74291 v2 Romania Functional Review LABOR AND SOCIAL PROTECTION SECTOR Final Report Vol. II [Type a quote from the document or the summary of an interesting point. June 20, 2011 The World Bank Europe and Central Asia Region Table of Contents Context and Purpose of the Review v CHAPTER I: MAIN SECTOR FEATURES AND INSTITUTIONAL MAPPING 1 CHAPTER II: MINISTRY OF LABOR, FAMILY AND SOCIAL PROTECTION 8 CHAPTER III: LABOR MARKET 18 CHAPTER IV: PENSIONS 35 CHAPTER V: SOCIAL ASSISTANCE (CASH TRANSFERS) 48 CHAPTER VI: SOCIAL ASSISTANCE SERVICES 83 CHAPTER VII: INFORMATION MANAGEMENT (CROSS-CUTTING ISSUE) 92 ANNEXES 104 ii ABBREVIATIONS ALMP - Active Labor Market Programs ARR - Average Replacement Ratio CBDA - Complementary Budget for Disabled Adults CFA - Complementary Family Allowance CHU - Central Harmonization Unit CRB - Child Raising Benefit ECA - Europe and Central Asia EC - European Commission EF&C - Error, Fraud and Corruption EGD - Economic General Directorate EU - European Union ESF - European Social Fund FA - Family Allowance GDP - Gross Domestic Product GDSACP - General Directorates for Social Assistance and Child Protection GMI - Guarantee Minimum Income GOR - Government of Romania GSG - General Secretariat of Government HR - Human Resource HB - Heating Benefit ICR - Indemnity for Child Raising IDA - Indemnity of Disabled Adults IM - Information Management IMF - International Monetary Fund IPSAS - International Public Sector Accounting Standards NIMEWCR - National Institute of Medical Expertise and Workforce Capacity Recovery L&SP - Labor & Social Protection LI - Labor Inspection LMP - Labor Market Policies L&SP - Labor and Social Protection LTC - Long Term Care MoLFSP- Ministry of Labor, Family and Social Protection MERYS - Ministry of Education, Research, Youth and Sports M&E - Monitoring and Evaluation MoPF - Ministry of Public Finance NAE - National Agency for Employment NAFA - National Agency for Fiscal Administration NAR - National Agency for Roma NASB - National Agency for Social Benefits NHPP - National House of Public Pensions NGO - Non-Governmental Organizations OECD - Organization for Economic Co-operation and Development PA - Priority Area PES - Public Employment Services PWD - Persons/people with disabilities PIAMGD - Public Institutions Accounting Methodology General Directorate PMU - Project Management Unit PSSA - Public Service for Social Assistance RATC - Regional Adult Training Center iii RIB - Regional Intermediate Body SA - Social Assistance SAFIR - Integrated Management Information System SCA - State Child Allowance SI - Social Inspection SOP HRD- Sector Operational Program for Human Resources Development SPA - Single Parent Allowance TA - Technical Assistance ToR - Terms of Reference UNCRPD- United Nations Convention on the Rights of Persons with Disabilities URB - Unified Registration of Beneficiaries WB - World Bank Note: For the purpose of this report, the EU-10 group of counters consists of: Czech Republic, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia and Romania Functional Review Team and Principal Counterparts The functional review was carried out by Richard Florescu (Senior Operations Officer—Team Leader), Ufuk Guven (Senior Social Protection Specialist), Emil Tesliuc (Senior Economist) and Mihai Seitan (L&SP Consultant). Rienk Prins (Disability Consultant), Alberto Serra (IT Consultant), Arvo Kudo (Senior Labor Economist) (Ionel Lumezianu (IT Specialist), Bogdan Constantinescu (Financial Management Specialist). Peer reviewers were Sorin Ionita (Research Director, Romanian Academic Society), Cem Mete (Senior Economist) The main counterparts at the Ministry of Labor, Family and Social Protection (MoLFSP) and related agencies were Nicolae Ivaschescu (Secretary of State), Domnica Parcalabu, President of National House for Public Pensions (NPPH), Silviu Bian, President of National Agency for Employment (NAE), and Loredana Georgiana Tintareanu, President of National Agency for Social Benefits (NASB). General Guidance to the team was provided by William Dorotinsky (Sector Manager), Kathy Lindert (Sector Manager), Bernard Myers (Task Team Leader for the whole Functional Review Project), and Francois Rantrua (Country Manager). Serban Cerkhez was the main counterpart for the MoLFSP Functional review within the General Secretariat of the Government. The main counterparts at the European Commission (EC) were Silvia Viceconte (SG), Diana Spiridon, Septimia Dobrescu and Oana Ciurea. iv Context and Purpose of the Review The Government of Romania (GOR), in agreement with the European Commission (EC) requested functional reviews of the Romanian public administration through an independent advisory service with the World Bank. The reviews are specified in GOR’s Memorandum of Understanding with the EC signed on June 23, 2009, and in the Agreement for Advisory Services, dated November 26, 2010. The GOR initiated such reviews to support its goal of modernizing the public administration and improving its ability to fulfill its commitments to the European Union, under the ongoing programmatic documents. The GOR has requested that the World Bank lead to reviews on its behalf, under an advisory services contract. The general objective of this advisory service is to review current situation of the Social Protection and Labor (L&SP) sector, assess its functioning and develop an action plan that the GOR can use over the short to medium term to strengthen its effectiveness in the above- mentioned areas of public administration, in accordance with the Memorandum of Understanding’s terms and conditions agreed upon by the GOR and EC. In meeting this objective, the World Bank examined: (i) whether the policy goals and objectives of Ministry of Labor and Social Protection (MoLFSP) and its agencies are clearly defined in measurable and achievable terms; (ii) whether the management systems, policies, staffing, and organizational structure are appropriate for them to meet their objectives; and (iii) whether there are factors that are external to the institutions that may impede their ability to meet objectives. The review of the L&SP sector comprised the following stages: • The Inception Report was submitted to the General Secretariat of the Government on February 24, 2011, summarizing the initial discussions with senior officials on the scope of the review, major concerns focused on the strategic framework, institutional setting and management systems of the Ministry of Labor and Social Protection (MoLFSP) and related agencies; • In-depth evaluation of the sector, focusing on the status of each business area, policy developments, organizational structures and related responsibilities, identification, financing channels and expenditures for various programs (benefits and services), as well as the identification of the problems hampering the proper functioning of the sector; • Formulation of recommendations and preparation of a related implementation plan (short and medium term) for GOR's consideration (contained in the present report, Volumes 1 and 2). v The report is organized into two Volumes. Volume 1 summarizes the main findings and messages, presents priorities for reform, and suggests an action plan to carry out these priority reforms. Volume 2 (this volume) provides the background diagnostics, assessment and findings in depth, covering: • CHAPTER I: Main Sector Features and Institutional Mapping • CHAPTER II: Ministry of Labor Family and Social Protection • CHAPTER III: Labor Market • CHAPTER IV: Pensions • CHAPTER V: Social Assistance (Cash Transfers) • CHAPTER VI: Social Assistance Services • CHAPTER VII: Information Management (cross-cutting) vi CHAPTER I: MAIN SECTOR FEATURES AND INSTITUTIONAL MAPPING Main Sector Features 1. The Labor and Social Protection (L&SP) sector is large, complex and highly sensitive, governing the labor market, pension and social assistance (both provision of benefits and delivery of social services) areas. Its aggregate share of GDP is 14.16 percent. Almost 84 percent of the country’s population is covered by at least one social protection program (cash transfer, in-kind or social services). Therefore, the proper and efficient functioning of L&SP’s institutions is highly important to overall public administration and to the various groups of beneficiaries. 2. The Ministry of Labor, Family and Social Protection (MoLFSP) is confronted with comprehensive and substantial challenges. Areas of major concern include labor market flexibility, long-term sustainability of the pension system, and equitable access to social assistance. These challenges were augmented by significant downsizing of staff and cuts in the public wage bill form 2010. However, this context also offered unique opportunities to deepen and accelerate reforms in almost all fields of labor and social protection. MoLFSP used the opportunities and promoted significant reforms aiming to: • Improve the financial sustainability of the public pension system by increasing revenues and reducing spending. A new pensions law was approved (Law 263/December 2010). This law provides, inter alia, for the gradual increase of the retirement age for women (from 60 to 63 years), a switch of pension benefits indexation from a wage- to a price-increase formula, and the consolidation of various special sector pension schemes with the overall public pensions scheme; • Implement a unified, coherent and equitable wage system for public sector employees. Two laws were approved: (i) (Law 284/December 2010, a framework public wage law; and (ii) and Law 285/December 2010, which stipulates the applicable wage levels for public employees in 2011, within the financial envelope allocated by the budget. • Improve the efficiency and effectiveness of the social assistance system. A comprehensive reform program was launched with the approval in March 2011 of the Strategy of the Social Assistance Reform, which focuses on social assistance benefits as the last resort support for vulnerable groups hit hard hit by the financial crisis • To revise and implement a more flexible labor market relationship framework. The Labor Code revision contained in Law 40/March 2011 would allow companies to respond rapidly and coherently to market changes. 1 Institutional Mapping 3. The L&SP sector is coordinated by the MoLFSP, which is the GOR’s main institutional structure responsible for overseeing labor market policies and relations, social insurances (pensions and unemployment) and social inclusion (social assistance benefits and social services and programs). In relation to the EU, the MoLFSP is responsible for the administration of EU funds under the Sector Operational Program for the Human Resources Development (SOP HRD), 2007–2013. 4. The Ministry went through several reorganizations during the transition to a market economy, adapting its structure, responsibilities and staffing to continuous reform of the L&SP sector. Thus, over the last 12 years the Ministry has evolved from a highly centralized institutional structure with branches (Directorates for Labor and Social Protection) at the judet (county) level that covered all the areas of L&SP sector, to a simpler structure that retains control of policy development, methodological guidance monitoring and evaluation and limited control functions. As sectoral reforms took place and decentralization advanced, new specialized institutions and related de-concentrated structures were established, taking over from the Ministry administrative and executive functions for various sector areas such as: the National Agency for Employment (1999), the department of Labor Inspection (1999), the National House of Pensions (2000), the National Agency for Equal Opportunities (2002), the National Agency for Persons with Disabilities (2003), the National Agency for Family Protection (2003), the National Authority for Child Protection (2004), the Social Inspection directorate (2006) and the National Agency for Social Benefits (2008). 5. In June 2010, as part of the GOR’s efforts to reduce public spending and improve the sector’s governance, the administration of the L&SP sector labor was dramatically restructured as follows: • MoLFSP staff size was reduced and the National Agency for Persons with Disabilities, the National Agency for Family and Child Rights Protection, the National Agency for Equal Opportunity and the Social Inspection became departments within MoLFSP; • The department of Labor Inspection (LI), the National House for Pensions, the National Agency for Employment (NAE) and the National Agency for Social Benefits (NASB) were reorganized through staff reductions. 6. As a result of this restructuring, the overall institutional landscape of the labor and social protection sector overseen by the MoLFSP has changed, as presented below (Figure 1.1.) 2 Figure 1.1. Labor and Social Protection Sector Institutional Framework in Romania MINISTER GENERAL DIRECTORATE GENERAL DIRECTORATE SOPHRD (EU funds) SOCIAL INSPECTION DIRECTORATE FOR EQUAL FOREIGN RELATIONS OPPORTUNITIES DIRECTORATE SECRETARY OF STATE SECRETARY OF STATE SECRETARY GENERAL GEN. DIRECTORATE FOR EMPLYMENT, DIRECTORATE for DIRECTORATE for DIRECTORATE for SOCIAL INSURANCE PERSONS WITH LEGISLATION COMMUNICATION PUBLIC POLICIES WAGES AND SOCIAL DIALOG MANAGEMENT DIRECTORATE DIRECTORATE DIRECTORATE DIRECTORATE GENERAL GENERAL GENERAL RESOURCES ECONOMIC HUMAN PROJ. AND NATIONAL HOUSE OF LABOR NATIONAL AGENCY FOR NATIONAL EMPLOYMENT PUBLIC PENSIONS INSPECTION SOCIAL BENEFITS AGENCY COUNTY HOUSE TERRITORIAL COUNTY AGENCY COUNTY FOR PUBLIC LABOR FOR SOC BENEFITS EMPLOYMENT PENSIONS INSPECTORAT AGENCY E LOCAL LOCAL HOUSES AGENCIE 7. The territorial organization of the MoLFSP is complex and based on a business model that requires dense coverage of physical delivery points across the country. NHPP, NAE, NASB and LI have regional branches in all 41 counties and six sectors in Bucharest alone. In addition, there are about 255 local offices. The county and local offices perform mostly clerical work, including payment processing. 8. The restructuring resulted in a reduction of personnel at both the national and county levels of the specialized agencies. The current staffing of the MoLFSP and subordinate agencies is presented below (Table 1.1). 3 Table 1.1. Staffing levels in MoLFSP and Specialized Agencies, December 2011 INSTITUTION TOTAL POSITION AUTHORIZED DISTRIBUTION POSITIONS CENTRAL LOCAL MoLFSP 1010 660 350 National Employment Agency 2067 154 1913 National House for Pensions 3476 280 3196 National Agency for Social Benefits 1032 47 985 Labor Inspection 3236 178 3058 TOTAL 10821 1319 9502 Link with Local Public Administrations. 9. Besides the above institutional structures, the labor and social protection landscape under the enhanced decentralization process is complemented by other specialized institutional structures for social assistance services, under the supervision and coordination of various local public administration entities such as: (i) General Directorates for Social Assistance and Child Protection (GDSACP) subordinated to the County Councils (elected bodies); and (ii) Public Services for Social Assistance (PSSA), which fall under local councils (elected bodies) at the city and commune levels. 10. These structures oversee social assistance services (e.g., care for children, the elderly, persons with disabilities, victims of domestic violence, youth at risk, etc.) These services are provided by: (i) specialized long- or short-term care institutions mostly owned by local authorities, or (ii) community-based social services and home care services contracted by the local authorities. Both types of service are financed from local budgets (using their own revenues or through redistribution- equalization grants). 11. Given the fact that these institutions and structures belong to and report to local authorities, it is difficult to get a clear picture of the entire social assistance system and total public financial resources spent on it. However, given that Romania has 41 counties in addition to Bucharest’s 6 sectors as well as 325 towns and 2,855 communes, the administrative staff of the structures mentioned above in (i) and (ii) is quite sizable. The total number of staff positions approved for just the county-level DGSACPs in 2011 is 11,529. Of these, 8,200 positions are filled (the remainder of the positions are frozen, in line with measures included in the anti-crisis package approved by the GOR in June 2010). Overall Sector Financing. 12. The L&SP sector’s financing is drawn from several sources: (i) social insurance contributions for pensions and unemployment benefits; (ii) state funds for social assistance benefits; (iii) local funds (from their own revenues and from state budget equalization grants); (iv) state funds for Programs of National Importance (functioning expenditures) and investment programs and (v) other donors. In addition, the state fund covers non- 4 contributory pension benefits and deficits run by the pensions and unemployment funds, as needed. Figure 1.2 below shows the flow of funds in the L&SP sector. In terms of spending, Romania’s total expenditure on social protection accounts for 14.3% of GDP (2010), which is above the average for the EU 10 New Member States (NMS), and below the EU-27 average. This spending level reflects a significant increase since 2008, rising from 10.75% of GDP (see Figure 1.3 below). Figure 1.3. Expenditures on social protection as share of GDP, 2008 and Romania 2010. 5 Source: Eurostat (online data code: spr exp sum)—Sickness/Health Care expenditures deducted. 6 Access to EU Funds. 13. The Sector Operational Program for Human Resources Development (SOP HRD), amounted to EUR 3.47 billion, provides additional financial support to the L&SP sector (as well as to the Education sector). The general objective of SOP HRD is the development of human capital and increase competitiveness, by linking education and lifelong learning to increase participation in the labor market and ensuring a modern labor market, flexible and inclusive, for 1,650,000 people. 14. MoLFSP is responsible for the overall implementation of the SOP HRS through the Management Authority (MA) for SOP HRD, established as a General Directorate under the direct subordination of the Minister. To support the implementation in some specific priority axis and key areas of intervention, three Intermediate Bodies (IBs) were established within: (i) National Agency for Employment; (ii) Ministry of Education, Research, Youth and Sports (MERYS) and (iii) National Center for Technical and Vocational Education Development (NCTVED). Also eight Regional Intermediate Bodies (RIBs) were established for the following regions: North-East, South-East, South-Muntenia, South-West Oltenia, West, North-West, Center and Bucharest-Ilfov. 15. After four years of implementation, the SOP RHD program in Romania is a matter of concern to the GoR, EC as well as to the beneficiaries. If the total commitment rate of 79.44% (EUR 2.76 bil) can be considered satisfactory, the reimbursement rate of 1.85% (EUR 64.53 mil) is extremely poor (data from December 30, 2010 provided by the Management Authority). These concerns are augmented by the fact that in the current context of economic crisis, the negative impact of the budgetary constrains cold have been attenuated to some extent, by the access to significant free financial support in areas covered by the SOP HRD. Compared with the performance of the other Operational Programs in Romania the SOP HRD is aligned to the overall poor absorption rate of EU funds, which is in the range of 1.6% – 6.2% being ranked next to the lowest performer (SOP for Environment). 16. MoLFSP has recently prepared a Road Map for the improvement of the EU funds absorption which was included in the GoR Priority Action Plan and submitted to EC. 7 CHAPTER II: MINISTRY OF LABOR, FAMILY AND SOCIAL PROTECTION Core Functions 17. The Ministry of Labor, Family and Social Protection (MoLFSP) has, inter alia, the following core functions, as listed in the official documents regulating the institution: • to regulate the labor and social protection by preparing and promoting draft legal acts needed to implement the GOR’s public policies in the labor and social protection sector; • to devise sectoral strategies for the development and implementation of public policies in the labor and social protection sector;to provide methodological guidance to institutions under its authority or coordination; • to monitor and evaluate the performance of the implementation of the sector-specific public policies; • to harmonize the legal framework in its activity sector with European Union regulations; to act as management authority for the Operational Sectoral Program “Human Resources Development�; • to administer assets, prepare budgets and allocate funds to support the implementation of its sectoral programs; • to represent the Romanian government and Romanian state inside and outside the country in its activity sector; and • to exercise sole control of the existing legislation governing the L&SP sector’s legal framework. Institutional Structure and Staffing 18. Following the latest institutional restructuring in 2010, the staff of the MoLFSP headquarters increased and the organizational structure became more complex. New institutional entities were incorporated, mainly in the area of social assistance services, and new responsibilities were added, including control over the entire social assistance/social inclusion system (both benefits and services). Four former national agencies (the National Agency for Persons with Disabilities, the National Agency for Family and Child Protection, the National Agency for Equal Opportunities and the Social Inclusion agency) were incorporated within the MoLFSP and became General Directorates. 19. The organizational structure of the MoLFSP became heavily unbalanced as far as the coordination of the various departments. Thus, seven departments with 284 staff (representing 43 percent of the Ministry’s employees) are under the direct coordination of the Minister. The minister also directly coordinates the activities of four agencies with national and territorial structure: NHPP (3,476 staff), NAE (2,162 staff), NASB (1,032 staff) and LI (3,236 staff). Immediately below the Minister are two Secretaries of State, who coordinate just two departments: one with 120 staff members, representing 18 percent of all employees; and the other with 146 staff members, 22 percent of all employees. In addition, the Secretary General coordinates the activity of 109 staff members, representing about 17percent of total employees. 8 20. While the reorganization so far, with its cost containment component, was intended to add more coherence to policy developments in the social inclusion system, it has increased the workload of senior managers (politically appointed), which may dilute the effectiveness and efficiency of coordination and decision-making functions in the MoLFSP as a whole. Given the commitment of the GOR to consolidate social assistance cash benefit programs in the future, as well as the envisaged switch from a focus on general social assistance to social services (as presented by the MoLFSP’s draft Framework Law on Social Assistance, currently under preparation), it is necessary for MoLFSP to strengthen its capacity to properly deal with these commitments. Chapter V: Social Assistance (Cash Transfers) presents in more detail the HR issues related to social assistance and makes proposals for adequate staff sizing. 21. At the same time, other central level institutions with responsibilities in the social inclusion area, such as the National Agency for Roma (NAR) and the Romanian Office for Adoptions, are functioning under the umbrella of the Prime Minister’s office. At the time they were established there might have been a rationale for placing them close to the PM’s office. However, once their specific sectoral policies are developed and enforced, it may make sense to bring them closer to the MoLFSP, which is the main institutional counterpart for social inclusion to the EU. The functional review of the Central Government conducted in the first phase of the functional review exercise has previously raised questions about the appropriateness of the two institutions’ placement within the GSG. 22. With the above findings in mind, a slightly improved organizational structure for the MoLFSP can be considered, as presented in Figure 2.1. below. In this structure, a new position of Secretary of State (or Under-Secretary of State) would be established to rebalance the coordination of the existing departments. 9 Figure 2.1. Possible Option for an Improved Organizational Structure of the MoLFSP MINISTER NATIONAL AGENCY FOR ROMA ROMANIAN OFFICE FOR ADOPTION - POPULATION- 30 20 GEN. DIR. FOR SOCIAL INSPECTION FOREIGN RELATION - 136 DIRECTORATE - 24 SECRETARY OF STATE SECRETARY OF STATE SECRETARY OF STATE SECRETARY GENERAL SOP – HRD (POSDRU)- 88 AND LEGISLATION - 69 EMPLOYMENT, WAGES GEN. DIR. PROTECTION HUMAN RESOURCES ECONOMIC DIR. - 52 DIR. FOR EQUALITY OF SOCIAL ASSISTANCE PROJ. MANAGEMENT SOCIAL INSURANCE CHILD PROTECTION for PERSONS WITH DIRECTORATE - 24 COMMUNICATION DIRECTORATE- 27 DISABILITIES - 41 PUBLIC POLICIES DIR. - 19 SOCIAL DIALOG GEN. DIR.. FOR DIRECTORATE GEN. DIR. - 47 GEN. DIR. - 54 CHANCES - 16 UNIT - 13 - 25 NATIONAL HOUSE OF LABOR INSPECTION - 3236 NATIONAL AGENCY FOR SOCIAL NATIONAL EMPLOYMENT PUBLIC PENSIONS - 3476 BENEFITS - 1032 AGENCY - 2162 County County house TERRITO TERRITO COUNTY COUNTY County County House for ... for public RIAL RIAL AGENCY . AGENCY FOR employment ... employment Public pensions 41 LABOR LABOR FOR SOC SOC BENEFITS agency agency INSPECT INSPECTO BENEFITS 41 1 41 ORATE RATE 1 1 41 Local Local Local Local Houses ... Houses Agency ... Agency 23. Staff allocation between technical and administrative functions can be improved. Currently, 23.6 percent of the ministry staff (126 people) is devoted to administrative tasks (human resources, financial and accounting, administrative, etc.), while only 76.4 percent (534 people) have technical duties and responsibilities (employment, social insurance, social assistance, social inspection, social dialogue, public policy, program structure, etc.). As a result of the government’s institutional restructuring and consolidation in 2010, the ratio of administrative employees to total employees has decreased from the previous level of almost 40 percent. However, compared with other European Union countries, this ratio is still above the average of 20 percent. In addition, staff allocation varies widely among the departments in the MoLFSP (general directorates, directorates, services, compartments). These variations should be reduced to no more than 25 percent. 24. Professional development is another area of concern. Usually, employees within the ministry and subordinate units are trained after they are hired. Personnel qualification is not based on an organized and coherent professional development system, but is done on the job by older or more experienced employees who may lack formal education in their specialties. Further, no formal guidance system or work-level integration addresses the needs of new employees or of employees who are moved to another department. In addition, there are limited opportunities for promotion and career development for qualified staff, given the financial constraints that existed in the past two years. 10 25. The professionalization of the management staff should be enhanced. The appointment of technical managers to various departments in the MoLFSP and subordinate agencies should be performance-based. Also, the current practice of temporarily delegating management responsibilities with the possibility of multiple renewals, is counterproductive and often leads to the politicization of a second layer of management staff. Both practices should be discontinued, as they also induce job insecurity. Alternatively, following an initial probation period that accords with the law (Labor Code), the temporary appointments should be converted to open-ended appointments. 26. Since reforms in the L&SP sector are often highly sensitive, there is a need to properly communicate them to the public and explain their rationale and impact. So far the MoLFSP has failed to establish proper mechanisms to support effective public awareness campaigns. As a result, the public and media have reacted adversely to the reforms recently implemented in pensions, social assistance and labor market relations areas. It is of course true that the GOR was constrained financially from encouraging the development and implementation of such campaigns over the last two years. Nonetheless, a public communication strategy that is implemented with the support of professional staff is recommended. 27. Timely access to accurate information from various areas of the L&SP sector is a prerequisite for informed decision making. Although three integrated management information systems cover pensions, the labor market and social assistance benefits areas, the Ministry’s headquarters lacks an information management platform. The three management information systems do not communicate among each other and, in the absence of a platform at headquarters, the Ministry must request information through electronic mail rather than having it automatically transferred. 28. There is a clear need for MoLFSP to create an overall information management vision, to create a future system that would integrate all existing IMS, ensure appropriate interoperability/integration, and fully support the day-to-day business functions of the MoLFSP. To achieve this objective, the collaboration of the MoLFSP with its subordinated agencies has to be enhanced. The owners of the above mentioned IMS should support this process, with the understanding that their systems have to be part of a larger eGovernment platform. A specialized institutional structure (such as a Chief Information Office) to help with the development and implementation of such a vision should be established within the MoLFSP. Such a structure would report either to the Minister or to the Secretary General, and would be responsible for: (i) Planning, prioritizing, coordinating and executing ICT initiative and projects; (ii) Acquiring and allocating ICT resources (budget, facilities, human resources); (iii) Reengineering the business process to efficiently use information and technology; (iv) Enacting or revising regulations to effect an E-Government project. FINANCIAL MANAGEMENT 11 Budget execution and financial management 29. The main activities of the MoLFSP in the budget execution area include: (i) in-year financial planning and release of funds; (ii) payment processing; (iii) accounting and reporting; (iv) internal financial control; and (v) internal auditing. 30. The Economic General Directorate (EGD) manages cash releases and therefore plays a key role in budget execution and cash planning, in addition to its functions in expenditure programming and budget preparation. 31. The EGD includes three departments: a) Financial—Accounting; b) Budget; and c) Acquisitions (in charge of procurement and administrative matters). Internal financial control functions are organized within the directorate. The EGD is headed by a general director who reports to the MoLFSP Minister and to the State Secretary in charge of economic and budget activities. The staff structure of EGD is more or less appropriate, with about 45 staff in 52 staff positions. However, there is a staff shortage in the Financial—Accounting department (at least 4 more staff needed) and in the Budget department (at least 3 more staff needed). It is unclear when these staff positions will advertised, given the continuing hiring freeze, whereby only one position can be advertised for every seven positions that are closed (for staff retiring or staff positions that are eliminated). Planning and budgeting 32. As in other reviewed Ministries, the current budget structure is a proper means of accounting and broadly complies with the requirements of the public finance legislation. However, both the budget’s structure and its display limit its usefulness as a tool for strategic resource allocation, effective management, performance measurement and accountability. The budget is primarily a functional budget, in line with legislation and reporting requirements of the Ministry of Public Finance (MoPF), and consistent with the medium-term framework issued by MoPF. The use of performance parameters is basic and oriented toward outputs rather than strategic outcomes. It therefore provides very little accountability and little feedback on implementation and performance. 33. Though the Romanian administration uses a functional and not a program budget structure, a basic program budget structure is annexed to the main budget document. This is meant to facilitate the use of the budget as a strategic funding allocation resource. 34. Ultimately, the MoLFSP would benefit from a shift to a full program budgeting approach. This, together with a renewed formulation process, would provide for a more strategic and efficient use of scarce resources by enhancing strategic allocations and promoting decentralization of decision-making powers. It would also create more accountability, foster financial monitoring and feedback, and inform budget formulation for the next budget cycle. Program budgeting would allow the Ministry to clearly match the budget to its priorities. It would define objectives for each program, and each program’s supporting budget would be consistent with measurable objectives. It would take into consideration the timing of program 12 implementation and would identify departments or agencies responsible for budget implementation and results. 35. A program budgeting format would also improve the formulation process, as it would more easily identify strategic tradeoffs. Rather than receiving requests from subordinate agencies that are primarily based on current spending levels and trying to “fairly� divide scarce resources among them, the Ministry’s management and policy unit would set clear priority guidelines on a yearly basis, within a continuously updated medium-term expenditure framework. These priority guidelines would in turn help the agencies and directorates propose their budgets. The consultation mechanism should also improve through program budgeting and empower each managing unit to design and be accountable for its own budget. A working committee of the Ministry’s leadership would then make final budgetary decisions. 36. Some challenges to budget formulation and execution are clearly cross-sectoral in nature and would require amendment of laws or regulations. However, when it comes to budget formulation and monitoring, the Ministry could build a number of internal budget management tools within the current legal framework. Rather than wait for changes to the public finance law, the Ministry can begin creating an internal program budgeting tool that would facilitate strategic budget formulation, monitoring and accountability for program objectives. Instead of building a program budget based on the official functional budget, the Ministry could establish a process for program budgeting, which would then provide the basis for the functional budget for MoPF. Such a budget would include the strategic priorities of the Ministry, outcome indicators, a detailed budget and headcount, and would identify the department in charge of implementing each priority. It should allow for clear and regular updates, not only on sectoral indicators but also on process performance. In-year financial planning and release of funds Allotment procedure 37. After approval of the annual budget law, the main spending authorities (ordonatori) draft quarterly budget implementation plans. These plans are reviewed by the EGD and approved by the MoLFSP Minister. The main spending authorities include presidents of MoLFSP agencies, heads of other public authorities and specialized agencies. Once the quarterly budget implementation plan is approved, the main spending authorities distribute the credits for their own budgets and for subordinate public entities or units whose managers are secondary or tertiary spending authorities. Then, the secondary spending authorities distribute the approved budgetary credits for their budgets and for their subordinate tertiary spending authorities. 38. To ensure prudent budget execution, the main spending authorities are required to reserve 10 percent of approved funding for all expenses except personnel expenditures and funds related to external liabilities. The reserve is distributed during the second half of the year. 13 Cash releases 39. Cash is released through monthly “credit opening� (deschidere de credit). The main spending authorities each month present several requests to the EGD for cash releases, which should be in line with the quarterly spending limit. These requests are accompanied by notes presenting the operations that are to be financed. After these requests are reviewed, the “credit openings� are authorized and thus cash is released to the main spending authorities. These “credit openings� are recorded in the Treasury payment system. Then the authorized cash releases are distributed in cascade within the main spending units. 40. The EGD exercises tight control over credit releases through the combination of quarterly cash limits and monthly credit opening. Such controls may help keep cash under control when the budget is not based on realistic revenue estimates. However, the process is time-consuming and involves a large number of checks and verifications. In addition, expenditure management at the lowest administrative level is negatively when there are delays in distribution of cash within MoLFSP. The process also risks generating arrears if the cash releases do not take into account the payment schedule for existing commitments, or if the cash releases are limited due to overall limited funds availability. Payment processing 41. An effective Treasury Single Account system is in place. All cash transactions are channeled through the Treasury account at the central bank with the exception of transactions in foreign currency, which are processed by commercial banks. The MoLFSP and subordinate entities’ accounts are kept with the Treasury. Payments are made to these accounts through the Treasury information system generally within one day. The subordinate entities lack an effective system to determine that funds have been made available to them. They rely heavily on frequent informal checks by telephone with MoLFSP financial staff and with the Treasury as to whether funds have been made available. 42. Spending authorities must bring payment orders (ordonantare) to the Treasury branch offices. This procedure, required by Law on Public Finance (500/2002), is cumbersome, time- consuming and involves significant paperwork and signatures. Up to now, problems related to legal authorization for electronic signatures have prevented the automated transmittal of payment orders from spending authorities to Treasury branch offices. At the Treasury branch offices, the payment orders are generally scanned (a payment order includes a bar code) or manually processed, for the registration in the Treasury database. Accounting and reporting 43. Main, secondary and tertiary spending authorities of the state budget and other government entities keep their accounts using the accrual accounting method (e.g., they account for depreciation of fixed assets). There is a unified chart of account for the central and local government units. From 2003 to 2010, the government implemented 18 International Public Sector Accounting Standards (IPSAS) accrual accounting standards (out of a total of 31 standards). Consolidating the implementation of these standards and implementing further IPSAS standards will require further training and close supervision. This is being addressed 14 separately by the Bank through a technical assistance with the Ministry of Public Finance (MoPF). 44. MoLFSP and the main spending authorities prepare quarterly and annual financial statements, which include: • A report on budget execution that shows : (i) the commitment authorization; (ii) the initial payment budgetary credit; (iii) the revised budgetary credit; (iv) budgetary commitments (reservation of the budgetary credit for a specific use); (v) legal commitments; (vi) payments; (vii) verified expenditures including unpaid expenditures; and (viii) monthly reports on salary expenses. • A balance sheet that shows assets and liabilities. 