ANNUAL FISCAL YEAR REPORT OCTOBER 2004 TO SEPTEMBER 2005 Moldova Local Government Reform Project THE URBAN INSTITUTE USAID's Moldova Local Government Reform Project EEU-I-00-99-00015-00, Task Order No. 806 (06901-007) MOLDOVA LOCAL GOVERNMENT REFORM PROJECT (LGRP) ANNUAL FISCAL YEAR REPORT OCTOBER 2004 TO SEPTEMBER 2005 Prepared for Prepared by The Urban Institute Moldova Local Government Reform Project United States Agency for International Development Contract No. EEU-I-00-99-00015-00, Task Order No.806 THE URBAN INSTITUTE 2100 M Street, NW Washington, DC 20037 (202) 833-7200 October 2006 www.urban.org UI Project 06901-007 TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY OF PROJECT ACCOMPLISHMENTS................................................1 II. MAJOR ACTIVITIES..................................................................................................................................3 III. LIST OF DOCUMENTS BY PROGRAM COMPONENT.........................................................................18 ANNEXES Annex A–Fiscal Decentralization Annex B–Democracy and Governance Annex C–Municipal Services/Demonstration Projects MOLDOVA LOCAL GOVERNMENT REFORM PROJECT ANNUAL FISCAL YEAR REPORT OCTOBER 2004 TO SEPTEMBER 2005 I. INTRODUCTION AND SUMMARY OF PROJECT ACCOMPLISHMENTS This report covers 12 months⎯October 1, 2004 to September 30, 2005 or Fiscal Year (FY) 2005 of the Moldova Local Government Reform Project (LGRP). Part I provides the introduction to the report and describes its organization. Part II describes major activities undertaken during the period covered by this report. Part III lists the work products for FY2005, which can be found in the annexes to this report. There are three annexes to the FY2005 LGRP report: Fiscal Decentralization, Democracy and Governance, and Municipal Services/Demonstration Projects. Task Order No.: EEU-I-00-99-00015-00, TO No. 806 Date of Issuance: February 1, 2000 Task Order Description: The Moldova LGRP is implementing a technical assistance program over a five-year period to assist all levels of government in the Republic of Moldova in shaping and realizing its agenda for local government reform. The principal focus of LGRP is on “governments of the first level” (i.e., cities and towns) and to a lesser extent villages. This includes improving local government autonomy (including fiscal decentralization and improved management) and strengthening civil society organizations (CSOs) role in democratic local governance. Increased citizen participation in decision-making in the target cities will indicate that the cities have enough fiscal decentralization to make independent decisions about their budgets and strategic plans, elected officials are aware of the importance of citizen participation, and citizens believe that their participation is important, and have been mobilized to play a role in their local government. Amount obligated under Task Order: $ 9,099,793 (As of 9/30/2004) Total potential Task Order amount: $ 11,348,206 Dollars expended to date, including accruals: $ 6,477,022 (As of 9/30/2005) Project results as of September 30, 2005 are shown in Table 1. Moldova 2 Local Government Reform Project Table I-1 Project Indicators1 Fiscal Year Indicator Definition and Unit of Baseline Data Plan Actual Performance Indicator 2006 Measurement Year Value 2005 2005 Target Actual Strategic Objective: 2.3: Democratic institutions more effective, responsive and accountable 1. Indicator: Citizen Definition: Citizens' participation in decision-making can be demonstrated through public hearings on the local budget and public hearings on municipal service decisions or strategic planning. This participation in decision- 2 making in partner local indicator counts the number of partner local governments that can demonstrate citizen governments in: participation through: Unit: Number (cumulative) a) A minimum of 1 public hearing on a) Budget process 2004 37 45 65 85 the local budget b) Decisions about b) A minimum of 1 public hearing on municipal services or municipal service decisions and/or 2004 82 85 111 137 strategic planning strategic planning IR 2.3.1: Local government autonomy strengthened 2. Indicator: Community Definition: Partner local governments strategic plans officially that have officially adopted a strategic adopted by action of the plan as confirmed by an officially 2004 57 72 80 98 council after a formal registered decision of the legislative public hearing body Unit: Number (cumulative) 3. Indicator: Partner Definition: Partner local governments communities, in which that have increased financial financial management management capacity by 2004 55 70 79 99 capacity is increased implementing office automation and through office automation receiving computer