AusAID support to LGU incentive program

Delivery Strategy on Subnational Governance “Improved local governance capacity to deliver basic services” Three major activities that will account for 40% of aid program over the five years PRMF (till August 2014) LGU Incentives Program (2013-2017) PRMF successor program (2013-2017)

PRMF Status recently mobilised in 3 new provinces expected transition to use local government systems for 7 provinces

PRMF Successor Program retaining core principles of PRMF: road sector as the entry point governance reform program (capacity building) performance-based/incentives for good performance working at the provincial level or supporting provinces rethinking of program delivery funding mechanism  performance-based/output-based significant role and responsibilities transferred to DILG scaled-up program and management arrangements partnership arrangements considerations for infrastructure component PRMF mid-term review recommendations DILG-DPWH program on national secondary roads (WB) design activities DILG assessment (not separate from LGU incentive design process) Analytical studies political economy analysis of the local road sector options for enhancing performance-based/output-based aid for road infrastructure Research on quality of service standards for local roads Design mission

LGU Incentive Program Proposed support to LGU incentive program: PCF-SGH FUND AUGMENTATION TO PCF SUPPORT TO POLICY DIALOGUE PROCESS (strategic direction and policy) TECHNICAL ASSISTANCE TO DILG (operational and management needs)

Concept Peer Review Process Key Points and Recommendations Keep it simple Use of partner government systems Focus on achievement of targets/performance PCF should remain small but SGH should allow access to bigger ‘incentives’ Sustainability of changed practice/outcomes not the funding mechanism (limited lifespan) Strategic and closer engagement with DILG to enhance PCF-SGH and strengthen policy Fiduciary risk assessment

Design timeline Important Milestones AusAID Design document – October 2012 NEDA ICC approval – November 2012 Memorandum of Subsidiary Arrangement – December 2012 Mobilisation – January 2013

Program design activities PCF financial assessment/fiduciary risk assessment (PFMP) PCF (DILG) organisational capacity assessment (PAHRODF) Consultation workshops with key stakeholders DILG PCF Management Team Local Chief Executives (Mayors and Governors) DILG Regional Directors Engagement and coordination with WB-AAA activity and PDF working group Analytical Support