45. MoLFSP consolidates these financial statements. They are then centralized by the Public Institutions Accounting Methodology General Directorate (PIAMGD) within MoPF through dedicated software. Quarterly reports are transmitted to the PIAMGD within 45 to 60 days after the end of the quarter under review. In parallel, the Treasury Information System is able to produce budget execution reports on a cash basis, nearly in real time.The time needed to get data on commitments is significant. Commitments made in the first month of a quarter are reported 3.5 to 4 months later. This poses the following problems: • Appropriations already committed have sometimes been cut during budget revisions because of insufficiencies in commitment reporting. This may lead to arrears generation. Reporting commitments in a timely manner, together with sanctions for over- commitments and off-budget commitments, will contribute to improved fiscal discipline. More effective cash planning would require a shorter reporting period for commitments and for reporting the payment schedule associated with the commitments. • MoLFSP financial information software systems focus mainly on accounting and reporting, but even these processes rely heavily on manual interventions. The transfer of data from the MoLFSP software to the format requested by MoPF’s PIAMGD is done manually, based on the MoLFSP trial balance. Manual data transfer takes some time and is prone to errors. • In addition, there is no systematic procedure to compare expenditure payments disclosed in the budget execution reports of a secondary and tertiary spending authority with payment transactions registered in the Treasury System. Financial accounting and reporting systems 46. MoLFSP uses a basic software application for its financial management functions. The main system is Sintec financial management software developed by a Romanian firm, which has several standard modules including accounting, fixed assets, inventories, and others. The salary module was not acquired, as it is difficult to transfer data from the older salary database. Some MoLFSP entities had a maintenance contract with the software firm to provide technical support and incorporate legislative and other updates into the software on a timely basis. However, some subordinate entities, such as the Public Pension House, have no current maintenance contract and 15 thus cannot fully use the software anymore. Instead, they use Excel spreadsheets. Excel is also extensively used for reporting and data analysis. 47. In terms of hardware, a number of hardware problems including aging computers have been reported, and some server failures, especially at busy quarterly reporting times. In one instance, the Public Pension House lost all financial data for 2009 due to a virus that affected its server. The effort required to re-enter all the data into the system from paper records was tremendous, and required full-time work from several staff for several months. It is clear that servers that are more powerful will be needed as well as appropriate antivirus protection. 48. There have been substantial efforts to modernize the MoLFSP software systems in recent years, including through financing provided from a World Bank loan. However, the Oracle system that was developed as a result is not in use. Once the loan ended, there were inadequate funds to keep the Oracle software up to date or even to maintain it. It is regrettable that such an expensive investment was not updated or fully used. The benefits of using a comprehensive system would far outweigh the extra costs. 49. MoLFSP would greatly benefit from upgrading its software systems and incorporating other critical functions in them, i.e., planning and budgeting (currently only kept in Excel), procurement planning, program budgeting, etc. In addition, errors caused by manual data transfer from the MoLFSP accounting software into the format requested by MOPF, as referenced above, could be prevented through a comprehensive system. Moreover, the data on commitments would be of more use to MoLFSP management if it were automated, eliminating the effort currently involved to obtain it and ensuring that the data is always up to date. Budget execution financial controls 50. Law No. 500 on Public Finance defines four stages of budget execution (which follow ALOP norms—commitment, verification, payment order and payment) and stresses the principle of separation of duties. Written procedures are lacking for some activities and functions. Current written procedures mostly describe the Ministry’s organization, structure, and main functional processes, as well as individual jobs. However, the MoLFSP should develop written internal control procedures customized to all its specific activities. It is recommended that the EGD update and finalize in writing all financial internal control procedures by December 31, 2011. The system of preventive (ex-ante) financial controls performed in MoLFSP is as follows: • Internal financial controllers who perform ex-ante financial control of all expenditure transactions (commitments, cash opening and payment order– ordonantare) are regulated by their own financial preventive control norms; • MoLFSP is subject to ex-ante financial preventive control from delegated MoPF financial controllers, who belong to the staff of the MoPF Central Harmonization Unit (CHU) for Financial Management and Control. They perform financial controls on transactions above a certain amount, generally in the range of 25,000 New Romanian Lei (RON). These transactions are submitted to a “double visa� system, consisting of both the visa of the internal unit’s own “preventive� financial controller and the visa of the MoPF “delegated� financial controller. 16 51. The “double visa� system increases paperwork and runs the risk of making line ministries think that they are relieved of their accountability requirements because their transactions are verified ex-ante by a MoPF controller. The MoPF intends to phase out its delegated financial controllers within line ministries by December 2012. After this date, only financial controllers reporting to line ministers will perform preventive controls. While this measure is desirable, line ministries will need to take further action to strengthen their internal controls. Line ministries are preparing a work program for this purpose. The MoPF CHU for Financial Management and Control will have to review and monitor these work programs. As of April 2011, MoLFSP was among the ministries that were still subject to the visa of the MoPF delegated financial controller. Internal Audit 52. The internal audit unit within the MoLFSP is established in accordance with the Law on Public Internal Audit (672/2002). This unit is monitored by the MoPF CHU for internal audit, which reviews the internal audit work plan and methodology, carries out training activities and participates in sectoral audits involving several ministries. 53. The internal audit department in the MoLFSP is facing the same issues as other parts of MoLFSP, i.e., reduced visibility of internal audit (it is currently organized as a department, even though it has been a directorate in the past); negative influences on work planning due to frequent changes in the management of the ministry; excessive ad-hoc internal audit missions, which impair the effectiveness of a risk-based internal audit strategy and annual work plan; severe understaffing (currently only four internal auditors are in place, reduced from ten in the past); reduced training budgets that impede the department’s ability to ensure appropriate continuous professional development; insufficient equipment (no laptops at all); extensive time required to implement recommendations following the internal audit findings; relatively limited interest by the MoLFSP management in using the internal audit findings to improve and streamline internal control processes and procedures. 17 CHAPTER III: LABOR MARKET Institutional Arrangements 54. The National Agency for Employment of Romania (NAE) is the main governmental body responsible for activities related to the implementation of labor market policies. NAE is an autonomous public institution, operating under the authority of the Ministry of Labor, Family and Social Protection and it is managed by a tripartite Governing Body. 55. At a local level, there are 42 county and Bucharest employment agencies in addition to eight Regional Adult Training Centers. The NAE’s activity has lately become highly decentralized. All proposals for future activities come from the local level and the actual implementation of the National Employment Program takes place at the local level. The county agencies have their own budgets and are able participate in public-private partnerships at the local level. 56. The National Agency for Employment was established in 1999 with the support of German technical assistance under bilateral twinning light pre-accession programs (linked to the WB-financed Employment and Social Protection Project), by taking over labor offices within the General Directorates of Labor and the Social Protection department of the Ministry of Labor. Taking into account the labor situation at that time, the main activities of the Agency were oriented towards passive measures (unemployment benefits, severance payments, etc.). 57. As Law N0.76/2002 on the unemployment insurance system and employment stimulation has entered into force, the Agency has shifted from passive to active measures to stimulate employment. Over time, the active measures have been adjusted in order to better meet the labor market’s requirements. In order to ensure the quality of the services it provides, the Agency in 2004 introduced the International Organization for Standardization (ISO 9001) standard for its management service. 58. In April 2007, the Agency incorporated the activities of the Office for Labor Force Migration. It now deals with the placement of Romanian citizens abroad as well as protection of their rights while employed abroad. The legal framework to regulate and coordinate the activities of the NAE is embedded in two laws: i) Law No. 202/2006 on the organization and functioning of the National Agency for Employment; and ii) Law No. 76/2002 on the unemployment insurance system and employment stimulation. 59. The institutional structure of both the NAE and its county and local branches fits the Agency’s responsibilities and business requirements. However, as the report will show further, staffing remains a big problem due to staff reductions and wage cuts last year. 60. Each year, based on proposals from the county agencies for employment, an Annual Employment Program is drafted and submitted for the approval to the Agency’s tripartite 18 Governing Body. The NAE concludes a contract-commitment based on performance indicators with the Ministry of Labor, Family and Social Protection. The National Development Program is always at the heart of any annual planning of the Agency’s activities. Overall Labor Market Situation 61. The recent global economic downturn is severely affecting most labor markets in Europe. In some countries, what began as a crisis in financial markets has become a serious jobs crisis. While there is hope for an economic recovery as output starts to grow again, the effects of the global crisis on the labor market are far from over. 62. However, the Europe 2020 Strategy set a target employment rate for population age 20–64 in EU-27 countries of 75 percent. Romania has committed to a target of 70 percent, compared with its current 63.3b percent employment rate. 63. In 2010, unemployment was still rising in all EU10 countries. Based on surveys, the unemployment rate was highest in the Baltic states, including Latvia (18.7 percent), and lowest in the Czech Republic, Slovenia and Romania (7.3 percent). The 2010 unemployment rate was almost triple the 2008 rate in Lithuania and Estonia, and more than doubled in Latvia over the same period (Annex 1— Table 1 and Figure 3.1. below). In addition, a significant portion of the workforce was forced to accept part-time jobs, take partially paid or unpaid administrative leave, or experience significant delays in wage payments. Figure 3.1 Unemployment in EU 10, 2008–2010 Compared with EU-15 countries, Romania is among those with the lowest unemployment rate, close to Germany, Denmark, UK, Italy and Finland (Figure 3.2. below). 19 Figure 3.2 Unemployment in EU-15 and Romania The recent national data for Romania show that at the end of February 2011, unemployment decreased to 6.58 percent (1.75 pp lower than the level of February 2010). Figure 3.3 below shows the change in unemployment in Romania over the last three years. Figure 3.3. Unemployment in Romania (2008– Evolutia numarului de someri inregistrati in perioada 2008-2011 800.000 750.000 700.000 650.000 600.000 550.000 500.000 450.000 400.000 350.000 300.000 ian. feb. martie aprilie mai iunie iulie august sept. oct. nov. dec. 2008 383.989 379.779 374.050 352.466 338.298 337.084 340.462 345.510 352.912 364.183 376.971 403.441 2009 444.907 477.860 513.621 517.741 526.803 548.930 572.562 601.673 625.140 653.939 683.123 709.383 2010 740.982 762.375 765.285 738.187 701.854 680.782 679.495 675.790 670.247 645.453 633.476 626.960 2011 614.976 600.308 2011) Source: NAE (2011) Geographically, the registered unemployment rate varies widely across the counties, although it respects the overall historical patterns observed so far (see Figure 3.4). The lowest unemployment rates (under 5 percent) were registered in Ilfov (including Bucharest), Timis and Cluj, while the highest rates (between 10 and 12 percent) were registered in Teleorman and Vaslui. Figure 3.4. Registered Unemployment Map in Romania (December 31, 2010) 20 Source: NAE (2011) Informal Employment 64. As in most of the countries worldwide, Romania has a shadow economy, which obviously contains an informal employment component. While the definitions of the shadow economy and informal employment vary according to who is asking and what motivates the question, the following ones (emerging from several international organizations – OECD, ILO or EC) be considered for the purpose of international comparisons: • Shadow Economy, referring to market-based production of goods and services that are in essence legal under prevailing laws, but concealed to avoid payment of income taxes and social insurance contribution and to escape product and factor market regulation; • Informal work force, referring to non-professional self employed and employers who employ workers without a written employment contract, unpaid family workers and/or those who do not make social insurance contributions. 65. Informal employment in the shadow economy is a phenomenon that worries policy makers and is gaining urgency in Europe in particular. The forces that accompany globalization put a premium on mobility and skill renewal. Rapid population ageing will require that people work longer and be far more productive. To achieve this, socil institutions have to be more “pro- employment�, encouraging greater participation. And looking ahead, public financial resources 21 will be increasingly scarce, requesting measures that can significantly and sustainably increase tax revenues (Packard, 2011). 66. This phenomenon matters and has negative implications to individuals and their households, to the companies and to the society as a whole. These effects can be easily observed in the reduced revenues to the unemployment and pension funds, as the functional review will show further on, hampering also these benefit levels, as well as the availability and delivery of social services. 67. The size of informal sector is often impacted by the level of taxes, of the mandatory social insurance contributions and of the labor market regulations. Although it is difficult to assess the size and structure of the informal sector given its very nature, several methods can be used, and they can be separated into three classes: (i) direct methods, such as voluntary survey data or the results from tax audits; (ii) indirect methods or “indicator� approached, such as discrepancy between aggregate income and expenditure: total labor force and and formal employment, or monetary methods based on unexplained components of money demand (transaction approach, currency demand approach); and (iii) model approach such as Multiple Indicator-Multiple Cause (MIMIC) or structural equation model. 68. International comparison, using labor contract criterion for dependent employed (European Social Survey 2008/09), indicates Romania with an aggregate of almost 15 percent of the labor force in shadow employment (dependent employment without a contract + informal self-employment + “unpaid� family employment, in the same range of 10-15 percent (Estonia, Denmark, Norway, Bulgaria, Russia, Slovenia). Using other criterion such as firm-size or contributing to social insurance the ranking may obviously vary. 69. Romania has amended the labor market regulations, increasing its flexibility and introducing higher penalties for firms activating in the shadow economy. The recent control campaign conducted by the Labor Inspection at the request of the MoLFSP, revealed a significant number of informal employment cases. As a result during the month of May 2011, a number of 353,339 new labor contracts were signed. Although not the entire number of new contracts signed can be attributed to the above mentioned control (employment seasonality could have had an impact too), the overall result is notable. 70. Registration of job seekers. The number and dynamics of registered unemployment are important to the activities of Public Employment Services (PES). In most EU10 countries, registered unemployment rates exceed survey-based unemployment, since registering as unemployed might be a precondition for free access to health insurance or social assistance, even for those who are de facto inactive or informally employed. For example, in Slovenia, the number of registered unemployed in 2009 was 42 percent higher than the number of survey- based active job seekers (Figure 3.5). Only in the Baltic states and Romania is the number of registered unemployed lower than survey-based unemployment. Figure 3.5. The ratio of registered unemployment to the total number of unemployed in 2009, by the labor force survey data; % 22 Source: Kuddo 2010 71. The pool of registered unemployed shares the same characteristics as the unemployed population in general: a high share of long-term unemployed and a high share of youth among the registered unemployed (Annex 1 Tables 2–3; registered unemployment in 2004—2010 in Romania see Annex 1 Table 4); Moreover, the ratio of job seekers to registered vacancies is extremely unfavorable in most EU10 countries. It is highest in Latvia, where 128 job seekers competed for one vacancy, followed by Romania, which had 95 jobs seekers per vacancy (December 2009). Basically, this means that once registered at PES, the job seeker remains on the roster for a long period of time. For example, in December 2009, just 2 percent of job seekers in Romania and Estonia and 4 percent of job seekers in most other reviewed countries were placed in jobs during the month. 72. Administration of Public Employment Services (PES). In most EU-10 countries, public employment services function as an independent government implementing agency that provides relevant services. They operate quite autonomously within their established legal framework and operating budgets. Usually the line ministry is responsible for policy related issues, including legislative framework and budgeting. The head office of the PES is responsible for the development of particular service standards and guidelines for employment programs; information systems (including collection of labor statistics); labor market analysis and research; financing of particular programs including unemployment insurance; contracting out to NGOs and private sector some of the services; quality control and internal auditing; international cooperation and public relations; human resources (staffing of PESs), and performs some other functions. Local offices of PES, under the general supervision of the head office and in close collaboration with local administration, are directly involved in interacting with the unemployed and with job seekers. Human Resources 73. An important factor contributing to the success of active labor market programs is the institutional capacity of national employment services, including the network of offices, the legal framework in which they operate, and especially an adequate number and professional level of 23 staff at the local employment offices. These determine how actively the employment services work with local authorities, employers and unions in determining job vacancies available or the skills needed by the trained labor force, and thus how effectively they design programs and choose service providers and beneficiaries. For staff size to be adequate it must take into consideration workload (expressed as client/staff ratios—staff caseload) and the complexity of the activities to be performed. 74. However, it is difficult to compare client/staff ratios without knowing the exact composition of the services delivered. For example, a public employment service that pays out unemployment benefits or operates adult retraining programs may have a higher staff/client ratio than a county in which PES simply contracts for adult training services or in which unemployment insurance benefits are administered by a social insurance agency. The differences are explained by the type as well as quality of services offered. 75. Staff caseload–the ratio of clients to employment counseling staff–is a critical constraint on PES performance in many countries. In fact, available data show wide variations in levels of PES staffing among the EU10 countries. By the end of 2009, the highest staff caseload was reported in Romania, (an average of 269 registered unemployed per one PES staff member), followed by Latvia (241 unemployed per one staff). In contrast, the staff caseload was only 88 registered unemployed per one PES staff in the Czech Republic. (Annex Tables 5–6). Within the European Union, the average staff caseload is around 1:150, while the figure recommended by the ILO is even lower—1:100. 76. Compared to 2008, some EU10 countries have found the resources to increase the number of staff in their PESs. For example, in Estonia the number of staff in the PES increased from 352 to 455 in 2009. By contrast, Romania reduced the number of PES staff from 2,897 employees in 2008 to 1,904 employees in 2011 (see Table 3.1 below) Table 3.1. Staff of the National Agency for Employment in Romania 2007 2008 2009 2010 2011 TOTAL (National + County + Local) 3517 2882 2882 2162 2162 of which: Total number of PES staff, 2897 2538 2538 1904 1904 of which: Number of PES staff in contact with 2227 2048 1922 1388 1396 job seekers and employers Source: NEA 77. Upgrading of staff skills, competence, and motivation are also important areas of reform. The issue of ongoing training is especially critical for employment counselors, who must be highly skilled and capable of working in different specialized areas yet, through job rotation, also able to acquire broad experience in the longer term. 24 78. NAE benefited in 2009 from a complex program to improve its ability to manage and develop human resources services that was delivered by the PES of Veneto, Italy, and financed by the EC under the Twinning Light arrangement (RO 2006/IB//SO-01 TL). The program was focused on HR performance: both actual performance and what would be needed to deliver effective service to citizens and companies. The results of this program are to be gradually implemented and internalized in the institutional culture of NAE, not only in the short term but also medium and long term. However, implementation appears to be proceeding at a slow pace. Funding of PES Activities 79. The efficiency of state employment policy is to a large extent related to the amount of resources available for financing labor market programs. The countries usually finance labor market policies through general revenues, payroll taxes or a combination of the two. 80. Most EU10 countries rely on earmarked employment taxes to finance labor market policies and programs. In Bulgaria, the Social Insurance Institute is collecting payroll taxes representing 31 percent of labor costs, a portion of which are then reallocated to finance labor market programs according to the approved budget of the employment agency. In Slovenia, the employment tax has not been imposed since 2009, and programs are predominantly financed from the budget (plus funding from international donors). The Czech Republic, Poland, Estonia and Romania financed employment programs predominantly through an earmarked employment contribution, but shortfalls are covered from the state budget. Notably, during the peak of the crisis, in 2009 Estonia increased its employment tax from 0.9 percent at the beginning of the year to 4.2 percent by August 2009. (Table 3.2). Table 3.2. Employment tax rates in 2008, 2009 and 2010 (% of payroll/wages) Employers’ contribution Employees’ contribution 2008 2009 2010 2008 2009 2010 Czech R. 1.2 1.2 1.2 0.4 0 0 Poland 0 0 0 2.45 2.45 2.45 Estonia 0.3 0.3*1.0**1.4*** 1.4 0.6 0.6*2.0**2.8*** 2.8 Romania 1.0 0.5 0.5 0.5 0.5 0.5 *- 01.01–31.05.2009; **- 01.06–31.07.2009; ***- 01.08.2009... Source: Kuddo 2010 81. In Romania’s case, the aggregate contribution rate of 1.0 percent brings so little revenue to the Unemployment Fund that the state budget must subsidize 68.8 percent of the fund in 2011. Under these circumstances, the system can hardly be considered to function on the principles of social insurance. Under these circumstances, the financing of the PES must be negotiated with the MoPF, which by definition has to be stingy in order to comply with budgetary constraints. 82. However, the problem is not only a matter of more funding, but also of greater effectiveness. While the funding of ALMPs is limited in EU10 countries, the emphasis should be 25 put on improving the design and effectiveness of ALMPs rather than only on increasing spending levels.1 83. High-income countries spend significant resources on labor market interventions. Across the EU, a total of 201 billion Euros, or 1.6 percent of EU-27 GDP, was spent on labor market policies (LMP) in 2008. There was, however, considerable variation between member states, with expenditure ranging from 3.3 percent of GDP in Belgium to just over a quarter of a percent in Romania and Estonia. A major part of LMP expenditure (60 percent) goes to income support for out-of-work job seekers–primarily unemployment benefits. Expenditure on LMP services in 2008 represented around 12 percent of total LMP expenditure or 0.19 percent of EU-27 GDP, with only four countries spending more than a quarter of one percent of GDP (the Netherlands, Sweden, Germany and the United Kingdom). The United Kingdom is the only country where more than half of LMP expenditure (52 percent) is spent on LMP services. (Public expenditure and participant stocks in labor market programs in the OECD, and in Australia, the Netherlands and the United Kingdom 2007–08 (are presented in Annex Labor Market Table 7). This reflects the policy approach of focusing support on active job searches and reserving placement in full- time measures for those most in need. (Gagel 2010). 2 84. However, the largest part of LMP expenditures in the EU, almost 60 percent of the total, went to passive LMP support (categories 8–9: out-of-work income maintenance, support, and early retirement). Expenditures on passive income support accounted for the largest share of LMP expenditures in 23 member states and exceeded 70 percent of total expenditure in five cases (Cyprus, Greece, Estonia, Spain and Latvia). Depending on unemployment rates or the generosity of the benefit and program schemes, EU10 countries’ financing of LMPs is unequal. But overall, allocations to finance LMPs are relatively low: from 0.90 percent of GDP in Poland to 0.27 percent in Romania and Estonia (2008; Table 3.3). This is partially explained by the fact that overall expenditures on social protection in these countries are also relatively low as a percentage of GDP, compared to EU15 countries. Differences in the rate of registered unemployment may also explain the variance in expenditure level. 85. Budgetary expenditures on public employment services in many Europe and Central Asia (ECA) countries are especially low when comparing expenditures of PESs in total and of ALMPs in particular, per one registered unemployed. By Eurostat data, the relevant expenditures on LMPs per registered unemployed in 2008 equaled 2,600 Euro in Slovenia and 2,200 Euro in Latvia. Meanwhile, in Bulgaria, the relevant expenditures were below 700 Euro, and in Romania 1 Public expenditures on ALMPs in OECD countries see: http://www.oecd-ilibrary.org/employment/public- expenditure-on-active-labour-market-policies_20752342-table9. 2 Labor market measures are divided into the following main categories: (1) general services for job seekers provided by the public employment services; (2) training programs; (3) programs that facilitate the insertion of the unemployed or other target groups into a work placement by substituting hours worked by an existing employee; (4) programs that facilitate the recruitment of the unemployed and other groups, or help to ensure the continued employment of persons at risk of involuntary job loss; (5) programs that aim to promote integration of disabled persons into the labor market; (6) programs that create additional jobs; (7) programs that promote entrepreneurship by encouraging the unemployed and target groups to start their own businesses or to become self-employed; (8) cash benefits to compensate for loss of wage or salary; and (9) programs that facilitate full or partial early retirement of older workers (EC/Eurostat 2006). 26 around 1,000 Euro. (Table3.3). Expenditures on labor market measures (categories 2 to 7) were even more dispersed: from 1,100 Euro per registered unemployed in Poland to 230 Euro in Romania. In addition, low expenditures on administrative costs hinder, inter alia, introduction and enhancement of more cost-effective ICT solutions. 86. Constraints on public finances associated with the crisis limited the scope of labor market interventions. In 2009, several countries, most notably Estonia, Latvia, and Slovenia, significantly increased the funding of “traditional� employment programs provided through the PESs, using resources received from the European Social Fund. Unfortunately, Romania’s absorption of EU funds remained weak and hence the Romanian PES could not augment its financial resources to support its programs. Table 3.3. Expenditures on labor market policies (LMP) in EU–10 countries in 2008 and 2009 (million Euro) LMP LMP LMP LMP Share of Average LMP Including: Spending Spending spending spending LMP number of spending per on LMP 2009 2008 % of % of GDP spending registered one measures GDP in in 2008 (categ. unemployed registered (categ 2– 2009 2–7) out in 2008, unemployed 7) in of total in (1000’) in 2008, 2008, 2008 (%) (Euro) (Euro) Czech R. 908.8 624.7 0.66 0.42 24.7 324.5 1925 476 Hungary ... 703.3 ... 0.66 31.3 442.5 1589 497 Poland ... 3285.8 ... 0.90 51.7 1525.8 2153 1114 Slovakia ... 446.9 ... 0.69 21.7 230.4 1940 421 Slovenia 340.6 166.1 0.96 0.45 20.8 63.2 2628 546 Estonia 207.4 44.0 1.49 0.27 12.7 19.9 2211 281 Latvia 248.9 110.4 1.35 0.48 16.3 57.7 1913 312 Lithuani ... 120.8 ... 0.37 37.3 73.4 1646 613 a Bulgaria 227.6 160.9 0.65 0.45 55.6 233.6 689 383 Romania 534.5 373.8 0.46 0.27 22.3 362.4 1031 230 Source: Eurostat on-line 87. Beneficiaries of ALMPs. The actual situation of a labor market reflects many influences, most of which are beyond the reach of labor market interventions. Nevertheless, these interventions have the potential to significantly improve labor market performance. In particular, ALMPs are implemented to enhance labor supply (e.g., training), increase labor demand (e.g., wage/employment subsidies and public works), and improve the functioning of the labor market (e.g., employment services). Whether or not this potential materializes, however, depends on a number of factors, and the innumerable variables that intervene in the final outcome of their implementation. Also, while some people may not require active labor market measures, they are essential for others to gain skills or work experience to achieve sustainable integration in the labor market. 88. EU10 countries have different priorities in providing ALMPs. According to the structure of budgetary allocations, in 2008 Bulgaria spent 66 percent of expenditure on active measures of job creation; the Czech Republic, 65.7 percent on supported employment and rehabilitation; 27 Estonia spent 86.8 % of its budget on ALMPs for training; Latvia spent 32.8 percent, and Romania 59.8 percent, on active measures or employment incentives. (Annex 1 Table 8) 89. Judging from the number of beneficiaries, the most popular programs tend to be career counseling and professional orientation (but students also benefit from the programs), job search assistance, training, and public works (Annex I, Table 9–10). Compared to 2008, in 2009 the number of participants in training programs increased from 8,600 to 29,200 in Latvia, and from 5,800 to 18,100 in Estonia. This reflects a shift in emphasis from a “work-first� approach to a “train-first� approach through training and work-experience programs. However, the number of beneficiaries of ALMPs (other than counseling) remains low in most cases. (Active labor market programs in Romania (Annex 1, Tables 11–12). Performance Management 90. The efficiency of PES operations can be improved by setting up monitorable performance targets using the administrative data generated by PES activities (e.g., number of individuals served, types of interventions, follow-up, etc.) at various levels. Key performance indicators may include quantitative indicators: the number of visitors to local employment offices, registered job seekers, participants in ALMP, placements, and job vacancies filled within a certain time; increasing the PES market share of notified vacancies; and reducing the incidence of long-term (over one year) and very long-term (two years and more) unemployment. Key performance indicators also may include qualitative indicators: client satisfaction (job seekers and employers) with PES services; establishment of a database of employers; and so on. 3 91. By using such information on a comparative basis, an internal measure of the effectiveness of PES operations can be made. By measuring performance against such targets, management tools can be applied, ranging from discretionary budget allocations to more formal reward/penalty arrangements, to raise efficiency (World Bank 2003). 92. In Romania, performance management is based on the objectives set in the Annual Employment Program, and contract-commitment is signed by the NAE and the MoLFSP. Similar contracts are then signed by the NAE with each of the 42 county agencies and with the Regional Adult Training Centers (RATCs), containing specific performance indicators. The fulfillment of such indicators is then controlled by means of quarterly reports and meetings with the management of the territorial agencies and with the Regional Adult Training RATCs. However, the indicators have not been differentiated depending on the local labor market situation, or institutional capacity to enforce the programs, and the county variance in performance indicators is enormous. Starting in 2011, one of the indicators — participation of unemployed youth in vocational training courses— was differentiated by county. (Annex 1, Tables 14–15). 3 For a review of best practices regarding performance-based financing of regional employment offices in OECD countries, see, for example, Ivory and Thomas 2007. 28 93. There are several international examples of good practice in the area of performance management, out of which the United Kingdom and Austria are presented below as best practice. 94. The labor market in the United Kingdom is overseen and managed in a goal-oriented approach (Management By Objectives—MBO), under which annual targets are specified in operational terms on a quantitative basis. The goals and funding are defined by the government (DWP) and the Treasury and set down in a Public Service Agreement. A differentiated system of ongoing monitoring of results and goal-related feedback on results enables oversight entities to intervene early when needed, so as to take corrective or countering action. Information about regional and national developments and events is updated weekly. Official reports are prepared monthly. Reports on the status of goal achievement are submitted to the DWP quarterly. Output indicators include unemployed persons placed (job entries)/placement counselor per week or persons placed (job entries)/registered job openings. A Diagnostic Tool Kit is designed to show an employment office’s current placement performance relative to the average performance of comparable offices from the year before. This instrument enables Job Centers in the United Kingdom to determine clearly where they stand. 95. Perhaps the most elaborate performance management system has been developed by the Austrian PES (Arbeitsmarktservice—AMS). The AMS scorecard integrates labour market policy goals with process and resource management, client and staff satisfaction, and the dimensions of management and equal opportunity at the AMS. Twenty-four indicators have been developed in the areas of job seeker service, business service, job market and career information, management, and support. Measurements are taken at the level of the Local Offices, which are grouped into six clusters (large cities, medium-sized cities, dynamic medium-sized towns, small towns, dynamic small towns, and towns of interest to tourists).4 (For performance management indicators in Hungarian, Austrian and Swedish PESs, see Annex 1 Table 13.) Intermediation and Reaching Out to Vacancies 96. In order to be effective, ALMPs require a reasonably buoyant supply of job vacancies. Data on job vacancies are critical for assessing the demand for labor and the skills shortage. Thus, vacancy registration and advertisement is one of the main activities for a PES. Even in most OECD countries, only between 10 percent and 50 percent of all new hires in the economy are preceded by registration of a vacancy with PES (OECD 2000). 97. In the EU, only around one third of the countries have legislation stipulating that employers must register any vacancy arising within their establishment to the Public Employment Service. These countries are Belgium, Czech Republic, Finland, Hungary, Luxembourg, Romania, Slovenia, and Sweden. 98. In Romania, according to Law No. 76/2002 on the unemployment insurance system and employment stimulation, all employers are obligated to notify the territorial agencies for employment within five days of any available vacancies. However, as a rule, employers will only 4 Retrieved from: www.pesmonitor.eu 29 seek the assistance of PES in filling vacancies if they expect to find job seekers with the preferred skills or experience. Even if there is a legal requirement to register vacancies, this obligation will only be respected if the costs of doing so are less than the benefits obtained, including any sanctions in the event that the non-compliance is discovered and acted upon. 99. Compulsory vacancy reports have not proven useful in Europe. Vacancies registered at PESs tend to be largely for unskilled or semiskilled workers at low wages; for public sector jobs; or for jobs with harmful working conditions that often go unfilled. Compulsory reporting causes an administrative burden for the employer and is counterproductive in terms of “service to employers.� However, suspending the duty for reporting vacancies is a big change and could have negative consequences (i.e., fewer vacancies than before). It should go hand in hand with improved services for employers and a positive image campaign. 100. During the recent crisis, the surge in registered unemployment was accompanied by other negative trends. The number of job vacancies offered by employment services dropped significantly, and the ratio of job seekers per registered vacancy rapidly worsened. In December 2009 in Romania, around 100 job seekers were registered per vacancy. In Latvia, the situation was even worse (Annex 1 Table 3). This could lead to longer unemployment spells for many job seekers in the coming years. Although the turnover in registered vacancies is quite high in Romania, as judged by the numbers of exits and entries of vacancies, the overall situation has not improved significantly in 2010 (Annex 1 Table 12). 