training Unit: Number (cumulative) 4. Indicator: Definition: Households in partner local Households receiving communities receiving higher quality new or improved public and more reliable services through 2004 67,540 70,000 83,874 80,000 services in partner local more transparent processes government communities Unit: Number per year 5. Indicator: Definition: Demonstration projects Demonstration projects implemented that achieve an objective competitively selected in a community strategic plan and and implemented result in improvement of strategically important services and/or facilities, and 2004 0 40 42 75 enhancement of the sustainability of community strategic planning in communities across Moldova Unit: Number per year 1 LGRP results as of September 30, 2005. 2 The total number of partner local governments is 110. The total number of local governments in Moldova is 903. Annual Fiscal Year Report - October 2004 to September 2005 3 II. MAJOR ACTIVITIES Task #1 – Assist in Establishing Legislation and Implementing Regulations towards Decentralization Since political conditions in Moldova were not conducive to deploying policy research aimed at advancing legislative reform towards decentralization, LGRP focused its attention and resources on preparing local governments to apply their capacity within the current restrictive legal framework. During the reporting period, LGRP monitored the political situation and conducted and/or supported actions and research related to improving the policy and legislative framework for local governance. In this context, a local (CCN) legal expert completed research aimed at analyzing the impact on local governments, in general, and their financial sustainability, in particular, of the proposed administrative regulations (the so-called “guillotine law”) to the current legislation related to small business operation. Report findings reveal that the domestic legislation that shapes the regulatory framework for local business is quite confusing and many legal provisions can be easily treated in different ways due to their unclear meaning. In addition, there is room for discretionary actions taken by local authorities in issuing permits, licenses, and other kinds of legal documents. The expert came to the conclusion that the intention to rationalize all by-laws related to small businesses will have a positive impact, as long as the reformers do not fall into a centralized “normative trap.” LGRP believes legal opinion can serve as a basis for promoting transparency and predictability. New laws and regulations should be consistent with the basic principles of a society based on citizen participation, government accountability, and rule of law. In FY2005, LGRP produced a monitoring report of recently passed governmental directives on strategic planning, which analyzed presidential decrees and governmental decisions regarding the National Program of Local Communities in Moldova of the Year 2005. The report outlines that international financial institutions (World Bank and International Monetary Fund) require that the National Strategy of Economic Growth and Poverty Alleviation should be complemented by a clear long-term action plan that specifies jurisdictional needs. Based on this report, the President passed a decree that encourages each community in Moldova to prepare a community strategic plan for the period 2005-2015. At the core of the presidential decree is a directive to all Moldovan communities calling for a centralized framework/approach to community planning. Tough time limits (two to three weeks) for completion of the community plans and a lack of transparency and citizen participation during the preparation process significantly undermined the quality of the community plans. However, many LGRP partner communities used working groups (with LGRP assistance) consisting of community members to draft projections for the period 2005 to 2015, which were eventually included in their community strategic plans. Moldova 4 Local Government Reform Project Task #2 – Build the Capacity of Municipal Officials to Implement Reforms and Improve Delivery of Services A. Component 1: Fiscal Decentralization 1. Quarterly LGRP Financial Applications Users’ group Meetings An important pillar in strengthening the local governments’ own capacities for better financial management has become Quarterly Financial Applications Users’ group (FAUG) meetings, organized by LGRP’s Fiscal Improvements (FI) team. During FY05, three major features were added to these meetings: • Significant increase in the number of participants attending the quarterly FAUG meetings, as a result of the addition of 20 new LGRP partners, as well as 30 existing LGRP partners that had not previously benefited from the full range of LGRP