision Assessment: Chile's Second Municipal Development Project, 2 August 2004, Washington, D.C. World Bank (1999), Quality at Entry Assessment: Chile's Second Municipal Development Project, 19 July 1999, Washington, D.C. World Bank (1998), Project Appraisal Document, Chile's Second Municipal Development Project, Report No. 18563-CH, 18 November 1998, Washington, D.C. Zanetta, C. (2005), Seeking Better Policies or Just Giving Up Responsibility? The Decentralization of the Argentina's National Housing Fund (FONAVI), Paper presented at the Third World Bank Symposium on Urban Poverty, 4-6 April 2005, Brasilia. - 45 - - 46 -