101. Private sector involvement. EU10 countries may consider involving the private sector even more actively in the provision of labor market services such as training, job brokerage, and other services as an integral part of PES reform. This trend was recognized and further boosted by the Private Employment Agency Convention adopted by the International Labor Organization in 1997 (Convention 181 supported by Recommendation 188). It allows for lower pressure on public budgets and provides a wider array of options for a diverse range of clients. By 2009, according to the national PES, there were 587 private employment agencies registered in Bulgaria, 63 in Latvia, 41 in Lithuania, and 51 in Slovenia. By contrast, there were 2,176 in the Czech Republic and over 2,800 in Poland. 102. The practice in many countries shows that the private agencies are often more efficient and effective in providing employment mediation services than the public sector, bearing in mind that they can secure services within smaller, more targeted segments of the labor market and are oriented more towards employers’ requirements than to the needs of the unemployed. However, in Romania the number of job seekers placed by private employment agencies is relatively small: in 2010, 1,722 individuals found a job through private agencies, and in January to February of 2011, 438 individuals did so. 103. Private agencies will likely address only a few labor market niches but will offer more proactive employment policy by better tailoring it towards labor demand. In general, PESs typically serve those individuals at lower skill levels and with limited education, while private employment agencies serve the better skilled and better educated. 30 104. Private agencies also offer a more specialized search, more exacting screening, and faster response times than most public services are equipped to offer. While private agencies also offer greater confidentiality to the employer, they choose large metropolitan areas and tend to ignore or underserve other parts of the country. In the absence of public regulation, private placement agencies will tend to concentrate on the most easily placed unemployed persons (i.e., “skimming off the cream�). 105. Many EU10 countries, for example, Bulgaria, Hungary, Poland, Romania, and Slovenia, purchase training programs from various providers through public tenders. The same principle can be applied to other types of employment services, separating purchasers from providers of services. So too, core job matching and career counseling activities are increasingly outsourced and subcontracted with private providers and NGOs in Bulgaria, Poland, and Romania. In the Czech Republic, job counseling services may be contracted out to specialized agencies regardless of their status (i.e., either private or non-profit organizations). 106. In Romania, out of the services the NAE may entrust to specialized providers, two categories can be distinguished: (i) services that can be contracted only to providers authorized and accredited according to the law: vocational information and counseling, job-matching, vocational training and pre-layoff services; (ii) services contracted to providers who, according to the current legal provisions, are not required to be authorized or accredited: consultancy and assistance for starting an independent activity or a business. 107. As of March 1, 2011, the following data is available on the accredited providers of employment stimulation measures: (i) 53 providers of vocational information and counseling services; (ii) 45 providers of job-matching services on the internal market; and (iii) 200 providers accredited for both types of services. 108. Information and communication technologies (ICT). Another way to combat human resource and budget constraints is to move away from costly face-to-face interactions and towards the extension of self-service facilities for job seekers and employers. They then can contact each other through these self-service systems without the intervention of placement officers. In EU countries, many services are now delivered through ICT, including call centers that employers notify of vacancies and job seekers contact for help. There are big advances in Internet access to PES registration systems, such as posting CVs, benefit claims, and job search. New ways of transferring data have been developed, like the mutual sharing of CVs and job vacancy notifications between PES and private employment services (Kavanagh 2007). 109. As agreed under the EU i2010 agenda (and further by the EU 2020 digital agenda), EU member countries need to put in place key enablers for citizens to they can benefit from convenient, secure and interoperable authenticated access across Europe, in selected 12 public services (Government to Citizen—G2C services). For each of these service areas, there are five levels of sophistication. Two of the 12 services are relevant to the activities of the PES, namely: (i) job search and (ii) social security benefits (specifically unemployment benefits). 110. According to the benchmarking exercise “Smarter, Faster, Better e-Government (EC 2009),� Romania registered 100 percent compliance for job search services and 57 percent 31 compliance for social security benefits, with a note that beside unemployment benefits, the social security benefits category also covers medical costs, child allowances and student grants. Figure 3.6. Job Search Services Figure 3.7. Social Security Benefits Source EC 2009 111. Vacancy registers. The most common development is the nationwide PES vacancy register that can be easily accessed via workstations (often equipped with touch screens) in local labor offices or online over the Internet. Given low Internet penetration rates in many countries in the region, the workstations can be set up in other public premises (i.e., shopping centers, libraries, and schools). In some EU-10 countries, call centers for various types of contact have been established. In such a way, PES staff is able to switch from offering traditional job- brokering activities to providing intensive assistance to hard-to-place and severely disadvantaged individuals who cannot find jobs through the electronic services. 32 112. Many EU-10 countries have also built CV databanks in their PES, which can be accessed electronically by employers. Just as employers can enter their vacancies in the databanks, job seekers can enter their CVs, with the help of a placement officer or by themselves. They can enter this information from a homework station over the Internet, or from stand-alone facilities in local labor offices or other public premises. 113. Evaluation of employment services and ALMPs. For governments, it is important to carefully evaluate labor market programs and introduce interventions based on what works in a country. Properly evaluated programs are less likely to lead to positive assessments of impact and effectiveness than judgments based on “non-scientific� methodologies. In the absence of such evaluations, policymakers are likely to overestimate the benefit of their interventions and, as a result, allocate resources inefficiently (World Bank 2010). However, net impact analysis of labor market program outcomes is rare, if not nonexistent, in most EU10 countries.5 Some examples from the literature follow. 114. Several authors have carried out meta-evaluations of the international evaluation literature (Heckman et al, 1999, De Koning et al, 2005, Kluve, 2006, De Koning and Peers, 2007). The general outcome is that the net impacts of ALMPs vary considerably. On average, the effects are found to be close to zero. Therefore, the overall picture emerging from the literature is not very positive. 115. On the other hand, impact evaluations have found that employment services are the most cost-effective of all active labor market programs. In its review of evaluations worldwide, the World Bank concluded that “employment services are generally the most cost�effective intervention: employment and earnings impacts are usually positive and, compared to other ALMPs, these employment services are inexpensive.� (Betcherman et al. 2004). 116. However, even if there are no effects on labor market outcomes, it is still possible that the program has positive effects for a participant. (De Koning et al 2008). Such effects could be: (i) an increase in well-being as a result of the social contacts obtained during participation; (ii) an increase in well-being as a result of the work done during the project, in the case of a public works program; (iii)increased skills obtained during the program that could be used in the personal sphere. 117. In Romania, employment services and small business assistance programs were both found to be useful active labor market programs to help get the unemployed back to work, but employment services were more successful than small business assistance (Rodriguez-Planas 2007). 118. Overall, the evidence suggests that job-search assistance programs in general and activation policies in particular rank high among the more cost-effective ALMPs to help the unemployed to find a job and keep it. Anecdotal evidence also suggests that an effective PES 5 Most evaluations in the reviewed countries were conducted in the 1990s. See Fretwell et al 1999. Romania conducted one study in 1998. 33 must carefully balance the carrot (i.e. services provided), and the stick (i.e. monitoring and sanctions to ensure compliance with job search requirements). Enforcement of “availability-for- work� requirements and provision of placement services seem to be complementary activities (EC 2006). 34 CHAPTER IV: PENSIONS Background 119. Romania inherited a generous, but fragmented and unsustainable, pay-as-you-go (PAYGO) mandatory pension regime from the socialist period. Replacement ratios were high and benefits were paid to a wide range of pensioners, including early and normal length of service, survivor and invalidity/disability benefits. The regime also financed several generous non-contributory benefits, such as sick leave, maternity/child upbringing leave, and farmers’ pensions. 120. As the transition to a market economy advanced, these inherited challenges were compounded by adverse economic developments. These included a rapid increase in the number of beneficiaries because of an aging population and generous early retirement plans; a protracted economic decline with a corresponding sharp fall in the number of contributors due to the emergence of open unemployment; a falling labor participation rate and more pervasive informal employment. 121. The ratio between the number of contributors and pensioners drastically decreased from 3.43 contributors per pensioner in 1990 to 0.89 pensioners per pensioner in 2010. This was unfavorable to the Romania public pensions system, with a negative impact on both the revenue and expenditure sides of the public pension budget. Figure 4.1 below presents the evolution of the numbers for pensioners and contributors (detailed statistics in Annex II, Table 3). Figure 4.1. Evolution of the number of pensioners and employees (1989– 2010) 35 122. These problems were aggravated by the weak administrative capacity of the pension system and policies that encouraged early retirement and the expansion of invalidity pensions as alternatives to unemployment for older workers. Annex II Table 1 presents the detailed evolution of pensioners by categories of pensions (old age, invalidity, survivors). 123. In the 1990s, various Romanian governments attempted to cope with these strains by raising contribution rates to levels that were high even by OECD standards. To make up the shortfall in revenues and the increase in system expenditures, the social security contribution rate was increased from 14 percent to 35 percent in 2001. 124. The first comprehensive parametric reforms were introduced in Romania with the approval of Law 19/2000. The main features of those reforms were: (i) a gradual five-year increase in the retirement age for both men and women; (ii) the introduction of a new pension benefit formula (point-based), that takes into account a pensioner’s lifetime contribution history; (iii) capping the contribution base to ensure a more equitable link with benefits; and (iv) penalizing early retirement and tightening eligibility criteria for hazardous working conditions. 125. A second set of reforms was implemented in 2004, which included the following main measures: a) the transfer of non-contributory benefits from the National Pension House to other financing sources; b) the recalculation of existing benefits using the point-based benefit formula; c) a gradual decrease in the level of contributions; d) the introduction of a new indexation mechanism to fully protect benefits from inflation; and e) the introduction of a multi-pillar pension system, starting in 2008, which in addition to the existing public earnings-related first pillar also included a mandatory, privately managed earnings-related second pillar as well as a voluntary, privately managed earnings-related third pillar. 126. These measures were taken primarily between 2004 and 2007. Combined with better revenue collection performance and supported by steady economic growth, they succeeded in restoring the balance of the pension fund, and even in achieving fragile surpluses of 0.3 percent of GDP in 2006 and 0.2 percent in 2007 (see Table 4.1 below). Table 4.1. Public Pension Fund Indicators (% of GDP) 2001 2002 2003 2004 2005 2006 2007 Revenues* 6.33 6.18 6.15 6.06 6.08 5.7 5.9 Expenditures 7.2 7.0 6.5 6.8 6.3 5.4 5.7 Balance -0.87 -0.82 -0.35 -0.74 -0.22 0.3 0.2 *Minus State Subsidy Source NHPP 127. However, in 2007 some of these reforms were undone, mainly by switching back to wage indexation of benefits, introducing a mandatory gross replacement rate of 45 percent, and increasing pension benefits for some groups of beneficiaries. These measures had a strong 36 electoral rationale, since local and parliamentary elections were planned in 2008. As a result, beginning with 2008, the pension fund again began facing deficits that have continued to increase to date. 128. The 2007 measures above led to the increase of the Average Replacement Ratio (ARR), calculated as a ratio between annual average pension and annual average wage earnings (net or gross). With a net ARR of 0.56 in 2009, Romania was ranked seventh among the EU-27 countries, behind France, Austria, Luxembourg, Hungary, Poland and Slovakia. However, Romania is above the average ARR of EU-27, EU-15 and EU-12 nations. Figure 4.2 below presents the ARR comparison among the EU countries. Figure 4.2. Net Average Replacement R un EU-27 countries. Source: EUROSTAT Recent Developments 129. During 2009 and 2010, the Romanian government launched a program that aimed to mitigate the effects of the economic and financial crisis, which included the following measures to protect vulnerable categories of people and to increase the revenues of the public pension fund: (i) introduction of a minimum (social) pension for low-income pensioners (by covering the difference between the their current pension level and the guaranteed minimum level of 350 RON); (ii) increase of the pension point value in 2 stages (to 718.4 RON in April 1, 2009 and to 732.8 lei in October 1, 2009); and (iii)increase of the social insurance contribution rate in February 1, 2009. 130. These measures, combined with the poor revenue collection performance of the last two years, brought the public pensions fund deficit close to 2.0 percent of the GDP at the end of 37 2010. Table 4.2 below illustrates the evolution of the revenues, expenditures and the deficits registered during 2008–2011. Table 4.2 Pension Fund Indicators, 2008–2011 (% of GDP) 2008 2009 2010 2011 (proj.) Revenues* 6.11 6.87 6.21 6.27 Expenditures 6.55 8.11 8.30 8.79 Balance -0.44 -1.23 -2.01 -2.53 *Minus State Subsidy Source NHPP 131. Beginning in 2010, Romania introduced comprehensive pension reforms that will bring significant fiscal savings. The objective of the pension reform was to improve the fiscal sustainability of the public pension system, while ensuring adequate retirement benefits for pensioners. The new pension law introduces important reforms, including: • gradual increase in the retirement age of women to 63 years until 2030; • gradual switch to price indexation of pension benefits; • tightened eligibility criteria for disability benefits: • increased penalties for early retirement; • inclusion of militaries and public officers with special status in the public pension system and gradual increase of their retirement age from 55 years to 60 years in 2030; • recalculation of the pensions established under special sectors pension laws (defense, interior, intelligence, etc), according to the public pension system benefit formula; • integration of new categories of contributors (self employed, freelancers and family associations) within the public pensions system; • introduction of a maximum ceiling for the contribution base equivalent to 5 average gross wages per month; and • protection of the mandatory (second pillar) pension scheme. 132. These reforms are projected to improve the fiscal sustainability of the pension system in Romania by as early as 2012, and reduce the pension system’s fiscal deficit by about 3.5 percent of GDP in 2025, compared with what the deficit would have been in the absence of reforms. Figure 4.3 presents the projected fiscal impact of the above measures mentioned measures. 38 Figure 4.3 Fiscal Impact of Pension Reforms Fiscal Balance of Public Pension Scheme (% of GDP) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (.5%) (1.0%) (1.5%) (2.0%) (2.5%) (3.0%) (3.5%) (4.0%) (4.5%) Baseline Draft Law Note: Projections do not include special regimes, military, etc) Source: World Bank PROST Projections Future Perspectives 133. The main challenge that lies ahead is to maintain the recently legislated reforms. By nature, pension systems are significantly affected by the political environment, since they relate to a large segment of the population. Particularly in Romania, the coverage of the elderly, who have significant voting power and expectations, is high. The reform reversals in 2007 illustrate the fragility of the public pension system in the face of attempts by elected politicians to gain votes. Recent reforms in Romania were introduced under fiscal distress brought by the economic crisis. The expected economic recovery may bring additional revenues to the public pension fund, which may reactivate the tendency of politicians to seek policy reversals. Romania should make an effort to resist such temptations. 134. Even when all the reforms introduced are fully implemented, the public pension system will continue to be under pressure over the next several decades, mainly due to the demographic parameters of the system. 135. Romania’s population is aging. While this trend can be seen in other countries as well, it is particularly pronounced and severe in Romania. Figure 4.4 illustrates the speed with which Romania’s population is aging as a combined result of mortality and decreased fertility. The 39 world as a whole is also experiencing this transition. In the 1950s, the global population was concentrated in the younger age ranges, with every age group being larger than the one older than itself, creating the traditional “age pyramid� shape. Today this is no longer the case, as the youngest age groups are approaching the same size as adult groups. By 2050, this adjustment in age structure is projected to become more prominent, with all adult and youth age groups approaching the same size, a change termed the “squaring of the pyramid.� Figure 4.4. Romanian and World Population Age Structure, in Thousands Male Female 136. Another key feature of Romanian demography is its shrinking population. The population of Romania has been steadily decreasing since 1990 and is projected to continue to decline. At its peak, the population of Romania was over 23 million, while today it is slightly over 21 million. The UN projects the total population will fall to approximately 17 million by 2050, bringing it down to 1950 levels. At the same time, the 65-and-over population has continuously grown as a share of the population. In the future, the elderly in Romania will outnumber the young. This change, along with the continued shrinking of the population, is the defining feature of Romanian demography. Figure 4.5 below presents these features. 40 Figure 4.5 Total Romanian Population and Age Cohort Distribution Over Time Source: United Nations, World Population Prospects: The 2008 Revision 137. As a result, Romania’s old-age dependency ratio (defined as a percentage of the number of persons aged 65 and over compared to the number of people aged 15–64) will be among the highest in the EU-27 countries, and well above the average of EU-27 countries. Romania’s dependency ratio will increase dramatically from 21.34 percent in 2010 to 65.27 percent in 2060 (a nearly threefold increase), compared with a softer increase in the EU-27 dependency ratio from 25.90 percent to 53.47 (almost a twofold increase). Figure 4.6 below illustrates the evolution of projected dependency ratios in Romania compared with EU-27 countries (detailed statistics in Annex II, Table 2). Figure 4.6 Trends in the old-age dependency ratios in EU-27 and Romania. Source: EUROPOP2008 convergence scenario/April 2011 41 138. It is important to note that the new EU countries coming out of the former socialist region will have a rapid growth of old-age dependency ratios in the next 50 years, reaching very high levels in countries such as Poland (68.97 percent), Slovakia (68.49 percent), Lithuania (65.65 percent), Latvia (64.45 percent), Bulgaria (63.54 percent) and Romania (65.27 percent) . At the same time, Western European countries that had dependency ratios above the EU-27 average in 2010, such as Belgium (45.84 percent), Denmark (42.66 percent), Great Britain (42.14 percent), Norway (43.92 percent) and France (45.20 percent) will be better off in 50 years. Annex II Table 2 presents detailed dependency ratio projections for all EU-27 countries. 139. Life expectancy at retirement will increase in Romania from 14.8 years in 2010 to 18.8 years in 2050 for men, and will decrease from 22.0 years to 21.1 for women over the same period (see Table 4.3. below for projected life expectancy for Romania). Table 4.3 Life expectancy in Romania (2010—2050) LIFE EXPECTANCY 2010 2020 2030 2040 2050 MEN - At birth 70.0 72.8 75.9 77.5 79.3 - At retirement 14.8 15.0 16.2 17.4 18.8 Standard Retirement Age 63.9 65.0 65.0 65.0 65.0 WOMEN - At birth 77.1 79.1 81.4 82.6 83.7 - At retirement 22.0 21.0 19.7 20.4 21.1 Standard Retirement Age 58.9 61.7 63.0 63.0 63.0 140. A possible conclusion about the future of the public pension system. Taking into account the above-mentioned challenges as well as the gradual implementation of the recently approved parametric reforms, it is envisaged that the expected improvement in fiscal sustainability of the public pensions system in Romania will not be realized over the short and medium term. To observe tangible results over the short term, the implementation of these reforms should be accelerated. Institutional Framework 141. The main institutions with responsibility for the public pension sector in Romania are the Ministry of Labor, Family and Social Protection (MoLFSP), the National House of Public Pensions (NHPP) and the National Agency for Fiscal Administration (NAFA). MoLFSP is the main institution for pension policy along with the Ministry of Public Finance, which handles the budgetary implications of policies. NHPP is responsible for administering pensions, while NAFA is the agency collecting social contributions. As part of the NHPP, National Institute for Medical Expertise and Workforce Capacity Recovery (NIMEWCR) represents the entry gate in the pensions system for the beneficiaries of invalidity pensions, verifying applicants’ eligibility. 42 142. While the institutions seem to coordinate well on the very short-term implications of political decisions on pensions, they have limited capacity and vision for analyzing the long- term implications of pension policies, which by nature require long-term planning. For example, a farmers’ pension insurance law was introduced in 2008, when the economy was growing fast. However, no analytical work was done on the magnitude of the fiscal impact of farmers’ pensions, which is significant. The impact of recent pension reforms has been analyzed with significant technical assistance from the World Bank. Significant technical assistance also was provided to these institutions during the reforms, but history has shown that it is unlikely these institutions will dedicate sufficient resources for actuarial capacity to contribute to informed policy making. It is strongly recommended that NHPP, MoLFSP and MOPF develop and maintain actuarial capacity in their institutions. 143. Formal responsibility for long-term policy planning in the government institutions that deal with pension policy is lacking. At the MoLFSP, for example, the interest in developments in the pension policy sector depends highly on the expertise and interest of senior management appointees. At the Ministry of Finance, only one person deals with long-term pension issues, and that person mainly responds to demands from the EU aging group. So even this capacity is rarely used in the decision-making process. There is a need to update the long- term fiscal projections of the public pension system using the WB PROST model, once the implementation of the December 2010 reforms produces its first effects and more information is available for this purpose (probably in 2012 or 2013). 144. Pension administration is hampered by weak capacity and information systems. Romania started developing an electronic database of contributors in early 2001. As part of the project, all the workbooks from past contributions (pre-2001) were scanned with a goal of transferring contributions history to an electronic database. However, this second step was never completed. As a result, pension are calculated manually in the regional offices of the NHPP, placing a big burden on the staff. This lack of an effective management information system leads to errors, inefficiencies and delays in awarding pensions. 145. As mentioned before, the collection of revenues for the public pensions fund is performed by the NAFA, which transfers the collected contributions to the NHPP. However, there is no reconciliation process between the information systems of the two institutions. As a result, NHPP doesn’t know the contributors from whom the contributions were collected. This longstanding problem still has not been addressed. 146. The pension administration and information systems also bear the burden of frequent changes in the laws. The House of Pensions needs to adapt to frequent changes even as its daily duties must still be performed. The NHPP integrated information system was completed in 2007 (under the WB financed project—SSD), but its functionality is incomplete since it only the legal changes up to February 2005. Due to lack of financial resources, it has not been possible to upgrade the information system. At the same time, due to the salary structure at NHPP, it is very difficult to attract and maintain qualified IT staff that could help adapt to these changes in the system. (Chapter VII of the Report, Information Management, presents in detail 43 the overall issues related to the information systems belonging the MoLFSP and its subordinate agencies.) 147. Pension administrators need to manage the process of integrating special categories of active public sector workers (such as the military and police) into the national public scheme and subsequently into the scheme’s new second pillar. The pension departments in the individual ministries (Defense, Interior, etc) that have to deal with this issue (due to the confidentiality of information) have been transformed into sectoral pension houses by a recent government decision. However, these pension departments lack expertise, as they do not have an understanding of the national pension scheme. At the same time, the transfer of contributions from these special categories to the second pillar also raises the issue of confidentiality of information. 148. The new, stricter criteria on disability pensions require means that significant capacity improvement is required in the regional offices to implement the provisions of the new legislation. The new pension law introduced stricter eligibility provisions for disability pensions. NHPP (through NIMEWCR) is also undertaking the difficult task of recertifying existing invalidity pension beneficiaries to ensure that their pensions reach the truly disabled, as the law requires. This would help control the increasing spending on disability pensions. At the same time, NHPP is in the process of establishing regional sub-units of the NIMEWCR to screen people for eligibility. 149. As there are overlaps on the eligibility determination for invalidity pensions and disability allowances, which are conducted by different institutions, it is recommended that the medical eligibility criteria and institutional framework be harmonized. There will be a significant need for improved capacity (staff and medical equipment) to implement these difficult reforms. Human Resources 150. At the time of its establishment in 2001, the NHPP was approved to have a total number of of 5,950 employees, 400 employees at the central office and 5,550 employees at the territorial level. From 2001 to 2011, the total number of staff decreased to 3,729 people, including 280 employees at the central level and 3,449 employees at the local level. Overall, staff in the county and local pension houses was reduced by about 38 percent, and the staff of NHPP was reduced by almost 30 percent. Table 4.4 below shows the size of the NHPP staff over time). Table 4.4 Evolution of the NHPP staff during (2001–2011) APPROVED STAFF POSITIONS 2001 2002 2003 2004 2007 2010 2011 TOTAL NHPP 5950 5951 4494 4337 4737 3729 3729 -Central level 400 400 360 393 443 280 280 - Local level 5550 5237 3886 3691 4041 3196 3196 NIMEWCR 314 248 253 253 253 44 253 Source: NHPP 151. Staff reduction was achieved at a time when public pension legislation had been amended more than 80 times. These amendments implied new responsibilities for the NHPP, such as calculation of point-based contributions made throughout the entire active life of an employee, analysis and transmission to contributors of their employment history, scanning workbooks, uploading wage related earnings , implementation of EU regulations (beginning with the 2007 regulations), and transfer of contributions to private pensions (Pillar II). 152. The number of staff per 10,000 pensioners at the CNPP level decreased from approximately 9.03 employees in 2001 to 6.7 employees in 2011. Romania is well below the level of public pension administrator staffing in the EU, where the numbers vary between 15 and 20 employees per 10,000 pensioners. Such low rates lead to increased transaction costs for both beneficiaries and staff, high error rates in calculating pension benefits (which are still manually performed), and often result in publicly expressed dissatisfaction by beneficiaries. As a result, many claims related to the calculation of pension benefits are ending up in court, which puts additional pressure on the NHPP and its territorial branches. The NHPP must develop and maintain adequate legal capacity to face such challenges, which are likely to increase in the near future as implementation of the new pension legislation advances. 153. Similarly, the NIMEWCR’s staff allocation was reduced from 314 positions in 2001, when it was included in the structure of the NHPP, by 61 positions (almost approx 20 percent). As the NIMEWCR’s activity addresses a number of 855,645 beneficiaries of invalidity pensions, it results in a ratio of 2.96 employees per 10,000 beneficiaries, which again is well below the average of 14.5 recorded by the EU-27 countries. Given the projected future workload of the Institute (validation of new entries, mandatory recertification of all current beneficiaries, and the proposed harmonization of various disability criteria and of related institutions), it appears that staffing needs must be carefully reconsidered. If the increased staff allocation cannot be considered in the short term, at the very least the NIMEWCR should explore the possibility of a waiver from the current hiring freeze. Financial Management 154. There is a need to move toward more realistic budgeting. The NHPP estimates expenditures for budgeting purposes, while revenue projections are undertaken by the Ministry of Finance. NAFA collects contributions, which are currently set at 31.2 percent of the wage bill, shared between employers (20.8 percent) and employees (10.4 percent). In general, pension expenditures based on existing laws are fairly predictable with a small error margin, given that the NHPP has a good understanding of the profile of current contributors and has historic trends to rely on. Despite this predictability, the NHPP’s budget is typically smaller than needed, with the expectation that it will be augmented later, during the year’s budgetary exercise. 155. For instance, analysis of the public pension budget for 2009 and 2010 indicates that the expenditure projections made by MOPF and NHPP were realistic (with a minor error margin) 45 compared with actual expenditures, but MOPF overestimated revenues in order to match forecasted expenditures. Table 4.5 Budgetary chapter analysis for the public pensions system (2009—2011) NHPP Budget Execution 2009 2009 Diff. 2010 2010* Diff. 2011 Progra Actual (%) Program Actual (%) Progr. m TOTAL REVENUES 40.42 39.43 -2% 41.32 43.20 5% 47.89 Revenues from contrib. 40.31 33.03 -18% 34.12 32.24 -6% 33.85 State Budget Subsidies 0.00 6.40 7.06 10.88 54% 13.94 TOTAL EXPENDITURE 39.96 40.39 1% 41.06 42.93 5% 47.64 Balance (rows 2–4) 0.34 -7.36 -6.94 -10.69 54% -13.79 Source: MoPF *MOPF estimates 156. As seen above, real costs in 2009 (when there was a pension increase of 5 percent) exceeded the draft program budget by only 1 percent, but revenues from the collection of contributions were overestimated by 18 percent. Although the government did not think that subsidies from the state budget were needed, eventually such a subsidy (amounting to RON 6.4 billion) had to be granted to the NHPP to cover the deficit. The same thing happened in 2010, when revenues were overstated by 6 percent, leading to the need for subsidies 54 percent higher than initial estimates (RON 10.9 billion, compared to RON 7 billion). For the last two years, the public pension fund deficit was close to 2 percent of GDP. However, in 2011, the public pension budget deficit may be slightly higher (close to 2.5 percent of GDP), due to the inclusion in the public pension system of pensioners from the special sectors (defense, interior etc). Private Pensions 157. The economic downturn spotlighted the importance of private pension systems. Despite the short history of Romanian private pension system (Pillar III] started in second half of 2007 and Pillar 3 in May 2008), its development was quite successful. 158. The mandatory private pension funds (Pillar II) reported at the end of 2010 5.2 million participants (a 6.2 percent increase over 2008), as well as an 85 percent increase in net assets. 159. The scheme of privately administered optional pensions (Pillar III) reported over 221,000 participants in December 2010 (60 percent more than in the previous year). The tax exemption ceiling for contributions was raised to EUR 400 per year for both employer and employee in order to stimulate participation in the system. 160. The overall performance of private pensions has not been affected so far in Romania by the financial and economic crisis, except for the third Pillar in 2008, as seen in Table 4.6 below: 46 Table 4.6 Private pension systems performance in Romania (Pillars II and III) Gross Yield Gross Yield INFLATION Pillar II Pillar III RATE 2008 11.5 2.7 6.3 2009 17.7 15.8 4.7 2010 15.1 11.5 7.96 Source: Private Pensions Supervision Commission 161. This is in line with the results of a survey conducted by OECD and FIAP (Federacion Internacional de Administradoras de Fondos de Pensiones), indicating that the yields obtained in private pension systems exceed inflation rates, even without specific regulations. The study indicates also that the financial turmoil and economic crisis affected the public pension systems to a larger extent than the private ones. 162. Although the value of some private pension funds assets dropped in 2008, due to financial crises and capital market losses, these funds saw a recovery trend in 2009 and 2010 in countries such as Poland, Hungary, Bulgaria, Croatia, Slovakia, and the Baltic states. 163. Observing the overall positive performance of the mandatory private pensions funds (Pillar II), the FR recommends the GOR to preserve this pillar and continue the transfer of contributions at the pace established by current legislation, in spite of some pressure for discontinuing them. 164. In fact, the private pension legislation is a contract between the government and the private sector. Elimination/reduction of the contribution rates to the second pillar would be a breach of contract that would send negative signals to the markets. 47 CHAPTER V: SOCIAL ASSISTANCE (CASH TRANSFERS) 165. This chapter is organized into four sections. The first section describes the main social assistance programs, The second section describes the key institutional actors (the agencies and units that implement the cash transfer programs) as well the cross-sectoral implementation functions. The third section describes ongoing and planned reforms, with a focus on the government’s Social Assistance Strategy and Action Plan, and discusses the key inputs needed to implement the ambitious reform agenda. The fourth section focuses on the technical assistance (TA) needed to implement the Strategy and modernize the SA system. Main Social Assistance Programs Figure 5.1 Social Assistance Spending in Romania • During 2005–2009, the fiscal cost Figure 2. Social Assistance Spending in of the social assistance system Romania (% of GDP) rose. Social assistance spending 3.5 surged from 1.4 percent of GDP in 3.0 Other 2005 to 2.9 percent of GDP in 2.5 2010. (Figure 5.1). Social 2.0 Social assistance pensions Assistance spending has expanded 1.5 Programs for disabled through four channels: 1.0 Support for low income households • Family policies aimed, inter alia, 0.5 Family policies at stimulating fertility. Several 0.0 2005 2006 2007 2008 2009 2010 new programs aimed at boosting (budget) fertility were introduced (a Child- Rising Benefit, a birth grant, and an in-kind allowance for newborns). The State Child Allowance (SCA) for children years old was increased five times (from 42 to 200 RON per month, approximately USD 13 to USD 63), which added 0.9 percent of GDP to the social assistance bill. This expansion was accompanied by a modest increase in the total fertility rate, achieved at the expense of a reduction in labor force of parents of childbearing age. In part, this is due to the overly generous and inequitable aspects of the Child Raising Benefit (non-contributory parental leave benefit), which pays 85 percent of pre-benefit earnings to the stay-at-home parent for the child’s first two years (three years if the child is disabled). This benefit is generous even by developed country standards.6 • A new disability benefits system. In 2006, a new benefit system increased the generosity, eligibility and scope of disability programs, adding another 0.45 percent of GDP. Part of this increase led to improved support for vulnerable disabled, but some lost due to abuse of the system or accrued to better-off families. For instance, since the new system discontinued income testing, some beneficiaries were able to “double dip� by claiming both the disability pension and disability assistance benefits, and it also increased the share of funds going toward upper-income households. 6 In most EU countries, non-contributory parental leave benefits are offered for up to one year; in contrast, Romania offers these benefits for two years. Also, the size of the benefit is typically less than the average wage in most countries, but in Romania it is 2.5 times the average wage. With an implicit marginal tax rate of 85 percent on earnings (the benefit compensates 85 percent of the average wage earned by the applicant parent during the previous two years), this benefit discourages work. 48 • Increased thresholds for means-tested programs. In 2008 and 2009, the eligibility thresholds for three income-tested programs (Complementary Family Allowances (CFA), Single Parent Allowances (SPA) and Heating Benefits (HB)) were increased from levels corresponding to the poorest decile (in 2008) to income levels as high as those of households in the fifth or sixth decile (in 2009), diluting the targeting accuracy of scarce budgetary resources. • Introduction of a social pension top-off for pensioners on low pensions. The social pension, introduced in 2009, fills the gap between the current pension and a relatively generous social minimum (350 RON in 2010, which is 35 percent higher than the absolute poverty line and roughly three times higher than the Guaranteed Minimum Income—GMI). In 2010, the cost of this policy was 0.13 percent of GDP. 166. At the end of 2010, the social assistance system included 14 programs administered by MoLFSP, and others administered by local governments. They are summarized in Table 5.1. Annex III, Table 1 provides detailed information on the benefit level and eligibility criteria for these programs; and Annex III, Table 2 provides information on the dynamics of the beneficiaries and transfers for the largest programs over 2005–2010. Table 5.1 Main Social Assistance Programs in 2010 — Number of Beneficiaries and Spending 2010 No of Assistance Amounts Social assistance programs or groups of programs beneficiaries unit: I, F (Million (’000s) or H RON) Family policy programs 6558 State Child Allowance 4013 I 2887 Child Raising Benefit / Back-to-work bonus 207 I 2030 Other family-related benefits, paid by MoLFSP 295 I 303 Other family-related benefits, paid by local budget or others I 1338 Programs for low-income households 3089 Guaranteed Minimum Income H 743 Complementary Family Allowance 607 F 444 Single Parent Allowance 204 F 191 Heating Benefit 3263 H 980 Heating Subsidies, paid from local budget and others H 731 Programs for people with disabilities 3332 Indemnity for Disabled Adults 667 P 956 Complementary Budget for Disabled Adults I 724 Other programs for disabled people according to the Disability Law I 415 Other programs for disabled people financed by MoLFSP 67 I 113 Programs for people with disabilities financed from local budgets I 1124 Other social assistance programs 1638 Social pension I 645 Other programs (privileges etc) I 993 TOTAL SOCIAL ASSISTANCE 14617 Source: Government of Romania, Social Assistance Reform Strategy 2011–2013, Table 4. Pro-memoria: Romania’s population in 2010 was 21,462 thousand persons; equivalent to 7.4 million households. 49 Note: Social assistance programs have different assistance units: individuals (I), families (F) or households (H) 167. Key target groups and objectives of the social assistance programs. By their objectives and target groups, these programs fall into four categories: family policy programs; means-tested programs for low-income households; programs for people with disabilities (treated separately); and other programs (notably the social pension). Eight programs, large both in terms of the number of beneficiaries served and the spending level, represent the backbone of the social assistance system. These eight programs, described in more detail below, account for 61 percent of total social assistance spending. They are the focus of the government’s Strategy for Social Assistance Reform (see Section 3). 168. The key design parameters (eligibility criteria and benefit levels) as of December 2010 for the eight largest programs are: • The State Child Allowance (SCA), a monthly cash transfer to all children under 18 (or older if still in school), with differentiated benefit levels for all children under 2 years old (200 RON); 2–18 years old (42 RON); children with disabilities under 3 years old (200 RON) and 3 to 18-year-old disabled children (84 RON). In Annex III, Table 1, this is program No 1. • The Child Raising Benefit (CRB), a monthly cash transfer for the parent of a child who stays home to care for the child, is equivalent to 85 percent of the average income earned over the past 12 months, capped at a minimum of 600 RON and a maximum of 4,000 RON. It is granted until the child turns 2 years old or 3 years old if disabled. In Annex III, Table 1, this is program number 2A. Starting January 1, 2011, the parameters of this program have been modified as follows: parents who opt for 2 years in the program receive a monthly allowance equivalent to 75 percent of average income earned over the past 12 months, capped at a minimum of 600 RON and a maximum of 1,200 RON. Parents who opt for one year in the program receive a monthly allowance equivalent to 75 percent of average income earned over the past 12 months, capped at a minimum of 600 RON and a maximum of 3,400 RON. Parents who opt for the one-year program and return to work before the end of the program are eligible for a back-to-work bonus of 500 RON per month for the second year upon returning to work. • The Guaranteed Minimum Income (GMI) program, a monthly cash transfer that tops up family income to a GMI threshold, as described in Annex III, Table 1. Adult family members who can work are subject to a work requirement (provide work that benefits of the community in exchange for their share of benefits) and an activation requirement (actively seek work with the unemployment office). The average benefit per capita is around 60 RON per month. In Annex III, Table 1, this is program number 10. • The Complementary Family Allowance (CFA) and Single Parent Allowance (SPA) were two income-tested benefits for poorer families with children. These two programs were consolidated and replaced on January 2011 by the Family Allowance (FA) program, a monthly cash transfer to families with children that targets children in the poorest three deciles, is subject to a means test and, for school-aged children, to school conditionality. The new FA program pays a benefit of 30 RON for each of the first four children of families with per capita income less than 200 RON, and 25 RON for each of the first four children of families with per capita income between 201–370 RON, subject to additional asset tests (see Table A8.6). Benefits are higher for families with a single parent. In Annex III Table 1, CFA and SPA are programs number 8 and 9, and the new FA program is number 9a. 50 • The Heating Benefit (HB) is a seasonal cash transfer program targeted through a means test to households in the poorest half of the population. The program operates in the winter season (November to March). It covers a share of heating costs, with higher subsidies for household in lower income brackets. There are three service delivery channels, depending on the type of fuel used for heating: for households connected to the central heating grid; for those heated with natural gas; and for those heated with wood, coal or crude oil fuels. The amount of the subsidy varies between 19 RON and 262 RON. In Annex III Table 1, this is program number 21. • The Indemnity of Disabled Adults (IDA) and the Complementary Budget for Disabled Adults (CBDA) are monthly cash payments for people with disabilities, based on the severity of their disability (major, severe, and average disability). In Annex III Table 1, these are programs number 18 and 19. 169. The social assistance system has produced mixed results in terms of protecting the poor and vulnerable (see Table 5.2 and Annex III Tables 4, 5, and 6). Targeting accuracy varies among the social assistance programs measured in the 2009 Household Budget Survey (HBS). Means-tested programs for low-income households have very good targeting accuracy (with 64 percent of targeted benefits accruing to those in the poorest quintile—for a poverty profile of the households in the poorest quintile, see Table 9). This share is substantially higher than for categorically targeted programs (for families or people with disabilities), which transfer about a third of their funds to the poorest quintile. Privileges are regressive, transferring fewer funds to the poorest quintile than the share of this group in the population. Overall, the targeting accuracy of the system (37.7 percent in 2009) is on the low side in the ECA region, due to the prevalence of categorically targeted programs. The system scores high on coverage of the poor (82.2 percent of the poorest quintile receives at least one social assistance program in 2009) and generosity (social assistance programs account for 26.2 percent of the income of the poorest quintile). Five programs account for a large share of the income of the households in the poorest decile: the Child Raising Benefit, the GMI, the HB, benefits for people with disabilities and the social pension. The high coverage levels of the social assistance system are due primarily to the State Child Allowance and Heating Benefit programs; all others cover less than 10 percent of the population. 51 Table 5.2 Targeting Accuracy, Coverage and Generosity of Main Social Assistance Programs in Romania (2009) Targeting Coverage Generosity Accuracy Poorest Poorest All Poorest Population 20% 20% beneficiaries 20% Total social assistance programs, 37.7 57.5 82.2 9.3 26.2 of which: 1. Family policy / pro-natality programs State Child Allowance 33.1 52.2 74.3 4.0 10.1 Child Raising Benefit 29.1 4.0 6.2 22.7 37.2 2. Programs for Low Income Households Guaranteed Minimum Income 81.5 3.4 14.2 19.4 23.6 Complementary Family Allowance 59.5 7.9 23.8 4.0 5.5 Single Parent Allowance 68.6 0.8 2.8 6.4 8.4 Heating Benefits 53.0 na na 18.5 40.4 3. Disability programs Benefits for People with Disabilities 35.7 4.4 8.6 15.5 25.8 4. Other social assistance programs Privileges 13.1 1.4 1.1 14.8 25.4 Social Pension 48.9 0.1 0.3 20.2 39.9 Source: Own estimations based on HBS 2009. Deciles constructed based on per capita income net of transfers Notes: Targeting accuracy is the transfer amount received by the group as a percent of total transfers received by the population; Program coverage is the portion of population in each group that receives the transfer; Generosity is the ratio of the transfer amount received by all beneficiaries in a group over the total welfare aggregate of the beneficiaries.; By beneficiaries we mean all direct and indirect (other household members) receiving a transfer. 170. The targeting accuracy of means-tested programs (GMI, FA and the HA) is on par with the best last-resort programs in the region (Figure 5.2) below. 52 Figure 5.2 Targeting Accuracy of Last-Resort Social Assistance Programs in ECA Region Source: Sundaram, Kiso and Strokova “Performance of social assistance programs in Europe and Central Asia.,� forthcoming Key implementation units of the social assistance programs 171. The social assistance policy is designed and implemented through a three-tier system (see Figure 1.4. Organizational Chart of the MoLFSP) • The first tier is represented by MoLFSP. The MoLFSP plays a stewardship role: it designs the policies, develops the draft legal framework and supervises its implementation, monitors and evaluates the implementation of policies, and prepares and executes the budget for programs administered by the MoLFSP. To implement these functions, the Minister is seconded by a State Secretary of Social Assistance, who oversees three general directorates for Social Assistance, Persons with Disabilities and Child Protection (See Table 4). Two other General Directorates with significant roles in the implementation of social assistance policies report directly to the Minister: Social Inspection and Gender Equal Opportunity. • The second tier is represented by the National Agency for Social Benefits, which administers the Management Information System for the majority of social programs and processes payments via its regional (judet-based) units. • The third tier is represented by the Social Assistance offices of the local governments. 172. The NASB and three General Directorates within MoLFSP are key for the implementation of the Social Assistance Reform Strategy, as discussed in section three: (i) The National Agency for Social Benefits (NASB); (ii) the General Directorate for Disabled Persons, which supervises social care centers and monitors cash transfers for non- institutionalized disabled (treated in a separate section); (iii) the General Directorate for Social Inspection, which guards the integrity of the social protection system against error, fraud or poor management; and (iv) the General Directorate for Social Assistance, which is in charge of revising the legislation and monitoring the social assistance sector. Table 5.3 below presents these MoLFSP social assistance structures and their current staffing (those highlighted in grey make a significant contribution to implementation of the cash transfer programs). 53 Table 5.3 Staffing level in the key social assistance units and agencies, January 2011 DEPARTMENT/AGENCY PERSONNEL TOTAL 1. General Directorate for Social Assistance 54 2. General Directorate for Persons with Disabilities 44 3. Directorate for Child Protection 47 4. Directorate for Gender Equity of Chances 16 5. General Directorate for Social Inspection 136 6. National Agency for Social Benefits 1266* TOTAL 1563 General Directorate for Social Assistance 173. The General Directorate for Social Assistance is the key MoLFSP unit with a stewardship role. The unit includes two Directorates, one for cash transfer programs and another for social services. Both directorates fulfill similar functions in their respective areas: (i) develop a strategy and action plan for the sector; (ii) develop a proposal for the improvement of the legal framework; (iii) monitor implementation of legislation; and (iv) develop budget proposals and monitor the execution of the budget. Among these key four functions, the focus of the unit is primarily on improving or modifying the legal framework, including dialogues with Parliament (especially the Social Protection committees). The other three functions (strategy development, monitoring and evaluation, and budgeting) receive less attention. 174. A stronger focus on policy development, monitoring, evaluation and budgeting is needed, accompanied by adjustments in the level and composition of human resources [[staff?]]. In part, the focus on legislative development is because in 2010, the unit was mandated by the government to develop a Framework Social Assistance Law and revise legislation on key benefits, a policy priority of the government. This major effort absorbed a large share of the scarce human resources of the unit during 2010/11, at the expense of the other functions. However, the bias toward legislative development was also a constant feature of the General Directorate, reflecting a legal framework that was under constant revision during the last decade or so. NASB 175. The NASB is the main beneficiary registry and payment agency for many cash transfer programs. The National Agency for Social Benefits (NASB) is an agency established in 2008 within the MoLFSP. The NASB administers a subset of social assistance programs7. The 7 NASB, through its SAFIR information system, manages the payment of the following social benefits: the State Child Allowance ; the Family Allowances; Monthly allowance for child placement; the Child Raising Allowance; Supplementary income for working parents for raising children until age 2; Emergency aid (for the families and the persons that are victims of the natural disasters, fires, accidents, as well as special situations as defined by law); Financial aid (for the families and the persons that are in extreme difficulty due to the health situation or other justified causes); Refundable aid for refugees; Monthly food subsidy for children and adults infected by HIV/AIDS; Allowances for persons with/without disability raising a child with/without disability, granted accordingly to the conditions of the law. 54 Agency applies the policies and strategies in the field of social assistance, in particular those related to: (i) managing cash transfer programs;; (ii) preventing fraud and error; (iii) monitoring of cash transfer payments; (iv) providing necessary information to set up the policies and strategies in social security area; and (v) managing human and material resources in its area of activity. The NASB is organized at the central level. Some 41 territorial agencies are subordinate entities at the county level and in Bucharest. They are decentralized public services with legal representation. Their mandate is to manage the social benefits system at territorial level. 176. A key function of NASB is to maintain a registry of beneficiaries for a subset of social assistance programs. The registry is maintained through an integrated management information system called SAFIR. SAFIR has three main components: an operational system, a decisional system and a disaster recovery system. The operational system is a central database accessed by territorial agencies through a Web interface. It manages approximately four million payments for about eight million beneficiaries each month. The database offers a comprehensive picture of the different social assistance payments received by a beneficiary family, as well as the history of transactions with that family. The decision-making module was designed to provide a concise set of indicators specific to different management levels; to generate reports and statistics; to provide data and query tools for new reports and statistics. However, it is not yet fully operational, due to human and technical capacity constraints. NASB intends that this system will become operational in the next few months. The SAFIR information system is protected in case of disaster by a National Disaster Recovery Center. A review of ICT issues in NASB, including the SAFIR system, is presented in Chapter VII: Information Management. Social Inspection 177. To protect the social assistance system against the risk of error, fraud and corruption (EF&C),8 the MoLFSP has a special unit in charge of inspections, the General Directorate for Social Inspection. This unit has small territorial units that review ex-post the files of beneficiaries that are suspected of EF&C. The Directorate is required by law to respond to referrals from the public or the social assistance network, or to respond to the detection of information in the application files that is inconsistent with the same information stored in other public databases, a process known as cross- checking. This requirement extends to all social assistance programs. The process is known as ad-hoc inspection. In addition, the directorate can undertake large sample inspections of an entire social assistance program at the request of the Minister of Labor, Family and Social Protection; these inspections, which look at eligibility compliance, are called thematic inspections. The thematic inspection typically includes a review of a large sample of beneficiaries’ files, followed by in-depth investigations of cases that are 8 It is important to recognize upfront that all social assistance programs suffer from some degree of error, fraud and corruption. Of particular concern is the level of fraud and corruption (F&C). This level is typically higher in programs that have complex eligibility requirements, such as means-tested programs or disability programs. Even in OECD countries, this type of programs could exhibit rates of fraud of 5–10%, despite the strong systems and mechanisms to combat F&C and the high volume of resources used to minimize fraud and corruption (e.g. means- tested programs in the UK and the US). This rate is likely to be higher for programs operating in low capacity environments (low income countries). What is important is to put in place systems for detecting, remedying, and minimizing these irregularities. 55 determined to be suspicious. In an in-depth investigation, the inspectors collect information via home visits, discussions with neighbors, employers, or–in the case of disabled people–with medical personnel. The operation of a special unit with investigative powers is considered a best practice in the area of social protection for systems that carry out millions of relatively small payment transactions each month. Ongoing and planned reforms: The government’s Social Assistance Reform Strategy The government’s Social Assistance Reform Strategy 2011–2013 178. The Government of Romania has embarked on a comprehensive reform of its social assistance system. The outline of the new reforms, at the level of goals and principles, was endorsed by the government in April 2010. Since then, the MoLFSP has prepared a Social Assistance Reform Strategy, adopted by the government on February 28, 2011. In April, the Minister of Labor adopted an Action plan for the period from 2011–13, which ensures that the Strategy will be implemented following a realistic timeframe, with clear assignation of institutional responsibilities and with adequate resources. 179. The government’s strategy grounds social assistance reforms on clear equity and efficiency results. Specifically, the goals of the government’s social assistance reforms include: • Reducing the fiscal cost of the system. The fiscal savings in 2013 are estimated to reach 0.78 percent of GDP compared to 2010 spending. While these savings will not bring social assistance spending to its 2005 level, they will bring outlays closer to the average level of spending in the new EU member states;Consolidating the number of benefit programs to reduce fragmentation, and containing and/or reducing spending levels; • Increasing the equitability of the system by expanding the principle of granting assistance primarily to those in need; • Increasing the pro-activity of the system by providing incentives for households to invest in the education of their children and for adults to seek and retain work; • Simplifying the administration of the system; and • Setting clear program objectives and monitoring their results to improve performance management. 180. The Social Assistance Reform Strategy covers four inter-related areas: parametric reforms; improvements in the management of information; improvements in payment arrangements; and improvements in the use of public resources (reduction of error, fraud and corruption in the system). To support these changes, the Strategy indentifies the key inputs to achieve its goals: legislative and regulatory inputs; human resource needs; technical assistance and other investments. 181. Parametric reforms include merging and consolidating programs and modifying the parameters of the programs (eligibility criteria, recertification criteria), as well as detailed implementation rules (application procedures and forms, documentary evidence, procedures for home visits). • Program consolidation. During 2011–2013, the government’s strategy supports a reduction in the number of key programs by consolidating the CCA and SPA into the 56 redesigned Family Allowance program, further consolidating all means-tested programs into one program for low-income households in 2013, and consolidating two cash transfer programs for disabled adults (IDA and CDB) in 2013. This will result in a reduction in the number of major social assistance programs from 21 at the beginning of 2010,9 to 18 by the end of 2010, 13 in 2011 and 14 by 2013 (see Annex III, Table 1, for a description of social assistance programs in 2010). The number of social assistance programs in the “Government Social Assistance Program� will also fall, from eight in 2010 to 7 in 2011 and to 4 by 2013. Table 5.4 illustrates the process of program consolidation, identifying the “before� and “after� composition of the social safety net. • Revised eligibility and recertification criteria as of January 2011. New legislation was adopted in December 2010 changing the eligibility rules for Family Allowances and the Child Raising Benefits. Starting in January 2011, the government established new eligibility thresholds and benefits levels for the Family Allowance Program, which narrows the program’s target group from the poorest five to the poorest three deciles, and increases the benefit level for those in the poorest quintile and for families with more children.10 The new program also conditions benefits for school-age children on minimum school attendance. Reforms have also reduced the generosity of the Indemnity for Child Raising (ICR), both in terms of benefit levels and duration.11 Furthermore, the new legislation on Family Allowances (December 2010) and Heating Benefits (September 2010) has tightened the means-testing rules of these programs, moving from income testing to income and asset testing, and introducing clearer and stricter rules for documenting incomes and for the composition of the assistance unit, similar to the rules used by the best targeted program, the GMI. Recertification criteria for the three means- tested programs are now similar, a first step toward a full harmonization of eligibility criteria. • Further measures to revise eligibility and recertification criteria during 2012–2013. The government’s Strategy provides for the harmonization of rules and procedures to declare and verify household means (2011); the introduction of a unified application form for family policy programs and programs for low-income households (2013); the harmonization of the assessment criteria for disability allowances and pensions and the development of a unified institutional framework for programs for people with disabilities. Through this process, access to the social assistance system will be based on a single-point-of-service approach, thus minimizing transaction costs for an applicant, reducing the administrative cost of the system and minimizing the risk of error or fraud. • Harmonized and simplified program implementation rules. The government’s Strategy also aims to harmonize and simplify the implementation rules, an ongoing process during 2011–2013. To simplify data entry into the NASB management information systems and reduce data entry errors, the new application forms for FAs, 9 In July 2010, as part of the austerity measures, the Government discontinued three smaller family policy programs. 10 As discussed elsewhere, these parametric measure were supported by the Development Policy Loan (DPL). 11 The new Child Raising Benefit (CRB) has reduced the benefit level from 85% to 75% of the income earned by the parent in the year before the child was born, and has lowered the maximum benefit level from RON 4000 (before the austerity measures) to RON 3400 if the parent chooses to stay on benefit for one year, or RON 1200 if the parent chooses to stay on benefit two years. To encourage an earlier return to work, the back-to-work bonus was increased from RON 100 to RON 500, and is given to parents who opt to return to work after less than a year in the program. 57 ICRs, HBs and GMI have been redesigned to allow scanning via Optical Character Recognition techniques. Table 5.4 Program Consolidation during the Social Assistance Reform Strategy 2011–2013. 2010: Configuration of 2011 2012 2013: Configuration of Programs “Before� SASM Programs “After� SASM project project (% of SA spending 2010) *State Child Allowance (SCA) SCA SCA State Child Allowance (SCA) (20%) (unified application form) * Child Raising Benefits (24 CRB CRB Modified Indemnity for Child- months paid maternity leave) (modified) (modified) raising (14%) (unified application form) Policies Family Other family-policy benefits Other family- Other family- Other family-policy benefits (11%) policy policy benefits (unified application form) benefits *Complementary Family Family Family Consolidated program for low- Low-Income Allowances (CCA) (3%) benefits benefits income households paid through single payment *Single Parent Allowances agency (SPA) (1%) Households *Guaranteed Minimum Income GMI GMI (unified application form) Support Program (GMI) (5%) *Heating Benefits (7%) Heating Heating For Benefits Benefits *Indemnity for Disabled Adults IDA IDA Two largest disability benefit benefits, of which first two account Programs for Disabled (23% of SA (IDA) programs (IDA + CBD) consolidated; follow *Complementary Budget for harmonized assessment Disabled (CBD) criteria, unified institutional for 14% of SA spending) CBD CBD framework Other disability benefits (7%) Specific benefits remain but with harmonized disability and assessment criteria, unified institutional framework with single registry; and with strengthened O&C Social Pensions & Other (20%) Social Pensions & Other Number of 8 7 7 4 Key Social Assistance programs Total 2.9% of GDP 2.1% of GDP (0.78% cost savings compared to 2010) *As explained elsewhere, the programs that are shaded in grey and marked with an asterisk (*) are the focus of the Government’s Strategy and the proposed SASM project. These programs collectively represent 61% of total social assistance spending. The rest are very small programs. 182. The second and third reform areas, improvements in the management of information related to payment arrangements, is centered on the NASB, the payment agency for some of the social assistance programs. As of 2010, only four out of the eight large social assistance programs were part of the NASB: SCA, ICR, CCA, and SPA. In January 2011, NASB 58 took over the registry and payment function for the GMI. By 2013, all eight of the primary social assistance programs (those shaded in Table 5.4.) or their successors will be paid via a single payment agency (NASB). The operational management information systems for disability programs (allowances and pensions) will be administered outside the NASB by the new unified disability agency, with payments processed by NASB. The separation of the eligibility determination function (local government) from the payment function will reduce the risk of fraud and error. The development of a unique management information system for the social assistance system is a key input for the development of a performance monitoring system (scheduled for 2012). By 2013, the Strategy aims to link the performance-monitoring indicators to explicit decision rules if certain indicators go out of their normal range, introducing elements of performance management in the system. This will complement and greatly expand the scope and content of the performance management contract of NASB with MoLFSP. At the same time, the development of sector-wide management information systems will allow NASB to respond to other business needs, such as cross-checking of information across social assistance programs to spot irregularities in the application or recertification processes. 183. The fourth reform area focuses on strengthening mechanisms to reduce losses from error, fraud and corruption (EF&C). These measures are focused on strengthening the Social Inspection directorate, a specialized unit of the MoLFSP with the mandate to protect the system from abuse EF&C to check eligibility for benefits. The key elements of the EF&C section include a set of actions aimed at: (i) prevention: ensuring sufficient checks and capacity to verify eligibility and prevent errors or fraudulent claims from entering the system; (ii) detection: ensuring sufficient resources and mandate for social inspectors to routinely review the cases that are suspected of EF&C, using effective investigative techniques, intelligence from staff, the public, and other government departments; and (iii) deterrence: ensuring that a sufficiently robust sanctions regime is in place and that remedies are applied systematically to deter potential fraudulent claims on the social assistance system. To address EF&C effectively, the government’s Social Assistance Strategy aims to: • Simplify the social assistance system and administration (prevention); • Improve the capacity of local authorities to verify the circumstances that determine eligibility of the applicants for social assistance benefits (prevention); • Expand social inspections to all programs that have a high risk of EF&C (detection); • Use the data available in the public databases operated by MoLFSP and other ministries to identify the cases potentially affected by EF&C, and target EF&C inspections (checks) toward these cases (detection); • Provide sufficient resources and mandate for the social inspection services to detect and address fraud (detection); and • Ensure adequate deterrence through a sanctions regime (deterrence). 184. In the second half of 2010, the Social Inspection directorate began a process of thematic inspections in all programs that are prone to EF&C risks. These inspections include six out of the seven programs that remained under the “Government’s Social Assistance Program� between May 2010 and 2011. In 2010, the GMI, the two disability allowance programs and the Child Raising Benefit were thoroughly inspected. The inspections have resulted in the suspension or discontinuation of some benefits to beneficiaries of the GMI program and disability benefits. For the first half of 2011, two other programs—Heating Benefits 59 and Family Benefits—are scheduled for inspection. The only program not subject to this regime is the State Child Allowance (SCA), a categorical program that covers all children 0 to 18 years old in Romania, with one of the simplest eligibility criteria, managed and paid via the NASB SAFIR information and payment system. In the case of SCA, the Social Inspection directorate reviews all complaints, appeals, and referrals by the front-line social assistance staff. These thematic inspections allow the government to establish a baseline in terms of the cases with EF&C. At the same time, the Social Inspection directorate uses this information to develop risk profiles, which will increase the cost-effectiveness of inspections in the future. Starting in 2012, four programs (ICR, FA, GMI, and HB) will be subject to sample-based thematic inspection annually. Disability programs will be added to this inspection program once the harmonized legal and institutional framework is in place. 185. During the life of the Strategy, the cost-effectiveness of the social assistance system to prevent, detect and deter EF&C will increase, supported by technical assistance from the World Bank. The MoLFSP is committed in its Social Assistance Reform Strategy to take concrete steps that will reduce the level of EF&C in the system by (i) simplifying the social assistance system and administration (prevention); (ii) improving the capacity of local government officials to verify the circumstances that determine eligibility of the applicants for social assistance benefits (prevention); (iii) expanding social inspections to all programs that have a high risk of EF&C (detection); (iv) using the data available in the public databases operated by MoLFSP and other ministries to identify cases potentially affected by EF&C, and target EF&C inspections (checks) toward these cases (detection); (v) providing sufficient resources and investigative powers for the Social Inspection directorate to detect and address fraud (detection); and (vi) ensuring adequate deterrence through a sanctions regime (deterrence). 186. The overall goal of the government’s Social Assistance Strategy in combating EF&C is to ensure that most beneficiaries of social assistance programs will receive the right benefit, in the right amount and at the right time. During 2011–2013, the operational goal of the strategy is to put in place the key building blocks of a cost-effective strategy to fight EF&C, in particular: (i) Improve the capacity of local government officials to verify the circumstances that determine eligibility of the applicants for social assistance benefits (prevention); (ii) Ensure that all programs at high risk for EF&C are subject to annual inspections (detection); (iii) Gradually move from random inspections toward risk-based inspections, triggered by intelligence from within the social assistance system (referrals by staff or via cross-checking information from public databases) or from the public (via telephone and Internet hotlines) (detection); (iv) Develop a cost-effective sanction regime and enforce it; (v) Ensure adequate resources: staff, legal powers, and operational costs for its detection branch, Social Inspection. By 2013, Romania will narrow substantially the gap with other OECD countries with respect to the mechanisms and measures deployed to combat the EF&C gap is highlighted in Table 5.5 60 Table 5.5 Measures used to combat EF&C in Romania vs. certain OECD Countries Common measures used in many OECD countries Measures present in Romania in July 2010 Prevention -Eligibility checks at different levels (separation of -Eligibility checks by staff by municipality or functions) territorial unit -Data-matching -Information campaigns Detection -Data-matching - Staff referrals -Telephone hotlines - Random reviews -Staff referrals - Ad hoc inspection reports -Dedicated, trained, and resourced fraud investigators -Random and risk-based reviews - Regular measurement of risks to benefit system Deterrence -Adequate sanctions (penalties, prosecutions, confiscation -Limited sanctions regime of assets) - Information Campaigns 187. In terms of intended results, the government’s Social Assistance Strategy includes a set of six objectives with associated results’ indicators. The objectives are improving the equity of social assistance transfers; increasing the labor market participation of social assistance beneficiaries; reducing administrative costs; reducing the level of error, fraud and corruption; improving monitoring and evaluation capacity; and improving the quality of human resources. Expected Impacts of the Social Assistance Reform Strategy 188. The estimated economic and financial impacts of the Social Assistance Reform Strategy center on the expected overall outcomes generated by the strengthening of the government’s social assistance system. These relate to poverty, targeting accuracy, coverage of the poor, generosity, fiscal savings, and labor market impacts. Some outcomes, such as the dynamics of poverty and labor market impacts, will be strongly influenced by the state of the economy, over and above the changes in the distribution of social assistance transfers. While the simulated results presented here do not separate the impact of economic growth from the redistribution of social assistance funds, we note that growth effects are likely to be small. 189. The implementation period of the SA reform strategy coincides with a forecast for weak recovery (2011) followed by predictions of moderate growth (2012–2013) (Table 5.6). Moreover, real wages are projected to reach only 96 percent of their 2009 value by the end of 2013. The weak increase in real wages reflects the need to contain the public wage bill, to correct the large pay increases uncorrelated with productivity that occurred in the pre-crisis period. As wages represent a high share of the household incomes, wage stagnation will strongly influence the dynamics of overall household income or consumption. Hence, the impact of economic growth on reducing poverty is moderate for the period of implementation of the proposed project. 61 Table 5.6 Modest Growth Prospects: By 2013, Real Wages Are Expected to Fall Below 2009 Levels Indices (compared to previous year, y.o.y.) 2009 2010 2011 2012 2013 GDP 0.981 1.015 1.044 1.042 CPI (annual average) 1.061 1.061 1.034 1.030 Nominal wage growth 1.020 1.014 1.050 1.060 Real wage growth 0.961 0.956 1.015 1.029 Source: IMF (2010, December), “Staff report for the Sixth Review under the Stand-By Arrangement,� mimeo 190. The reforms are Figure 5.3. The Relative Annual Cost of Social Assistance will expected to result in significant fall during 2010-2013 with Implementation of Reforms fiscal savings (Figure 5.3). With 3.5 the implementation of reforms under the government’s Social 3 Assistance Strategy and the 2.5 proposed SASM project, the share % of GDP 2 of social assistance spending in GDP is projected to fall from 2.9 1.5 2.86 percent in 2010 to 2.1 percent by 2.44 2.14 1 2.07 2013, an average annual reduction of 0.8 percentage points over the 0.5 project period. This will bring 0 social assistance spending in 2010 2011 2012 2013 Romania closer to average Source: Social Assistance Reform Strategy 2011-2013, Government of Romania spending levels in the new EU countries. Relative to its 2010 (baseline) level, implementation of the Social Assistance Reform Strategy will reduce the relative annual cost of social assistance by 0.42 percentage points in 2011, 0.72 percentage points in 2012 and 0.78 percentage points by 2013. In 2011, the sources of fiscal savings are parametric reforms (0.16pp); reduction in the level of error, fraud and corruption (0.09pp); and the freeze of the benefit levels of most programs (0.17pp). By 2013, the largest reduction will accrue from keeping constant the nominal budget of most social assistance programs (0.62 percentage points of the total fiscal savings from the 0.78 percentage points). 191. The ultimate development objective of the government’s Social Assistance Reform Program is to protect the poor, while reducing the fiscal cost of the social assistance system. By 2013, the living standards of the households from the poorest quintile will improve compared to 2009, although economic growth will be modest and the overall cost of social assistance transfers will fall. The poverty headcount for the poorest 5, 10, 15 and 20 percent in 2009 will also fall, with impacts more pronounced for the poorest of the poor. A key driver for the reduction in poverty is the improvement in the equity of the social assistance spending, which 62 is the immediate project development outcome of the government’s Social Assistance Reform Program, supported by the proposed SASM project. Operationally, the improvement in equity (targeting accuracy) is measured by the increase in the share of social assistance funds reaching the poorest quintile of the population. Overall targeting accuracy is expected to rise from a baseline of 37.7 percent in 2009 to at least 45 percent by the end of 2013. 192. The targeting performance of means-tested programs is on par with the best programs in the region in 2009 and will improve with reforms. Over the life of the reform program, the poverty-reduction impact of means-tested programs will improve, especially after implementation of the consolidated program for low-income households (Minimum Social Insertion Income program) through better targeting, coverage and generosity for the population from the poorest quintile. Targeting accuracy, the share of program funds that accrue to the poorest quintile, is expected to increase for these programs from an average of 64 percent in 2009 to over 80 percent in 2013. The coverage of the population from the poorest quintile with means-tested programs is expected to rise from about 45 percent in 2009 to almost 60 percent in 2013. And the generosity of the last-resort program (GMI in 2009, MSII in 2013), which measures the share of the GMI transfers in the total income of beneficiary families, will go up from 24 percent in 2009 to almost 30 percent in 2013. 193. The targeting accuracy and coverage of the overall social assistance system will also improve, but to a lesser extent. By 2013, timely implementation of the reform program is expected to generate an increase in the targeting accuracy for the overall social assistance system from 37.7 percent in 2009 to at least 45 percent (estimated at 49 percent). The coverage of the poorest quintile is projected to increase from 82 percent in 2009 to over 90 percent in 2013. In addition, the generosity of social assistance programs for beneficiaries in the poorest quintile could grow from 26 percent to over 29 percent over the same period. 194. The estimated overall Figure 5.4. Reduction in absolute poverty headcount, for poverty impact of the proposed different ventiles at baseline (2009) reforms is positive and 25 significant (Figure 5.4). On 20 20 21 19 20 average, the living standards of Poverty Headcount, % the households in the poorest 15 15 16 14 quintile will improve, with 13 proportionally stronger gains for 10 10 10 9 the poorest of the poor. By 2013, 7 almost all people in the poorest 5 5 5 5 ventile12 in 2009 will earn more than 311 RON, the poverty line 0 0 cutoff that separated this group 2009 2011 2012 2013 from the rest of the population 5th percentile in 2009 10th percentile in 2009 (Annex III, Table 3). For this 15th percentile in 2009 20th percentile in 2009 12 A ventile is a quantile equal to 5 percent of the population. The poorest ventile is the poorest 5 percent of the population. 63 group, the poverty headcount is expected to fall from five percent in 2009 to 0.4 percent in 2013. Similarly, the poverty headcount for those in the poorest decile in 2009 is expected to fall to 6.8 percent in 2013. Poverty impacts are less strong for the poorest quintile, although they are positive and significant. 195. The overall program is expected to have positive labor market impact. Romania has a large number of work-able adults on social assistance who are not employed, disabled, in education, or in training, estimated at about 1.8 million (22 percent of working-age beneficiaries). The planned social assistance measures aim to provide stronger work incentives for some adults in this pool by: (i) reducing the marginal tax rate on earnings for the Child Raising Benefit from 85 percent to 75 percent; (ii) reducing the duration of the CRB to one year for high-income earners and increasing the back-to-work bonus from RON 100 to RON 500; (iii) eliminating the “false� disabled who could work but instead live on benefits; (iii) introducing stronger work- and activation-requirements in the GMI program, which will be maintained, fine- tuned and possibly expanded in the Minimum Social Insertion Income program. Key inputs needed for implementation of the Social Assistance Reform Strategy 196. To implement the ambitious Social Assistance Reform Strategy and its action plan, the Ministry needs to keep up with its legislative calendar (3.3.2); finance timely the technical assistance and investment needed to achieve the results-indicators of the Strategy (3.3.3); and adjust the level and skill mix of its human resources in the key implementation units (3.3.4). At the same time, policymakers need to boost the resources devoted to monitoring and evaluation, budget formulation, execution and forecasting; economic and policy analysis; and the strategic development of ICT resources for an integrated Management Information System across its key policy areas (pensions, labor and social assistance) (3.3.5). The Action Plan 197. The SA Reform Strategy was adopted by the government in March 2011. During March and April, the General Directorate for Social Assistance led the development of an action plan for the Strategy, which ensures that the Strategy will be implemented following a realistic timeframe, with clear assignation of institutional responsibilities, and with adequate resources. The Action Plan was adopted by Order of the Minister of Labor in April 2011. The Action Plan includes, inter alia: (a) the objective and scope of the Action Plan (the cash transfer programs covered); (b) key activities required to achieve the results-indicators of the Strategy; (c) timetable; (d) responsible institutions; (e) legal implications; and (f) indicators to monitor progress. Legislative Calendar 198. While most legislative and regulatory measures needed for implementation of the government’s Social Assistance Strategy are already in place, a few remain pending for adoption during the project period. Apart from the Framework Social Assistance Law, the legislative and regulatory inputs required to implement the Social Assistance Strategy have been 64 identified by MoLFSP, and a legislative calendar was included in the Action Plan. The most important legislative measures are included in blue in Annex III, Table 7. 199. The key pending legislative inputs include: (a) legislation for the consolidation of the means-tested programs into one program for low-income households; (b) legislation for the harmonization of the disability assessment criteria and unification of the institutional framework; (c) legislation relating to one application and one point of service; and (d) legislation on the harmonization of the sanction regime and improvement of its cost effectiveness. The quality of these regulations will depend on the quality of the background studies and analysis used to calibrate the parameters of the new cash transfer programs (e.g., for the consolidated program for low-income households) as well as to perfect adequate implementation arrangements via implementation pilots (relevant for all legislative measures). For some of these activities, the MoLFSP has identified technical assistance inputs (see 3.3.3. below). 200. Recommendation: As part of the implementation arrangements for the Social Assistance Action Plan, the General Directorate for Social Assistance is advised to prepare a detailed legislative calendar, going beyond identifying the key pieces of legislation and their deadlines, to (i) a plan for the different steps for the adoption of draft legislation; and (ii) the development of implementation regulations such as governmental decrees, Ministerial orders, internal procedures, etc. Technical Assistance and Investments 201. Some technical assistance (TA) and investments are needed to achieve the result sought under the Social Assistance Reform Strategy. Technical investments and other inputs would be needed to support implementation and achievement of the results-indicators (see Annex III, Table 8). Financing for these technical investments and activities would come from several sources outside the proposed project: (a) approximately €6 million to be made available through the proposed restructuring of the ongoing Social Inclusion Project of the World Bank; (b) the government’s own budget resources; (c) EU structural funds; and (d) others. The implementation of the Strategy could be delayed if the critical technical assistance is not deployed in time and is not of the quality expected by the government. To minimize these risks, both the MoLFSP staff and the Project Management Unit (PMU) should devote sufficient resources to procurement processes. 202. Recommendations: - Hire a dedicated public manager to follow up on TA for the implementation of the SA Strategy; - Hire a project management specialist in the PMU who is able to use project monitoring tools (e.g., GANTT Charts) - Develop detailed TORs for each element of critical TA; review them; peer-review them - Conduct regular monitoring reports on progress in implementation of the critical TA and investment plan; in case of delay, seek management support to bring the procurement plan back on track. 65 Human Resources 203. The implementation of the Social Assistance Reform Strategy will require acquisition of core skills and additional staff. As part of the austerity package implemented in the second half of 2010, the staff of MoLFSP and its subordinate agencies has been reduced by about 25 percent, and wages were reduced by 25 percent. For 2011, the Ministry’s network operates under a staff hiring freeze. These budgetary and human resource constraints notwithstanding, the management of MoLFSP is well aware that the implementation of the Social Assistance Strategy would require more skills and staff in certain areas. The Ministry has requested the assistance of the World Bank, through the Functional Review, to assess staffing needs in four key units that are critical for implementation of the government’s Social Assistance Strategy: the General Directorate for Social Assistance; the General Directorate for Persons with Disabilities; the General Directorate for Social Inspection; and National Agency for Social Benefits. While an estimate for the number of personnel differs from unit to unit, in general it should be based on the critical functions that the unit or agency is expected to perform during 2011–13; a forecast of the workload; and a target staffing level based on assumptions about productivity. Another complementary approach is benchmarking with other units or agencies in similar countries. This estimate of staffing needs would be an input in the Action Plan for the implementation of the government’s Strategy. 204. Recommendation: The Functional Review team recommends an increase in the staff by 41 percent in certain areas, concentrated in two highly understaffed units: Social Inspection and the NASB. While this increase seems large, and in fact is larger than the cut effected during the 2nd half of 2011, the recommendations are well-justified in terms of cost- benefit ratio (the estimated fiscal savings from reducing error, fraud and corruption in the SA system of 400–460 million RON annually is more than 60 times the current wage bill of the unit, and the savings are contingent on adequate staffing levels). Despite the human resources hiring freeze, the Ministry can reallocate staff from units that are well staffed (or over-staffed) to those areas that are under-staffed. The overall staffing level in the Ministry and subordinate units (Pension, Employment, and Labor Inspection agencies plus NASB) was 10,916 in December 2010; the increase in staff recommended for the four implementation units is only 619, or 5.6 percent of the total. The MoLFSP has already begun to adjust upwards its personnel in the four implementation units, notably in the Social Inspection directorate and NASB, through temporary reassignment of personnel from other units. 205. There are additional implementation issues related to the front-line units, the Social Assistance services operated by local government, for which the FR has not provided any estimate of required staff. During 2005–2009, these units have been burdened by additional workload, when both spending and the number of programs and categories of beneficiaries have multiplied. During 2010, local government staff, including social assistance staff, was reduced as part of the austerity measures. As a result, some local governments, especially those in rural areas, could face capacity constraints. Over 2011–2013, these capacity constraints are likely to be relaxed. The proposed project would have a positive impact of the workload of the frontline units, through consolidation or elimination of certain programs; harmonization of rules and procedures across means-tested programs; simplification of rules and procedures to reduce both 66 administration and client participation costs; introduction of a unique application form for family policy programs and for the program for low-income households. Table 5.7 Proposal to increase the number of staff in critical implementation units Department Number of Staff Justification or Agency Dec 2010 Proposed, FR GD for 54 64 Increase in the scope of work / need to acquire new skills: Social • monitoring of the SA Strategy Action Plan; Assistance • selected M&E activities; stronger interaction with implementation units; • simulating, designing, piloting the new consolidated program for LIHs GD for 44 52 Increase in the scope of work: Persons with • development of a national database for disabled Disability persons; • preparation of the legislative and regulatory framework for harmonized disability assessment and unified institutional framework for disability allowances and pensions • supervising TA activities; piloting of the new service delivery model GD for 136 320 Baseline: severely understaffed (when benchmarked Social internationally) Inspection Increase in the scope of work • from two programs inspected in 2010 to five during 2012–2013; • move from random and referral-based inspections to risk-based (client-profiling) inspections; • expansion in the investigative powers of the inspectors Benefit-cost ratio: the ratio of irregularities detected in 2010 to the wage bill of the unit was 60 to 1 NASB 1266 1683 NASB is an agency that will expand its “business functions� over 2011–12 and rationalize them in 2013, as follows: (i) NASB is taking over new programs and payments, currently carried on by the local governments (the GMI starting Jan 2011; potentially the heating benefits). In 2012 or 2013, the means-tested programs will be merged into the Social Insertion Minimum Income program. This will involve more files being processed (in 2011/12) and more payments being made through SAFIR; (ii) The workload will fall during 2012/13 with the 67 consolidation of programs and the introduction of the unique (family) application form / family- based file. (iii) Starting 2011, NASB will develop new business functions: (i) cross-checking information and generating referrals for the SI and the local governments; (ii) expanded monitoring (including performance monitoring) reports. Total 1500 2119 Relative 100% 141% Relative increase in staffing for these critical areas increase Capacity Building Areas 206. Romania’s social assistance system has some strong features, which the current Government is committed to build upon. With the GMI, a program that ranks among the best in terms of targeting accuracy in the region and the world, Romania has found a model for channeling scarce budgetary resources only to those in need that is well adapted to country circumstances and can be replicated more widely. For the subset of programs administered by the NASB, the system that processes payments, the management information systems and the financial management arrangements are strong. The institutions and mechanisms for oversight and controls, including those for reducing the level of error and fraud, are also in place. In particular, the Social Inspection directorate has well trained (albeit insufficient) personnel and adequate procedures that proved their effectiveness during the thematic inspections implemented during 2010. In all these areas, the basic investments—human resources, information technology, processes—are in place. 207. However, the utilization of these resources is below potential. During 2011–12, the Ministry should focus on improving the efficiency of using these systems and processes. The areas with high “value-for-money� potential are (i) monitoring and evaluation, (ii) budget formulation, execution and forecasting; (iii) the use of economic and policy analysis to adjust existing cash transfer programs and/or the system; and (iv) the strategic development of its ICT resources for the development of an integrated Management Information System across its key policy areas (pensions, labor and social assistance)—the last aspect covered in Chapter VII: Information Management. All these areas would help improve the basic architecture of the social assistance system. 208. At the same time, MoLFSP should invest in a focused program of policy reviews and analysis to address second-generation reforms of the social assistance systems, to identify solutions to (i) activate the large pool of social assistance beneficiaries who are able to work; (ii) provide stronger incentives for low-income households to invest in the human capital of their children (e.g. more effective conditioning of payments on school attendance); and (iii) increase the cost-effectiveness of family policies, especially those aimed to boost fertility (the Child Raising Benefit). 68 Monitoring: Moving from a basic monitoring system toward a performance management system 209. The monitoring of cash transfer programs is one example of a system where the basic investments are in place, but their potential is unrealized. The MoLFSP, through NASB, has invested in a modern registry of beneficiaries and a payment system. The Integrated Information System for Administration of Social Benefits (SAFIR) for the social assistance system was launched in 2008 (see Chapter VII). However, by 2011 the key social assistance programs were only partially covered. SAFIR covers only four of the seven major social assistance programs (in includes the SCA, CRB, FA and GMI, but not HBs and the two disability allowances IDA and CBD). The lack of a comprehensive MIS covering all key social assistance programs precludes MoLFSP from fulfilling a number of desired functions, such as indentifying duplications in payments for the same program or identifying beneficiaries who are over-reliant on social assistance transfers. Such a system will be gradually developed over 2011– 2013, according to the Social Assistance Reform Strategy and its Action Plan, in part with World Bank support via the Social Inclusion Project. 210. Apart from its incomplete coverage, the information collected by SAFIR is underutilized. On the supply side, there is an abundance of data. By the end of 2010, SAFIR was storing about one terabyte of data on a monthly payroll of 6 million beneficiaries. A monitoring module is part of the existing SAFIR software, but is not used due to staffing and hardware constraints. Only a small fraction of this data is used for monitoring purposes, and an even smaller fraction is disseminated transparently via the Quarterly Statistical Bulletins of MoLFSP13. While SAFIR contains important data on social assistance programs, it is insufficiently used to support operational and policy-level management. Rather, SAFIR is primarily used as a tool to manage payment processes for a subset of social assistance programs. 211. A best-practice monitoring system is an essential management tool that regularly supplies information about how well a program is working so that program managers can take action to improve the program’s implementation. Monitoring provides information on how much money is spent, how many beneficiaries the program is reaching, how efficiently the program is serving them, and whether the outcomes of the program show progress or not. The monitoring information consists of indicators that are compared with targets to assess whether the program is on track. Managers act upon this information to correct and improve the program. A good monitoring system is comprehensive, actively used, and adapted to the country and program context. Effective monitoring systems require a strategic focus and political support more than they require costly investments in information technology. They require adequate skills, management attention, and funding and take time to develop and mature. MoLFSP’s current 13 Quarterly, MoLFSP publishes a statistical bulletin that includes a section on social assistance focused mainly on inputs (amounts spent) and outputs (beneficiary served), with minimal disaggregation (e.g. household size, number of children, gender, area of residence, judet (region), ). The bulleting is available on the website of MoLFSP. For the last bulletin covering the year 2010, see: http://www.mmuncii.ro/pub/imagemanager/images/file/Statistica/Buletin%20statistic/2010/2010Asistenta.pdf 69 monitoring system has only some basic elements (input/outputs, not outcomes or performance indicators), and it is mostly used as a passive, ex-post (limited) accountability tool, rather than as a management tool to improve the performance of the different cash transfer programs and the system. 212. The move from a basic monitoring system to a performance management system is one of the key objectives of the Social Assistance Reform Strategy for 2011–2013. Achieving this objective requires a substantial increase in capacity within MoLFSP and NASB in the following areas: • Ensure high-level (ministerial) support for the improvement of monitoring (and evaluation) activities; • Train and/or personnel specialized in monitoring (and evaluation); • Expand the scope of the monitoring system to cover all key social assistance programs, as they are gradually processed by NASB via SAFIR; • Expand the quality (relevance, depth, timeliness) of the monitoring information; in particular, expand the set of indicators from inputs and outputs to outcomes and performance (productivity) indicators (see Table 5.8 below); disaggregate them using relevant breakdowns (see Table 5.9 below); set targets where appropriate and monitor the progress toward achieving these targets; • Link the performance monitoring information with decision-making rules; identify areas that require management attention (indicators that are in the “red� area, as opposed to “yellow� or “green�). Table 5.8. Key Uses of Performance Indicators Identify problem areas and modify practices accordingly. Identify the root causes of problems, develop action plans, and track progress. Identify technical assistance needs, supply technical assistance, and track progress. Tighten funding procedures and standards and reduce or eliminate funding for poorly performing programs. Identify the need for policy or legislative changes. Identify underserved groups. Identify and disseminate successful practices. Motivate staff and recognize and reward high-performing agencies, offices, and individuals. Allocate resources, set priorities, and develop plans and targets. Source: Grosh et al (2008) Table 5.9 Examples of Disaggregation Subgroups and Benchmarks Information disaggregated by Information disaggregated by Benchmarks for comparison client characteristics service characteristics purposes Age group Region served (urban or To previous performance Gender rural) To agency targets Race or ethnicity Office or facility that Among categories of Household income provided the service customers 70 Information disaggregated by Information disaggregated by Benchmarks for comparison client characteristics service characteristics purposes Household size Amount of assistance Among geographical areas Location (urban versus rural, provided to individual clients Among organizational units district, city, local Mode of service delivery By type and amount of government, and so on) (especially useful for testing service Difficulty of improving the different approaches) To the performance of similar situation of the beneficiary Individual supervisor or programs in other countries (for example, very, caseworker To the performance of private somewhat, or not difficult) sector organizations Source: Grosh et al (2008) “For protection and promotion,� World Bank 213. An example of a set of indicators for cash and conditional cash transfer programs is presented in Annex III Table 10. 214. Critical technical assistance inputs for the development of a performance monitoring system have been identified in the Social Assistance Reform Strategy and the Project Appraisal Document of the Social Assistance System Modernization project of the World Bank, and will be financed from the WB Social Inclusion project. These TA inputs include: • Support for development of a performance management system. Under this TA, a Consultant will work with a MoLFSP/NASB counterpart team to (i) expand the current monitoring system into a full-fledged performance monitoring system; and (ii) make proposals for the use of the monitoring information by middle- and upper-management. o Make a proposal for a performance monitoring system covering all key social assistance programs. The expected outputs of this consultancy are the development of (a) logical models (frameworks) for the seven largest cash transfer programs; (b) a monitoring and evaluation plan; and (c) a monitoring manual with the relevant set of monitoring indicators and their specification sheets. The set of indicators should cover operational indicators for the regional management; and strategic indicators for the management of NASB and MoLFSP, tracking both performance and results/impact; o Develop a proposal for a performance management system; o Review the existing monitoring and evaluation capacity in MoLFSP and NASB and recommend steps to improve this capacity. • Expand SAFIR decision-making rules to generate regular performance management reports. This TA consultancy will complement the previous one by developing the software routines for the automatic generation of a large part of the indicators described in the monitoring manual. 215. The Functional Review team, in consultation with MoLFSP, has identified additional technical assistance inputs that would facilitate the timely development of the performance monitoring system over 2011–2012 and the deployment of a performance management system by 2013, in particular: 71 • Training of the monitoring and evaluation specialists in MoLFSP and NASB; • Focused training for regional staff from CASBs; • Exchange of experience between MoLFSP and NASB staff and other line ministries from EU (study tours; stages of on-the-job training abroad; seminars with international M&E specialists in Bucharest). Developing the evaluation capacity of MoLFSP 216. As with monitoring, MoLFSP Figure 5.5. A Modern M&E System has limited capacity to contract or conduct program evaluations, and figure 6-1 limited experience using the results of such evaluations. However, program evaluation is another essential management and policy-making tool, as illustrated in Figure 5.5 below. Internationally, it is considered best practice to check whether programs are implemented as intended and/or whether they achieve their intended results through specialized program evaluations. Three types of program evaluations are quite common across OECD and many middle-income countries for social assistance programs: process evaluations, evaluation of targeting accuracy and impact evaluations. A process evaluation asks whether a program is being implemented as intended, and if not, why not (see Annex III, Table 11 for examples of topics covered by this type of evaluation). An assessment of targeting accuracy investigates whether program beneficiaries are indeed the poorest members of the population. Impact evaluation quantifies a program’s net impact on the outcomes it is trying to influence, that is, it examines whether a program, as delivered, is achieving its goals. 217. To date, MoLFSP is acquainted with two types of evolutions—process evaluation and evaluations of targeting accuracy, typically contracted to specialized consultants. • Limited assessments of targeting accuracy are done jointly by NSI and MoLFSP experts, and reported, for example, in the annual Social Inclusion Reports14. According to the Social 14 See, for example, the Social Inclusion Report for 2010 (preliminary) and 2008 (complete), on MoLFSP website at: http://www.mmuncii.ro/pub/imagemanager/images/file/Domenii/Incluziune%20si%20asistenta%20sociala/Raportar i%20si%20indicatori/090810Raport_incluziune_2008.pdf 72 Assistance Reform Strategy, a full evaluation of the targeting accuracy of the social protection programs will be jointly conducted by MoLFSP and NSI and published in a specialized statistical bulletin. The World Bank, through its Social Inclusion Project, will finance a consultancy for the development of the first bulletin. • MoLFSP has contracted few process evaluations. These evaluations, however, have been mainly focused one small program— the Guaranteed Minimum Income. An example of such process evaluation is the GMI program by Gallup in 2009, which included an institutional analysis and a quantitative analysis of current beneficiaries; of applicants who were denied aid and of officials in the front-line units (local governments’ offices for social assistance). Similar process evaluations for other cash transfer programs, or evaluations focused on specific operational processes (such as the system of appeals and complaints, for example) have not been carried out. • The thematic inspections carried out by Social Inspection have a component of process evaluation, i.e., they identify legal, institutional, or organizational bottlenecks that hinder program compliance. This aspect is complementary to the fiduciary role of these inspections — to ensure that benefits are only paid to eligible beneficiaries. Ideally, the inspection’s findings should be integrated in the overall M&E activity of MoLFSP. 218. Recommendation. The Functional Review team recommends an increased and regular use of process evaluation to fine-tune the implementation of cash transfer programs. 219. In contrast with process or targeting evaluations, MoLFSP has neither the practice nor the capacity to conduct impact evaluations of cash transfer programs15. In the past, lack of a clear result orientation in social assistance policy contributed to the neglect of this type of evaluation. The current Social Assistance Reform Strategy, and the draft Social Assistance Framework law, explicitly mandate monitoring and evaluation. A number of reformed and consolidated programs, in particular the programs for low-income households and the disability allowance programs, have clear and identifiable objectives that could be tested for impact. The consolidated program for low-income households aims to boost the human capital accumulation of poor and vulnerable students via school conditionality (implemented from January 2011) and stronger activation requirements. It is important to test empirically whether the interventions have the desired impact, and to identify changes in program parameters that could improve the impact of the program. 220. Two critical technical assistance inputs— process evaluations— have been identified in the Social Assistance Modernization Project and will be financed by the Social Inclusion Project of the World Bank: • Support the harmonization of disability medical criteria, institutional framework and capacity building support for the unification of the disability institution as well as upgrade SAFIR with new payment rules for harmonized disability benefits. • Study to track the changes in administrative and client participation costs. http://www.mmuncii.ro/pub/img/site/files/ae247f9b6c39f43d22f8371e144388bb.pdf 15 The only impact evaluation of a social protection program in Romania was for active labor market programs. 73 221. Recommendation. For reasons of efficiency and accountability, MoLFSP’s capacity to design, contract and use the results of program evaluations needs to be increased. These capacity-building activities are related and complementary to monitoring activities, and should be housed in the same organizational unit. The new Social Assistance Framework law establishes a new entity, the Social Observatory, which may host the M&E activities. To increase the capacity of MoLFSP in identifying, contracting and using program evaluations, the following TA activities are recommended: (i) staff training in program evaluations; (ii) funding for selected evaluations (priority being given to priority areas in the Social Assistance Reform Strategy); (iii) expanding the composition of the PMU and/or SOP HRD unit with M&E specialist(s). Strengthen the accuracy of budget planning 222. One area that requires management attention is budget planning. During 2005–2010, a period of sharp increase in social assistance spending, there was significant deviation between planned and executed budgets. More recently, the introduction of asset filters in the heating benefit program have resulted in a sharp and unexpected reduction in caseload, by more than 50 percent. To a large extent, these deviations reflect an over-reliance on historical trends for budgeting, and an under-utilization of modern simulation techniques for cash transfer programs. It also reflects a fenced information policy, i.e., abundant information in SAFIR databases is not easily accessible, or not at all accessible, to budget department staff. 223. More accurate budget planning — critical in a sector that channels close to 3 percent of GDP— would require, inter alia, a stricter adherence to the legislative rules. The procedures for initiation of new or modified legislation require that the budgetary impact of any new legislative initiative be estimated for the current year and the next four years16. The standard format requires that each initiator of new or modified legislation will specify the impact of the law on budget revenues (by type) and on expenditures (by type). The net budgetary impact (broken down for state vs. local budgets) must also be estimated. The same format requires the initiator to propose ways to cover the fall in revenues or increase in expenditures, and to present detailed calculations and assumptions made. However, there is inadequate scrutiny of these calculations and assumptions. There are also cases of new legislation where the information on budgetary impact is not included, either by omission or by inaccurately stating that there is “no budgetary impact expected.� 224. Recommendations. To improve budgetary discipline and increase the accuracy of budgetary forecasting, the capacity of MoLFSP needs to be increased in the following areas: • Increase the skills of the budgetary staff, via dedicated training and/or by hiring of specialized expertise; • Improve the policy of access to information, with a special focus on information needed to forecast spending on the key (largest) cash transfer programs; 16 Section 4 of the “Rationale for new or modified legislation� concerns “Estimation of the budgetary impact on the consolidated budget, for the current year and the next 4 years.� 74 • Undertake an inventory of available information that can be used to simulate the budgetary impact of changes in program parameters, identify data gaps and develop measures to fill in this gap; • Increase the use of nationally representative surveys (such as the Household Budget Survey or the EU-SILC) in forecasting spending for the largest programs whenever there is an important change in the design parameters of the program; • Use specialized consultancy services to undertake ex-ante forecasting of spending for the largest programs whenever there is an important change in the design parameters of the program. In addition, develop the capacity to contract out such services and ensure adequate funding for them; • Undertake ex-post analysis of any deviations between planed and actual expenditures for the largest cash transfer programs; identify the causes of the deviations and take measures to minimize this source of error in the future. Improve program compliance 225. The Social Assistance Strategy includes a strong section devoted to reducing error and fraud in the social assistance system. Overall, these efforts could generate large savings, over and above the resources required to strengthen the capacity of the MoLFSP in general, and its detection unit (Social Inspection) in particular. 226. To achieve the error and fraud reduction results outlined in the SA Strategy, the Social Inclusion Project of the WB includes financing for critical TA activities, as follows: • Evaluate the accuracy and completeness of the information held in SAFIR; assess the capacity of SAFIR to cross-check information with other public databases; support development of cross-checking needs and requirements; • Develop a data-matching program for the databases operated by NASB, Pension House, NEA, Civil Registry and ANAF; • Support development of a national database for disability beneficiaries; • Legal TA to develop a new sanctions policy and investigative powers for the Social Inspections directorate; • Support the development of risk-based inspections (client profiling); • Upgrade SAFIR with new rules for GMI, Family Support benefits, Child Raising Benefits and the consolidated program for Low-Income Households; 227. Other important areas where technical assistance would be needed include: • Consultant services to inventory the data management systems of the Social Inspection directorate, with a view to generating proposals on how to collect, classify and analyze the information from inspections in order to generate risk profiles of beneficiaries and service units; • Studies to inform the MoLFSP and SI on the characteristics of households that do not comply with the eligibility criteria for means-tested programs, based on analysis of an (improved) Household Budget Survey. This analysis should involve the National Statistical Institute, and include improved collection of date for all circumstances that determine eligibility for means- tested programs), analysis of program compliance and development of risk profiles (identification of household or individual characteristics associated with noncompliance); 75 • Study tours and exchanges to other EU countries that are in the forefront of combating EF&C (UK, Netherlands, Sweden); • Staff training. Strengthen the evidence base for Second Generation Reforms of Cash Transfer Programs First versus second-generation reforms–conceptual clarifications 228. Investing in improved benefits administration and better targeting is generally a “first generation� challenge for social assistance programs (see Figure 5.6.). As countries improve the performance of their system to “protect the right people,� the second-generation question of “how long are these people going to be dependent on transfers?� gains urgency. The second- generation “Smart Safety Net� agenda focuses on reforms that increase incentive compatibility, proactivity and flexibility of the social assistance programs and the system: • Safety net programs should be designed to avoid creating perverse incentives that foster “poverty traps� whereby families become excessively dependent on transfer incomes or able- bodied adults reduce work to qualify for benefits. “Smart safety nets� are designed to promote “incentive compatibility� that aims at minimizing adverse work incentives. Figure 5.6 First- versus Second-Generation Reforms First and Second Generation Social Assistance Reforms Complexity 2nd Generation of Reforms: “Smart Safety Nets� Flexibility: to respond to crises Incentive Compatibility: work, dependency Proactivity: links to activation, human capital, integrated social services 1st Generation of Reforms: • Oversight and controls Improve compliance, reduce error and fraud •Benefits Administration (Beneficiaries’ Registries, , ICT ) •“Smart� Targeting, coverage of poor, “filtering out� access to rich 27 Time • Closely related to incentive compatibility, proactivity encompasses efforts to get “beyond cash assistance� (passive welfare policy) and to proactively link beneficiaries to employment, human capital and other social services. The idea is to strengthen the structural assets of beneficiaries (active welfare policy) to help them “graduate from poverty.� In addition to 76 enhancing their structural impact, strengthening the proactivity of safety net programs boosts their political acceptability and sustainability. • Flexibility encompasses the ability of safety nets to respond flexibly to changing circumstances, such as economic crises; natural disasters; mobility; or other policy changes (such as energy reforms) that might need to leverage safety nets as compensatory measures to protect the poor and other vulnerable groups. 229. The Social Assistance Reform Strategy 2011–2013 focuses on improving the performance of the social assistance system (first generation reforms). Looking forward, MoLFSP could better link social assistance administration with the National Employment Agency (NEA). In doing so, it would be possible to advance the second-generation reforms of the social assistance system in areas such as activating social assistance beneficiaries and providing incentives for human capital accumulation. 230. A focus on second-generation reform is both timely and strategically important. As described in the pension section, Romania is expected to suffer a severe decline of its population, from 21 million in 2011 to 17 million by 2050. This process will occur in tandem with an aging population and increase imbalances in the first pension pillar. In these conditions, policies that improve the human capital of the younger generation (such as the school conditionality introduced in January 2011 in the Family Allowance program), especially of the poorest segments that could find themselves in a poverty trap, will ensure that younger cohorts will be more productive, earn higher wages and contribute more substantially to financing pension liabilities. The population decline brings home the dictum “every body counts�: development of the human capital of the poorest pupils has not only private benefits but also significant externalities and benefits for older generations. A second argument concerns the size of the group of pupils affected by the school conditionality policy: about a third of the cohort of pupils in grades 1–12 are subject to this policy. Disincentives to work and activation measures 231. Current conditions that could trigger a reduction of work effort for social assistance beneficiaries apply to a large number of people in Romania. First, the pool of working age individuals (age 15 to 64) who receive, directly or indirectly, social assistance transfers is large: 8.3 million persons out of 15 million. A large segment of these are NEETD beneficiary adults: 1.8 million, or 22 percent of the total number of adults that receive social assistance transfers. Second, a number of social assistance programs are, in fact, income-replacement program offering generous benefits. For example, the child raising allowance replaces 75 percent of the beneficiary’s last year of earnings, and entitles the beneficiary to other benefits for young children; it represents half of the income of the households from the poorest decile. Other allowances that are highly generosity to beneficiaries in the poorest deciles are the heating allowances (a generosity of 54 percent); the disability allowances (31 percent) and the GMI (26 percent). Third, some individual benefits are offered on condition that the beneficiary not work, which has a strong work disincentive effect (high MTR). For example, the CRB is an income- replacement benefit that is conditional on the parent caring the child, i.e., conditional on not working. The GMI has an implicit marginal tax rate on earnings (close to 100 percent). 77 Moreover, the negative impact of all social assistance benefits could be compounded at the household level, given the possibility of accumulating numerous benefits. 232. The current pool of beneficiaries of working age who are not working and depend on social assistance benefits is quite large (Table A8.11). In 2009, about 22 percent of the working age beneficiaries of social assistance were “Not in Employment, Education, Training or Disabled� (NEETD) (1.8 million individuals). This number is driven by the large number of NEETD adults benefiting from the State Child Allowance (about 1.6 million), but there is a sizeable number of such adults in the other programs. A large segment of NEETD adults exhibit characteristics similar to those in employment: 45.5 percent of them live in urban areas, where labor demand is stronger; only a small minority of them are single parents (0.7 percent); 63 percent of them are 25 to 44 years old, the age-groups with the highest employment rate; 60 percent of them have at least a vocational or high-school education; 36 percent of them previously had earnings that placed them in the upper 60 percent of income distribution. 233. A large fraction of NEETD adults live in households that currently derive a substantial share of income from social assistance benefits, and a fair share of them are not poor (Tables A8.12 and A8.15). As shown in Table 12 below, the share of households that derive more than 25 percent of their income from transfers is high for a large fraction of the Child Raising Benefits, Heating Benefit and the GMI. In a family with two earners, this is equivalent to having the second earner earn a third of the wage of the primary earner; this level of generosity may deter that spouse from working. Table 15 quantifies the fraction of NEETD beneficiary adults who live in households where more than half of the income comes from social assistance transfers, an extreme form of dependency. A smaller number of adults are in this category, and they are concentrated in the Heating Benefit program. However, considering the high number of NEETD adults, rates between 10 to 20 percent in the Heating Benefit, Child Raising Benefit and the GMI programs account for a large number of NEETD adults living on benefits. 234. Summarizing the descriptive analysis, we found three social assistance programs where the conditions that could trigger a work disincentive are all present: the CRB, HBs, and the GMI. (Table 5.10). For these programs, the introduction of policy measures that provide stronger incentives to work, such as those introduced or planned in the Social Assistance Reform Strategy, are likely to be effective. 78 Table 5.10. A subset of social assistance programs with potential benefit dependency issues Marginal Number of Beneficiaries (Direct and indirect): Dependence Tax on transfers NEETD (% NEETD Generosity>2 Rate on Total Adults Adults adults) 5% Earnings* 1 2 3 4 = 3/2 5 6 Total Social Assistance 12,343,275 8,306,858 1,796,543 22 of which: State Child Allowance 11,210,038 7,543,853 1,635,395 22 Low 0 Family Allowances 1,860,249 1,080,486 349,488 32 Low Moderate Child Raising Benefit 857,374 521,356 250,133 48 High High GMI 730,806 460,419 194,350 42 Moderate Moderate Heating Benefits 546,063 383,009 93,405 24 High Moderate Pro-Memoria Population 21484287 Nr of Adults (15–64 years old) 15028172 2881699 19 Source: Staff estimations based on HBS 2009 Notes: Programs highlighted in gray are likely to suffer from benefit dependency issues. Generosity is the share of social assistance income(s) in the total income of the beneficiary household. Adults are people aged 15 to 65 (ILO definition). NEETD adults are those who are not employed, disabled or in education or training programs. Social assistance beneficiaries include both direct and indirect beneficiaries (those who live in households where at least one person receives social assistance). 235. The overall Social Assistance Reform Program is expected to have positive labor market impact. The planned social assistance measures aim to provide stronger work incentives for some of this pool of adults: (i) the implicit marginal tax rate on earnings for the Child Raising Benefit was reduced from 85 percent to 75 percent, the duration of the program was reduced to one year for high income earners, and the back-to-work bonus was increased from RON100 to RON500; (ii) some of the “false� disabled who could work but were living on benefits would be encouraged to seek work; (iii) stronger work and activation requirements have been introduced in the GMI program, and will be maintained, fine-tuned and possibly expanded in the Minimum Social Insertion Income program. 236. Recommendation: MoLFSP is advised to invest in a set of policy analyses to identify the programs and beneficiary groups that are likely to suffer from work disincentives and the policy changes that could induce them to regain productive employment. In particular, we recommend: • Inventory existing programs and policies and their work disincentive potential, using tax- benefit models; • Modify program parameters and design to reduce the work disincentive effects; and • Ensure stronger links between NASB and the Public Employment Office. School conditionality 237. Until recently, opportunities for promoting linkages of social cash assistance to human capital were not tapped. Many countries have conditioned cash transfers on school attendance to provide incentives for higher school attendance and possibly higher education outcomes; and there is ample evidence that these approaches can be successful. Romania 79 operates three large programs aimed at families with school-aged children and youths—the State Child Allowance (SCA), the Complementary Family Allowance (CFA) and the Single Parent Allowance (SPA)—which until recently did not condition benefits on school attendance. Under the DPL program, the CFA and SPA programs have being consolidated into a Family Benefits (FB) program that will better target the poor. In addition, beneficiaries with school-age children receive benefits conditional on the children’s school attendance as of January 2011. 238. The new Family Allowance law (December 2010) introduces school conditionality for school-aged children. About 680,000 families with 1.2 million children will be eligible for the program; of these, about 840,000 are of school age and will be subject to the school conditionality. Accumulating a number of unexcused absences per semester over a certain threshold triggers reduction or suspension of benefits for the next three months17. Monitoring data indicate that the threshold for unexcused absences could affect a significant number of pupils18. Noncompliance with conditionality will trigger penalties estimated at 15 percent of the income of the families from the poorest decile, providing strong incentives to change behavior and maintain high school attendance. 239. Recommendation: Technical assistance will be needed to support the development of a system of monitoring absences for the Ministry of Education; to evaluate the school conditionality program19; and to identify changes that could increase the effectiveness of the 17 The sanction policy of the Family Benefit law is as follows: # of unexcused absences / semester / Benefit reduction for the next 3 child months (hours) 11–20 20% 21–30 50% >30 100% (suspended) 18 The Ministry of Education does not collect yet student-level data on absences on a regular basis; it only collects the average number of unexcused absences per student per school per year. About 30% of schools have reported an average number of unexcused absences higher than the smaller threshold that trigger the milder sanction (10 unexcused absences per semester). A review of the student-level data on unexcused absences in three schools from Covasna district indicate that more than half of the children could be subject to the milder sanction if they do not correct their behavior; and somewhere between 4% and 46% of the students’ families could face benefit suspension. 19 The introduction of school conditionality in the Family Benefits program is amenable to a rigorous impact evaluation. The design of the new family allowance program would allow an unbiased estimation of the impact of the program on students from the third income decile, using a regression-discontinuity design. The evaluation will compare a sufficient sample of students that benefit from the family allowance (living in families with incomes just below the income threshold) with a “placebo� sample of students living in families with incomes just above the income threshold. The SAFIR database (the MIS for the social assistance system) could be used to extract the two samples. The National Database of Pupils administered by the Ministry of Education is used to regularly track the level of absences per pupil. The results of the evaluation would be used to adjust the parameters of the program for greater effectiveness, for example by limiting the school attendance conditionality to those segments of the population where school attendance is low or by adjusting the level of incentive (benefit level; sanction policy) for different group of students. 80 program at boosting school attendance and educational outcomes. MoLFSP is advised to invest in a set of policy analyses and evaluations to identify whether the current school conditionality arrangements have impact, whether that impact is strong across all groups of pupils, and what improvements might potentially be made to the Family Allowance program. 240. In particular, we recommend: • Evaluate the impact of the newly introduced school conditionality; • Use the results to improve the programs’ parameters; • Undertake a literature review of other support services used to increase human capital accumulation for low-income households. 241. The expected results from these analyses are: (i) Improved school attendance through fine-tuned school conditionality for pupils of the beneficiary households of the Family Allowance program; and (ii) Improved menu of support services or Human Capital accumulation conditionalities. Fertility & cost-effective family policies 242. To halt the sharp population decline, Romania offers a Child Raising Benefit to parents of young children (from 0 to 2 years old, or 3 years old if disabled) that compensate the at-home parent 75 percent of his or her previous wage. The effectiveness of this policy, in Romania as in many other countries, is doubtful. Despite its generous cash support, the total fertility rate changed little in Romania over the period 2000–2009 (Figure 5.7). The overly-generous support has made work unattractive for young couples (this measure is corrected, in part, by a generous back-to-work bonus), and correlates with one of the sharpest reductions in labor force participation by women of child-bearing age in 2009 vs. 2000 across new EU countries (Figure 5.8). At the same time, the Child Raising Benefit program continues to be the second most costly social assistance program (at about 0.4 percent of GDP) and has among the lowest targeting accuracy across social assistance programs. The program coverage is also small; its benefits accrue only to a small segment of the population (about 200,000 beneficiaries from a population of 21 million). Figure 5.7. Total Fertility Rate, Romania, 2000–2009 81 Figure 5.8. Labor Force Participation in EU-10: Romania’s falls as other new EU countries increase 243. The Child Raising Benefit was reformed in December 2010. The change in program parameters, however, was modest, due to an adverse political economy. These modest changes are likely to lead to modest results. To advance the reform, MoLFSP needs more rigorous information about the result of this policy, coupled with a communication campaign to inform the public of the facts. 244. Recommendation: MoLFSP should undertake studies to assess the results of its current family policies on fertility, and to identify working models from abroad. In particular, these studies should: • Evaluate whether the existing policies to stimulate fertility have the desired impact; • Review the evidence on the effectiveness of such policies in other countries, to inform the Romanian public and policies; and • Undertake a public information campaign. 82 CHAPTER VI: SOCIAL ASSISTANCE SERVICES 245. Besides the provision of SA Benefits, the L&SP sector also provides social assistance services to a wide range of beneficiaries: children and youth at risk, persons with disabilities (PWDs), the elderly and victims of domestic violence. These services are equally important to the achievement of the objectives of EU 2020 Strategy related to the poverty reduction and to the prevention of social exclusion. As Romania established for itself the target of reducing poverty by 580,000 persons until 2020, efforts should be made in the area of social services and social inclusion policies as well. 246. The MoLFSP is responsible for policy developments targeting the above-mentioned beneficiaries and the related methodological guidance, while local governments are responsible for financing and provision of these services through specialized bodies (GDSACP and PSAS), and compliance with approved standards. The social assistance services are delivered by residential Long Term Care (LTC) institutions, non-residential (day-care) centers and home care providers, belonging to the local authorities, communities, private sector NGOs and public- private partnerships. 247. Given the complexity of the SA services sector and its beneficiaries, the MoLFSP’s responsibilities vis-à-vis other government institutions, and the costs and varied performance of its sub-sectors, this report will only cover selected areas of the social service, including persons with disabilities, the elderly, and the social inclusion of Roma. 248. The reforms in the Social Assistance sector currently envisaged by the MoLFSP tackle both the cash benefits (presented in the previous chapter) and social services. The new draft Framework Law on Social Assistance (posted on the Ministry’s web site for public consultations) promotes a new approach for the future of the SA in Romania, in line with the EU philosophy for an integrated social assistance sector, combining passive programs (cash benefits) with active ones (social services) that would enhance the social inclusion of various vulnerable groups of people. PERSONS WITH DISABILITIES 249. Definition of Disability. The United Nations Convention on the Rights of Persons with Disabilities (UNCRPD), which was ratified by Romania also, uses an open definition that says, “Persons with disabilities include those who have long-term physical, mental, intellectual or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society on an equal basis with others.� 250. Definitions of disability vary widely across the EU, as they are often used for determining benefit entitlements and for political purposes. Therefore, the administrative data collected by the Member States and their local authorities are heterogeneous and allow for only limited comparisons. In order to overcome this impediment, several broad data-gathering 83 instruments have been developed and used in EU, including the Social Inclusion and Living Conditions Survey (SILC), European Quality of Life Survey (EQLS) and the Labor Force Survey (LFS). 251. Prevalence of Disability. With 689,680 registered PWDs (2.9 percent of the population) in December 2010, Romania is well below the widely accepted EU average of 10 percent. The “Breaking the Barriers� Report (Sickness, Disability and Work), which also compared OECD countries, indicates average disability prevalence at working age (20–64) of about 13.5 percent. Romania is well below that with a level of about 2.2 percent. However, it must be noted that Romanian figures do not include beneficiaries of invalidity pensions (contributory scheme) and the mentally ill who are registered with the Ministry of Health. If the latter were included, Romania’s prevalence figures might double, but they would still remain at half the international levels. (Annex IV, Table 1 presents detailed statistics of the PWD, by types of disability and severity.) 252. Worryingly, in Romania the prevalence of disability has increased by 50.0 percent in recent years, due in particular to the increase in the number of adult PWDs, while the number of children with disabilities remained flat. The increase in the number of adult PWDs was determined by a change in the legislation in 2007, when new categories of PWDs became eligible for disability benefits. This provided an incentive for many people to apply for disability certification, with many of them abusing the system. Figure 6.1. below presents the evolution of PWD from 2002 to 2010 (December). Figure 6.1 Evolution of persons with disabilities (2002—2010 December) 2002 2003 2004 2005 2006 2007 2008 2009 2010 Adults 366507 351996 369419 404691 432933 510645 571952 620042 629393 Children 56886 56124 56292 54861 55121 56896 59247 61516 61287 TOTAL 423393 408120 425711 459552 488054 567542 631199 681558 689680 Source: MoLFSP—General Directorate for the Protection of PWDs 84 253. Disability determination. Disability in Romania is still determined by criteria mainly focused on the medical conditions and restrictions of the individual, in contrast to the social model of disability developed by the World Health Organization and conceptualized in the International Classification of Functioning Disability and Health. This concept indicates disability as arising from the interaction of a person’s functional limitations with physical, cultural and policy environments. This means that with proper support and services, a person previously considered disabled might be able to fully participate in society. 254. For programmatic purposes, the determination of disability is undertaken by the territorial (county-level) Commissions of Medical Expertise which are the de facto entry gates into the system for PWD. Romania has three disability assessment schemes covering different target groups of beneficiaries and overlapping in many instances: (i) children, (ii) contributory adults, for invalidity pensions, and (iii) non-contributory adults, for disability allowances. For each group, the assessment is conducted by a different entity and based on a different set of medical criteria. The determination criteria appear to be both arbitrary and restrictive, leaving room for many inclusion and exclusion errors, as controls exercised in 2010 by the Social Inspection directorate revealed. A harmonization of the institutions conducting these assessments and of the assessment criteria would make sense. This would allow a more efficient and transparent disability or invalidity determination, and would reduce both administrative and benefits costs. As well, it would reduce the number of inclusion and exclusion errors. 255. Institutionalized Care. A passive and non-inclusive protection system for PWDs was inherited from the Communist era, based on poor-quality care delivered in large, obsolete, state- owned Long Term Care (LTC) institutions, hidden in remote areas. Although the restructuring of the LTC institutions was launched early in the 2000s, the number of the institutionalized adult PWDs, decreased only slightly, to 17,003 persons (2.46 percent of the total) in December 2010 compared with 18,958 persons in 2002. 256. The restructuring process continues, in line with the Government’s National Strategy for the Protection, Integration and Social Inclusion of Persons with Disabilities (2006–2013). However, the pace of restructuring was hampered by the lack of adequate financial resources (both at the central local levels), and was significantly aggravated by the economic and financial crisis of the last years. Currently, these institutions for PWDs (belonging to local governments because of decentralization) have diversified the services offered to the PWDs, gradually shifting from heavily institutionalized passive care to a more inclusive de-institutionalized care. The size of these institutions has been also decreased in many cases. Table 6.1 below presents the services provided and their beneficiaries (adult PWDs). Table 6.1 Public social assistence institutions for the adult PWDs (December, 2010) Number Beneficiaries TOTAL 372 19.155 Residential Centers 320 17.036 Centers for care and assistance 99 6.447 Centers for integration through occupational therapy) 19 1.550 Centers for recovery and rehabilitation of PWD—pilot 3 214 Centers for Neuropsychiatric recovery and rehabilitation 52 5.551 85 Centers for recovery and rehabilitation 53 2.553 Protected houses 84 644 Training centers for living an independent life) 2 31 Respite care center) 4 30 Crisis centers 4 16 Non-residential Centers 52 2.119 Day care centers 14 517 Centers with occupational profile 1 26 Ambulatory Centers for neuromotor rehabilitation 31 1.270 Mobile team 1 163 Home care social services 3 73 Centers for psychic-social counseling 1 25 Recovery and social inclusion centers—neurological recovery 1 45 Source: MoLFSP—General Directorate for the Protection of PWDs 257. Out of the 61,287 children with disabilities registered as of December 2010, 9,043 (14.7 percent of the total) were placed in the residential public and private institutions. These institutions also belong to local governments, but they are under the methodological supervision of the General Directorate for Child Protection (former National Agency) in the MoLFSP. Table 6.2 below presents the structure of care institutions and their beneficiaries. Table 6.2. Public and private residential center for children with disabilities (December 2010) Number Beneficiaries TOTAL 400 9,043 Public Residential Centers 357 8,802 Placement enters (traditional) 66 4,078 Placement enters (modular type/ restructured) 41 1,806 Apartments 56 398 Family type small houses 190 2.124 Other services (day/night shelters for independent living leaning) 4 396 Private Residential Centers 43 241 Placement enters (traditional) 1 23 Placement enters (modular type/ restructured) 3 13 Apartments 6 21 Family type small houses 33 184 Source: MoLFSP—Directorate for the Child Protection 258. Financing of Services. Funding of services for both categories of PWDs (adults and children) comes from four sources: (i) county council budgets (GDSACPs); (ii) state budget; (iii) beneficiaries’ contributions and (iv) other donors. Until 2009, budget allocations were made more or less on a historical basis. Beginning with 2009, Cost Standards were established for budget planning purposes, and they are used for various types of residential services. These standards have to be adjusted annually against inflation. However, the total monthly expenditure per beneficiary adult PWD has decreased constantly in the last three years (2007, 2008, and 2009) as it seen in Table 6.3 below: Table 6.3 Evolution of expenditures for social services /beneficiary adult PWD (RON) Type of Center 2007 2008 2009 TOTAL CENTERS 2437.03 2061.01 2031,78 - Residential Centers 2628.12 2162.92 2135.56 86 - Non-Residential Centers 1216.99 946.15 533.38 Source: MoLFSP—General Directorate for the Protection of PWDs 259. Quality of Services. In line with the above-mentioned national and international programmatic documents, Romania has developed a set of minimum quality standards for various residential and non-residential institutions. These standards are regularly revised and compliance by the service providers is randomly controlled on a yearly basis, by the Social Inspection directorate, which makes the inspection reports public. 260. However, over the last two years the SI directorate did not exercise such controls, being focused on eligibility criteria controls for various SA benefits (Minimum Income Guaranteed and Disability Allowances). If the SI is to combine quality controls for social services with eligibility controls for SA benefits, its institutional capacity has to be strengthened, in terms of both staffing and qualifications. 261. Employment opportunities for persons with less severe disabilities are still poor, in spite of the incentives granted to employers and the specialized career and counseling services and communication equipment made available to the PWDs by the network of public employment services under the NEA umbrella. 262. Only 28,420 PWDs of working age (20–64) are currently employed. This indicates an employment rate among the disabled of 7.11 percent, far below the best EU performers. Germany, Austria and Belgium each have disabled employment rates of 50 percent or above (EU “Study on Compilation of Disability Statistical Data from the Administrative Registers of the Member Sates—2007. Romania’s figure is half of the lowest EU performers: Finland (15 percent) and Poland (20 percent). 263. Some reasons for such a low employment rate may be: (i) poor outreach to PWDs; (ii) lack of specialized adult training programs for PWDs; (iii) poor accessibility for PWDs; (iii) attitudinal barriers such as stigma; (iv) the generosity of benefit levels (especially when combining various types of benefits). 264. The incentives for employers also seem not to work. The current “quota system� for employers hiring PWDs is not attractive because employers they have to invest accessibility, labor safety and supervision for employed PWDs. Not even the government institutions themselves are good employers in regard to contracting PWDs and benefiting from the quota system. 265. Further Policy Developments. As the EC initiates preparation of a new “European Disability Strategy 2010–2020,� Romania, as a member state and as a UNCRPD ratifying country, should be actively involved. Once this process is completed, the GOR should revise accordingly its National Strategy for the Protection, Integration and Social Inclusion of Persons with Disabilities. In addition, a cost evaluation of the strategy’s implementation should be conducted and adequate financial resources should be secured further on. 87 THE ELDERLY 266. Social protection of the elderly is mainly based on the LTC services provided by the residential institutions belonging to the local governments (similar with the ones for PWD and children with disabilities). At the national level, these services are methodologically supervised by the MoLFSP through its Directorate for Social Services and Social Inclusion. 267. Although Romania has specific legislation to protect the elderly (Law 17/2000, which has been subsequently amended several times, and a National Strategy for the Development of Social Assistance System for Elderly (2005–2008) accompanied by a detailed Action Plan), not much progress has been achieved in their implementation in recent years. Long-term care (LTC) capacity was not increased, nor was provision of home-care services developed. 268. Financing of Services. As with other social assistance services, funding for social assistance services for elderly comes from four sources: (i) county council budgets (GDSACPs); (ii) state budget; (iii) beneficiaries’ contributions and (iv) other donors. It should be noted that the state budget provided no support for these services in 2011. 269. LTC Services. Currently, a number of 132 nursing homes with a total capacity of 7,141 beds are functioning. Of those, 78 nursing homes (5,323 beds) belong to local governments and 54 nursing homes (1,818 beds) belong to the NGO sector (figures from 2010). This capacity is far below the population’s needs, and almost 2,660 applicants are on waiting lists. Countrywide, coverage of these services is not balanced. Seven counties have no public LTC institutions at all (Arges, Botosani, Dolj, Harghita, Prahova, Salaj, and Ilfov), and four of these are completely lacking in such services. This is a clear indication of low interest by some local authorities in developing and providing such services. 270. However, LTC capacity for the elderly may increase beginning in 2011 because of the recent closure of 67 small hospitals. These can be converted into nursing homes, with financing secured from the state budget for the next three years. So far, only 15 of these institutions have applied for this opportunity. 271. As in the case of the other services for PWDs, cost and quality standards have been approved and implemented. Compliance with these standards is to be verified randomly by the Social Inspection directorate each year. The quality of services provided depends largely on adequate staffing of the LTC centers in terms of both number and qualification. In terms of numbers, the actual ratio was 1.6 staff per beneficiary in 2010, compared with the approved standard of two staff per beneficiary. This ratio can be improved, provided the existing vacancies are filled. 272. Further policy developments. Given the rapid pace of aging in the population, Romania should think and act now in order to secure adequate provision of social services for future generations of elderly. A new National Strategy for the Social Protection of the Elderly should be prepared shortly and implemented with adequate financing. 88 273. International experience shows that countries such as Germany, Japan, France, Denmark and Holland launched various types of saving instruments to secure sustainable provision of LTC services and benefits for their future old age generations. Romania might also consider the development of such saving instruments (insurance time, mandatory or voluntary, public or private) which could be complemented by other measures to control the demand for LTC services and benefits or to control the cost of publicly provided LTC services. SOCIAL INCLUSION OF ROMA 274. As acknowledged by the EC in its Communication Paper [COM (2011) 173/4] for the establishment of an EU Framework for National Roma Integration Strategies through 2020, the improvement of the situation of the Roma is a social and economic imperative for the Union and its Member States. 275. Out of the estimated 10–12 million Roma people living in Europe, Romania accounts for 535,000 persons who have self-declared as members of the Roma minority (National Census 2002). However, various sociological survey reports estimate the number at around 1.5 million persons, which would represent about 7 percent of the total population of the country. 276. The socio-economic situation of the Roma is very difficult, with a poverty level three times higher than the majority population and four times higher than other minority groups. Two thirds of Roma live in poverty and more than half in severe poverty; only 12.9 percent of active Roma are formally employed, while 33.6 percent are engaged in informal employment. Roma education has begun to improve, but the education gap between Roma and non-Roma children is still very wide. 277. Legal and Policy Framework. The overall legal framework of Romania (both Constitution and sector specific legislation) does not discriminate against Roma, thus ensuring equal access to education, employment and social services. In fact, many programs provide positive discrimination, such as reserving places for Roma students in secondary and higher education and providing specialized counseling services for health and education. 278. Besides the approval of a ten-year National Strategy for Improvement of the Roma Situation in 2001, Romania has also been active in the launch of the Decade of Roma Inclusion (2005–2015), preparing Decade Action Plans for education, employment, housing and health. Implementation has lagged, and results to date are far from initial expectations. In addition, the monitoring and evaluation of the programs is poor. 279. However, the promotion of educational and employment programs for Roma (occupational counseling, training and job fairs) has achieved some tangible results in increasing their participation in the labor market. About 21 percent of new labor market entrants in Romania are Roma (WB study on Roma Inclusion—An Economic Opportunity for Bulgaria, the Czech Republic, Romania and Serbia, September 2010). 280. Notably, the implementation of the two Roma-related components of the ongoing WB Social Inclusion Project in Romania has been quite successful so far. The improvement of small 89 communities’ infrastructure in the poorest Roma settlements (EUR 11.7 mil—implemented by the Romanian Social Development Fund) is almost complete at 97 sites. Also, the development of inclusive early childhood education programs (EUR 6.7 mil—implemented by the Ministry of Education Research, Youth and Sports) allowed inclusive curriculum development, training of 2,500 educators and the construction or rehabilitation of 27 kindergartens in poor Roma communities. The demand for improvement of infrastructure and the development of social services coming from the Roma communities is quite high. As a result, during the recent project restructuring, an additional EUR 2.0 million were reallocated to RSDF to finance additional sub- projects over the next two years. 281. National Aagency for Roma was awarded six programs to be financed under SOP HRD, and implemented five of them at the end of 2008 and one in mid-2009. Although the pace of implementation was reasonable and pre-financing payments remained constant, reimbursements from EU funds are rather poor. Besides the above mentioned projects awarded to NAR, another 89 contracts targeting Roma social inclusion programs, amounted to EUR 219 million (EU Contribution) were signed, having NOGs and other public institutions as promoters and implementing partners. 282. Institutional Framework. The National Agency for Roma (NAR) is the government institution responsible for elaborating government policy and strategy on Roma issues. It also administers funds for Roma programs, represents Roma in specific national and international events, and monitors national strategy implementation. 283. Initially, this was a Roma Office functioning under the Government Office for Minorities. However, at the end of 2004 it was upgraded to a national agency. The NAR is currently led by a President with the rank of Secretary of State, and functions under the General Secretariat of the Government. 284. The Government received an IDF grant in 2005 from the Bank aimed at supporting the NAR in developing policies and strategies for addressing Roma problems, improving the targeting of social inclusion programs, disseminating information, and working to improve relations between Roma populations and adjacent communities. However, much of the gains obtained from the grant have dissipated because of the frequent changes in the agency’s senior management and continuous technical staff turnover. Hence, the overall institutional capacity of NAR remained weak, especially in the areas of social inclusion policy development and monitoring and evaluation of implemented programs. Also, the collaboration with other government partner institutions and the Roma civil society representatives is not enough effective, hampering the possible synergies that could support better design and implementation of the social inclusion programs. 285. The functional review of the Center of Government conducted in 2010 questioned the appropriateness of NAR’s institutional location there. Since the MoLFSP is the main institution responsible for social inclusion in Romania, it is recommended that NAR be relocated within the institutional structure of the Ministry. Thus, NAR will be closer to all the institutional structures in charge of various areas of social inclusion, and could benefit from their expertise. 90 286. Further policy developments. In line with the EC recommendation for the establishment of An EU Framework for National Roma Integration Strategies up to 2020, the GOR launched the preparation of a new National Strategy for Roma Inclusion for 2011–2020. Thus, in March 2011, the Cabinet approved the outline of the future strategy, and NAR launched the public consultation process, where the NGO sector as well as other stakeholders, was invited to provide inputs. A first draft of the strategy is posted on the NAR’s website. The FR team recommends that NAR also hold consultations with EC before submitting the strategy for Cabinet approval, to make sure that the strategy is consistent with EC programmatic documents. 91 CHAPTER VII: INFORMATION MANAGEMENT (CROSS-CUTTING ISSUE) 287. The area Information Technology and Communications (ITC) and Information Management (IM) was identified by the Inception Report as a key crosscutting issue for proper functioning of the L&SP sub-sectors in Romania, and recommended for more detailed analysis. This chapter aims to: (i) assess the alignment of the MIS/ITC systems of agencies within the MoLFSP with their business needs and processes; (ii) propose options for the improvement of the agencies’ activities by using more efficient information systems; (iii) propose improvements in the interoperability of these MIS/ITC pillars; and (iv) suggest further upgrade solutions for existing MIS of the National Agency for Social Benefits (NSAB). 288. The timely availability of accurate information is a must for all government institutions, including the MoLFSP. Information is needed to assess the performance of various sectors, to develop well-informed sectoral policies, and to implement, administer and monitor programs for which they are responsible. 289. The MoLFSP does not have an integrated MIS. A part of the information needed for its current activities is accessed from the three MISs that are operating independently in each of the three main areas of coordinated by the Ministry: labor, pensions and social assistance. Each of the agencies coordinates the administration of the programs for which they are responsible and have developed their own MISs, which are mainly used for calculation and payment of benefits. These systems were developed at various moments in time, as the relevant agencies (NEA, NHPP and NASB) were established. Since the legislation governing each of the three sectors frequently changed, it was difficult to update these MISs accordingly. Thus, their current functionality varies significantly across the sectors. 290. Gap analysis. The assessment covered the seven functional areas that are important for the proper functioning of the MoLFSP and its agencies. For each of these areas, the report presents the main findings and suggests recommendations. 1. Information Flow and Data Management 2. Security and Identity Access Management 3. Integration and Transformation 4. Technology Platforms 5. Interoperability within the MoLFSP’s network and with external institutions 6. Enterprise Content Management 7. Enterprise Applications: Management of the Social Benefits and Services 92 Information Flow and Data Management 291. Findings • Neither the MoLFSP nor its subordinate agencies have formal “blueprints� for their flows of information; • Despite the level of automation, many processes are still largely manual and labor- intensive; they require many points of internal control that take many steps and actors to perform manual tasks; they are paper-based, requiring multiple levels of approval; • MoLFSP currently lacks a widespread focus on information as a strategic organizational asset; • Management of structured information and access to that information, which are important tools for further improvement of the functional capabilities and processes of the Ministry, still present some deficiencies; greater gains could be achieved by merging structured information (transactions) with unstructured (documents). 292. Recommendations: • Business workflow management system. Consider the evaluation, selection and procurement of a workflow or business process management tool to automate workflows. This, combined with electronic signatures or some other form of approval, could alleviate processing overhead. Implementing an automated workflow process with a uniform identity and access management system will also strengthen existing controls to prevent fraud. • Development of standard interfaces between systems (e.g. Social Assistance-SAFIR and Pensions); this will help automate some validation processes (e.g. eligibility) which are currently done manually or on a “one time event� basis; • Operational business procedures simplification. Initiate an MoLFSP steering committee that will comprehensively look at all business processes; • Reduction of manual steps and paper controls. This will require changes to current processes and potentially legislation and adoption of new technologies, including electronic signatures, electronic documents, automated workflow, and strong identity and access management. One or more pilots should be implemented to gain experience and slowly shift from manual processes to automated processes; • Improvement of the catalogue of unstructured information, in terms of documents. A strategy and taxonomy for metadata and metadata management should be developed. Investigate the use of a technology product for meta-data taxonomy development and management; • Development and implementation of a data warehouse, by using “data mining� to scan the database to understand data anomalies across MoLFSP; • Development of a steering committee across the units and agencies within MoLFSP and beyond, to look at data and develop common definitions, understanding, metadata, and business rules. Develop a strategy for improved data sharing across organization units and applications, and externally; and • Improvement of data management competency by training or hiring high-end information management professionals in modeling and information architecture. 93 Security and Identity Access Management 293. Findings: • Initiatives to automate current manual processes are hindered by the need to have greater clarity and security of the use of electronic signatures; • Some elements for identity and access management are in place and linked with the application systems for some systems (e.g. SAPHIR); • Access to systems is restricted almost exclusively to specialized staff (for each process), who are responsible for processing information and generating reports for decision makers. 294. Recommendations: • Develop a centralized registry of all staff core information in MoLFSP and its agencies to support identity and access management and improve HR data; • Leverage the current identity and access management infrastructure and development of an enterprise IAM technology platform. Provide a shared service for authentication and authorization. This service should be used by all applications across the MoLFSP to ensure that authentication and authorization is being implemented consistently and to the same policy definitions across the organization; • Roll out digital signatures for all MoLFSP capabilities. Integration and Transformation 295. Findings: • Production systems exist to support major business processes. The current IT systems are a combination of legacy systems supported by older technologies (e.g. Microsoft Visual FoxPro) and newly developed web-based applications available on the Intranet and Extranet (e.g., Oracle 10g). Figure XX below presents the main features of the three MISs belonging to the NHPP, NEA and NASB: 94 National Agency for Social Benefits Environment WEB Database Engine ORACLE Operating Systems LINUX—RED HAT Software Development JE2 / GOOGLE PROGRAMMING INTERFACE Connectivity VPN Distribution CENTRALIZED National House of Pensions and Other Social Insurance Rights Environment WEB Database Engine ORACLE Operating Systems UNIX Software Development JE2 / ORACLE DEVELOPER Connectivity VPN Distribution DECENTRALIZED National Employment Agency Environment CLIENT / SERVER Database Engine DB2—IBM Operating Systems UNIX Software Development MISCELLANEOUS Connectivity VPN Distribution DECENTRALIZED • Most integration interfaces between applications are based on batch files sent via email or external support. 296. Recommendations: • Develop a strategy for improved data sharing across MoLFSP’s units, applications and externally; • Define and implement a Data Service Layer. The MoLFSP would be well served to work on an integrated architecture that would share information across departments and eventually beyond organizational units into other ministries. This would include a set of common data services designed to enable information sharing across existing NLFS applications and externally. This integration architecture would be the beginning of a broader Service- Oriented Architecture which integrates business processes with automation; 95 • Develop an Operational Data Store sourced from existing applications systems (e.g. pensions, unemployment, social benefits, etc), would be an important step forward to the information integration: • Move to online applications rather than form-based ones. This will require a more reliable network infrastructure at the country level and adequate skills for all staff. • The move from paper to electronic documents could also alleviate the problem of being unable to export data from forms into an electronic format. This could also be achieved in other ways outside of online capabilities: review forms and processes to determine if all steps and data are required. Technology platform 297. Findings: • The history of purchase of technology platforms for the L&SP Sector indicates four types of problems: a. Acquisition of technology that does not meet the business requirements and is insufficient to accomplish the necessary task; b. Acquisition of technology that exceeds the requirements and is therefore wasted; c. Acquisition of technology that combines the two previous problems in one. This is the most common case; and d. Technology acquisition that is not accompanied by the necessary changes in human resources, business procedures and technology maintenance and updates (e.g. Pension System, deployed in 2005, but not updated since then to fit with multiple legislative changes). • No system of document collaboration was noted in the environment. 298. Recommendations: • Evaluate, select and implement all technology changes in close coordination with the necessary changes in human resources and business procedure. Ensure necessary resources for technology maintenance and updates for the entire lifecycle of the systems. • Adopt a collaboration platform for document and knowledge sharing to improve existing processes. Coupled with a workflow approval, it could drastically improve productivity levels. 96 Interoperability 299. EU Definition: Interoperability, within the context of European Public Services delivery, is the ability of disparate and diverse organizations to interact towards mutually beneficial and agreed common goals, involving the sharing of information and knowledge between the organizations, through the business processes they support, by means of the exchange of data between their respective ICT systems. There are three broad focus areas: • Organizational—Business Process/Services • Semantic—Information • Technical—Systems and Technologies 300. Findings: • Both MoLFSP and its agencies recognized the need to cross-check the information available in various IMSs, to improve eligibility certification for social assistance benefits and prevent errors and fraudulent practices; • The MoLFSP started an informal project to interconnect all subordinate agencies and other external institutions (e.g., NAFA, the Registry of Commerce, the Ministry of Administration and Interior). Although several bilateral interagency collaboration protocols were signed, the process is far from operational. Other state agencies took steps towards interoperability: NAFA implemented a unique online reporting system, which allows companies to submit only one statement. The information is then distributed electronically to other institutions such as the NHPP, NEA, and Health Insurance House. • At the level of government, there are several interoperability initiatives in progress: o Interoperability draft law in Parliament; o Cross-ministry working group to define an interoperability framework; o Inventory of ITC assets in all ministries; o Technical solutions and a shared services model in various levels of maturity (e.g. state’s communication infrastructure). 301. The Ministry of Communications and Information is mandated to coordinate this effort, but it has limited implementation capacity and authorizing ability. 302. Recommendations: • At least at the Ministry’s level, it is necessary to have an interoperability reference model that is accepted by all stakeholders. There are sound examples in the EU and the US, where models were adopted based on Enterprise Architecture Methodology, establishing working and data exchange procedures. If necessary, the Ministry should consider hiring a consultancy to support them in this critical effort; • The Ministry should take action to formalize a coherent Interoperability Architecture and Action Plan. Enterprise Content Management 303. Findings: • While some agencies are largely automated, a fair amount of paper still exists. Managing such volume is both time-consuming and costly; 97 • Many people within the organizations are not comfortable with electronic documents. Whether it is required by operational procedure or is a personal choice, the customary procedure is to use paper. 304. Recommendations: • Electronic Documents/Records Management o Develop a records management strategy and policy that supports both paper and electronic documents; o Develop an information governance mechanism and competency to help the business develop and maintain taxonomies and classifications schemes needed for description of documents; o Evaluate, select and implement a robust technology platform for an MoLFSP document and records management system. • Evaluate, select and implement a document tracking system in MoLFSP and its agencies. Enterprise Applications: Management of Social Benefits and Services 305. Findings: • Different social protection systems are not integrated among themselves or with other external systems; • No enterprise application is used in more than one agency; • Current information systems should be considered “back office� architecture, as they have been designed to meet the needs of data entry and information processing for specific purposes. They usually lack the capability to generate information and reports to various stakeholders and public. 306. Recommendations: • Implement an integrated IMS system for the L&SP sector as a gateway to state social assistance benefits. An integrated system of social information would include at least four components: Unified Registry of Beneficiaries (URB), System for Single Payment of Benefits, Social Information Reporting and Monitoring and Evaluation. To achieve such a solution, a Service Oriented Architecture (SOA) platform is recommended, to create services that allow interoperability with the systems and with other agencies outside the ministry. Figure 8.1 below shows the possible structure of such a system. 98 National National Protection Labour Employment Persons NASB House of Others Pensions Inspection Agency Disabilities …. INTEROPERABILITY (WEB SERVICES) Other Registry Socioeconomic Validation´s Population Characteri� Fonts zation ISSI Integrated System Vulnerability URB Index of Social Information MONITORING AND EVALUATION 307. Unified Registry of Beneficiaries (URB). The establishment of a URB requires a regulatory framework that sets the limits and scope of the system. This will enable improved decision-making on social spending, as it supports the selection of recipients and rational delivery of benefits and services. In relation to the interconnection of databases, the legal framework underpins the flow of information from various social programs, i.e., allows interoperability of social protection programs. In the same way, it requires public institutions to re-adapt their practices to incorporate the URB into their core processes. 308. For all purposes, it is necessary to have a regulation that requires the partner institutions to sign agreements between them, first, because it is essential to safeguard the privacy of the information reported by the beneficiaries and second, because it will prevent misuse of information. 99 Unified Registration of Beneficiaries (URB) National Labour National Protection NASB House of Inspection Employment Persons Others Pensions Agency Disabilities Single Payment of Benefits Calculation Audit and Management and Payment Control 309. Single Benefits Payment Agency. The process associated with payment of benefits is an activity that can be deployed as a service to all agencies of the MoLFSP, focused on management and control of payments. This system should allow the calculation and payment of benefits only (ticket only), generate payment files to paying institutions (banks, mail), audit and control the payment process and accountability for the administration of benefits (quadrature balance of payments). Such a system shall not incorporate the process for benefits eligibility determination, this function being retained by the original benefits administration systems (e.g., pensions, unemployment and social assistance). Such an integrative approach is worth carefully analysis and if chosen, its implementation has to be properly planned, as it requires significant effort in terms of financial and human resources as well as time. 100 310. Specific findings and recommendations for the IM/ITC systems used in the selected agencies have been identified: SAFIR System 311. Findings: • The SAFIR system was designed and implemented so that it does not allow an application to be entered into the database [[correct? this seemed to say the opposite]] at the local administration level (municipalities, small cities and rural communes). In effect, the system is operated only at the county and national level. Thus, a beneficiary is not informed when he submits an application if his request is complete (e.g., if other documents are necessary) and when he will start to receive payments. Even if human and technical resources were adequate for data entry at the local level, this limitation would remain because the SAFIR hardware lacks the capacity to host a large number of simultaneous connections. • In the data entry phase, the following weaknesses have been identified: o The personal information of beneficiaries and members of their families is not validated with the Population Registry o The employer’s information is not validated with the Trade Registry o The system allows entry of only one certificate of income, even if a beneficiary has more than one. In such cases, an operator should manually calculate the amounts and enter the data in the system. However, this procedure generates reporting errors. o There is no “electronic dossier� associated with the paper dossier. The electronic format would include the scanned documents and would facilitate a better archiving and easier review of the file. o Not all information is filled out on the paper applications. Further, not all information from the paper applications is entered in the system. These cases generate problems in reporting processes. o Suspension and recalculation processes are done manually, which can generate errors. o SAFIR’s module for generating reports is not used due to its complexity and the lack of specialized staff. 312. Recommendations: • Provide data entry at the level of local administrations. This would improve the entry process for applications and speed up processing. It would require that SAFIR hardware capacity be strengthened. • Make SAFIR interoperable with other systems/databases (e.g. Population Registry) in real time. Thus, much information will be checked at the moment that the operator enters application data. • Incorporate a module for electronic document management. • Improve the reporting module so that it is able to generate on-demand reports for various stakeholders or the public. • Create an on-line application tracking system for applicants. 101 313. The National Pension House system • The system was developed in 2005. Since then, due to lack of resources some of the systems modules could not be updated with legislative changes. Thus, they became obsolete and not used anymore (e.g., the module for benefits calculation). 314. The National Employment Agency system: • Computer services are fully outsourced. The agency has a very limited number of qualified staff who could be good professional counterparts for the service providers. 315. The Disability Agency applications: • There is no single countrywide register of people with disabilities. • There is no single software solution for all local directorates (at the county level). Each of them uses its own solution, most of which were developed in-house. 102 ANNEX I—LABOR MARKET Table 1: Employment and Unemployment Rate of Population in EU10 Countries, and in EU27 and EU15 Countries in 2008, 2009 and 2010, Aged 15–64, by the LFS data (%) Unem- Youth Employ— Unem- Youth Unem- Employ- ploy— Long-term Unem- ment Rate ploy— Long-term unem- ploy— ment ment Unemploy- ploy— ment Unemploy- ploy— ment Rate Rate* ment Rate ment Rate* ment Rate* ment Rate* Rate Rate 2008 2009 2010 EU-27 65.9 7.0 37.1 15.4 64.6 8.9 33.7 19.6 9.6 EU-15 67.3 7.1 36.6 15.3 65.9 9.0 33.3 19.2 … Czech 66.6 4.4 50.0 9.9 65.4 6.7 29.9 16.6 7.3 Republic Hungary 56.7 7.8 46.2 19.9 55.4 10.0 42.0 26.5 11.2 Poland 59.2 7.1 33.8 17.3 59.3 8.2 30.5 20.6 9.6 Slovakia 62.3 9.5 69.5 19.0 60.2 12.0 54.2 27.3 14.4 Slovenia 68.6 4.4 43.2 10.4 67.5 5.9 30.5 13.6 7.3 Estonia 69.8 5.5 30.9 12.0 63.5 13.8 27.5 27.5 16.9 Latvia 68.6 7.5 25.3 13.1 60.9 17.1 26.9 33.6 18.7 Lithuania 64.3 5.8 20.7 17.3 60.1 13.7 23.4 29.2 17.8 Bulgaria 64.0 5.6 51.8 12.7 62.6 6.8 44.1 16.2 10.2 Romania 59.0 5.8 41.4 18.6 58.6 6.9 31.3 20.8 7.3 *—aged 15–74 Source: Eurostat on-line Table 2: The share of youth, females, and long-term unemployed among the registered job seekers in December 2008, and June and December 2009 in EU10 countries Youth, (%) Females, (%) Long-term unemployed, Dec- June Dec- Dec- June Dec- (%) Dec- June Dec- Czech 2008 17.2 2009 17.0 2009 18.1 2008 52.1 2009 50.0 2009 47.9 2008 28.8 2009 21.9 2009 23.0 Republic Hungary 15.6 15.3 15.2 47.4 47.2 46.1 30.0 24.8 25.5 Poland 20.7* 21.6* 22.5* 56.5 52.4 51.1 34.0 27.4 25.8 Slovakia 51.8 48.0 46.6 43.2 33.2 36.9 Slovenia 12.7 12.1 11.9 50.9 49.1 48.2 46.5 35.3 40.7 Estonia 14.5* 16.2** 15.7** 49.0 44.6 45.4 30.6 29.4 41.0 Latvia * 13.6 13.3 14.6 52.0 49.1 50.8 11.1 9.4 13.5 Lithuania 12.1 15.1 14.5 48.3 41.7 42.2 3.3*** 5.6*** 14.4 Bulgaria 8.0 8.6 9.0 62.7 57.6 55.1 39.1 28.0 25.8 Romania 17.6 11.8 15.5 46.4 43.8 42.6 18.9 16.0 13.4 * 18–24. ** 16–24 *** Long-term unemployed: youth on the roster more than 6 months and older more than 12 months. 103 ANNEXES ANNEX I—LABOR MARKET Table 3: Job-seekers-to-vacancy ratio, and the number of job placements per 1,000 registered job seekers between March 2008 and December 2009 in EU10 countries Ratio of job seekers per one registered Job placements per 1,000 job seekers per vacancy June Mar- March June Dec- month June March March June Dec- Czech 2008 2.2 2008 2.0 2009 8.1 2009 10.8 2009 17.4 2008 115 2008 89 2009 72 2009 75 2009 41 Republic Hungary 7.3 6.1 10.9 9.9 22.3 Poland 24.0 18.0 38.2 40.5 88.9 55 63 42 54 40 Slovakia 11.1 10.6 39.0 51.3 75.9 Slovenia 3.2 3.0 9.6 6.1 8.3 64 48 45 45 40 Estonia 2.6 3.1 18.7 30.0 39.7 61 67 23 31 24 Latvia 4.0 4.7 61.5 64.7 128.0 86 80 19 26 43 Lithuania 3.8 4.1 20.6 19.3 35.8 115 137 42 56 31 Bulgaria 9.6 13.3 11.9 13.9 38.4 94 60 75 69 28 Romania 19.1 29.6 48.5 57.8 94.9 100 78 45 49 21 Source: Kuddo 2010 Table 4: Dynamics of registered unemployment in Romania in 2004—2010 2004 2005 2006 2007 2008 2009 2010 Registered 6.8 5.8 5.4 4.3 4.0 6.3 7.6 Unemp. Rate ( %) Female Unemp. 6.0 5.1 4.7 4.0 3.6 5.9 6.1 Rate ( %) Male Unemp rate, 7.5 6.5 6.1 4.6 4.0 6.6 9.3 % Average number 607.2 513.7 484.7 386.7 362.4 573.0 693.4 of registered Unemp. (1000’) Recipients of 253.9 195.4 178.5 128.6 108.6 299.6 384.4 unemployment benefit (1000’) Overall stock of 1100.9 965.2 1026.8 1060.6 920.0 1068.3 996.4 registered Unemp. (1000’) Of which New entries into 699.4 647.7 685.4 623.0 605.3 620.5 727.7 unemployment (1000’) Currently Unemp. 278.1 230.1 229.6 176.4 168.9 447.8 351.1 and mass layoffs, (1000’) Source: NAE 104 ANNEX I—LABOR MARKET Table 5: Number of Registered Unemployed and PES Staff in EU10 Countries, End-2008 Number of Total number Number of PES Staff Ratio of front- registered of PES staff staff in contact caseload line counselors unemployed, with jobseekers * to total PES ’000 and employers staff (%) Czech Republic 480.0 5991 2286 80 38.2 Hungary 407.0 3600 2500 113 69.4 Poland 1473.8 22362 66 Slovakia 248.6 Slovenia 66.2 861 432 77 50.2 Estonia 32.5 350 260 93 74.3 Latvia 76.4 780 513 98 65.8 Lithuania 95.0 1476 1090 64 73.8 Bulgaria 232.3 2551 1720 91 67.4 Romania 403.4 2538 2048 159 80.7 * The average number of registered unemployed per PES staff. Source: Kuddo 2010 Table 6: Number of registered unemployed and PES staff in EU10 countries, end-2009 Number of Total Number of Staff caseload* Ratio of front- registered number of PES staff in line counselors unemployed, PES staff contact with to total PES 1000’ jobseekers and staff (%) employers Czech Republic 539.1 6135 2399 88 39.1 Hungary 604.6 3600 2500 168 69.4 Poland 1892.7 Slovakia 379.6 Slovenia 96.7 998 488 97 48.9 Estonia 87.3 455 343 192 75.4 Latvia 179.2 744 540 241 72.6 Lithuania 268.8 1434 1081 187 75.4 Bulgaria 338.1 2551 2142 133 84 Romania 683.1 2538 1922 269 75.7 * The average number of registered unemployed per PES staff. Source: Kuddo 2010 105 ANNEX I—LABOR MARKET Table 7: Public expenditure and participant stocks in labor market programs in the OECD, and in Australia, the Netherlands and the United Kingdom 2007–08 Program categories and sub- Australia Netherlands United Kingdom OECD categories unweighted average PuEx* PaSt+ PuEx* PaSt+ PuEx* PaSt+ PuEx* PaSt+ 1. PES and administration 0.17 0.41 0.28 0.15 of which: Placement and related services 0.11 0.24 0.14 0.06 Benefit administration 0.03 0.17 0.06 0.05 2. Training 0.01 0.17 0.10 1.38 0.02 0.07 0.14 1.19 4. Employment incentives 0.01 - - 0.01 0.01 0.14 0.10 1.83 5. Supported employment and rehabilitation 0.06 1.18 0.47 1.80 0.01 0.06 0.09 0.56 6. Direct job creation 0.05 0.48 0.11 0.41 0.01 - 0.05 0.58 7. Start-up incentives 0.01 0.05 - - - - 0.01 0.18 8. Out-of-work income maintenance and support 0.42 4.16 1.39 6.38 0.16 2.78 0.64 4.98 9. Early retirement - - - - - - 0.11 0.76 TOTAL (1–9) 0.74 2.49 0.48 1.32 Active measures (1–7) 0.32 1.09 0.32 0.56 of which: Categories 2–7 only 0.14 1.89 0.68 3.61 0.05 0.29 0.40 4.28 Passive measures (8–9) 0.42 4.16 1.39 6.38 0.16 2.78 0.75 5.71 * Public expenditure as a percentage of GDP. + Participant stocks as a percentage of the labor force. Note that the OECD cannot capture expenditure at lower levels of government in devolved systems, as in The Netherlands. Source: OECD Online Statistics and Statistical Annex, OECD Employment Report, 2009. Table 8: Expenditure on LMP measures by type of action in EU10 and EU27 countries, 2008 % total expenditure on LMP measures Expenditure Training Job Employment Supported Direct Start-up on LMP rotation incentives employment job incentives measures and job and creation (Euro; sharing rehabilitation millions) EU-27 58768.6 39.0 0.4 24.0 16.1 13.4 7.2 Czech R. 154.4 7.0 – 12.7 65.7 12.1 2.5 Hungary 220.0 31.1 – 45.2 – 20.6 3.1 Poland 1699.8 26.2 – 12.3 44.2 4.7 12.6 Slovakia 96.9 7.1 – 10.1 10.9 35.3 36.6 Slovenia 34.5 27.2 – 6.7 – 46.4 19.7 Estonia 5.6 86.8 – 1.9 0.4 – 10.9 Latvia 18.0 36.2 – 32.8 0.5 23.5 7.0 Lithuania 45.0 30.4 0.8 52.4 4.2 10.9 1.4 Bulgaria 89.5 13.4 – 16.5 2.2 66.0 1.9 Romania 83.5 14.9 – 59.8 – 24.1 1.3 Source: Eurostat on-line 106 ANNEX I—LABOR MARKET Table 9: Participation in Active Labor Market Programs (Number of Program Beneficiaries) in Some EU10 Countries, 2008 disabled and youth and assistance Entrepreneurship grants professional orientation counseling designed Wage/tax subsidies Training programs for Other (indicate) Public works Job search unemployed counseling Programs programs Job clubs Specially Career Czech R. 543 36451 12756 16246 974 118602 16584 Estonia 12046 5801 116 162 592 30 Hungary 57064 53269 7126 63100 10638 e) Latvia 65296 67939 8579 1,136 93 9983 11222 78 a) Lithuania 1080141 27394 11195 7011 16388 1153 11554 Romania 386811 43915 18706 447 35321 285 16488 2636 f) Slovenia 4491 71895 1486 16307 2235 2015 3936 195 Table 10: Participation in Active Labor Market Programs (Number of Program Beneficiaries) in Some EU10 Countries, 2009 disabled and youth and assistance Entrepreneurship grants professional orientation counseling designed Wage/tax subsidies Training programs for Other (indicate) Public works Job search unemployed counseling Programs programs Job clubs Specially Career Czech R. 560 39831 20208 19794 1231 10789 Estonia 23785 18110 194 495 1577 Hungary 47112 39750 6827 15761 16870 e) Latvia 171762 5,084 29238 609 31179 441 a) Lithuania 2107205 33614 13929 13439 18834 1057 6573 Romania 294641 36378 4838 10 21982 94 6594 2233 f) Slovenia 7885 91973 2227 23411 6652 6261 4188 230 a) Vocational training by employer. b) Complex support measures for specific target groups. c) Work trials. d) Number of vacancy fairs. d) Participants in job creating investments program. e) Mobility grants. Source: National Employment Service 107 ANNEX I—LABOR MARKET Table 11: Active and passive labor market policies 2008—2011 in Romania Measures Budget Beneficia Estimated Budget Beneficiar Estimated Budget Beneficiari Estimated Budget for Estimated Estimated for 2008 ries in placement for 2009 ies in placement in for 2010 es in 2010 placement 2011 no off placement (Thou. 2008 (if) in jobs in (Thou. 2009 (if ) jobs in 2009 (Thou. (if) in jobs in (Thou. beneficiaries in jobs in RON) 2008 (if ) RON) (if ) RON) 2010 (if) RON) in 2011 (if) 2011 (if) Labor market 190825 137665 119527 113675 services (1) Training (2) 44639 43915 20067 26276 36378 15844 27341 35454 17237 30674 47816 Job rotation and sharing (3) Employment 193331 85132 146262 52225 189815 63898 255079 46890 incentive (4) Integration 285 94 218 250 of PWD (5) Direct job 61545 44381 44765 4599 creation (6) Start-up 6375 3807 3803 4295 incentives (7) Out-of-work 997068 108632 2357316 299614 3510019 384446 3801731 income support (8) Total LMP 1493783 854741 412922 2715707 1080326 304588 3895270 1093999 377772 4210053 908780 324000 (categ.1–8) Total 496715 358391 355929 408322 ALMPs (categ 2–7) Categories: (1) general services for job seekers provided by the public employment services (administrative expenses of the PES); (2) training programs; (3) programs that facilitate the insertion of the unemployed or other target groups into a work placement by substituting hours worked by an existing employee; (4) programs which facilitate the recruitment of unemployment persons and other groups, or help to ensure the continued employment of persons at risk of involuntary job loss; (5) programs that aim to promote integration of disabled persons into the labor market; (6) programs that create additional jobs; (7) programs that promote entrepreneurship by encouraging the unemployed and target groups to start their own business or to become self-employed; (8) cash benefits to compensate for loss of wage or salary; (9) programs which facilitate the full or partial early retirement of older workers. Source: NAE 108 ANNEX I—LABOR MARKET Table 12: Participation of the unemployed in active and passive measures in Romania in 2008–2011 Measures/indicators 2008 2009 2010 Planned in 2011 Total average of registered unemployed 362429 572974 693407 580000 Average number of unemployed receiving UB 108632 299614 384446 315000 Average number of unemployed NOT receiving UB 253797 273360 308962 265000 (job seekers) Found a job/were placed in job 397574 286247 358920 324000 Monthly average of registered vacancies 16941 9492 8889 … Entries of new vacancies (monthly average) 53901 30858 39507 … Exits of new vacancies (monthly average) 50417 35039 39508 … Users of job mediation services 320544 239958 305179 252750 Users of job counseling/information services 66265 53683 64784 38250 Participants in training programs 43915 36378 35454 45100 Placed in job after completion of training 19561 15222 16818 13150 Benefit in case of employment before the end of the 18782 21036 29019 20100 period the person is entitled to receive the benefit Employed using wage subsidy scheme(single parents 18356 4740 14229 14650 over 45) Employed using wage subsidy scheme (job seekers at 350 58 207 315 pre-retirement age) * Employed as a result of incentives to increase 2636 2233 3410 3125 mobility of labor force (mobility grant) Hired graduates using subvention for employment 10809 3605 5568 10290 First employment for graduates’ program 5,669 2,989 3,685 4,490 Subsidized employment for persons with disabilities 285 94 218 250 Employed following provision of micro credits 447 10 45 50 Number of job seekers who launched their own 593 869 507 710 business following business advisory services Participants in public works program 35,321 21,982 13,832 — Employed as a result of solidarity contracts 1,229 710 825 1,285 Placed in job as a result other active measures 584 668 423 125 ANNEX I—LABOR MARKET Table 13: Performance management indicators in Austria, Sweden and Hungary Performance management indicators developed by the Austrian PES—Arbeitsmarktservice Indicators on the AMS scorecard: 109 • Average time unemployed individuals spend on the rolls • Returns to work after assistance • Share of assistance budget spent for women • Returns to work and participation in training per employee (budgeted position) • Overall satisfaction of job-seekers • Process quality for job-seekers (summary of various items from the client satisfaction survey) • Application processing (time between issuing of application for unemployment benefits until application is cleared) • Demands for repayment in % (demands for repayment as a percentage of disbursements in unemployment insurance) • Placement rate for vacancies (job vacancies registered with the AMS as a percentage of all hires registered with the National Association of Social Insurance Funds) • Placement rate for training positions (open training positions registered with the AMS as a percentage of all new trainee engagements registered with the National Association of Social Insurance Funds) • Duration of job vacancies • Job vacancies filled per employee (budgeted position) • Overall satisfaction of businesses • Accuracy of placement match • Satisfaction with Career Information Centers • Job satisfaction of AMS staff • Management feedback (staff satisfaction with managers) • Internal customer relations (staff satisfaction with internal cooperation and communication) • Labour market policy goals for job-seekers • Labour market policy goals for businesses • Women in management positions • Selected costs of supplies and equipment per budgeted position) operation? • ServiceLine (call center) service level • Cases resolved by ServiceLine • Total score, Job-Seeker Service • Total score, Business Service • Total Score ABI • Total score, management process • Total score, support process • Total score, AMS scorecard Source: www.pesmonitor.eu 110 ANNEX I—LABOR MARKET Performance management indicators for the Swedish PES (Arbetsförmedlingen) The measures for 2008 are: Customer 40 % of the group “new� unemployed people are employed within 90 days. The effect of our programme for long-term-unemployed people shall be X%. 8 % of new immigrants with a permanent residence permit have obtained a job, entered an education or a labour market program each month. 85% of the employers have had enough of jobseekers to be able to employ. 75 % of our unemployed people are satisfied with our service. 90 % of the employers are satisfied with the Swedish employment office’s service. Activity 80 % of the jobseekers registered at the employment office have obtained a first assessment along with an activity plan within 20 days. 98 % of all the concluded orders from employers in need of labour have an agreement that is documented. 75 % of the unemployed people regard their activity-plan as useful. 90 % of the unemployed people who have unemployment insurance have also the knowledge of its rules and regulations. Economy Deviation from budget is not allowed by more than 75 %. Staff 75 % of our employees are satisfied with their own possibilities for development. 60 % of our employees are satisfied with how our staff-meetings contribute to their work. No more than 5 % sick leave is acceptable within our organization. Source: www.pesmonitor.eu The Hungarian PES manual suggests the following performance indicators (AFSZ 2004): - The employment service must maintain relations with at least X% of employers. - Compared to the previous year, the number of reported jobs must increase by X%. - Compared to the previous year, the number of placements must increase by X%. - The ratio of customers involved in training must be X% of the number of recorded customers. - The number of persons figuring in the unemployed register 90 days after the completion of a training course cannot be higher than X% of the total number of those having completed the course. - The number of the long-term unemployed cannot be higher than X. - The number of placed employees with reduced working capabilities must attain X. 111 ANNEX I—LABOR MARKET Table 14: Status of performance indicators in Romania for 2010 % in the performance Accomplished, % County variance contract (highest— lowest), % Rate of participation of adult unemployed 70 80.7 99.0—49.0 in active measures in the first 4 months following registration Level of vacancies communicated by 75.0 81.4 98.9—56.2 employers and registered with the NAE, filled through Agency’s own effort Level of employment of all jobseekers in 40.0 26.3 45.0—13.7 the NAE’s records Rate of participation of the unemployed in 15.0 5.5 12.7—1.3 vocational training courses Placement rate of graduates of vocational 20.0 27.3 48.9—9.9 training courses within 6 months following graduation exams Placement rate of graduates of vocational 50.0 45.8 66.5—12.3 training courses within 12 months following graduation exams Rate of participation of long-term 25.0 22.5 69.4—7.4 unemployed in active measures Rate of participation of unemployed in 70.0 87.0 98.4—77.2 active measures Rate of participation of unemployed aged 70.0 82.6 98.7—57.9 over 50 in active measures Rate of participation of unemployed with 70.0 76.6 89.1—69.9 primary, lower secondary and vocational education in active measures Weight of the unemployed who benefit 50.0 65.9 99.9—34.7 from vocational information and counseling services in the total number of unemployed in NAE’s records Weight of the persons from special needs 50.0 54.8 84.2—27.0 groups who benefit from vocational information and counseling services in the total number of persons from special needs groups in NAE’s records Employment rate of participants in active 20.0 23.1 49.6—3.5 measures within 3 months following participation in an active measure Employment rate of participants in active 25.0 24.5 51.3—6.7 measures within 6 months following participation in an active measure Rate of participation of young unemployed 100.0 93.7 100.0—50.2 in active measures in the first 4 months following registration Rate of participation of adult unemployed 70.0 80.7 99.0—49.0 in active measures in the first 4 months following registration 112 ANNEX I—LABOR MARKET Table 15: List of performance indicators in Romania for 2011 • Level of vacancies communicated by employers and registered with the NAE, filled through Agency’s own effort: 75% • Level of employment of all jobseekers in the NAE’s records: 40% • Rate of participation of the unemployed in vocational training courses (with a balanced representation, function of their level of education): 7%—10%, varying by counties • Rate of participation of the unemployed in active measures: 70% • Rate of participation of the unemployed in active measures in the first months following registration, respectively: (i) in the first 4 months following registration, for the young unemployed: 100% (ii) in the first 6 months following registration, for the adult unemployed: 70% • Rate of participation of long-term unemployed in active measures: 25% • Employment rate of participants in active measures: (iii) within 3 months following participation in an active measure: 20% (iv) within 6 months following participation in an active measure: 25% • Weight of the persons from special needs groups who benefit from vocational information and counseling services in the total number of persons from special needs groups in NAE’s records: 50% • Number of projects financed out of the ESF through the SOPHRD 2007–2013, approved or under implementation: (v) where the agency is the applicant/beneficiary: at least 4 projects / 2 new projects for each county and Bucharest agency for employment (vi) where the agency is a partner: at least 3 projects for each county and Bucharest agency for employment • Level of immobilized budget credits: maximum 10%. Source: NAE 113 ANNEX II—PENSIONS Table 1. Evolution of number of pensioners, by categories of benefits (1989–2010) Out of which: TOTAL YEAR FARMERS PENSIONERS OLD AGE INVALIDITY SURVIVORS 1990 2,380,000 1,713,300 192,700 474,000 985,400 1991 2,816,600 2,124,000 205,700 486,900 995,900 1992 2,996,000 2,221,400 242,500 532,100 978,500 1993 3,174,100 2,304,000 304,200 565,900 1,138,700 1994 3,358,900 2,418,600 369,900 570,400 1,478,100 1995 3,518,900 2,504,900 431,000 583,000 1,586,900 1996 3,651,700 2,587,300 466,900 597,500 1,612,100 1997 3,782,300 2,680,200 490,700 611,400 1,649,100 1998 3,923,700 2,776,000 524,300 623,500 1,682,200 1999 4,074,300 2,876,500 564,400 633,500 1,713,400 2000 4,246,100 2,997,700 606,200 642,100 1,751,100 2001 4,425,800 3,111,900 657,000 652,200 1,766,600 2002 4,535,300 3,115,800 701,700 649,700 1,677,000 2003 4,569,900 3,072,400 745,900 649,700 1,571,600 2004 4,596,500 3,051,800 785,300 641,800 1,473,300 2005 4,610,600 3,036,000 822,900 627,200 1,291,800 2006 4,633,000 3,027,600 860,400 613,900 1,005,500 2007 4,643.500 3,037,600 876,600 600,800 931,900 2008 4,665,800 3,067,100 886,200 587,500 866,100 2009 4,719,300 3,116,200 903,100 577,100 799,200 2010 4,768,100 3,184,800 880,900 568,000 736,700 114 ANNEX II—PENSIONS TABLE 2. Projected old-age dependency ratios in EU Countries (2010—2060) COUNTRY 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 European Union 27 25,9 28,3 31,1 34,2 38 42,1 45,36 48 50,42 52,5 53,47 Belgium 26,09 28,2 30,6 33,8 37,6 40,5 42,27 43,01 43,87 44,7 45,84 Bulgaria 25,29 28,2 31,1 33,8 36,3 39,1 43,58 49,7 55,44 61,4 63,54 Czech Republic 21,83 26,5 31,1 33,8 35,7 37,8 42,71 50,17 54,81 58,8 61,4 Denmark 24,98 29,1 31,9 34,5 37,9 41,1 42,69 42,69 41,31 41,2 42,66 Germany 31,17 32,2 35,3 39,5 46,2 52,8 54,73 55,13 56,43 58,3 59,08 Estonia 25,01 26,7 29,2 31,9 34,4 36,1 38,96 42,17 47,19 53,7 55,55 Ireland 16,67 18,4 20,2 22,3 24,6 27,2 30,6 35,27 40,4 42,9 43,57 Greece 28,22 30,6 32,8 35,4 38,5 43,2 48,25 53,23 56,99 57,6 57,12 Spain 24,43 25,8 27,4 30,2 34,3 39,7 46,39 53,88 58,69 60 59,07 France 25,81 29,3 32,8 35,9 39 41,7 43,99 44,18 44,68 45,2 45,2 Italy 30,99 33,6 35,5 38 42,5 48,3 54,07 57,89 59,24 59,4 59,32 Cyprus 18 19,9 22,3 24,9 27,4 29 30,76 33,32 37,65 41,4 44,47 Latvia 25,17 26,2 28,1 31,2 34,6 37,1 40,72 44,72 51,18 60 64,45 Lithuania 23,18 24 26 29,7 34,7 38,8 42,81 45,96 51,13 59,1 65,65 Luxembourg 21,07 22,3 24,2 27,1 30,8 34,4 36,31 37,23 37,82 38,1 39,1 Hungary 24,22 26,3 30,3 33,3 34,1 36,2 40,11 46,69 50,83 54,5 57,64 Malta 21,19 26,7 31,3 35,9 39,1 40 41,71 45,37 49,77 54,5 59,07 Netherlands 22,82 27,1 30,7 35 40 44,5 46,77 46,14 45,61 46 47,18 Austria 26,01 27,4 29,2 32,7 38,1 43,4 46,03 46,76 48,31 49,3 50,65 Poland 18,98 21,9 27,2 32,9 36 37,9 41,29 47,19 55,69 63,5 68,97 Portugal 26,58 28,6 30,7 33,2 36,6 40,2 44,59 49,49 52,96 54,2 54,76 Romania 21,34 22,5 25,7 29,1 30,3 35,4 40,75 47,77 54 62,7 65,27 Slovenia 23,91 26,3 31,2 36,2 40,8 45,4 49,4 54,65 59,4 62,3 62,19 Slovakia 16,95 19,2 23,9 28,5 32,3 35,3 39,98 47,58 55,46 62,9 68,49 Finland 25,7 31,7 36,8 40,6 43,9 45,7 45,06 45,51 46,61 47,5 49,3 Sweden 27,81 31,5 33,7 35,5 37,4 39,6 40,78 41,11 41,91 44 46,71 United Kingdom 24,72 27,1 28,6 30,4 33,2 35,9 36,92 36,72 37,96 40,2 42,14 Norway 22,73 25,7 28,3 31,3 34,3 37,7 40,24 40,94 41,43 42,4 43,92 Switzerland 24,94 27,5 29,9 33,2 37,7 41,8 43,74 44,61 45,74 47,1 48,51 Source of Data: Europop2008 convergence scenario = April 2011 115 ANNEX II—PENSIONS Table 3. Evolution of contributors, pensioners and dependency ratios in Romania Average Average number of Dependency ratio number of state YEAR wage earners in state pension pensioners (thou) system (thou) 1989 7,997.10 2,132.50 3.75 1990 8,156.00 2,380.00 3.43 1991 7,574.00 2,816.60 2.69 1992 6,888.00 2,996.00 2.30 1993 6,672.00 3,174.10 2.10 1994 6,434.00 3,358.90 1.92 1995 6,160.00 3,518.90 1.75 1996 5,939.00 3,651.70 1.63 1997 5,597.00 3,782.30 1.48 1998 5,369.00 3,923.70 1.37 1999 4,760.53 4,074.30 1.17 2000 4,623.40 4,246.10 1.09 2001 4,619.00 4,425.80 1.04 2002 4,567.80 4,535.30 1.01 2003 4,590.90 4,569.90 1.00 2004 4,645.00 4,596.50 1.01 2005 4,536.50 4,610.60 0.98 2006 4,594.30 4,633.00 0.99 2007 4,720.70 4,643.50 1.02 2008 4,806.04 4,665.80 1.03 2009 4,594.57 4,719.30 0.97 2010 4,238.13 4,768.10 0.89 116 ANNEX II—PENSIONS TABLE 4. Expenditures on pensions in EU Courtiers (% of GDP) COUNTRY 2000 2001 2002 2003 2004 2005 2006 2007 2008 European Union (27 countries) 12,24 12,20 12,17 12,24 12,15 12,14 11,95 11,41 11,67 Euro area (15 countries) 12,51 12,52 12,65 12,73 12,66 12,63 12,44 12,27 12,44 Belgium 10,94 11,06 11,19 11,30 11,13 11,14 11,01 10,71 11,35 Bulgaria 8,14 7,90 7,79 7,74 7,88 7,57 7,25 6,85 7,02 Czech Republic 8,53 8,54 8,76 8,70 8,27 8,39 8,33 8,22 8,51 Denmark 10,47 10,61 10,74 11,13 11,03 10,99 10,68 10,73 11,10 Germany (including former GDR) 12,97 13,10 13,29 13,47 13,35 13,27 12,86 12,37 12,28 Estonia 6,61 5,93 5,88 5,88 5,99 5,89 5,91 5,86 7,11 Ireland 3,60 3,72 4,66 4,88 4,92 4,93 5,04 5,17 6,00 Greece 11,13 11,87 11,76 11,54 11,70 12,08 12,06 12,17 12,59 Spain 9,64 9,36 9,30 9,18 9,13 9,06 8,95 9,01 9,25 France 12,95 12,94 12,98 13,06 13,12 13,23 13,23 13,31 13,56 Italy 14,40 14,35 14,59 14,70 14,63 14,71 14,63 14,61 14,97 Cyprus 5,78 5,84 6,50 6,79 6,64 6,80 6,82 6,70 6,86 Latvia 9,51 8,57 8,23 7,50 6,85 6,33 6,13 5,28 5,98 Lithuania 7,80 7,26 6,97 6,76 6,68 6,52 6,33 6,62 7,43 Luxembourg 9,27 9,81 10,02 10,11 9,89 9,57 8,64 8,24 8,26 Hungary 8,52 8,61 8,86 9,19 9,25 9,83 10,00 10,39 10,92 Malta 8,01 8,87 8,65 8,94 9,06 9,19 9,12 9,01 9,27 Netherlands 12,52 12,44 12,75 12,79 12,79 12,54 12,29 12,07 12,02 Austria 14,30 14,53 14,61 14,75 14,53 14,26 14,05 13,77 13,89 Poland 12,60 13,60 13,74 13,84 13,27 12,68 12,55 11,59 11,61 Portugal 10,09 10,47 10,94 11,42 11,95 12,34 12,63 12,65 13,20 Romania 6,11 6,19 6,65 5,89 6,05 6,07 5,90 6,32 7,46 S Slovenia 11,06 11,18 11,30 10,78 10,53 10,32 10,26 9,74 9,62 Slovakia 7,47 7,39 7,41 7,33 7,41 7,49 7,35 7,25 7,12 Finland 10,46 10,51 10,79 11,08 11,01 11,05 10,98 10,64 10,74 Sweden 11,26 11,27 11,51 12,19 12,16 12,25 11,80 11,58 11,77 United Kingdom 11,93 11,51 10,79 10,64 10,57 10,77 10,73 8,49 8,70 Iceland 6,23 6,12 6,61 7,29 7,11 6,97 6,78 6,95 7,21 Norway 7,56 7,72 8,32 8,63 8,36 7,97 7,62 7,79 7,61 Switzerland 12,09 12,55 12,73 13,15 13,02 13,15 12,65 12,44 12,17 117 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 1. Description of the Key Social Assistance Programs in Romania Legislative framework, benefit level and eligibility criteria Name of the social Frequency Amount of the payment in 2010, RON assistance program of payments 1. State Child monthly 200 RON. paid for children two years old or less or to three- Allowance year olds or less if disabled (SCA) 42 RON. paid for children of over two years of age and to youngsters 18 years old or more, that attend secondary schools or vocational institutions - for disabled 84 RON. paid for disabled children aged over three children 2. A. Child monthly 85% of the average paid to one parent who had taxable earnings in the Raising Benefit income earned in the past 12 months before the birth of the child (CRB), for 12 months, children born min. 600 RON, duration: until the child turns 2 years old, or 3 if before Jan 1st max. 4,000 RON. disabled. 2011 payment of health accounts for 5.5% off the value of the child raising insurance contribution for allowance and is fully paid from the state budget. beneficiary 100 RON, back-to-work paid to those to get back to work and earn a bonus professional income before the child turns 2/3 years respectively. B. Child monthly Regime A. 75% of the paid to one parent who had taxable earnings in the Raising Benefits average income earned in 12 months before the birth of the child (CRB), the past 12 months, for children born min. 600 RON, duration: until the child turns 2 years old, or 3 if before Jan 1st max. 1,200 RON. disabled. 2011 (beneficiary opts Regime B. 75% of the paid to one parent who had taxable earnings in the between regime average income earned in 12 months before the birth of the child A or B) the past 12 months, min. 600 RON, duration: until the child turns 1 years old, or 3 if max. 3,400 RON. disabled. 500 RON, back-to-work Back-to work bonus paid to those returning to bonus work before the expiration of the 12 months, and who continue to earn a taxable income before the child turns 2/3 years respectively. 118 payment of health accounts for 5.5% off the value of the child raising insurance contribution for allowance and is fully paid from the state budget. beneficiary C. Other child monthly 450 RON, allowance paid to people raising disabled children aged 3—7 raising years allowances 450 RON, allowance paid to severely/accentuated disabled people raising disabled children aged 0—3 years who only generate the income referred to under Article 57, paragraph (4) of Law No. 448/2008 as amended and completed. 300 RON, allowance paid to severely/accentuated disabled people raising disabled children aged 3—7 years who only generate the income referred to under Article 57, paragraph (4) of Law No. 448/2008 as amended and completed. 300 RON, allowance paid to people raising disabled children aged 0—3 years who are not compliant with the conditions that are referred to used Government Emergency Ordinance No. 148/2005 150 RON, monthly aid paid to people raising disabled children aged 3—7 years who are not compliant with the conditions that are referred to under Government Emergency Ordinance No. 148/2005. 450 RON, allowance paid to severely/accentuated disabled people raising children aged 0—2 years who only generate the income referred to under Article 57, paragraph (4) of Law No. 448/2008 as amended and completed. 150 RON, monthly aid is paid to major/severely disabled people raising children aged 2—7 years who only earn the income referred to under Article 57, paragraph (4) of Law No. 448/2008 as amended and completed. 3. Allowance for Once 230 RON, is paid to each of the first four newly born children newly-born Repealed children on July 2010 4. Newly-born kit Once 150 RON, paid for each newly born child Repealed on July 2010 5. Placement monthly 97 RON allowance - for disabled children this is paid as an amount increased by 50% 6. Day-care monthly 350 RON vouchers 119 7. Financial Once 200 Euro, paid in RON equivalent support to newly Repealed weds on July 2010 8. Complementary monthly 50 RON—for families with 1 child - 470 RON / family member, Family Repealed 60 RON—for families with 2 maximum net monthly income for Allowance on January children which this is paid (CFA) 1st, 2011 65 RON—for families with 3 - the allowance is increased by 25 % children for GMI beneficiaries 70 RON—for families with 4 children or more 9. Single Parent monthly 70 RON—for families with 1 child - 470 RON / family member, Allowance Repealed 80 RON—for families with 2 maximum net monthly income for (SPA) on January children which this is paid 1st, 2011 85 RON—for families with 3 children 90 RON—for families with 4 children or more 9a. Family monthly 30 RON—for families with 1 child 0–200 RON / family member, Allowance 60 RON—for families with 2 plus asset filters (FA): children - the allowance is increased by 25 % new program 90 RON—for families with 3 for GMI beneficiaries replacing 8 and 9 children as of January 120 RON—for families with 4 2011 children or more monthly 25 RON—for families with 1 child 201–370 RON / family member, 50 RON—for families with 2 plus asset filters children 75 RON—for families with 3 children 100 RON—for families with 4 children or more monthly 50 RON—single parents, 1 child 0–200 RON / family member, 100 RON—single parents, 2 children plus asset filters 150 RON—single parents , 3 - the allowance is increased by 25 % children for GMI beneficiaries 200 RON—single parents, 4 children or more monthly 45 RON—single parents with 1 child 201–370 RON / family member, 90 RON—single parents, 2 children plus asset filters 135 RON—single parents, 3 children 180 RON—single parents, 4 children or more 10. Guaranteed monthly This is paid on a differentiated basis to families or singles having a per family Minimum income below: Income (GMI) 125 RON—for single-person families Program 225 RON—for families of 2 people 313 RON—for families of 3 people 390 RON—for families of 4 people 462 RON—for families of 5 persons 31 RON each for every person of the family above no. 5. 11. Emergency aid Based on purpose—emergency situations - from the local need The government and the mayors can provide emergency aid, within the limits or state budget that are provided for in the budget in cases of necessity due to acts of God, fires, accidents. 120 12. Financial aid Based on The government can approve aid, within the limits of the funds that are need approved in the budget for this specific purpose, for special situations due to a health condition or other justified causes. 13. Reimbursable monthly 540 RON aid to refugees 14. Aid to cover a Based on Mayors can approve, in the case of a death, to give—out of the funds part of the need allocated for social aid—certain amounts of money to persons of the families funeral expenses that enjoy social aid, in order to cover a part of funeral expenses. 15. Monthly food monthly adults -13 RON/day allowance for children-11 RON /day HIV-infected or AIDS-affected persons 16. Food allowance monthly 11 RON/ day for HIV-infected /AIDS-affected children 17. Allowance for monthly From: 3 July 2010—461 RON (allowance equal to the net salary of the junior the caregiver of social assistant working for a budgetary institution) the visually impaired (with major disability) 18. Indemnity for monthly Monthly allowance paid to people with a major/severe disability, regardless Disabled Adults of income: (IDA) -202 RON, for adults with major disabilities; -166 RON, for adults with severe disabilities; 19. Complementary monthly Complementary personal budget, regardless of incomes: Personal - 91 RON, for adults with major disabilities; Budget for - 68 RON, for adults with severe disabilities; Disabled - 33.5 RON, for adults with average disabilities. Persons (CPBDP) 20. Aids for medical Based on treatment and need surgery performed abroad. 21 Heating Benefit Monthly, net monthly average income per aid per family to a proportion: (HB) from family member—RON/person November 1 November 2010—31 March 2011 Regime A. For to March up to 155 90% beneficiaries 155,1 -210 80% living in 210,1 -260 70% apartments 260,1 -310 60% connected to the 310,1 -355 50% central heating 355,1 -425 40% grid 425,1 -480 30% 480,1 -540 20% 540.1 -615 10% 121 - the actual value of the aid paid in support of the heating bill shall be calculated as a percentage off the invoice value, computed by multiplying the consumption broken down per individual consumers times the local heating power price as invoiced to local consumers; - the aid shall not exceed the value calculated by multiplying the maximum monthly consumption established per type of apartment and depending on the temperature zone times the local reference price; - singles get a benefit 10% higher than the proportions established per family; - for GMI beneficiaries the benefits are paid to an extent of 100% - the compensation is granted for 5 months (cold season), 12 months or 12 months on a differentiated basis (cold season and the rest of the year), depending on the option of the beneficiary. Heating Benefit Monthly, net monthly average income per Amount of aid per family: (HB) from family member—RON/person November 1 November 2010—31 March 2011 Regime B. For to March up to 155 262 RON beneficiaries 155,1 -210 162 RON using natural gas 210,1 -260 137 RON for heating 260,1 -310 112 RON 310,1 -355 87 RON 355,1 -425 62 RON 425,1 -480 44 RON 480,1 -540 31 RON 540.1 -615 19 RON - aid for heating with natural gas is paid in the established amounts, but not more than the value of the individual invoice or, as applicable, the expenses that are actually distributed for the amount of natural gas that is used during the cold season. - the additional aid is directly paid to beneficiaries of natural gas heating aid and is paid from the Social Fund, which is created out of sponsorship from internal producers and distributors of natural gas, for the periods February-March and November- December. Heating Benefit Monthly, net monthly average income per Amount of aid per family: (HB) from family member—RON/person November 1 November 2010—31 March 2011 Regime C. For to March up to 155 54 RON beneficiaries 155,1 -210 48 RON using wood, coal 210,1 -260 44 RON and crude oil 260,1 -310 39 RON fuels 310,1 -355 34 RON 355,1 -425 30 RON 425,1 -480 26 RON 480,1 -540 20 RON 540.1 -615 16 RON - GMI beneficiaries get aid for heating their homes during the cold season, from 1 November 2010—31 March 2011, of 58 RON /month. Source: Based on Romania Social Assistance Reform Strategy, Annex 1 122 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 2. Dynamics of the number of beneficiaries and budget for the main social assistance programs financed by MoLFSP, 2005– 2010 2005 2006 2007 2008 2009 2010 Number of Number of Amounts Number of Amounts Number of Amounts Number of Amounts Number of Amounts Amounts beneficiarie Social Assistance program beneficiaries (million beneficiaries (million beneficiaries (million beneficiaries (million beneficiaries (million (million s (thousands) RON) (thousands) RON) (thousands) RON) (thousands) RON) (thousands) RON) RON) (thousands) State Child Allowance 1.517 429 1.480 447 1.481 1.262 3.724 2.543 3.835 2.841 4.013 2.887 Child Raising Benefit/ Back-to- work bonus 0 0 198 1.697 207 1.460 197 1.342 196 1.757 207 2.030 Other programs for children and family 65 83 251 175 286 306 271 332 271 305 295 303 Complementary Family Allowance 708 335 652 317 577 297 506 289 549 405 607 444 Single Parent Allowance 247 162 245 165 221 156 190 145 194 181 204 191 Heating Benefits 1.040 309 1.114 467 4.087 1.281 4.779 1.178 3.592 514 3.263 980 Allowance for disabled children 53 29 52 30 53 27 52 43 53 53 54 54 Indemnity for raising a disabled children 0 0 0 0 1 3 3 12 4 21 6 28 Indemnity of Disabled Adults (IDA) and the Complementary Budget for Disabled Adults (CBDA) 390 674 419 811 507 1.306 590 1.682 635 1.967 667 2.095 Monthly allowance for HIV- infected 5 14 6 16 6 23 6 28 7 31 7 31 TOTAL 2.035 4.125 6.121 7.594 8.075 9.043 Source: Government of Romania: Social Assistance Reform Strategy, Annex 2. 123 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 3. Poverty profile of the poorest 5%, 10%, 15% and 20% of the population in 2009 Poverty headcount defined as: Poorest 5% Poorest 10% Poorest 15% Poorest 20% Poverty line = 260 RON Poverty line = 332 RON Poverty line = 383 RON Poverty line = 430 RON Distribution Poverty Distribution Poverty Distribution Poverty Distribution Poverty Distribution of Headcount of poor Headcount of poor Headcount of poor Headcount of poor population Total 5.0 100.0 10.0 100.0 15.0 100.0 20.0 100.0 100.0 Area of residence Urban 2.4 26.1 4.6 25.4 7.2 26.3 10.3 28.3 54.9 Rural 8.2 73.9 16.5 74.6 24.5 73.7 31.8 71.7 45.1 Macro region North-East 6.9 24.0 15.1 26.2 23.3 26.9 29.0 25.1 17.3 South-East 6.8 17.8 12.2 16.1 18.6 16.3 25.0 16.4 13.2 South 4.5 13.6 9.6 14.6 14.4 14.7 20.6 15.8 15.3 South-West 5.9 12.5 12.6 13.3 19.8 13.9 25.8 13.6 10.5 West 4.2 7.5 6.6 5.9 8.5 5.1 11.9 5.3 8.9 North-West 4.7 11.9 9.6 12.2 13.9 11.7 19.0 12.0 12.6 Center 4.7 11.1 9.0 10.6 12.2 9.6 16.1 9.5 11.7 Bucharest 0.7 1.5 1.2 1.2 2.7 1.9 4.3 2.3 10.4 Occupation Employee 0.5 2.8 1.5 4.5 3.2 6.1 5.5 8.1 29.2 Employer 1.5 0.1 1.5 0.0 3.4 0.0 3.4 0.0 0.2 Self-employed non-agriculture 11.5 8.5 21.4 7.9 30.7 7.6 38.3 7.1 3.7 Self-employed agriculture 14.6 24.9 29.3 24.9 40.6 23.1 50.1 21.3 8.5 Unemployed 13.4 12.2 21.5 9.8 29.8 9.0 36.6 8.3 4.5 Pensioner 1.3 6.2 3.4 8.0 6.5 10.3 9.9 11.8 23.7 Pupil, student 6.0 19.7 12.7 21.0 19.3 21.2 25.5 21.0 16.5 Housewife 10.9 11.8 20.2 10.9 28.5 10.2 37.8 10.2 5.4 Other 8.4 13.9 15.7 13.0 22.5 12.5 29.1 12.1 8.3 Ethnicity Romanian 4.1 73.9 8.7 78.7 13.7 81.9 18.5 83.4 89.9 Hungarian 3.1 3.9 7.7 4.8 11.7 4.9 16.3 5.1 6.2 Roma 36.0 20.5 52.8 15.0 63.2 12.0 73.2 10.4 2.8 Other 8.5 1.7 15.8 1.6 19.5 1.3 23.0 1.1 1.0 124 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 3. Poverty profile of the poorest 5%, 10%, 15% and 20% of the population in 2009, continued Poverty headcount defined as: Poorest 5% Poorest 10% Poorest 15% Poorest 20% Poverty line = 260 RON Poverty line = 332 RON Poverty line = 383 RON Poverty line = 430 RON Distribution Poverty Distribution Poverty Distribution Poverty Distribution Poverty Distribution of Headcount of poor Headcount of poor Headcount of poor Headcount of poor population Total 5.0 100.0 10.0 100.0 15.0 100.0 20.0 100.0 100.0 Education No formal schooling 9.4 23.6 17.4 21.9 24.0 20.1 30.7 19.3 12.6 Primary, grades 1–4 8.4 20.7 15.4 19.1 22.6 18.6 29.8 18.4 12.4 Middle, grades 5–8 7.6 32.6 15.3 33.1 22.5 32.4 29.4 31.7 21.6 Vocational 3.6 12.5 8.2 14.1 13.1 15.1 18.1 15.7 17.3 High school, grades 9–12 1.9 9.3 4.5 10.8 7.9 12.7 11.3 13.7 24.2 Post-secondary 0.6 0.4 0.9 0.3 1.6 0.4 2.9 0.5 3.4 Higher school 0.5 0.8 0.7 0.6 1.2 0.7 1.5 0.6 8.5 HH size 1 1.8 2.3 3.5 2.2 6.0 2.5 9.7 3.1 6.3 2 1.6 5.7 3.7 6.8 6.3 7.6 9.3 8.5 18.2 3 3.3 15.6 7.0 16.7 10.3 16.3 14.1 16.8 23.9 4 4.8 25.5 9.6 25.5 15.1 26.7 21.3 28.1 26.4 5 7.1 19.0 15.9 21.1 24.0 21.3 30.0 20.0 13.3 6 8.9 12.4 17.0 11.8 26.0 12.1 33.9 11.8 7.0 7 or more 19.9 19.5 32.3 15.8 41.3 13.5 47.8 11.7 4.9 Number of Children no children 3.3 37.5 7.0 40.0 11.0 41.9 15.3 43.6 57.1 1 5.2 24.7 9.6 23.1 14.9 23.8 19.6 23.4 23.9 2 6.5 17.4 13.9 18.7 19.8 17.7 26.5 17.8 13.4 3 or more children 18.4 20.4 32.9 18.2 45.0 16.6 54.8 15.2 5.5 Source: World Bank Staff estimations based on HBS 2009 Note: The poverty lines correspond to the income cut-offs for the 5th, 10th, 15th and 20th percentile of the per adult equivalent income distribution in 2009. Estimations performed with ADePT Poverty 125 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 4. Distribution of Benefits (Targeting Accuracy) Quintiles of per adult equivalent income, net of all social assistance transfers Total Q1 Q2 Q3 Q4 Q5 All social protection 100.0 10.2 15.0 19.9 26.2 28.6 All social insurance 100.0 5.3 13.4 20.1 28.8 32.4 Old age pension 100.0 2.9 9.5 17.6 30.7 39.3 Disability pension 100.0 10.0 18.2 24.9 28.4 18.5 Survivor pension 100.0 12.3 24.1 27.7 22.5 13.4 Farmer pension 100.0 14.7 32.4 29.8 18.0 5.1 War veterans (including survivor) pension 100.0 13.3 15.1 20.1 32.1 19.5 All labor market programs 100.0 13.4 23.1 31.8 19.4 12.3 Unemployment benefits 100.0 14.1 23.8 32.0 19.3 10.7 Redundancy payments 100.0 2.5 13.7 28.5 19.9 35.4 All social assistance 100.0 37.7 22.5 16.5 12.9 10.3 State Child Allowance 100.0 33.1 24.1 17.7 13.7 11.5 Complementary Family Allowance 100.0 59.5 26.1 9.3 3.6 1.4 Single Parent Allowance 100.0 68.6 13.5 15.0 2.1 0.8 Child Raising Benefit 100.0 29.1 24.7 18.1 16.9 11.1 Disability Allowances 100.0 35.7 22.4 16.3 14.7 11.0 Guaranteed Minimum Income 100.0 81.5 7.9 4.0 3.6 3.1 Heating Benefits 100.0 53.0 25.0 12.8 7.8 1.2 Scholarships 100.0 27.2 15.8 18.9 17.6 20.6 Privileges for war veterans, heroes, etc 100.0 13.1 19.0 28.7 13.3 26.0 Social assistance pension 100.0 48.9 16.7 16.3 14.8 3.3 Other social assistance benefits 100.0 57.2 20.4 11.7 7.4 3.3 Source: Staff estimations based on HBS 2009 Note: Households are ranked based on per adult equivalent income distribution in 2009, net of all social assistance transfers. Benefits’ incidence is the transfer amount received by the group as a percent of total transfers received by the population. Specifically, benefits’ incidence is: (Sum of all transfers received by all individuals in the group)/(Sum of all transfers received by all individuals in the population). Estimations performed with ADePT Social Protection 126 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 5. Generosity of Benefits, for Direct and Indirect Beneficiaries Quintiles per ae consumption, net of all SA transfers Total Q1 Q2 Q3 Q4 Q5 All social protection 38.6 43.5 39.7 40.2 41.5 33.5 All social insurance 53.1 48.4 52.1 54.1 55.0 52.0 Old age pension 55.8 51.6 50.8 54.2 57.2 57.2 Disability pension 30.5 41.9 37.6 35.1 29.6 20.8 Survivor pension 28.9 37.3 35.4 32.6 27.4 17.2 Farmer pension 28.0 37.1 38.3 28.1 20.2 13.4 War veterans (including survivor) pension 14.0 11.0 23.7 7.6 17.5 23.0 All labor market programs 27.2 42.9 32.4 29.3 23.5 16.5 Unemployment benefits 26.2 42.6 31.8 28.1 22.5 14.5 Redundancy payments 40.7 91.3 60.3 51.8 33.1 33.6 All social assistance 9.3 26.2 12.0 7.7 5.8 3.4 State Child Allowance 4.0 10.1 5.5 3.6 2.7 1.6 Complementary Family Allowance 4.0 5.5 3.5 2.6 1.9 1.3 Single Parent Allowance 6.4 8.4 4.8 4.1 3.8 1.9 Child Raising Benefit 22.7 37.2 26.5 21.3 21.4 10.6 Disability Allowances 15.5 25.8 15.9 14.9 11.9 8.2 Guaranteed Minimum Income 19.4 23.6 9.3 11.6 10.2 18.9 Heating Benefits 18.5 40.4 17.1 9.2 7.7 6.0 Scholarships 12.6 23.5 11.2 14.8 9.0 9.7 Privileges for war veterans, heroes, etc 14.8 25.4 18.7 21.3 8.9 10.9 Social assistance pension 20.2 39.9 17.1 17.4 10.3 8.9 Other social assistance benefits 11.2 14.1 10.2 8.3 7.3 7.1 Source: Staff estimations based on HBS 2009 Note: Households are ranked based on per adult equivalent income distribution in 2009, net of all social assistance transfers. Generosity is the mean value of the share transfer amount received by all beneficiaries in a group as a share of total welfare aggregate of the beneficiaries in that group. Estimations performed with ADePT Social Protection 127 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 6. Coverage of Population Groups with Social Protection Programs Quintiles of per ae consumption, net of all SA transfers Total Q1 Q2 Q3 Q4 Q5 All social protection 84.4 91.7 89.1 86.7 83.6 71.1 All social insurance 46.0 31.8 48.5 51.8 55.3 42.7 Old age pension 29.4 11.7 26.0 33.3 41.5 34.4 Disability pension 10.2 8.2 11.1 11.9 12.3 7.7 Survivor pension 5.0 5.0 6.5 6.1 4.5 2.8 Farmer pension 9.9 10.6 14.4 13.5 8.7 2.5 War veterans (including survivor) pension 0.1 0.2 0.0 0.1 0.1 0.0 All labor market programs 4.0 3.4 5.1 6.0 3.4 1.9 Unemployment benefits 3.9 3.4 5.0 5.9 3.3 1.8 Redundancy payments 0.1 0.0 0.1 0.2 0.2 0.2 All social assistance 57.5 82.2 65.7 56.5 45.0 37.9 State Child Allowance 52.2 74.3 60.0 51.2 40.6 34.9 Complementary Family Allowance 7.9 23.8 10.0 3.8 1.5 0.6 Single Parent Allowance 0.8 2.8 0.6 0.5 0.1 0.0 Child Raising Benefit 4.0 6.2 5.1 3.8 2.7 2.2 Disability Allowances 4.4 8.6 5.5 3.1 2.8 2.0 Guaranteed Minimum Income 3.4 14.2 1.8 0.5 0.4 0.1 Heating Benefits 2.5 4.6 3.5 2.7 1.6 0.2 Scholarships 0.6 0.8 0.7 0.4 0.6 0.4 Privileges for war veterans, heroes, etc 1.4 1.1 1.4 1.4 1.4 1.4 Social assistance pension 0.1 0.3 0.1 0.1 0.1 0.0 Other social assistance benefits 1.0 3.1 1.0 0.5 0.3 0.1 Source: Staff estimations based on HBS 2009 Note: Households are ranked based on per adult equivalent income distribution in 2009, net of all social assistance transfers. Program coverage is the portion of population in each group that receives the transfer. Specifically, coverage is: (Number of individuals in the group who live in a household where at least one member receives the transfer)/(Number of individuals in the group). Estimations performed with ADePT Social Protection 128 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 7. Legislative and Regulatory Inputs needed for the implementation of the Government’s Social Assistance Strategy and the DLIs under the proposed SASM project (tentative list) 129 Envisaged legislative or regulatory measure Latest Result Indicator needed or completed* Timing** #1. Adopted Action Plan for the Social MoLFSP will disseminate the Action Plan for the 2011 Assistance Strategy is disseminated by the Social Assistance Strategy through a Ministerial MoLFSP Order #2. Three monthly monitoring reports of 4 major programs (Family Allowance, Child No legislative input needed Raising Benefits, GMI and State Child n.a. Allowance) are produced by the NASB #3. Three monthly performance-management A systematic feedback procedure to incorporate the reports for programs for low-income By 2013 results of the Performance management reports into households are produced by NASB and used the decision-making will be adopted through a at the management level in the NASB Ministerial Order (output) #4. At least 90% of the family allowance *Legislation already adopted: Done. beneficiaries are paid, through NASB, for Law 277/ December 2010, with modifications via two consecutive months according to Emergency Ordinance 2/January 2010; harmonized means-testing procedures and Governmental Regulation 38/ January 2011 on lower eligibility threshold Implementation Procedures #5. At least 90% of Child Raising Benefits beneficiaries entering the program since Done. Legislation adopted: January 1st 2011 are paid through the NASB Emergency Ordinance 111/ December 2010 for two consecutive months, using a lower replacement income of 75% #6. At least 90% of beneficiaries of the new Before end consolidated program for low-income Legislation needed. Slated for adoption before the 2012 households are paid through the NASB for end of 2012 two consecutive months #7. Share of social assistance funds going to the first poorest quintile increased to 45% from 37.7 % at baseline (in 2009) , as No legislative input needed n.a. measured by the Household Budget Survey (HBS) #8. Enacted harmonized means testing Legislation or Regulation and implementation procedures for the GMI, family allowance, regulations needed for harmonized means testing By 2011 and heating benefits are disseminated procedures. The legislation has been issued already for GMI and Family Allowance. #9. Enacted harmonized disability medical Legislation needed to harmonize medical disability assessment criteria are disseminated for disability assessment By 2012 #10. At least 90% of individuals who are certified for disability benefits according to Legislation to unify the institutional structure for By 2013 the new harmonized disability system are disability assessment paid through the NASB #11. At least 90% of the new applications for programs for low-income households and n.a. family policy programs in the preceding two New legislative input needed. months have complied with one-application and one-point of service operational guidelines #12. Administrative costs and client participation costs for means-tested programs No legislative input needed n.a. were reduced by 15% from baseline value #13. At least one thematic inspection campaigns is carried out for each of the n.a. No legislative input needed following programs: GMI, disability, family allowance, heating, and child-raising benefits #14. Remedial action plan is adopted by NASB to address the recommendations of: (i) In 2011 Ministerial Order needed to establish a remedial an independent evaluation of the action plan to address evaluation and feasibility completeness and accuracy of the SAFIR study recommendations. information; and (ii) a feasibility study of SAFIR data crosscheck with other databases #15. At least 90% of GMI beneficiaries are *Legislation adopted: 130 paid through the NASB for two consecutive Law 276/ December 2010 on the modifications of Done. months the GMI Law (416/2001) Government Decree 50/January 2011 #16. A central registry with a national Regulatory measures needed to introduce the **Note: “Latest Timing� in this table refers to the tentative calendar for legislative/regulatory measures (by which such reforms needed for implementation of the Strategy and achievement of the related Results’ Indicators). 131 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 8. Complementary Technical Assistance (TA) Inputs for the Implementation of the Social Assistance Reform Strategy (Tentative listing and financing plan) Financing Amount Planned TA Source (Euro) Support for the development of the action plan of the social assistance SIP 10,000 strategy Support for development of a performance management system SIP 50,000 Expand SAFIR decision-maker rules to generate regular performance SIP 15,000 management reports Development of a statistical bulletin to track the distributional impact of SIP 15,000 social protection spending Upgrade SAFIR with new rules for GMI, Family Support benefits, SIP 3,560,000 Child Raising Benefits and the consolidated program for Low-Income Households* Support the harmonization of disability medical criteria and institutional SIP 1,000,000 framework and capacity building support for the unification of the disability institution as well as upgrade of SAFIR with new payment rules for harmonized disability benefits Study to track the changes in administrative and client participation SIP 75,000 costs Evaluation of the accuracy and completeness of the information held in SIP 80,000 SAFIR; asses the capacity of SAFIR to cross-check information with other public databases; support for the development of the cross- checking needs/requirements Develop a data matching program for the databases operated by NASB, EU Funds 1,400,000 Pension House, NEA, Civil Registry and ANAF Support to develop a national database for disability benefit SIP 350,000 beneficiaries* Legal TA for the development of a new sanction policy and SIP 15,000 investigative powers for Social Inspections Support for the development of risk-based inspections (client profiling) SIP 50,000 Communication strategy SIP 500,000 Studies/ analyses to support the implementation of the Social Assistance SIP 100,000 Reform Strategy Capacity building for MoLFSP, including on-the-job training abroad for SIP 100,000 managers Source: MoLFSP Social Assistance Reform Strategy, Action Plan, Project Appraisal Document of the Social Assistance Modernization SIL. 132 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 10. Sample Monitoring Indicators for Social Assistance (Cash Transfer) Programs I. Cash transfers programs Input indicators Budget allocation and expenditures Number of program staff by level Output indicators Beneficiaries Number of program beneficiaries (total and as a percentage of the estimated target population) Key characteristics of beneficiaries: gender, age, level of education, number of dependents, employment status (or employment history depending on eligibility requirements), household income, location Benefits and services Amount of benefits paid (total per payment period by area) Intermediate outcome indicators Access and satisfaction Targeting efficiency as measured by inclusion and exclusion errors Average time of program participation Beneficiary satisfaction with program access and delivery Outcome indicators Depending on program objective Increase in beneficiary household consumption Increase in beneficiary consumption of specific products (for example, food) Decrease in poverty incidence or depth Process and efficiency indicators (to be compared to targets, past performance, or other measurement units) Entry (outreach, targeting, registration, and so on) Average (and range) of time for processing applications to the program (calendar days following the application) Number of benefits processed per month per staff member of the implementing agency Payment Cost of processing payments per beneficiary Beneficiaries experiencing payment delays as a percentage of total beneficiaries Beneficiaries not collecting their payments as a percentage of total beneficiaries Amount of assistance provided to individual clients; office or facility that provided the assistance; method of service delivery (useful for testing different approaches); individual supervisor or caseworker Exit Average (and range of) time for cancellation of the benefit (calendar days following a finding of ineligibility, fraud, or the like) 133 Beneficiaries whose benefit is canceled as a percentage of total beneficiaries by reason for cancellation Administration Average administrative cost of program (and range) per beneficiary Average benefit (and range) per beneficiary (depending on the terms of the program) Total amount of benefits paid as a percentage of total cost to the government of the program Amount used as a percentage of the amount allocated II. Conditional cash transfers The indicators used to monitor cash transfers are also used for conditional cash transfers. In addition, the following aspects are monitored. Output indicators Benefits and services School attendance rate by children Health care utilization by children from birth through six years old and not enrolled in school Intermediate outcome indicators Access and satisfaction Beneficiary satisfaction with availability and access to schools Beneficiary satisfaction with availability and access to health care facilities Outcome indicators Education-based requirements Change in school attendance, primary and secondary school Change in secondary school enrollment Health care–based requirements for children and adults Change in the percentage of children brought to health centers for preventive care Change in the number of children aged newborn through age six and not enrolled in school who have received all required immunizations on time Change in the number of poor pregnant and lactating women visiting health centers for timely checkups Change in the number of poor elderly, disabled, and other beneficiaries visiting health centers Process and efficiency indicators Administrative costs for beneficiary selection, delivery of cash, and verification of compliance 134 ANNEX III—SOCIAL ASSISTANCE (Cash Transfers) Table 11. Examples of Questions Addressed by Process Evaluations of Cash Transfer Programs Aspect evaluated Questions Program • Is the program well organized? organization • Does program implementation follow a clear organizational structure? • How well do different groups involved in delivery work together (in terms of different staff within delivery teams and different programs and agencies with which the program in question must interact)? Program • Are adequate resources being used to implement the program? resources • Is program staffing and funding sufficient to ensure appropriate standards? • Are program resources (inputs) being used effectively and efficiently? • Are costs (per beneficiary, per benefits transferred, and so on) reasonable? Program • How did people hear about the program? availability and • What is the level of awareness among the eligible and potentially eligible population? participation • Do those eligible and potentially eligible understand the program’s key elements? • Do all those eligible participate in the program? • Who participates and why? Who does not participate and why? Do particular groups within the target population not receive the program and why? • Do some people who are not eligible participate, and if so, does this suggest that the target population is poorly defined or that program delivery is poorly controlled? Delivery of • Are participants receiving the proper amounts, types, and quality of benefits and services? services and • Is delivery of benefits and services consistent with the program’s intent? benefits • Are all components of the program being delivered adequately and consistently? • How much change has occurred since program implementation? • Does the program comply with professional and legal standards, for example, are appropriate complaints procedures in place? Participant • What are participants’ experiences of contact with the program, for instance, how were they invited experiences to participate? What kinds and how many contacts with the program did they have? What was the duration and content of their contacts? • Are participants satisfied with their interactions with staff delivering the program, with program procedures, and with the services they receive? • Do participants engage in anticipated or intended follow-up behavior? Program • Are benefits and services delivered according to different models or by different organizations, for performance example, do banks distribute cash in some areas while post offices or private contractors do so in issues other areas? If so, how do these compare? • Are program resources and/or program delivery consistent and appropriate across all geographical locations? • Do variations exist across locations or models that provide examples of best practice or that are important interventions that should be considered elsewhere? Are variations occurring over time or for different groups? • Is the program focused on those who are easier to reach at the expense of those who are harder to reach? If so, what is the impact on the nature of the services provided and the net outcomes of these services? What would be the effect of shifting the balance between the easier and harder to reach? Sources: Purdon and others 2001; Rossi, Freeman, and Lipsey 1999; Werner 2004. 135 ANNEX IV—SOCIAL ASSISTANCE SERVICES Table 1. Disabled persons, by types and degrees of deficiencies, on December 31, 2010 out of total, by degree of deficiencies: December out of which: Type of Total 31, 200) Severe Marked Medium Minor deficiencies persons (+/-) Children Adults Children Adults Children Adults Children Adults Children Adults TOTAL 689.680 8.122 61.287 628.393 30.155 202.830 12.584 360.782 18.145 60.805 403 3.976 132.514 3.344 6.519 125.995 3.144 36.087 1.445 75.558 1.902 13.630 28 720 Physical 140.852 1.902 13.322 127.530 4.788 21.046 3.342 83.998 5.134 20.958 58 1.528 Somatic 23.157 318 1.958 21.199 223 122 461 19.211 1.266 1.796 8 70 Auditive 116.038 4.045 3.434 112.604 1.187 57.310 749 44.657 1.487 9.602 11 1.035 Visual 116.407 194 10.707 105.700 4.930 40.539 2.344 58.722 3.294 6.126 139 313 Mental 92.491 255 11.537 80.954 7.017 27.610 1.835 49.459 2.591 3.765 94 120 Psychic 54.699 6.026 12.479 42.220 7.806 13.520 2.241 24.397 2.369 4.144 63 159 Associated 5.592 202 192 5.400 174 4.425 16 938 2 27 0 10 HIV/AIDS 6.598 659 1.027 5.571 805 1.649 131 3.235 89 686 2 1 Rare diseases 541 17 112 429 81 13 20 404 11 12 0 0 Deafness-blindness 791 206 0 791 0 509 0 203 0 59 0 20 (Social) Source: General Directorates for Social Assistance and Child Protection at the country 136 137